Working Paper: CEPR ID: DP5465
Authors: Paolo Buccirossi; Giancarlo Spagnolo
Abstract: We review current methods for calculating fines against cartels in the US and EU, and simulate their deterrence effects under different assumptions on the legal and economic environment. It is likely that European fines have not had significant deterrence effects before leniency programs were introduced. Previous simulations of the effects of fines ignore the different type of deterrence that leniency programs bring about, and, therefore, grossly overstate the minimum fine likely to have deterrence effects. With schemes that reward whistleblowers, the minimum fine with deterrence effects falls to extremely low levels (below 10% of the optimal "Beckerian" fine). Strategic judgement-proofness can and should be prevented by suitable regulation or extended liability. Criminal sanctions, in the form of imprisonment, certainly bring benefits (and costs) in terms of cartel deterrence, but the firms? limited ability to pay does not appear any longer such a strong argument for their introduction.
Keywords: amnesty; antitrust; cartels; collusion; corporate crime; debt; deterrence; extended liability; fines; immunity; imprisonment; judgement proofness; law enforcement; leniency; optimal fines; optimal liability; optimal sanctions; organized crime; political economy; rewards; sunk cost bias; whistleblowers
JEL Codes: D43; D78; G18; G33; K21; K42; L41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| leniency programs (K40) | probability of detecting cartel behavior (L12) |
| probability of detecting cartel behavior (L12) | minimum fines necessary to achieve deterrence (K49) |
| leniency programs (K40) | minimum fines necessary to achieve deterrence (K49) |
| whistleblower programs (L49) | strategic behavior of firms (L21) |
| whistleblower programs (L49) | incentive to engage in collusion (D43) |
| leniency programs (K40) | deterrent effects of fines (K40) |
| fines imposed in the EU (F38) | deterrence of cartel behavior (K21) |