AAI Calls for Increased Cartel Penalties in Honor of World Competition Day

The American Antitrust Institute (AAI) will be honoring World Competition Day on December 5, 2011 by highlighting cartels’ harmful effects on consumers and calling for the U.S. government to set penalties at a level to more optimally deter cartels. We urge the media, antitrust agencies at all levels, elected officials, and consumer organizations to take formal public notice of World Competition Day.

World Competition Day was founded by non-governmental organizations around the globe as an occasion to propagate the benefits of competitive markets and harmful effects of anticompetitive behavior to citizens, internationally. The theme of this year’s event is the harmful effects of cartels on consumers. Recognition of the economic impact of cartel overcharges is especially important at a time of governmental budget cutting, where reduced public expenditures on antitrust enforcement could be severely counterproductive.

Private cartels fix prices, rig bids, or divide customers or markets to cause harm to consumers by causing them to pay monopoly overcharges. Such collusive behavior is felonious and can also give rise to private actions to recover treble damages. An AAI study found that in the United States $9 to $30 billion was returned to victims of cartels through private enforcement since 1990. As long as cartelizing companies and their decision-making employees can profit as they do, even after detection, governmental prosecution, and private treble damage awards, they will continue to cause huge harm to consumers.

The AAI is calling on the U.S. government to work to increase corporate penalties and improve employment practices to help deter cartels. The AAI proposes five important steps to raise the existing levels of sanctions so that they are more nearly optimal.

1. Congress should enact a law adding prejudgment interest to both private treble damage actions and criminal fines.

2. The U.S. Sentencing Commission should double its mistaken presumption that cartels raise price by an average of only 10 percent.

3. The Department of Justice Antitrust Division (DOJ) could change its administrative practice of recommending fine discounts from the bottom of the Sentencing Guidelines’ range and start instead from the middle or top of the range.

4. The DOJ should, as part of it settlement negotiations, require corporations never to hire as officers, directors, or consultants persons convicted of antitrust felonies.

5. The DOJ should require corporations not to indemnify culpable employees for the criminal fines imposed against them as individuals or the costs of their legal defense, if convicted.

A paper with empirical data and detailing the five recommendations is available here.