Steve Davies  ‘The deterrence value of competition policy can and should be measured’

This blog post – which can be found here –  pulls together the results from three recently completed papers on cartel deterrence (namely: (1) “The Deterrent Effect of Anti-Cartel Enforcement: A Tale of Two Tails”, with Bos, Davies, Harrington and Ormosi, 2017; (2) “Quantifying the deterrent effect of Anti-Cartel Enforcement”, Davies, Ormosi & Mariuzzo, 2017; and (3) “Cartel enforcement and deterrence over the life of a Competition Authority”, with Armoogum, Davies & Mariuzzo, (2017)). Given that deterrence can never be directly observed – because it refers to events that never occur – the papers are instead based on two statistical regularities that the authors uncovered from close scrutiny of large databases already in the public domain. The first regularity comes from a historical comparison of the overcharges set by 500 legal and illegal cartels. This comparison reveals a significantly lower incidence of illegal cartels in the two tails of the distribution of overcharges – i.e. when it is illegal to…

Murillo Campello (Cornell), Daniel Ferrés  (Montevideo) and Gaizka Ormazabal  (IESE)  ‘Whistle-Blowers on the Board? The Role of Independent Directors in Cartel Prosecutions’ (2017) The Journal of Law and Economics 60(20 241

The goal of this paper – which can be found here – is to examine ‘whether market-based penalties for nonexecutive officials [more specifically, independent board members] in firms involved in price-fixing are significant in shaping their behaviours.’ The reason to focus on independent board members is that they ‘are highly sensitive to market sanctions (for example, in the form of reputational losses). Importantly, directors have powers not only to order internal investigations but also to require officers and employees to cooperate with prosecutors. In some cases, boards also establish special committees and appoint outside counsel to consider applications for leniency. As a result, they constitute a set of corporate insiders whom antitrust policies can exploit in designing prosecution policies.’ The paper is structured as follows: Second 2 begins by providing an overview of US and EU regimes for cartel prosecution and leniency. It also describes the role of corporate boards in cartel investigations. In the US: ‘Once the corporation learns…

Pierre Cremieux and Edward A. Snyder ‘Enforcement of Anticollusion Laws against Domestic and Foreign Firms’ (2016) The Journal of Law and Economics 59(4) 775

This paper – which can be found here – looks into whether cartel enforcement in the EU and the US is protectionist or neutral. With globalization, individual authorities decide with increasing frequency whether to proceed with actions against foreign firms, and what penalties to impose when they are found liable. In principle, individual authorities should exhibit a neutral approach to the origin of an investigated entity – i.e. the national identities of firms should not influence enforcement actions. This paper seeks to confirm whether this is indeed the case, and is structured as follows: Section 2 discusses three potential hypotheses con­cerning the behaviour of antitrust authorities in a global context. First, authorities may follow a neutral approach according to which the national identities of firms play no role in enforcement decisions to impose a fine or its amount. Second, they may treat foreign firms more harshly than domestic firms. Third, they may focus their enforcement efforts on domestic firms and…