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Cartel Punishment And The Distortive Effects Of Fines

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  • Emilie Dargaud
  • Andrea Mantovani
  • Carlo Reggiani

Abstract

The fight against cartels is a priority for antitrust authorities worldwide but the goal is pursued in many different ways. Several types of fines can be levied on firms that are caught colluding but one common trait is that fines are usually distortive. In this article we focus on the economic effects of distortive fines. To this end, we compare a fine based on the cartel profit as opposed to one based on the cartel damage. We study the effects of the two fines and show that a potential trade-off between ex ante deterrence and ex post consumer surplus may occur. We show that such a trade-off is of particular relevance when antitrust authorities face exogenous fine caps, as it is often the case in practice. The results are robust to a number of extensions, including the relevant case of fines designed to punish managerial firms involved in cartel activities.

Suggested Citation

  • Emilie Dargaud & Andrea Mantovani & Carlo Reggiani, 2016. "Cartel Punishment And The Distortive Effects Of Fines," Journal of Competition Law and Economics, Oxford University Press, vol. 12(2), pages 375-399.
  • Handle: RePEc:oup:jcomle:v:12:y:2016:i:2:p:375-399.
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    File URL: http://hdl.handle.net/10.1093/joclec/nhw010
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    More about this item

    JEL classification:

    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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