Prioritizing Cartel Enforcement Professor D. Daniel Sokol University of Florida – Levin College of Law

Big Picture Issues Three types of cartels International cartels Domestic cartels Bid rigging Two large problems particularly for competition regimes: The fixed cost for bringing cases is large regardless of the size of the jurisdiction Competition culture seems to be weaker in Latin America

International Cartels Globally greater economic damage Overcharges have been higher in Latin America than US and Europe BUT Problems with evidence and relevant information Implied threat of exit May lead to greater protectionist backlash Particular problem of export cartels Remedies

Domestic Cartels Social ties limit detection Low level of fines Powerful families own the cartel member firms Enforcement can be seen as political retribution Other parts of government might be creating conditions for cartels Penalties (civil and criminal) seen as too high

Bid rigging Framed as stealing from the government Can create good will for the agency with some parts of government Procurement agency needs to be supportive Chilean experience: While most procurement officers were aware that bid rigging might be going on, they were unaware that such behavior was illegal and that such activity could result in significant penalties

Creation of Competition Culture Difficult even in countries with longer competition histories Need an element to moral shaming for cartel activity Cartel crimes different from other economic crimes such as accounting fraud

Difficulty of Creating Awareness Studies of Australia, Netherlands, UK: Large firms are more aware than small firms, general population is not well aware Good cases may not increase the visibility of competition law in the country if the cartels do not involve basic consumer goods. Effective domestic cartel program requires case selection that takes newsworthiness into account (e.g., pharmacies in Chile) Other examples: supermarkets (Bulgaria), bread (South Africa, Panama), cooking oil (Indonesia) or toilet paper (Brazil) have a chance of significant media coverage

Cartels and Culture – Is the Public Aware?

Ineffective Media Coverage of Cartels in the US YearCartel news stories (815 different newspapers) Cartel cases filed Stories per cases filed NY Times stories only (narrow search on “accounting /2 fraud”)

Corporate Law’s Impact on Cartel Compliance Oversight Duties High threshold for liability Poor incentives for serious compliance programs (especially given antitrust strict liability regime)

Competition Law has Ignored Insights into the Firm Agency costs Organizational structure Cultural embeddeness Structures and methods to promote compliance

Other possibilities Cartel bounties  Theory  South Korean experience