The increasing criminalization of economic law – a competition law perspective
| Published date | 29 December 2011 |
| Date | 29 December 2011 |
| DOI | https://doi.org/10.1108/13590791211190740 |
| Pages | 76-98 |
| Author | Julie Clarke |
| Subject Matter | Accounting & finance |
The increasing criminalization
of economic law – a competition
law perspective
Julie Clarke
Deakin University, Geelong, Australia
Abstract
Purpose – The purpose of this paper is to examine the trend towards the criminalization of hard core
cartel conduct and to consider the appropriateness and effectiveness of extending the criminal law to
this conduct. In addition, it will consider some of the legal implications, including the exposure of
directors of companies to potential racketeering charges.
Design/methodology/approach – The paper first examines cartel theory and the justification for
prohibition. The paper then identifies the emerging trend toward criminalization of hard core cartel
conduct, followed by an assessment of potential justifications for criminalization. Implications of
criminalization, including the potential impact of organized crime legislation on offenders and
regulators, will then be considered.
Findings – There is a clear trend towards the criminalization of hard core cartels. The paper argues
that this trend is appropriate, both because of the moral culpability it attracts and because of its
potential to enhance general deterrence. The paper also argues that cartel conduct, in jurisdictions in
which it is criminalized, will constitute “organized crime” as defined in the Palermo Convention and, as
such, expose participants to potential money laundering and asset forfeiture consequences.
Originality/value – This paper is of value to governments and regulators considering adoption or
implementation of a criminal cartel regime and to practitioners in advising clients about potential
consequences of cartel conduct within a criminal regime.
Keywords Cartel conduct,Organized crime, Criminalization
Paper type Research paper
Introduction
Although there is no universally accepted definition of “economic crime”, there can be
little doubt that illegal cartel conduct fits squarely within any reasonable definition,
whether it focuses on the motive of the individuals or corporate entities involved or
purely their financial returns. Some have gone as far as to describe it as “the economic
crime par excellence” (Ball and Friedman, 1964/1965; Kadish, 1963). Cartels involve
conduct between competitors designed to limit the amount of competition in the
markets in which they operate. This unlawful market manipulation for financial gain
has been labeled the “supreme evil of antitrust”[1] and a “veritable cancer in an open,
modern market economy” (Monti, 2002).
Competition (or antitrust law in the USA) is almost exclusively targeted toward
economic outcomes. While competition policy may facilitate goals beyond the pure
economic, it is principally the economic consequences of anti-competitive conduct that
provided the genesis for the development of competition laws and remain the central
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1359-0790.htm
Paper presented at 28th International Symposium on Economic Crime 2010, Jesus College,
University of Cambridge, 9 September 2010.
JFC
19,1
76
Journal of Financial Crime
Vol. 19 No. 1, 2012
pp. 76-98
qEmerald Group Publishing Limited
1359-0790
DOI 10.1108/13590791211190740
consideration in competition policy and enforcement today. Competition policy
is predicated on the notion that a competitive business environment is better –
economically and socially – than one which is uncompetitive. Cartel conduct, as the
most egregious form of anti-competitive behaviour, is an anathema to free market
competition.
Despite the recognition of harm, cartel conduct has, until recently, largely avoided
the tag of “economic crime” by virtue of the fact that, with the notable exception of the
USA, it has remained relatively immune from criminal classification or, at least,
effective criminal enforcement.
There is, however, an emerging trend toward criminalization and an increasing
recognition of the importance of protecting against economic harm occasioned by
cartels, particularly those operating on the international stage.
This paper discusses possible explanations for the predominantly “civil” approach
taken to cartel conduct until recently and assesses whether the current tr end toward
criminalization is appropriate, particularly in times of economic distress. The paper
concludes by considering some of the implications and challenges associated with
categorizing cartel conduct as “economic crime.”
Cartel theory
There are a variety of possible explanations for the traditional failure of most countries
to classify cartel conduct as criminal, notwithstanding recognition of economic harm
occasioned by cartels and the clear parallels between cartel conduct and other forms of
recognized economic crime, including corporate fraud.
One explanation may be the lack of broad public recognition that cartel conduct is
wrongful or that it causes significant harm (Parker, 2006; Stucke, 2006). This perception
differs between jurisdictions, but is highlighted by a recent survey suggesting that only
one in ten Britons think imprisonment is appropriate for individuals engaged in cartel
conduct (Stephan, 2009)[2]. It was also recently exemplified in Australia by divided
public opinion over the moral culpability to be attributed to high flying businessmen and
philanthropist[3], Richard Pratt, following admissions of long-term cartel conduct,
described by the sentencing judge as the “most serious cartel case to come before the
Court in the 30 plus years in which price fixing has been prohibited by statute”[4].
Even Australia’s Prime Minister at the time, John Howard and the Victorian premier
made statements in support of the businessman, which have been appropriately
described as “somewhat troubling” (Hoel, 2008) and which make it more difficult for the
public to appreciate the serious nature of the harm caused and the moral
blameworthiness that it should attract (Hoel, 2008).
Even where “economic harm” is acknowledged, the “indirect” nature of the harm
caused to individual members of the public does not elicit the same emotional response
and moral condemnation as more traditional crimes, such as theft, which are more likely
to target individuals.
This public disconnect between cartels and harm is magnified by the often
substantial delay between the occurrence of the cartel conduct and its discovery.
A judicial determination years after the cartel event, that consumers may have been
overcharged (cumulatively) $50 as a result of artificial market distortions attributable to
cartel conduct, does not raise the immediate sense of injustice that would be felt should
$50 be snatched from their wallets.
Criminalization
of economic law
77
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