Tuesday, May 24, 2011

Daniel Sokol Book Symposium Comments on Criminalising Cartels: Critical Studies of an International Regulatory Movement

Posted by D. Daniel Sokol

I applaud Caron and Ariel for their edited volume Criminalising Cartels: Critical Studies of an International Regulatory Movement. As someone who edits books myself (shameless plugs for my Stanford University Press series, previous edited volume, and a volume in the works on antitrust/competition economics with Oxford University Press), I know how difficult it can be to get a volume to be coherent. There are different analytical approaches, writing styles and themes for coverage to include. I liked nearly all of the chapters and believe that cover to cover, this is the best contemporary book on cartels. There are so many things worth mentioning about the book. Let me highlight just two.

1. We have seen that over time antitrust (and I use the US term for a reason), have become global. Perhaps the most important antitrust norm to be diffused elsewhere has been the push to criminalize collusion offenses. A number of chapters of the book suggest limits to the transplant effect of a US based legal concept onto different legal systems (including Kovacic's excellent chapter that explains why things have worked as well as they have in the US). This set of reactions provide an excellent case study on the limits in practice of good ideas in one jurisdiction of taking root in others.

2. The assumptions behind criminalization may not be accurate. Antitrust has not focused its attention in the compliance context on the various components within a firm. Instead, antitrust often treats the corporation as a “black box” in which it assumes away the internal workings of the firm and focuses instead at the firm level. Both theoretical and empirical work in a number of different fields, including economics, accounting, finance, organizational theory and sociology, provide important insights indicating that a firm is not merely a single entity in its actions. Rather, a firm has a number of various components, each of which has its own incentives that shape behavior. This literature suggests that organizational subunits and individuals within them need to be addressed. The organization’s environment and the amount of individual discretion offered affect decision-making for the entire organization and may constrain decision-making of individuals within them. I mention these other literatures because many IO economists and antitrust/competition law professors ignore the inner workings of the firm. As a result, there are a number of assumptions about how individuals and firms respond to punishment that may be wrong. Required reading for anybody writing on cartels should be Christine Parker's chapter (Chapter 11), where she provides a literature review of antitrust empirical work on cartels. One minor problem with her literature review is that she seems to be unaware of the growing literature in experimental economics on collusion. However, Parker does include some seminal works in organizational theory and sociology that often gets overlooks by economists. Maurice Stucke in his chapter points to some problems based on his behavioral antitrust model. Much of the insights he provides are interesting. Even if these are true, none of his recommendations are things that traditional rational choice types would find disagreement with - more empirical studies, improved compliance, and more informed merger review. What I would like to see is a set of policy recommendations that are workable unique to behavioral law and economics.

Where I disagreed with various authors on their analysis or conclusions (and I do not mean to pick on Christine and Maurice - both contributed very good chapters and my comments are meant with regard to the entire volume and collection of authors) it is because they grappled with topics that are not easy. The various authors in this volume challenged some of my assumptions and understandings. In doing so, they did their job. I highly recommend this book.


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