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A discovery of an active cartel represents only one stage in antitrust enforcement. Another important stage, which is quite widely discussed among scholars, is the imposition of fines against cartels. The economic efficiency of cartel fining is broadly covered in the academic literature and legal documents providing a number of analyses and study aspects, such as compensation of damages, deterrence from other violations of competition law and/or punishment of violators.
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Especially in scholarly works from the United States where participation in cartels is governed by criminal law.
In compliance with European Union and Lithuanian laws, an undertaking found to be a present or former cartel member may be imposed a fine of up to 10 % of the total annual revenues.
The new procedure is in effect in Lithuania from 27 January 2012 ( for more details, see Sect. 6.4).
The average consumer benefits resulting from the work of the Competition Council ranges from 13.24 million € ( when only direct financial benefits are included) to 77.73 million € ( including deterrence). The comparison made between these amounts and the annual budget of the Competition Council during the period 2010– 2012 that amounted to 3.16 million €, i.e. on average 1.04 million € per year, revealed that the direct benefits to consumers brought by the Competition Council exceeded its annual budget by 12.6 times or by almost 75 times ( if deterrence effect is included).
Total factor productivity ( TFP) is a measure of an economy’ s allocative, productive, and dynamic efficiency.
For example, if profit ( p) from a cartel is 300, 000 € and detection probability ( dp) is 0.3, fine ( F) should be F = 300/ 0.3 = 1, 000, 000 €.
For example, if net harm to others ( h) from cartel is 300, 000 € and detection probability ( dp) is 0.3, fine ( F) should be F = 300/ 0.3 = 1, 000, 000 € ( if individuals are risk neutral).
Transit from compensatory fines to deterrence was started in 2006 when the European Commission approved the Guidelines on the method of setting fines imposed pursuant to Article 23( 2)( a) of Regulation No 1/ 2003.
The purpose of antitrust compliance programmes is to make employees and owners of firms familiar with competition law and culture by means of various measures ( e.g. methodological guidelines, training courses, workshops, seminars, etc.).
There is scarce EU- wide information on litigation costs suffered by cartel firms. According to Connor ( 2008), litigation costs of the lysine, citric acid, and vitamins cartels amounted to approx. $ 180 million. Law firms/ lawyers representing private damage claims probably received 15– 20 % of awarded damages. As for the European Union, Hüschelrath and Weigand ( 2010) cited Neven ( 2005) who reports that the costs and fees spent by Airtours in the EC merger investigation of Airtours/ First Choice add up to more than 2.2 million € overall with about 80 % of these costs referring to the work of lawyers and the remaining 20 %— to the work of economists. Considering that merger cases are more complex and therefore need more resource input than cartel cases, costs and fees still become impressive, and legal industry receives quite significant sums paid by both cartel firms and those requiring compensation of damages.
Penalties include both fine and compensation.
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- Critical Analysis of Economic Efficiency of Fines Imposed on Cartels
- Chapter 6
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