Cartel Laws Undermined: Corruption, Social Norms, and Collectivist Business Cultures
| Date | 01 June 2010 |
| Author | Andreas Stephan |
| Published date | 01 June 2010 |
| DOI | http://doi.org/10.1111/j.1467-6478.2010.00507.x |
JOURNAL OF LAW AND SOCIETY
VOLUME 37, NUMBER 2, JUNE 2010
ISSN: 0263-323X, pp. 345±67
Cartel Laws Undermined: Corruption, Social Norms, and
Collectivist Business Cultures
Andreas Stephan*
The combination of leniency programmes, high sanctions, complaints
from customers and private actions for damages, has proven very
successful at uncovering and punishing cartel agreements in United
States Antitrust Law. Countless jurisdictions are being encouraged to
adopt these `conventional' enforcement tools, in the absence of an
international competition authority. This paper identifies three issues
which may undermine the universal efficacy of these cartel laws: (i)
corruption and organized crime; (ii) social norms that are sympathetic
to collusive practices; (iii) collectivist business cultures built on
personal relationships.
INTRODUCTION
Cartels have come to be seen as `cancers on the open market economy', as
the `supreme evil' of antitrust, and as striking `at the very heart of the
principal virtue of economic activity'.
1
However, the prohibition and
punishment of practices such as price fixing and market sharing is a
relatively recent phenomenon in the majority of legal jurisdictions. With the
345
ß2010 The Author. Journal Compilation ß2010 Cardiff University Law School. Published by Blackwell Publishing Ltd,
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*Norwich Law School and ESRC Centre for Competition Policy, University
of East Anglia, Norwich NR4 7TJ, England
a.stephan@uea.ac.uk
The support of the Economic and Social Research Council is gratefully acknowledged.
The author would also like to thank William E. Kovacic (FTC), Danniel Sokol (Florida),
Morten Hviid (UEA), and Lindsay Stirton (Manchester) for helpful comments. The usual
disclaimer applies.
1M.Monti, `Cartels Why and How? Why should we be concerned with cartels and
collusive behaviour?', speech to Third Nordic Competition Policy Conference,
Stockholm, (September 200l); Verizon Communications Inc v. Law Offices of Curtis
V Trinko LLP,124 S Ct 872, 879 (2004); N. Kroes, `Enforcement of Prohibition of
Cartels in Europe' in European Competition Law Annual 2006: Enforcement of
Prohibition of Cartels, eds. C. Ehlermann and L. Atanasiu (2006).
support and guidance of the US Department of Justice, the European
Commission (EC), and international organizations, many are still reforming
competition laws and adopting the tools of cartel enforcement which have
proved so successful in the United States. Characteristically, these include
the offer of immunity to the first firm to self-report an infringement and the
imposition of heavy sanctions on every other cartel member.
2
They also
include a reliance on customers to report suspected infringements to the
competition authority and sue for any damages incurred.
3
This paper
identifies three issues which may undermine the universal efficacy of the
`conventional' enforcement tools identified above: (i) the paralysing effects
of corruption, heightened by underfunding, direct political control, and high
levels of organized crime; (ii) social norms which are sympathetic to
collusive practices, compounded by historical factors such as the past
behaviour of governments, and a lack of political support for the stepped-up
enforcement of new cartel laws; (iii) collectivist business cultures in which
agreements are largely built upon personal relationships and trust, partly as a
response to weak legal systems.
Cartel enforcement must be understood as an international problem. The
boundaries of markets plagued by anticompetitive behaviour do not
generally coincide with the borders of legal jurisdictions. Yet competition
authorities generally impose sanctions according to the harm caused within
their own markets only. The United States vigorously pursues foreign cartels
which affect its markets, even imprisoning foreign executives through plea
bargains or by seeking their extradition.
4
The EU demonstrates similar
determination, imposing very significant fines on non-European under-
takings involved in cartels affecting European markets. However, neither
jurisdiction appears comfortable with the role of international cartel police-
man in relation to harm caused outside of their own markets. The usual
concerns about comity and respect for jurisdictional sovereignty are clearly
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2 For example, in a European case involving the price fixing of beer in Holland, the
company Interbrew received immunity for reporting the infringement, while its
competitor Heineken was fined ¨219.3 million (DG Competition Press Release, IP/
07/509, 18 April 2007).
3 There has been a high volume of private action suits in the United States, although it
is unclear what proportion of these primarily concern a breach of contract. In
Europe, private enforcement is currently perceived as weak and the European
Commission is making efforts to encourage damage claims. DG Competition,
`White Paper on Damages Actions for Breach of the EC antitrust rules' COM(2008)
165, 2 April 2008; D.I. Baker, `Revisiting History ± What Have We Learned About
Private Antitrust Enforcement That We Would Recommend To Others?' (2004) 16
Loyola Consumer Law Rev. 379.
4 For a discussion of criminalization and extradition, see: J. Lawrence et al.,
`Hardcore bargains: what could plea bargaining offer in criminal cartel cases?'
(2008) 7 Competition Law J. 17±42; A. Stephan, `The UK Cartel Offence: Lame
Duck or Black Mamba?', CCP Working Paper 08-19 (2008) 24; Norris v.
Government of the United States of America and others [2008] UKHL 16.
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