LAW AND ECONOMY: EUROPEAN COMMISSION - COMPETITION POLICY - CARTELS - FINES - DETERRENCE - DETERMINATION OF OPTIMAL FINES

The determination of optimal fines in cartel cases: Theory and practice

The determination of optimal fines to deter the formation or continuation of cartels is a major objective of competition policy. Several recent publications have suggested that the recent fines imposed by the European Commission are too low to be dissuasive and should therefore be substantially increased. In this paper, we question the economic reasoning underlying the models used in those articles as well as the methodology used in their application. Further, we propose a more adequate dynamic framework to assess the role of fines in deterring cartels and define a dissuasive benchmark level, from which we come to the conclusion that on average recent fines are adequately dissuasive.

I. Introduction 1. Starting with Combe et al. (2006) a number of authors have suggested that there exists a well defined economic methodology to define the appropriate level for optimal cartel fines and further that when the actual level of fines incurred by offenders in recent European Union (EU) cases is compared to the benchmark generated by this methodology the finding is that current fines need to be substantially increased. Others have challenged these conclusions [1]. In this article, we revisit the economic reasoning underlying this argumentation, both the methodologies used and their application. We suggest that the current level of EU cartel fines is adequately dissuasive. For clarification purposes it is important to realize that a fine may be viewed as a means to deter

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Marie-Laure Allain, Marcel Boyer, Jean-Pierre Ponssard, The determination of optimal fines in cartel cases: Theory and practice, December 2011, Concurrences N° 4-2011, Art. N° 63260, pp. 32-40

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