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Private International Cartels: Effectiveness, Welfare, And Anticartel Enforcement

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  • Connor, John M.

Abstract

This paper presents and analyses economic data on 167 international cartels that were discovered by antitrust authorities after January 1990. The median cartel had five corporate members and generated $1.2 billion in sales during the collusive period. Nearly 40% of affected sales occurred in the organic chemicals industries, half of which were sold to food, feed, and agricultural firms. On average, the cartels lasted nearly six years, but average durability declined by more than 60% from the early 1990s to the early 2000s. In the early 2000s more than 20 international cartels were discovered each year, a rate six times faster than the early 1990s. The large size and longevity of these cartels, when combined with average monopoly overcharges of 28%, cause a great deal of monetary harm to buyers. Discovered cartels have met with increasingly harsh sanctions since 1990. Government authorities have imposed a total of $7.1 billion in fines on 870 companies and 62 executives, of which the United States (27%) and European Union (51%) are the major governments responsible. Private antitrust suits resulted in settlements totaling at least $3.4 billion. Some 32 executives have been imprisoned. Statutory penalties, if imposed at maximum levels, would extract about 12 times cartel overcharges, a level sufficient to deter most firms from forming or joining a cartel. However, applying optimal deterrence concepts to the characteristics of modern international cartels allows one to deduce that current antitrust enforcement is inadequate to deter cartel formation. This conclusion follows from low probabilities of detection, overly generous leniency policies in fine-setting, the absence of private suits outside North America, the inability of most indirect purchasers to recover damages, and generally weak anti-cartel enforcement in Asia and Latin America.

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  • Connor, John M., 2003. "Private International Cartels: Effectiveness, Welfare, And Anticartel Enforcement," Staff Papers 28645, Purdue University, Department of Agricultural Economics.
  • Handle: RePEc:ags:puaesp:28645
    DOI: 10.22004/ag.econ.28645
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    2. John M. Connor, 2004. "Global Antitrust Prosecutions of Modern International Cartels," Journal of Industry, Competition and Trade, Springer, vol. 4(3), pages 239-267, September.
    3. Nikolaus Fink & Philipp Schmidt-Dengler & Konrad Stahl & Christine Zulehner, 2017. "Registered cartels in Austria: an overview," European Journal of Law and Economics, Springer, vol. 44(3), pages 385-422, December.
    4. Connor, John M. & Bolotova, Yuliya, 2006. "Cartel overcharges: Survey and meta-analysis," International Journal of Industrial Organization, Elsevier, vol. 24(6), pages 1109-1137, November.
    5. Delina Agnosteva & Constantinos Syropoulos & Yoto V. Yotov, 2017. "Multimarket Linkages, Cartel Discipline and Trade Costs," CESifo Working Paper Series 6829, CESifo.
    6. Connor, John M. & Helmers, Claes Gustav, 2006. "Statistics On Modern Private International Cartels, 1990-2005," Staff Papers 28650, Purdue University, Department of Agricultural Economics.
    7. Hinloopen, Jeroen & Onderstal, Sander, 2014. "Going once, going twice, reported! Cartel activity and the effectiveness of antitrust policies in experimental auctions," European Economic Review, Elsevier, vol. 70(C), pages 317-336.
    8. Helland, Eric & Sovinsky, Michelle, 2019. "Do Research Joint Ventures Serve a Collusive Function?," CEPR Discussion Papers 13533, C.E.P.R. Discussion Papers.
    9. Sally S. Simpson & Melissa Rorie & Mariel Alper & Natalie Schell‐Busey & William S. Laufer & N. Craig Smith, 2014. "Corporate Crime Deterrence: A Systematic Review," Campbell Systematic Reviews, John Wiley & Sons, vol. 10(1), pages 1-105.
    10. Frederik Silbye, 2012. "A note on antitrust damages and leniency programs," European Journal of Law and Economics, Springer, vol. 33(3), pages 691-699, June.
    11. Jeroen Hinloopen & Adriaan Soetevent, 2006. "Trust and Recidivism; the Partial Success of Corporate Leniency Program in the Laboratory," Tinbergen Institute Discussion Papers 06-067/1, Tinbergen Institute.
    12. Sovinsky, Michelle & Eric Helland, 2013. "Do Research Joint Ventures Serve a Collusive Function?," The Warwick Economics Research Paper Series (TWERPS) 1030, University of Warwick, Department of Economics.
    13. Buccirossi, Paolo & Spagnolo, Giancarlo, 2006. "Optimal Fines in the Era of Whistleblowers," CEPR Discussion Papers 5465, C.E.P.R. Discussion Papers.
    14. John Connor, 2006. "Effectiveness of Antitrust Sanctions on Modern International Cartels," Journal of Industry, Competition and Trade, Springer, vol. 6(3), pages 195-223, December.

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