Major Trends in Global Enforcement of International Cartels
“Major Trends in Global Enforcement of International Cartels” Distinguished Lecture by Prof. John M. Connor Professor Emeritus, Purdue University & Senior Fellow, American Antitrust Institute jconnor@purdue. edu New Delhi, March 1, 2017 J M CONNOR CUTS DELHI MAR 1 2017
Cumulative Corporate Penalties, Regions or Jurisdictions, Semi-Decades 120. 0 100. 0 Total $107 billion 80. 0 USA & Canada EC 60. 0 40. 0 EU NCAs 20. 0 ROW 0. 0 1990 -94 1995 -99 2000 -04 2005 -09 J M CONNOR CUTS DELHI MAR 1 2017 2010 -15
Trend in Cumulative Penalties Projected to Reach $280 billion by 2022 300. 0 250. 0 200. 0 150. 0 R 2 = 0. 9997 100. 0 50. 0 1995. 0 2000. 0 2005. 0 2010. 0 J M CONNOR CUTS DELHI MAR 1 2017 2015. 0 2020. 0
Number of Antitrust Jurisdictions Prosecuting International Cartels Is Climbing 70 Number of Jurisdictions 60 50 40 30 20 10 0 1995 2000 2005 Year cartel was investigated J M CONNOR CUTS DELHI MAR 1 2017 2010 2015
Intl. Cartel Fines Imposed by NCAs (EU’s National Authorities) 1989 -July 2016 5. 0 Total $23. 5 billion $ billions 4. 0 3. 0 2. 0 1. 0 0. 0 1989 1992 1995 1998 2001 Year of Decision 2004 J M CONNOR CUTS DELHI MAR 1 2017 2007 2010 2013 2016
Total Fines in ROW Exploding 12. 0 Total $17. 5 billion 10. 0 $ billion 8. 0 6. 0 4. 0 2. 0 0. 003 0. 065 1990 -1994 1995 -1999 2000 -2004 Year Cartel Penalized J M CONNOR CUTS DELHI MAR 1 2017 2005 -2009 2010 -2016
Total CARTEL AMNESTIES Rising and Spreading across Jurisdictions 60 50 40 ROW EU NCAs 30 EC 20 USA&Canada 10 0 1990 -94 1995 -2000 2001 -04 2005 -07 2008 -10 Year First Participant Fined Mar 5, 2016 J M Connor, Purdue U. 7
Average Size of Fines per Decision Rising in ROW 40 35 30 $ Million 25 20 15 10 5 19 92 19 96 19 98 19 99 20 01 20 02 20 03 20 04 20 05 20 06 20 07 20 08 20 09 20 10 20 11 20 12 20 13 20 14 0 Average Year Cartel Penalized Mar 5, 2016 J M Connor, Purdue U. 8
Cumulative Fines in ROW Projected to Reach $34 Billion by 2020 35 30 $ billion 25 20 15 R 2 = 0. 9907 10 5 0 1998 2001 2004 2007 2010 2013 2016 2019 Average Year Cartel Penalized Mar 5, 2016 J M Connor, Purdue U. 9
Most ROW FINES Originate in Asia 8000 7000 6000 5000 4000 USD Million 3000 2000 1000 0 Mar 5, 2016 Asia Africa Latin America J M Connor, Purdue U. Oceania 10
Most ROW FINES Originate in a Few Jurisdictions, 1990 -2014 4000 3500 3000 2500 2000 USD Million 1500 1000 500 0 Mar 5, 2016 Brazil Korea India South Africa J M Connor, Purdue U. Japan Turkey 11
INTERNATIONAL CARTELS INVESTIGATED IN INDIA, by Discovery Year INTERNATIONAL CARTEL NAME Soda ash export cartel, ZA & IN Cement, Jabalpur, India Medical supplies in India, World Bank Shipping conference within IN-PK-BD-Ceylon, IN Pyrethroid bid rigging in India, World Bank Cement, nationwide, IN Explosives manufacturing, IN Auto Parts, IN Potash & potassium chloride exports, CA & RU Cable, railway signaling, IN Construction equipment manufacturing, IN Airlines, passenger, IN Vaccine, meningitis, IN Cement, Haryana State, India TOTAL SALES ($M) FINE ($M) Note 1500 0. 997 So. Af. 442 NA 350 0 Banned ? 0 consent 33 0 Banned 19, 890 984. 14 949 11. 25 ? 485. 3 930 NA 49 NA 56, 000 NA 47, 000 dismiss ? 9. 9 ? 30. 14 127, 143 1, 522 J M CONNOR CUTS DELHI MAR 1 2017 DISCOV- PENALTY ERY YR. 1996 2001 2006 2007 2008 2010 2011 2013 2014 2015 2017 1996 2007 2008 2012 2014 2015 2017
Corporate Penalties Are Mostly Imposed on EU & U. S. Companies W. Europe 71. 1 US & Canada 48. 5 Asia 26. 3 Africa 1. 4 Other Europe 0. 7 Lat. America Oceana $ Billion 2. 1 0. 4 Location of headquarters of company or its ultimate parent group. J M CONNOR CUTS DELHI MAR 1 2017
Corporate Headquarters of Known Penalized Firms Number of Companies W. & Cent. Europe 1474 US & Canada 387 Asia 372 E. Europe 29 Lat. America 35 Africa 35 Australia 16 NB : European cartelists account for 64% of the total of 2354. Mar 5, 2016 J M Connor, Purdue U. 14
Disposition of Executives Charged for International Price-Fixing in USA Fined & Prison Fined only Prison only Guilty, waiting Indicted, waiting Fugitives Acquitted, dismissed Banned or Barred Other 0 50 100 150 J M CONNOR CUTS DELHI MAR 1 2017 200 250 300
Trend in U. S. Private Recoveries ($ Bil. ) 12 10 2016 -2020 Projected 8 6 R 2 = 0. 3285 4 2 0 1995 2000 2005 2010 Year First Company Settles (Zero Years Omitted) J M CONNOR CUTS DELHI MAR 1 2017 2015 2020
Mean Severity Ratios of Penalties on 662 International Cartels, 1990 -2015 Penalties/Affected Sales (%) 35 30 30 25 21 20 15 16 12 15 14 16 10 10 5 0 EC EU NCAs US Canada Other Private, World Nations No. Am. World J M CONNOR CUTS DELHI MAR 1 2017
RECOVERY RATIOS: PENALTIES THAT DETER • The optimal penalty (P*) for preventing cartels from forming ex ante is: • P* = (Expected Monopoly Profits) / (Probability of Prosecution) • We assume that the cartelists are good predictors, thus: • P* = (Actual Damages) / (Probability of Prosecution) • (Damages should be adjusted for the time value of money, i. e. , pre-judgment interest to compensate injured parties for delays in making awards) J M Connor CCI Conference 2017
U. S. Damages, Penalties, and the Optimal Penalty: The Lysine Cartel 500 $2010 Million 400 300 200 100 al ty es en al ti Op tim al P en ta l P To In ca rc er at io n ts em en Se ttl es Fin Da m ag es 0 Note: Optimal penalty assumes 30% detection, 80% conviction probability. J M CONNOR CUTS DELHI MAR 1 2017
Why Over-Deterrence is Rare Attorney anecdotes do not give numbers Serial collusion and recidivism is high. Affected commerce is typically too low. Prejudgment interest is rarely rewarded, which longevity, slow decisions exacerbate. • No compensation for dead-weight losses • Anecdotes are ex post: fail to consider low probabilities of detection and conviction • • J M CONNOR CUTS DELHI MAR 1 2017
GLOBAL CARTELS REQUIRE COORINATED, GLOBAL ENFORCEMENT • Joint multinational raids are necessary to avoid destruction of evidence, but are seldom • Sharing information across authorities helps. • Basing fines on jurisdictional affected commerce avoids double-jeopardy problem. • The Intl. Competition Network (ICN) creates personal ties among enforcers. J M CONNOR CUTS DELHI MAR 1 2017
SUPERCARTELS A GROWING PROBLEM • Vitamins the first? Now 70 Auto Parts and 11 Currency Exchanges cases ($25 bil. penalties): J M CONNOR CUTS DELHI MAR 1 2017
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