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The Determination of Optimal Fines in Cartel Cases The Myth of Underdeterrence

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  • Marie-Laure Allain

    (X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris)

  • Marcel Boyer

    (X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris, UdeM - Université de Montréal)

  • Rachidi Kotchoni

    (University of Alberta)

  • Jean-Pierre Ponssard

    (X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris)

Abstract

The determination of optimal fines to deter the formation or continuation of cartels is a major objective of competition policy. We provide an analysis of static and dynamic frameworks to characterize the restitution and deterrence properties of fines: cartel stability depends on their ability to prevent deviation by firms, while the benefit of a deviation depends on the fines to be imposed in case of detection by the antitrust authority. We show that the proper consideration of the dynamics of competition has a major impact on the determination of optimal dissuasive fines: our results suggest that a clear majority of fines imposed by the European Commission in recent years meet the deterrence objective.

Suggested Citation

  • Marie-Laure Allain & Marcel Boyer & Rachidi Kotchoni & Jean-Pierre Ponssard, 2011. "The Determination of Optimal Fines in Cartel Cases The Myth of Underdeterrence," Working Papers hal-00631432, HAL.
    • Handle: RePEc:hal:wpaper:hal-00631432
    Note: View the original document on HAL open archive server: https://hal.science/hal-00631432
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    Cited by:

    1. Emilie Dargaud & Carlo Reggiani & Andrea Mantovani, 2013. "The fight against cartels: a transatlantic perspective," Post-Print halshs-00878871, HAL.
    2. 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.
    3. Marcel Boyer & Anne Catherine Faye & Rachidi Kotchoni, 2017. "Challenges and Pitfalls in Cartel Policy and Fining," CIRANO Working Papers 2017s-20, CIRANO.
    4. Motta, Massimo & Fabra, Natalia, 2013. "Antitrust Fines in Times of Crisis," CEPR Discussion Papers 9290, C.E.P.R. Discussion Papers.
    5. Emilie Dargaud & Andrea Mantovani & Carlo Reggiani, 2013. "The fight against cartels: a transatlantic perspective," Post-Print halshs-00944334, HAL.
    6. Marcel Boyer, 2012. "How Much Do Cartels Typically Overcharge?," CIRANO Working Papers 2012s-15, CIRANO.
    7. 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.
    8. 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.
    9. Katsoulacos, Yannis & Motchenkova, Evgenia & Ulph, David, 2014. "Penalizing Cartels: The Case for Basing Penalties on Price Overcharge," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 2015-15, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    10. Yannis Katsoulacos & Evgenia Motchenkova & David Ulph, 2020. "Penalising on the Basis of the Severity of the Offence: A Sophisticated Revenue-Based Cartel Penalty," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 57(3), pages 627-646, November.
    11. 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.
    12. Joseph E. Harrington, Jr. & Yanhao Wei, 2014. "What Can the Duration of Discovered Cartels Tell Us About the Duration of Cartels?," PIER Working Paper Archive 14-042, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    13. 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.
    14. Harrington, Joseph E., 2014. "Penalties and the deterrence of unlawful collusion," Economics Letters, Elsevier, vol. 124(1), pages 33-36.
    15. Shastitko, Andrey (Шаститко, Андрей) & Golovanova, Svetlana (Голованова, Светлана), 2015. "'Comparable Markets' as a Tool of Antitrust Policy: Design, Application Experience, Development Directions [«Сопоставимые Рынки» Как Инструмент Антимонопольной Политики: Дизайн, Опыт Применения, На," Published Papers mn31, Russian Presidential Academy of National Economy and Public Administration.
    16. Aghadadashli, Hamid, 2020. "Let’s Collude," CEPR Discussion Papers 15241, C.E.P.R. Discussion Papers.
    17. Vasiliki Bageri & Yannis Katsoulacos, 2023. "Measuring the effects of information exchange on incentives to collude using calibrated simulations (with an example of the South African oil industry)," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(4), pages 1846-1875, June.
    18. Katsoulacos, Yannis & Motchenkova, Evgenia & Ulph, David, 2015. "Penalizing cartels: The case for basing penalties on price overcharge," International Journal of Industrial Organization, Elsevier, vol. 42(C), pages 70-80.
    19. Katsoulacos, Yannis & Motchenkova, Evgenia & Ulph, David, 2020. "Combining cartel penalties and private damage actions: The impact on cartel prices," International Journal of Industrial Organization, Elsevier, vol. 73(C).
    20. Katsoulacos, Yannis & Motchenkova, Evgenia & Ulph, David, 2015. "Penalizing cartels: The case for basing penalties on price overcharge," International Journal of Industrial Organization, Elsevier, vol. 42(C), pages 70-80.
    21. Aditya Bhattacharjea & Oindrila De, 2021. "India’s Cartel Penalty Practices, Optimal Restitution and Deterrence," IEG Working Papers 424, Institute of Economic Growth.
    22. Marcel Boyer & Rachidi Kotchoni, 2015. "How Much Do Cartel Overcharge? (The "Working Paper" Version)," CIRANO Working Papers 2015s-37, CIRANO.

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    Optimal fines; Cartels;

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