The Bankruptcy Wildcard in Cartel Cases
Where fines are the only available sanction against cartels there is a trade-off between increased deterrence and the increased risk of insolvency. Higher fines are unacceptable to the European Commission because of the costs and uncertainties associated with bankruptcy. These concerns have led to the emergence of a 'financial constraints' discount which is applied with a lack of transparency and may be strongly influenced by the EC treaty objectives of protecting employment and social justice. Such bankruptcy discounts encourage infringing firms to paint as gloomy a picture of their financial situation as possible to reduce their cost of collusion. They also provoke cartel members into raising prices further, safe in the knowledge that they will never incur fines high enough to threaten their financial viability. The existence in the US of a parallet 'loose' bankruptcy discount allows international infringing firms to cite sanctions previously incurred in the US as grounds for 'financial constraints' in Europe. The effect is lower fines to the detriment of EC deterrence and international enforcement.
|Date of creation:||Mar 2006|
|Date of revision:|
|Contact details of provider:|| Postal: Norwich, NR4 7TJ|
Phone: +44(0)1603 593715
Fax: +44(0)1603 591622
Web page: http://www.ccp.uea.ac.uk
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:ccp:wpaper:wp06-05. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Cheryl Whittkaer)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.