Penalising on the Basis of the Severity of the Offence: A Sophisticated Revenue-Based Cartel Penalty
- PDF / 1,593,187 Bytes
- 20 Pages / 439.37 x 666.142 pts Page_size
- 39 Downloads / 150 Views
Penalising on the Basis of the Severity of the Offence: A Sophisticated Revenue‑Based Cartel Penalty Yannis Katsoulacos1 · Evgenia Motchenkova2 · David Ulph3
© Springer Science+Business Media, LLC, part of Springer Nature 2019
Abstract We propose a new penalty regime for cartels in which the penalty base is the revenue of the cartel but the penalty rate increases in a systematic and transparent way with the cartel overcharge. The proposed regime formalises how revenue can be used as the base while taking into account the severity of the offence. We show that this regime has better welfare properties than the simple revenue-based regime under which the penalty rate is fixed, while having relatively low levels of implementation costs and uncertainty. We conclude that the proposed penalty regime deserves serious consideration by Competition Authorities. Keywords Antitrust enforcement · Antitrust penalties · Antitrust law · Cartels JEL Classification L4 antitrust policy · K21 antitrust law · D43 oligopoly and other forms of market imperfection
* Yannis Katsoulacos [email protected] Evgenia Motchenkova [email protected] David Ulph du1@st‑andrews.ac.uk 1
Department of Economic Science, Athens University of Economics and Business, Patission 76, 104 34 Athens, Greece
2
Department of Economics, TILEC and Tinbergen Institute, Vrije Universiteit Amsterdam, De Boelelaan 1105, 1081 HV Amsterdam, The Netherlands
3
School of Economics and Finance, University of St Andrews, St Andrews KY16 9AR, Scotland, UK
13
Vol.:(0123456789)
Y. Katsoulacos et al.
1 Introduction In the majority of jurisdictions, including the European Commission, the corporate fine for collusion is based on the revenue of the colluding firms.1 As in the rest of the literature we define “simple” revenue-based penalty regimes as those in which the penalty to be applied in any given cartel case is determined by multiplying the revenue that was earned by the cartel by a fixed penalty rate that is the same in all cases. As identified by Bageri et al. (2013) and Katsoulacos and Ulph (2013) this regime has the poor welfare property of inducing cartel prices above the monopoly level. On the other hand, it is attractive due to its transparency and ease of implementation as revenue data are generally publicly available. In practice, many CAs that use the simple revenue-based penalty regime start from a fixed baseline penalty rate which is adjusted in individual cases to take into account a number of “mitigating and aggravating factors”: One of these factors may be the severity of the offence as reflected in the size of the cartel overcharge.2 However, these “mitigating and aggravating factors” can cover a range of non-price behaviours and are taken into account in a non-systematic, largely ad hoc manner that does not allow firms to foresee exactly how the penalty rate will be adjusted in their case if they were found to violate the law. Hence, this method lacks transparency and it is impossible to establish what effect it has on carte
Data Loading...
