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Evidence and Cartel Sanctions

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... responsible for cartel acts. Rights of parties harmed by cartels to sue for ... Deterrence requires sanctions for cartel members. The optimal fine is not zero. ... – PowerPoint PPT presentation

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Title: Evidence and Cartel Sanctions


1

Evidence and Cartel Sanctions Simon J.
Evenett www.evenett.com
2
Evidence and the Magnitude of Sanctions
  • Why punish cartels at all?
  • Key principle Optimal deterrence.
  • Consider fines. Optimal fine is higher the lower
    the probability of successful prosecution and the
    higher the financial gain to the cartel members.
  • It is important to think about what market
    outcomes would have been without the cartel.
  • Evidence needed on demand and costs.

3
Optimal Fines
  • Problems created by too low fines little or no
    deterrent undermines credibility of agency.
  • Problems created by too high fines incentives
    for evasion inducing exit create incentives to
    merge.
  • Comments on legal provisions on magnitude of
    fines relate to benefits to firms in affected
    markets diversity of firm circumstances may
    have to complement with alternative sanctions.

4
Alternative Sanctioning Mechanisms
  • Adverse publicity.
  • Bid rigging cases bans from bidding for future
    government contracts.
  • Sanctions for individuals responsible for cartel
    acts.
  • Rights of parties harmed by cartels to sue for
    damages.
  • The alternatives have pros and cons as well.

5
Main policy conclusions
  • Deterrence requires sanctions for cartel members.
  • The optimal fine is not zero.
  • Cease and desist orders are second best.
  • Legal provisions should allow fines to be related
    to benefits to conspirators.
  • The optimal fine is not infinity!
  • Evidence needed to establish optimal fine.
  • Alternative sanctions may be needed.
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