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Tuesday, May 24, 2011

Anestis Papadopoulos Book Symposium Comments on Criminalising Cartels: Critical Studies of an International Regulatory Movement

Posted by Anestis Papadopoulos

“Criminalising Cartels: Critical Studies of an International Regulatory movement” has been a very interesting, informative and useful reading. The major strength of this work is that it offers a clear presentation and analysis of the historical development of the move towards criminalization of cartels, and the lively debate that has been developed in recent years and has generated arguments in favour of and against the adoption and application of penal law provisions in the field of competition law and policy.

This analysis has been carried out through the lens not only of competition law experts, but also through the lens of other areas of law, such as criminal law, human rights, and the regulation of institutions that enforce the law. The discussion is also informed by experts from other areas of political and social sciences, such as political economy and behavioral economics. These perspectives give a broader understanding of the various facets of the general theme under examination in the book.

 The analysis has been further strengthened by the presentation of the way in which criminal cartel laws have been applied in particular industrialized states, and the implications of the criminalization of cartels in the international competition law arena.

What clearly emerges from the book is that as with any major development in the field of competition law and policy, this trend towards criminalization of cartels originates from the US. With the exception of Germany where, as Wagner von-Papp shows, sanctions have been imposed for participation in bid rigging, and less so in the UK and Ireland where a broader cartel offence has been adopted but imprisonment of cartel participants has been rare, the US is the only country where the criminal law provisions (other than ones imposition of criminal fines) have been practically applied. As noted in the chapter of Ezrachi and Kindl, over 99% of the time served in jail by competition law violators around the world has been served in the US.

Donald Baker and William Kovacic discuss the way in which the prosecution of individual cartel participants has evolved in the US. They both show that the development of cartel criminalization has taken place at a slow pace, which has given the opportunity to academia, government, and the courts to develop the norms and improve the institutional framework in such a way so as to achieve more efficient enforcement of the relevant provisions. 

The major question that arises nevertheless is whether this trend towards cartel criminalization should be followed by other states. In more particular, whether states that have recently embarked in the adoption and/or consistent application of competition laws should move towards the criminalization of cartels. As noted, various contributors to this book develop a number of arguments made in favor of criminalization, the most common of which is that criminal sanctions may increase the deterrent effect of the relevant competition rules. Without underestimating these arguments, it has to be admitted that from the perspective of a practitioner from a jurisdiction (Greece) where the broader understanding about competition law in general is low and criminal sanctions for cartels infringements were included in the law only recently (in 2009), and have not been applied as yet, certain arguments raised in the book, which illustrate the concerns expressed in relation to the application of criminal rules in competition cases seem to be more persuasive.

In particular, as Cristine Parker notes, there are a number of questions that have not been addressed as yet regarding the criminalization of cartels, the most important of which asks ‘to what extent is criminalization morally appropriate’. This is a question also raised by Maurice Stucke and Rebecca Williams, and the answer to the question is important in view of the basic principle that imprisonment should be limited to practices that are socially considered not only as immoral but also as crimes. In a similar context, Ezrachi and Kindl note that the effectiveness of cartel criminalization may only be achieved through social acceptance of cartels as crimes.

Nonetheless, as also becomes evident from the book, such common understanding as to the morality of cartels criminalization is not clear, even in countries like the UK where there has been strong political support in the last few years for including cartels in the list of crimes. As Andreas Stephan, a supporter of criminalization, notes, in a 2007 survey in the UK, only 10% of the respondents felt that imprisonment was an appropriate sanction for cartel offenders. In a more judgmental manner, Stephen Wilks concludes his contribution by stating that “The US- style criminal cartel offence simply underlines the obsessive preoccupation for punishing cartels and the careless inattention given to abuse of dominance by large corporations…”

Irrespective from whether one agrees with this position, what goes beyond doubt is that there is a long way to go before criminalization of cartels is socially considered a criminal offence in a number of countries that have recently adopted competition rules, or have recently started applying competition rules in a consistent manner.

It should be noted that 72% of the 111 countries that had competition law in place in 2008, adopted such law recently, and in particular after 1991. Thus, it has been pointed out that in the vast majority of countries with competition law, courts have not had the time to review many competition cases, relevant academia has not had the time to examine and develop competition related principles, and agencies have not had much time to apply competition policy widely. Against this background, it seems that from a comparative and international competition law perspective, it is more important to achieve convergence in the analysis and understanding of the main practices covered by competition law, i.e. anticompetitive agreements (primarily cartels), abuse of dominance and the review of mergers.

Put differently, it seems that at least in countries that are at the early stages of competition law enforcement, it is vital to persuade politicians to support the transparent enforcement of competition laws, include competition law in the curricula of universities so as to produce competition experts and explain to market participants and consumers why cartels are bad for the economy and, in more general, for the society. Criminalisation of cartels is something that should chronologically follow these basic steps.

That said, works like the one edited by Caron Beaton Wells and Ariel Ezrachi are most welcomed, and should be the basis for further research that would examine the particular issues arising from the process of adoption and/or application of criminal sanctions for cartel conduct in more states, including developing countries.   

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