Iwan Bos

Cartel Ringleaders and the Corporate Leniency Program

Cartel ringleaders can apply for amnesty in some jurisdictions (e.g., the E.U.), whereas in othersthey are excluded (e.g., the U.S.). This paper provides a survey of identified ringleaders inrecent European cartel cases and explores theoretically the effect of ringleader exclusion oncollusive prices. Our survey shows that (i) cartels often had more than one ringleader, (ii) therole of ringleaders was very diverse and (iii) ringleaders were typically the largest cartelmembers. Our theoretical analysis reveals that ringleader exclusion leads to higher prices when(iv) the joint profit maximum cannot be sustained under a nondiscriminatory leniency policy, (v)antitrust fines depend on individual cartel gains in a nonlinear fashion and (vi) the sizedistribution of members is sufficiently heterogeneous. These findings support the imposition ofantitrust penalties proportional to firm size when ringleaders are excluded from the corporateleniency program.

COMPETITION POLICY AND CARTEL SIZE

This article examines endogenous cartel formation in the presence of a competition authority. Competition policy is shown to make the most inclusive stable cartels less inclusive. In particular, small firms that might have been cartel members in the absence of a competition authority are no longer members. Regarding the least inclusive stable cartels, competition policy can either decrease or increase their size and, in the latter case, the collusive price can rise.

A note on cartel ringleaders and the corporate leniency programme

Cartel ringleaders can apply for amnesty in some jurisdictions (e.g., the EU), whereas in others they are excluded (e.g., the US). This note shows that ringleader exclusion loosens the incentive constraint of regular cartel members and tightens or loosens the incentive constraint of ringleaders. The latter may occur when the first firm that applies for leniency receives a sufficiently high discount.

Antitrust as Facilitating Factor for Collusion

Abstract This paper examines collusion among firms whose discount factors are private information. Mutual uncertainty regarding intentions to restrict competition might undermine the possibility of tacit collusion. Firms that want to collude may, however, reveal their intentions by consciously acting in breach of antitrust laws. As antitrust activity makes explicit collusion costly in expected terms, it can potentially be (ab)used as signaling device. We show that the fight against cartels may indeed facilitate collusion.

Do antitrust agencies facilitate meetings in smoke-filled rooms?

This article identifies a potential adverse effect of antitrust enforcement. We show that if tacit collusion is not sustainable, firms are able and willing to collude explicitly when demand is viscous, the expected antitrust penalty is limited and antitrust agencies are sufficiently effective in catching cartels.

Tracing the Base: A Topographic Test for Collusive Basing-Point Pricing

Basing-point pricing is known to have been abused by geographically dispersed firms in order to eliminate competition on transportation costs. This paper develops a topographic test for collusive basing-point pricing. The method uses transaction data (prices, quantities) and customer project site locations to recover the basing-point(s) from which delivered prices were calculated. These bases are compared to the locations of the production mills in a test that discriminates between competitive and collusive basing-point pricing. We define a measure for the likelihood of collusion that can be used to screen industries that traditionally apply delivered pricing for the presence of cartels. We operationalize this screen with a software. The test is hard to beat for cartels using this otherwise elusive form of price-fixing. When a cartel was found to have abused the basing-point system, our method can be used to estimate antitrust damages.

Leniency and Cartel Size: A Note on how Self-reporting Nurtures Collusion in Concentrated Markets

Leniency programs lower the expected cost of anticompetitive behavior to the extent that they allow colluding firms to pay reduced fines. This paper connects this potential adverse effect to the number of firms involved in the cartel agreement. It is shown that leniency programs may provide firms with an incentive to form cartels of limited size in concentrated markets.

On the Scope for the European Commission's 2006 Fining Guidelines Under the Legal Fine Maximum

In its recently published fining guidelines, the European Commission bases antitrust fines on affected commerce with the objective to deter competition law infringements. We show that Article 23(2) of Regulation 1/2003 constrains this approach at low fractions of the value of affected EEA commerce over total worldwide turnover. The legal maximum leaves the Commission little scope to apply its new fining method effectively.