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Are cartel fines optimal? Theory and evidence from the European Union

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  • Allain, Marie-Laure
  • Boyer, Marcel
  • Kotchoni, Rachidi
  • Ponssard, Jean-Pierre

Abstract

Deterring the formation or continuation of cartels is a major objective of antitrust policy. We develop a dynamic framework to characterize the compensation and deterrence properties of fines, based on the fact that cartel stability depends on the ability to prevent deviation, which itself depends in part on fines imposed in case of detection and conviction. We show that the proper consideration of cartel dynamics plays a major role in determining optimal deterrent fines. Our results suggest that fines imposed by the European Commission in recent years meet the deterrence objective in a significant number of cases.

Suggested Citation

  • Allain, Marie-Laure & Boyer, Marcel & Kotchoni, Rachidi & Ponssard, Jean-Pierre, 2015. "Are cartel fines optimal? Theory and evidence from the European Union," International Review of Law and Economics, Elsevier, vol. 42(C), pages 38-47.
    • Handle: RePEc:eee:irlaec:v:42:y:2015:i:c:p:38-47
    DOI: 10.1016/j.irle.2014.12.004
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    Cited by:

    1. Marcel Boyer & Anne Catherine Faye & Rachidi Kotchoni, 2017. "Challenges and Pitfalls in Cartel Policy and Fining," CIRANO Working Papers 2017s-20, CIRANO.
    2. Marcel Boyer & Thomas W. Ross & Ralph A. Winter, 2017. "The rise of economics in competition policy: A Canadian perspective," Canadian Journal of Economics, Canadian Economics Association, vol. 50(5), pages 1489-1524, December.
    3. Marcel Boyer & Rachidi Kotchoni, 2015. "How Much Do Cartel Overcharge?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 47(2), pages 119-153, September.
    4. von Auer, Ludwig & Pham, Tu Anh, 2020. "Optimal Destabilization of Cartels," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224521, Verein für Socialpolitik / German Economic Association.
    5. Marcel Boyer & Anne Catherine Faye & Éric Gravel & Rachidi Kotchoni, 2019. "Guiding Principles in Setting Cartel Sanctions (The Working Paper Version)," CIRANO Working Papers 2019s-18, CIRANO.
    6. Ran Jing & Jiong Gong & Fang Yi, 2020. "Antitrust Fines: Experiences from China," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(1), pages 167-187, August.
    7. Franco Mariuzzo & Peter Ormosi & Zherou Majied, 2019. "Public and reputational sanctions: The case of cartels," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2018-06v3, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    8. Cuiabano, Simone, 2017. "Competition Policy Evaluation through Damage Estimation in Fuel Retail Cartel," TSE Working Papers 17-847, Toulouse School of Economics (TSE).
    9. Mariuzzo, Franco & Ormosi, Peter L & Majied, Zherou, 2020. "Fines and reputational sanctions: The case of cartels," International Journal of Industrial Organization, Elsevier, vol. 69(C).
    10. Thomas Wein, 2020. "Cartel behavior and efficient sanctioning by criminal sentences," Working Paper Series in Economics 390, University of Lüneburg, Institute of Economics.
    11. Ludwig von Auer & Tu Anh Pham, 2019. "Optimal Destabilization of Cartels," Research Papers in Economics 2019-07, University of Trier, Department of Economics.
    12. Hüschelrath, Kai & Laitenberger, Ulrich, 2015. "The settlement procedure in EC cartel cases: An empirical assesment," ZEW Discussion Papers 15-064, ZEW - Leibniz Centre for European Economic Research.
    13. Ludwig Auer & Tu Anh Pham, 2021. "Optimal destabilization of cartels," Journal of Regulatory Economics, Springer, vol. 59(2), pages 175-192, April.
    14. Xiaowei Wang & Wuyan Long & Meiyue Sang & Yang Yang, 2022. "Towards Sustainable Urbanization: Exploring the Influence Paths of the Urban Environment on Bidders’ Collusive Willingness," Land, MDPI, vol. 11(2), pages 1-14, February.
    15. Merino Troncoso, Carlos, 2019. "Optimal dynamic antitrust fines," MPRA Paper 96781, University Library of Munich, Germany.
    16. Aditya Bhattacharjea & Oindrila De, 2021. "India’s Cartel Penalty Practices, Optimal Restitution and Deterrence," IEG Working Papers 424, Institute of Economic Growth.
    17. Moritz Birgit & Becker Martin & Schmidtchen Dieter, 2018. "Measuring the Deterrent Effect of European Cartel Law Enforcement," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 18(3), pages 1-27, July.
    18. Marcel Boyer & Rachidi Kotchoni, 2015. "How Much Do Cartel Overcharge? (The "Working Paper" Version)," CIRANO Working Papers 2015s-37, CIRANO.
    19. González, Xulia & Moral, María J., 2019. "Effects of antitrust prosecution on retail fuel prices," International Journal of Industrial Organization, Elsevier, vol. 67(C).

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    More about this item

    Keywords

    Cartels; Fines; Antitrust policy;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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