Sunday, September 16, 2007
Posted by D. Daniel Sokol
In a departure from much of the literature that suggests that we still may be under-deterring cartels with the existing system of financial and non-financial penalties, Patrick J.G. Van Cayseele of the Department of Economics at the Catholic University of Leuven and P.D.N. Camesasca of Erasumas University School of Law suggest that EU cartel fines may be too high and may lead to over-deterrence in their new working paper The EC Commission's 2006 Fine Guidelines Reviewed from an Economic Perspective: Risking Over-Deterrence.
We test the economic principles that play a role for imposing fines against the intentions put forward by the EC Commission in the new 2006 Fine Guidelines.
Whereas a number of economists in the past adopted the opinion that cartel enforcement policy was too lax in Europe, it is now much stricter.
The 2006 Fine Guidelines only bear a slight link to the economic determinants of the advantages that an infringement produces. As a result, they introduce distortions, in the sense that some offenders are dealt with more severely than others. It is therefore not possible to translate stricter enforcement into
more effective enforcement. While serious offenders may still escape with a relatively favorable fine, there is now a risk that 'overkill' will be created in other cases.