AAI Sends U.S. Sentencing Commission Its Working Paper on Cartel Remedies

The AAI on April 3, 2005, submitted to the U.S. Sentencing Commission its Working Paper 04-01, by John Connor and Robert Lande, titled How High Do Cartels Raise Prices? Implications for Reform of Sentencing Guidelines.

The Working Paper was submitted pursuant to Federal Register Notice, 70 FR 8868-8872 relating toProposed Amendment No. 2, concerning Antitrust Offenses.

The Working Paper may be found at http://www.antitrustinstitute.org/recent2/342.cfm.

ABSTRACT The current U.S. Sentencing Guidelines for criminal price fixing violations begin with an assumption that cartels raise prices by an average of 10% of the affected commerce, and use this estimate to calculate recommended fines to achieve optimal deterrence. Some have suggested that this figure might be too high, and a recent Supreme Court decision has called into question the constitutionality of the Guidelines. For these reasons the Guidelines might well be re-formulated. This article re-examines the Sentencing Commission's assumption using 2 data sources: every available economic study of cartels, and every final verdict in a U.S. cartel case that reported the overcharge percentage. The results from the different data sources and periods, show median and average cartel overcharges that are between 15% and 36%, with most of the median and average results between 20% and 30%. Based upon this finding the authors recommend that the Sentencing Commission raise the current level of cartel penalties.