The Prevalence And Injuriousness Of Cartels Worldwide

By John M. Connor & Robert H. Lande, Purdue University & University of Baltimore

The purposes of this chapter are to present empirical evidence on the size of the economic injuries resulting from contemporary price-fixing cartels and to assess the effectiveness of the antitrust and competition-law enforcement designed to deter these harms.

First, we gather and analyze summary statistics on a large number of topics that might reveal whether discovered cartels are responding to the increased worldwide effort to suppress them. Specifically, we examine the numbers and sizes of price-fixing cartels, the damages they generate, and key antitrust and competition law enforcement statistics. Broad geographic and jurisdictional differences are highlighted.

Second, we address whether current price-fixing penalties are sufficient to deter the formation of new cartels. In doing so, we first present a theoretical framework for determining optimal cartel penalties. We then apply this framework to data on US-penalized cartels. That is, we examine whether the multiple sanctions that are actually imposed on such cartels in the United States are high enough to provide optimal deterrence.

Our empirical results demonstrate that cartels are almost always substantially under-deterred even in the United States, the jurisdiction that imposes the most severe sanctions. A fortiori, the overall levels of cartel sanctions should be increased dramatically worldwide.

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