‘Reconceptualising deterrence within competition policy’

Only three more sessions remain in our Autumn seminar series, including the tantalising prospect of some distinguished guest speakers. On Friday 11th December, we are delighted to welcome back the ever-enthralling Jonathan Galloway (Newcastle Law School), who presented at our Annual Conference back in 2007. Jonathan is a Senior Lecturer in Law at Newcastle University and an expert in Competition Law. His research interests include the intersections of competition law (particularly its relationship with politics, innovation, and industrial policy), international convergence, and cooperation between competition authorities.

Jonathan will be presenting one of his current research projects, entitled ‘Reconceptualising deterrence within competition policy‘. An abstract for his paper can be found below.


Competition authorities, and the politicians who hold them to account, primarily rely upon deterrence theory in order to achieve their objective of preventing anti-competitive behaviour. Broad trends of increased severity of sanctions, particularly for cartel behaviour, are easily observable and yet it is far from clear that the deterrence led approach is effective. Heightened severity of sanctions, and heightened probability of sanction, facilitated in part through the operation of leniency, ought to prevent recidivism and also lead to lower levels of infringements as part of a successful deterrence strategy, yet there is little evidence to suggest this is taking place. Efforts to ‘double down’ on deterrence through introducing individual sanctions in jurisdictions such as the UK can be useful but are unlikely to provide a complete answer in order to prevent anti-competitive behaviour. This paper will argue that deterrence should continue to be an important driver of competition authorities’ enforcement strategy, but that it should be framed within an overarching strategy of regulatory compliance, which affords greater priority to individual accountability, and embraces insights from behavioural economics in order to foster the creation of a competition culture and so as to align the incentives between corporation and individual.

The seminar takes place from 13:00-14:00 in the Thomas Paine Study Centre, Room 1.03. Tea will be provided directly afterwards in the MBA Café (TPSC, Floor 2).

‘Endogenous antitrust enforcement and strategic cartel pricing: Experimental evidence’

The next presentation in our Autumn seminar series takes place on Friday 6th November, with the return of Carsten Crede (CCP and ECO) who will be presenting ‘Endogenous antitrust enforcement and strategic cartel pricing: Experimental evidence‘, a joint project with Liang Lu (CCP and ECO). An abstract for his presentation can be found below.


We experimentally examine the effects of endogenous antitrust enforcement, i.e. an enforcement that increases in the cartel overcharge, on cartel prices and stability. With a novel experimental design, we capture the non-profitability-related strategic effects of cartel pricing as a reaction to the endogenous punishment. By allowing self-selection of the cartel into expected low punishment, endogenous enforcement is effective when both fine and detection probability are sufficiently high. However, it may render deterrence less effective if fines are not sufficiently high, suggesting that the substitutability with respect to deterrence between fines and detection probabilities is limited. Nevertheless, both enforcement elements have welfare implications due to strategic effects: whereas high fines directly reduce cartel formation and undermine stability, high detection probabilities decrease the longevity of existing cartels and with it their economic harm.

The seminar will take place from 13:00-14:00 in the Thomas Paine Study Centre, Room 2.03. To find out about the other seminars in this series, visit the seminar pages on our website.

‘Do Competition Authorities’ Cartel Investigations exhibit a Life-Cycle?’

The Spring Seminar Series continues on Friday 27th February with our master empiricist Prishnee Armoogum (CCP & ECO) asking ‘Do Competition Authorities’ Cartel Investigations exhibit a Life-Cycle?‘. Prishnee is a PhD researcher and Associate Tutor in the School of Economics at the University of East Anglia. Her thesis topic explores the experiences of competition enforcement across different competition authorities around the world, with a particular interest in small economies. Prishnee is also a member of the Competition Commission of Mauritius. An abstract for her paper can be found below.


Although there are numerous recent papers which have studied the relationship between deterrence and cartel formation, there is not much literature on the empirical assessment of the Competition authority’s behaviour in the presence of deterrence. The purpose of this paper is to investigate the presence of deterrence on cartels during the life cycle of a competition authority (CA). The intuition of proposed theory developed in this work is used to study the lifecycle of the CA and the impact of competition law and policy deterrence on its cartel activities. A yearly panel data set of 32 countries (33 competition institutions) for period 2006-2012 is used empirically to test the model. Choosing the most preferred model, we find that the number of cartel investigations do not have a life cycle. However, the results show that tools used to deter cartels, i.e. cartel fines, years of imprisonment and number of leniency applications, do have an influence on the number of cartel investigations. The number of phase II merger investigations is also found to be negatively related to the number of cartel investigations.

The seminar takes place from 13:00-14:00 in the Thomas Paine Study Centre, Room 1.03.

‘The Economic Impact of Cartels and Anti-Cartel Enforcement’

The Spring Seminar Series is well under way and you can check out the list of speakers on our website. On Friday 23rd January the ever-enthralling Peter Ormosi (CCP & NBS) presents his paper on ‘The Economic Impact of Cartels and Anti-Cartel Enforcement‘, which he has been undertaking with Stephen Davies (CCP & ECO). Peter is a Lecturer in Competition Policy at the Norwich Business School at the University of East Anglia and has published many notable works on the effects and detection of cartels, as well as on merger control. Among other highlights, his research has recently been cited in evidence submitted to the US Court of Appeals in the Motorola v AU Optronics case. An abstract for Peter and Steve’s paper can be found below and the full working paper can be downloaded here.


Evaluations of the consumer harm caused by cartels are typically partial because they do not attempt to quantify the impact of deterrence, or acknowledge that the CA does not root out all anti-competitive cases. This paper proposes a broader framework for evaluation which encompasses these unobserved impacts. Calibration of this framework is challenging because one cannot rely on estimates for cases which have been observed to make deductions about those that have not – an example of the classic sample selection problem which is endemic across much of the empirical Industrial Organisation literature.

However, we show how empirical findings, already available in the existing literature, can be plugged into a Monte Carlo experiment to establish bound estimates on the magnitudes of cartel-induced consumer harm. Lower bound (i.e. cautious) estimates suggest that (i) the harm detected by the CA really is only the tip of the iceberg, accounting for only a small fraction (at most one sixth) of total potential harm; (ii) deterrence is at least twice as effective as detection as a means for removing harm; and (iii) undetected harm is at least twice as large as detected harm. Under less cautious, but very plausible, assumptions, all three effects could be much greater than this.

The seminar takes place from 13:00-14:00 in the Thomas Paine Study Centre, Room 1.03.

Policy Briefing: Is the Korean Innovation of Individual Informant Rewards a Viable Cartel Detection Tool?

Policy Briefing of CCP Working Paper 14-3:

Stephan A, ‘Is the Korean Innovation of Individual Informant Rewards a Viable Cartel Detection Tool?’. (Available to download from our Working Papers pages on the CCP website).


  • The defining characteristic of modern cartel enforcement is the use of leniency programmes. This innovation, first employed by the US in the late 1970s, has been emulated by the vast majority of competition law enforcement regimes around the world.

  • The basic principle of these programmes is to offer immunity to the first firm to report a cartel infringement to the competition authority.

  • It is thought leniency programmes have been instrumental in destabilising and uncovering cartel infringements, thereby undermining the trust that exists between cartel members and increasing the rate at which cartels are detected.

  • Despite the offer of leniency and the increasing levels of fines imposed on cartels, competition authorities continue to uncover a high volume of infringements. This might suggest that more could be done to strengthen deterrence in cartel enforcement. It has been suggested that the next logical step in advancing antitrust enforcement may be the use of rewards or bounties to individual whistle-blowers.

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‘Strategic Bypass Deterrence’

We’re into our second week of the CCP’s new Spring seminar series and on Friday 17th January we are delighted to welcome Francis Bloch, a Professor of Economics at Université Paris I. He will be presenting his joint-research with Axel Gautier (HEC University of Liege) on ‘Strategic Bypass Deterrence‘. An abstract for his seminar can be found below.


In liberalized network industries, entrants can either compete for service using the existing infrastructure (access) or deploy their own infrastructure capacity (bypass). In this paper, we demonstrate that, under the threat of bypass, the access price set by an unregulated and vertically integrated incumbent is compatible with productive efficiency. This means that the entrant bypasses the existing infrastructure only if it can produce the network input more efficiently. We show that the incumbent lowers the access price compared to the ex-post efficient level to strategically deter inefficient bypass by the entrant. Accordingly, from a productive efficiency point of view, there is no need to regulate access prices when the entrant has the option to bypass. Despite that, we show that restricting the possibilities of access might be profitable for consumers and welfare because competition is fiercer under bypass.

The seminar will takes place from 13:00-14:00 in the Thomas Paine Study Centre, Room 0.1.

Anti-trust and the Beckerian Principle: the Effects of Investigation and Fines on Cartels

This Spring seminar series concludes in style on Friday 12th July as our very own Frederick Wandschneider (CCP and ECO) presents his latest research on ‘Anti-trust and the Beckerian Principle: the Effects of Investigation and Fines on Cartels‘ which he has undertaken alongside Subhasish Modak Chowdhury. An abstract for his seminar can be found below.


In order to deter collusion and punish wrongdoers, antitrust authorities employ different combinations of ‘magnitude of fine’ and ‘likelihood of detection’. According to Becker (1968) these tools are substitutable. Since detection depends on costly investigation, it is optimal to minimize detection efforts and impose high fines. Recently the UK Office of Fair Trading followed this proposition and increased the maximum fine that it can impose on a colluding firm from 10% to 30% of its relevant turnover. It is not known, however, from a behavioral perspective how effective this type of policy design would be in a market. We address this issue through a market experiment to study the effects of magnitude and likelihood of fines on cartel activity, prices and collusive stability. We find support for the Beckerian principle only when leniency is not present. In the presence of a leniency program, however, a regime encompassing low detection rates and high fines is even more desirable as this reduces the propensity to collude and lowers the overall incidence of cartelized markets. It also achieves higher consumer welfare and triggers price defections.

CCP academic profiles: Frederick Wandschneider; Subhasish Modak Chowdhury

The CCP seminar series will return in Autumn 2013 with a new line-up of presenters from a variety of disciplines. The Autumn programme will be available to download from our CCP seminar page in the coming weeks and you can also revisit previous seminar series by following the relevant links. 

‘Cartels as Children of Hard Times, Antitrust Recidivism, and the Managerial Firm’

For this Friday’s research seminar, the Centre is delighted to welcome Professor Steve Martin (Krannert School of Management, Purdue University) who will be presenting his research on ‘Cartels as Children of Hard Times, Antitrust Recidivism, and the Managerial Firm‘. Steve presented an earlier version of this paper at the 39th Annual EARIE Conference in September of last year, a version of which is available for download here. A short abstract for his article can be found below.


In industries where the technology requires large fixed and sunk investment and there are severe demand fluctuations, in downturns decision-makers face a loss of control if they collude and are caught and they face a loss of control if they do not meet financial obligations. In these circumstances, corporate fines for detected collusion are unlikely to provide effective deterrence.

Steve will also be speaking as part of the CCP’s Summer Conference which is taking place next week. An abstract for his presentation on ‘Shaping U.S. Antitrust Institutions’ can be downloaded from our profiles page, along with the abstracts of our other guest speakers.

Cartel Criminalization and the Challenge of ‘Moral Wrongfulness’

The latest research offering of the CCP’s Dr Peter Whelan has been published in the prestigious Oxford Journal of Legal Studies. His article, entitled ‘Cartel Criminalization and the Challenge of ‘Moral Wrongfulness’‘, is available for advance access download via Oxford Journals. An abstract for his paper can be found below.


There is considerable debate at present, particularly in the Member States of the European Union, concerning the necessity and appropriateness of imposing custodial sentences upon individuals who have engaged in cartel activity. The vast majority of those contributing to this debate have focused on the punishment theory of (economic) deterrence. Little room is devoted to the punishment theory of retribution or to consideration of the ‘moral wrongfulness’ of cartel activity. This article posits that the issue of ‘moral wrongfulness’ is a central issue in the debate on cartel criminalization, irrespective of whether it is deterrence theory or retribution theory that informs the debate. By employing a norms-based approach, this article then examines the extent to which cartel activity can indeed be interpreted as conduct that is ‘morally wrong’ due to its violation of the moral norms against stealing, deception and/or cheating. By doing so, this article not only challenges traditional views of the nature of cartel activity but also provides scholars, legislatures and policymakers with specific analyses which are crucial to a decision whether to justify (or indeed to oppose) the introduction and maintenance of criminal cartel sanctions.

Andreas Stephan talks Deterring EU Competition Law Infringements

Recorded recently at a conference in Brussels, Andreas Stephan gives his views on deterring EU competition law infringements.


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