Monday, June 21, 2010

The Predictability of Global Cartel Fines

Posted by D. Daniel Sokol

Douglas J. Miller, University of Missouri at Columbia - Department of Economics and John M. Connor, Purdue University discuss The Predictability of Global Cartel Fines.

ABSTRACT: Legal opinion is divided on whether predicable sentences are a good thing for the administration of justice. In the case of cartel violations, both the United States and the EU have introduced guidelines for calculating fines that are intended to make fining decisions more transparent and to deter cartel formation. The research summarized in this paper finds that with one exception both jurisdictions follow the principles of optimal deterrence in a highly predictable fashion. However, actual fines on corporations guilty of global price fixing are only about one-third as high as optimal-deterrence theory dictates. We do find rather large differences in temporal patterns between U.S. and EC fines: the former do not increase from 1990 to 2008 whereas the latter increase dramatically. The Kroes commissionership and the second fining guidelines resulted in separate, substantial increases in global cartel fines.

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