Thursday, July 24, 2008
The United States Department of Justice Antitrust Division's Cartel Enforcement: Appraisal and Proposals
Posted by D. Daniel Sokol
John Connor of Purdue University's Applied Economics Department offers some important thoughts on DOJ's cartel enforcement program in his paper The United States Department of Justice Antitrust Division's Cartel Enforcement: Appraisal and Proposals.
ABSTRACT: This paper evaluates the effectiveness of the efforts of the Antitrust
Division of the U.S. Department of Justice (hereafter "Division") to
detect, indict, and deter horizontal collusion, and to offer
suggestions for policy or procedural changes that are likely to improve
that enforcement. It is unusual to read much negative criticism of
federal cartel enforcement. Indeed, for decades the Division has
largely been lionized for its aggressive campaign to rid the nation and
the world of cartels.
Division
leaders emphasize that collusion is the agency's number-one priority.
Paradoxically, there is evidence that the number, size, and
injuriousness of discovered cartels is increasing. This is particularly
true for international cartels.
Since 1990, the number of cartel
investigations has not risen appreciably. Moreover, the number of
criminal Section 1 cases filed annually fell during 1990-2007. Even
from 1995-99 to 2004-06 cartel cases filed fell by 49%. Moreover, the
number of corporations charged annually averaged 68 in 1990-1994 and
dropped continuously throughout 1995-2007. There now is a significant
and growing backlog of criminal investigations and unresolved matters
that may exceed the Division's ability to dispose of cases effectively.
Although
the Division is bringing fewer Section 1 cases, the monetary penalties
imposed on convicted price fixers have grown. The total amount of
cartel fines imposed since FY1990 is approximately $4.2 billion, but
damages recouped by private plaintiffs in the United States are roughly
four times as large.
Division policy statements place great
weight on the deterrence value of predictably high prison sentences for
convicted cartel managers. Not only the frequency but also the severity
of prison sentences has increased. These trends are positive in terms
of cartel deterrence. However, the number of prison-days imposed per
person is flat; the number of carve-outs of officers of guilty
corporations is also flat.
There is no question that higher
cartel penalties would be in the public interest, especially for
international cartels. The Division should take several steps to expand
potential fines that do not require new legislation. They include:
filing more multiple counts, substituting the global affected sales of
cartels members in place of U.S. sales when computing the base fine,
applying the principle of joint and several liability to maximum fines,
using the middle or upper end of the Guidelines' range as the standard
starting demand in plea negotiations, applying strong culpability
multipliers to recidivists, and requiring cartel fines to include
pre-plea interest. Other improvements would require changes in the U.S.
Sentencing Guidelines (USSGs). For example, the 10% overcharge
assumption should be raised to at least 20 or 30%, with the latter
applying to international conspiracies. To effectively deter cartels, a
substantial increase in Division positions and budget is amply
justified; perhaps at least a 50% increase in professional positions
dedicated to cartel matters.
July 24 Update
Listen to Scott Hammond's (DOJ) comments on this paper.
https://lawprofessors.typepad.com/antitrustprof_blog/2008/07/the-united-stat.html