IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_3506.html
   My bibliography  Save this paper

The Law and Economics of Enhancing Cartel Enforcement: Using Information from Non-Cartel Investigations to Prosecute Cartels

Author

Listed:
  • Vivek Ghosal

Abstract

I present the following proposal: information revealed during non-cartel investigations by competition law enforcement authorities, such as evaluation of M&As or investigation of monopolization (dominance) conduct, should be directly used to investigate and prosecute cartels. Currently, in several jurisdictions, information acquired in, for example, a M&A investigation typically cannot be directly used for a cartel case due to the underlying statutes and the legal and administrative procedures that govern information use. Reviewing the management and corporate strategy literature, I note that M&As form a vital part of firms’ core business strategy, with the longer-run strategic aspects being more important. These longer-run strategies could be jeopardized if the firms were engaging in collusion, as the likelihood of detection and prosecution would increase under the proposed rule change, which would punish bad (collusive) behavior. I argue that irrespective of exactly how many cartels are actually prosecuted via this channel, the proposal has the likelihood of creating a meaningful deterrence effect. I also discuss the potential downsides related to Type 1 errors and administrative costs. Overall, I argue that the proposed rule change could increase the efficiency and effectiveness of cartel enforcement, and open an additional front in the fight against hardcore cartels that operate within jurisdictions as well as internationally.

Suggested Citation

  • Vivek Ghosal, 2011. "The Law and Economics of Enhancing Cartel Enforcement: Using Information from Non-Cartel Investigations to Prosecute Cartels," CESifo Working Paper Series 3506, CESifo.
    • Handle: RePEc:ces:ceswps:_3506
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo1_wp3506.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Dick, Andrew R, 1996. "When Are Cartels Stable Contracts?," Journal of Law and Economics, University of Chicago Press, vol. 39(1), pages 241-283, April.
    2. 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.
    3. Oecd, 2009. "Cartels: Sanctions against Individuals," OECD Journal: Competition Law and Policy, OECD Publishing, vol. 9(3), pages 7-47.
    4. Treadway, Arthur B, 1971. "The Rational Multivariate Flexible Accelerator," Econometrica, Econometric Society, vol. 39(5), pages 845-855, September.
    5. John M. Connor, 2008. "Forensic Economics: An Introduction With Special Emphasis On Price Fixing," Journal of Competition Law and Economics, Oxford University Press, vol. 4(1), pages 31-59.
    6. Motta,Massimo, 2004. "Competition Policy," Cambridge Books, Cambridge University Press, number 9780521016919, September.
    7. Robert W. Crandall & Clifford Winston, 2005. "Does antitrust policy improve consumer welfare? Assessing the evidence," Chapters, in: Colin Robinson (ed.), Governments, Competition and Utility Regulation, chapter 2, Edward Elgar Publishing.
    8. Focarelli, Dario & Panetta, Fabio & Salleo, Carmelo, 2002. "Why Do Banks Merge?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(4), pages 1047-1066, November.
    9. Peter A.G. van Bergeijk, 2008. "On The Allegedly Invisible Dutch Construction Sector Cartel," Journal of Competition Law and Economics, Oxford University Press, vol. 4(1), pages 115-128.
    10. Tomaso Duso & Klaus Gugler & Florian Szücs, 2013. "An Empirical Assessment of the 2004 EU Merger Policy Reform," Economic Journal, Royal Economic Society, vol. 123(11), pages 596-619, November.
    11. Jonathan B. Baker, 2003. "The Case for Antitrust Enforcement," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 27-50, Fall.
    12. Vivek Ghosal, 2011. "Regime Shift In Antitrust Laws, Economics, And Enforcement," Journal of Competition Law and Economics, Oxford University Press, vol. 7(4), pages 733-774.
    13. Duso, Tomaso & Gugler, Klaus & Yurtoglu, Burcin B., 2011. "How effective is European merger control?," European Economic Review, Elsevier, vol. 55(7), pages 980-1006.
    14. Schuler, Randall & Jackson, Susan, 2001. "HR issues and activities in mergers and acquisitions," European Management Journal, Elsevier, vol. 19(3), pages 239-253, June.
    15. Cosh, A. D. & Hughes, A. & Lee, K. & Singh, A., 1989. "Institutional investment, mergers and the market for corporate control," International Journal of Industrial Organization, Elsevier, vol. 7(1), pages 73-100, March.
    16. Baker, Jonathan B, 1989. "Identifying Cartel Policing under Uncertainty: The U.S. Steel Industry, 1933-1939," Journal of Law and Economics, University of Chicago Press, vol. 32(2), pages 47-76, October.
    17. Shimizu, Katsuhiko & Hitt, Michael A. & Vaidyanath, Deepa & Pisano, Vincenzo, 2004. "Theoretical foundations of cross-border mergers and acquisitions: A review of current research and recommendations for the future," Journal of International Management, Elsevier, vol. 10(3), pages 307-353.
    18. Cécile Aubert, 2007. "Instruments for Cartel Deterrence, and Conflicts of Interests," Contributions to Economic Analysis, in: The Political Economy of Antitrust, pages 123-148, Emerald Group Publishing Limited.
    19. M. Mark Walker, 2000. "Corporate Takeovers, Strategic Objectives and Acquring Firm Shareholder Wealth," Financial Management, Financial Management Association, vol. 29(1), Spring.
    20. Cloodt, Myriam & Hagedoorn, John & Van Kranenburg, Hans, 2006. "Mergers and acquisitions: Their effect on the innovative performance of companies in high-tech industries," Research Policy, Elsevier, vol. 35(5), pages 642-654, June.
    21. Joseph E. Harrington, Jr, 2005. "Detecting Cartels," Economics Working Paper Archive 526, The Johns Hopkins University,Department of Economics.
    22. Ghosal, Vivek, 2007. "Regime Shift in Antitrust," MPRA Paper 5460, University Library of Munich, Germany.
    23. Nathan H. Miller, 2009. "Strategic Leniency and Cartel Enforcement," American Economic Review, American Economic Association, vol. 99(3), pages 750-768, June.
    24. Caves, Richard E., 1989. "Mergers, takeovers, and economic efficiency : Foresight vs. hindsight," International Journal of Industrial Organization, Elsevier, vol. 7(1), pages 151-174, March.
    25. Stephanie Peltier, 2004. "Mergers and Acquisitions in the Media Industries: Were Failures Really Unforeseeable?," Journal of Media Economics, Taylor & Francis Journals, vol. 17(4), pages 261-278.
    26. Margaret C. Levenstein & Valerie Y. Suslow, 2002. "What Determines Cartel Success?," UMASS Amherst Economics Working Papers 2002-01, University of Massachusetts Amherst, Department of Economics.
    27. Jay Pil Choi (ed.), 2006. "Recent Developments in Antitrust: Theory and Evidence," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262033569, April.
    28. Gregor Andrade & Mark Mitchell & Erik Stafford, 2001. "New Evidence and Perspectives on Mergers," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 103-120, Spring.
    29. Oecd, 2004. "Competition Policy in Subsidies and State Aid," OECD Journal: Competition Law and Policy, OECD Publishing, vol. 6(1), pages 109-173.
    30. Block, Michael K & Feinstein, Jonathan S, 1986. "The Spillover Effect of Antitrust Enforcement," The Review of Economics and Statistics, MIT Press, vol. 68(1), pages 122-131, February.
    31. J. P. Gould, 1968. "Adjustment Costs in the Theory of Investment of the Firm," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 35(1), pages 47-55.
    32. Kennan, John, 1979. "The Estimation of Partial Adjustment Models with Rational Expectations," Econometrica, Econometric Society, vol. 47(6), pages 1441-1455, November.
    33. Ghosal, Vivek & Gallo, Joseph, 2001. "The cyclical behavior of the Department of Justice's antitrust enforcement activity," International Journal of Industrial Organization, Elsevier, vol. 19(1-2), pages 27-54, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Vivek Ghosal & D. Daniel Sokol, 2016. "Policy Innovations, Political Preferences, and Cartel Prosecutions," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 48(4), pages 405-432, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ghosal, Vivek, 2006. "Discovering Cartels: Dynamic Interrelationships between Civil and Criminal Antitrust Investigations," MPRA Paper 5499, University Library of Munich, Germany.
    2. Vivek Ghosal & D. Daniel Sokol, 2016. "Policy Innovations, Political Preferences, and Cartel Prosecutions," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 48(4), pages 405-432, June.
    3. Kaplow, Louis & Shapiro, Carl, 2007. "Antitrust," Handbook of Law and Economics, in: A. Mitchell Polinsky & Steven Shavell (ed.), Handbook of Law and Economics, edition 1, volume 2, chapter 15, pages 1073-1225, Elsevier.
    4. Ghosal, Vivek, 2007. "Regime Shift in Antitrust," MPRA Paper 5460, University Library of Munich, Germany.
    5. Clougherty, Joseph A. & Duso, Tomaso & Lee, Miyu & Seldeslachts, Jo, 2016. "Effective European Antitrust : Does EC Merger Policy Generate Deterrence?," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 54(4), pages 1884-1903.
    6. Seldeslachts, Jo & Clougherty, Joseph A. & Barros, Pedro Pita, 2007. "Remedy for Now but Prohibit for Tomorrow: The Deterrence Effects of Merger Policy Tools," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 218, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
    7. Vivek Ghosal, 2008. "The Genesis Of Cartel Investigations: Some Insights From Examining The Dynamic Interrelationships Between U.S. Civil And Criminal Antitrust Investigations," Journal of Competition Law and Economics, Oxford University Press, vol. 4(1), pages 61-88.
    8. Mats Bergman, 2008. "Quis Custodiet Ipsos Custodes? or Measuring and Evaluating the Effectiveness of Competition Enforcement," De Economist, Springer, vol. 156(4), pages 387-409, December.
    9. Jo Seldeslachts & Joseph A. Clougherty & Pedro Pita Barros, 2009. "Settle for Now but Block for Tomorrow: The Deterrence Effects of Merger Policy Tools," Journal of Law and Economics, University of Chicago Press, vol. 52(3), pages 607-634, August.
    10. Hüschelrath, Kai, 2008. "Is it Worth all the Trouble? The Costs and Benefits of Antitrust Enforcement," ZEW Discussion Papers 08-107, ZEW - Leibniz Centre for European Economic Research.
    11. Gao, Ning & Peng, Ni & Strong, Norman, 2017. "What determines horizontal merger antitrust case selection?," Journal of Corporate Finance, Elsevier, vol. 46(C), pages 51-76.
    12. Jonathan B. Baker, 2003. "The Case for Antitrust Enforcement," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 27-50, Fall.
    13. Martin Carree & Andrea Günster & Maarten Schinkel, 2010. "European Antitrust Policy 1957–2004: An Analysis of Commission Decisions," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 36(2), pages 97-131, March.
    14. Normann, Hans-Theo & Tan, Elaine S., 2013. "Effects of different cartel policies: Evidence from the German power-cable industry," DICE Discussion Papers 108, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    15. Dissanaike, Gishan & Drobetz, Wolfgang & Momtaz, Paul P., 2020. "Competition Policy and the Profitability of Corporate Acquisitions," Journal of Corporate Finance, Elsevier, vol. 62(C).
    16. Stephen Davies & Peter L. Ormosi, 2014. "The economic impact of cartels and anti-cartel enforcement," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2013-07v2, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    17. Jing Yan, 2018. "Do Merger Laws Deter Cross‐Border Mergers and Acquisitions?," Australian Economic Papers, Wiley Blackwell, vol. 57(3), pages 376-393, September.
    18. Kalyn Coatney & Jesse Tack, 2014. "The Impacts of an Antitrust Investigation: A Case Study in Agriculture," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 44(4), pages 423-441, June.
    19. John K. Ashton & Andrew D. Pressey, 2012. "Who Manages Cartels? The Role of Sales and Marketing Managers within International Cartels: Evidence from the European Union 1990-2009," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2012-11, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    20. Duso, Tomaso & Gugler, Klaus & Yurtoglu, Burcin B., 2011. "How effective is European merger control?," European Economic Review, Elsevier, vol. 55(7), pages 980-1006.

    More about this item

    Keywords

    cartels; enforcement; law and economics;
    All these keywords.

    JEL classification:

    • A10 - General Economics and Teaching - - General Economics - - - General
    • D49 - Microeconomics - - Market Structure, Pricing, and Design - - - Other
    • K00 - Law and Economics - - General - - - General (including Data Sources and Description)
    • K14 - Law and Economics - - Basic Areas of Law - - - Criminal Law
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • L00 - Industrial Organization - - General - - - General
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L44 - Industrial Organization - - Antitrust Issues and Policies - - - Antitrust Policy and Public Enterprise, Nonprofit Institutions, and Professional Organizations
    • L49 - Industrial Organization - - Antitrust Issues and Policies - - - Other
    • M00 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_3506. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.