In a letter to the United States Sentencing Commission pursuant to its request for public input on its priorities for the coming year, the American Antitrust Institute (AAI) calls for the Commission to reconsider and double a key portion of the formula it uses to calculate fines for antitrust offenses. This reconsideration should cause the current fines for illegal price fixing and similar collusion offenses to double.
Currently the Commission uses a formula based upon an unduly low presumption that illegal price fixing increases prices by 10 percent on average. The AAI Comment makes three important points about this presumption. “First, the evidence demonstrates there currently is significant underdeterrence of price fixing and other anticompetitive forms of horizontal collusion. Second, the general approach to calculating cartel fines … which utilize a specific presumed overcharge, is sound and in the public interest. Third, the 10 percent cartel overcharge presumption in the Guidelines is much too low to achieve deterrence. The best evidence demonstrates that the Commission should double it to 20 percent. This change would move the Guidelines in the direction of both recent and historical evidence on average overcharges likely to result from collusion, yet still be a conservative resolution of the issues. Raising the 10 percent presumption should improve the overall level of cartel deterrence and raise consumer welfare.”
In July 2013, the AAI submitted a Comment to the Commission that the evidence warranted at least a doubling of its cartel overcharge presumption. This year – apparently in response to the 2013 AAI suggestion, and for the first time since 1991 – the Commission said, in it’s request for public input, that re-examining the level of cartel fines would be among it’s “tentative priorities”.
The AAI Comment attaches two documents in support of its conclusions: an article by John M. Connor and Robert H. Lande, “Cartels As Rational Business Strategy: Crime Pays,” from 34 Cardozo L. Rev. 427 (2012); and an article by John M. Connor, “Cartel Overcharges,” from 29 Research In Law & Economics 249 (2014). In their paper, Connor and Lande conclude that raising the presumption of illegal overcharge to 20 percent would result in a considerable increase in the funds available to the Crime Victim’s fund for compensating victims of violent crimes, as well as lead to more nearly optimal deterrence of price fixing and other cartel behavior.