Search results

This paper surveys published economic studies and judicial decisions that contain 1,040 quantitative estimates of overcharges of hard-core cartels. The primary finding is that the median long-run overcharge for all types of cartels over all time periods is 25.0%:18.8% for domestic cartels and 31.0% for international cartels. Cartel overcharges are positively skewed, pushing the mean overcharge for all successful cartels to 43.4%. Convicted cartels are on average as equally effective at raising prices as unpunished cartels, but bid-rigging conduct does display somewhat lower mark-ups than price-fixing cartels. These findings suggest that optimal deterrence requires that monetary penalties ought to be increased.

This paper explores the nature and causes of the cartel compliance crisis that befell the National Industrial Recovery Act (NIRA) one year after its passage in 1933. We employ a simple game-theoretic model of the NIRA's cartel enforcement mechanism to show that the compliance crisis can largely be explained by changes in expectations, rather than a change in enforcement policy. Specifically, firms initially overestimated the probability that defection would be met with sanction by the cartel's enabling body, the National Recovery Administration – including a consumer boycott resulting from loss of the patriotic Blue Eagle emblem – and complied with the industry cartel rules. As these expectations were correctly adjusted downward, cartel compliance was lost. We support this hypothesis empirically with industry-level panel data showing how output and wage rates varied according to consumer confidence in the Blue Eagle. The analysis provides insight about cartel performance more generally.

Many jurisdictions fine illegal cartels using penalty guidelines that presume an arbitrary 10% overcharge. This article surveys more than 700 published economic studies and judicial decisions that contain 2,041 quantitative estimates of overcharges of hard-core cartels. The primary findings are: (1) the median average long-run overcharge for all types of cartels over all time periods is 23.0%; (2) the mean average is at least 49%; (3) overcharges reached their zenith in 1891–1945 and have trended downward ever since; (4) 6% of the cartel episodes are zero; (5) median overcharges of international-membership cartels are 38% higher than those of domestic cartels; (6) convicted cartels are on average 19% more effective at raising prices as unpunished cartels; (7) bid-rigging conduct displays 25% lower markups than price-fixing cartels; (8) contemporary cartels targeted by class actions have higher overcharges; and (9) when cartels operate at peak effectiveness, price changes are 60–80% higher than the whole episode. Historical penalty guidelines aimed at optimally deterring cartels are likely to be too low.

The purpose of this paper is to show that cartel conduct is a common example of non‐compliance with competition laws and, in order to generate insight and lessons regarding aspects of corporate governance, two areas of cartel behaviour are to be analysed. The first is the extent to which employees of organisations were aware of the seriousness and illegality of their cartel conduct, and the second is the extent to which determining bodies acknowledged the presence or absence of compliance strategies within corporations being prosecuted for cartel conduct.

A measurement matrix devised from the literature was used as a methodological framework through which content analysis was conducted to explore whether cartel offenders were aware of the illegality of their behaviour and whether the presence or absence of compliance strategies was acknowledged by the court. In total, 69 publicly available investigatory outcomes sourced from 11 different jurisdictions were analysed.

The findings suggest a need for competition regulators to educate and raise the awareness of business people to improve understanding of the deleterious effects of cartels and of the provisions of relevant legislation in order to achieve better corporate governance and observance of enacted laws.

In 71 per cent of matters examined, cartel participants were found to be aware of the illegality of their behaviour and, whilst 45 per cent of Australian companies had no compliance programme in place to begin with, some other companies had established compliance programmes which were blatantly ignored by employees.

Using resource dependency theory, the purpose of this paper is to examine what elements in the business environment may be associated with the formation and continuance of cartels.

The authors employ a unique data set of 148 cartel data points from the 1970s to 2008 which have at least one American company involved to quantitatively test causal relationships. The authors also interview key class action anti-trust attorneys for their views and opinions on the impact of these environmental factors on cartel formation and continuance.

The authors find statistically significant relationships between the pursuit and maintenance of industry profits and the dynamism in the industry, and illegal behavior as represented through price fixing by business cartels. The authors find that in the attorneys’ opinion, it is also the pursuit of individual corporate profits and munificence that are associated with these cartels.

This research furthers the understanding of organizational deviance which is critical given its impact on organizations, individuals, regulators, law enforcement, and the general public.

This research is a first step in considering cartel activity in a way that encompasses external influences in a new and innovative manner and as a tool to help researchers and practitioners better understand how organizational deviance, as manifested through illegal corporate activity, can be anticipated, identified, and prevented.