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Ananya Gaur, Jul 24, 2015
Penalties/fines are an important element of a competition jurisdiction’s toolkit, even when criminal sanctions are present. The purpose of imposing penalties is generally either deterrence or retribution. They may play a critical role in deterring anticompetitive conduct particularly in countries with limited personal liability for participating in a cartel, lack of prison terms for cartel organizers, and/or limited ability of affected third parties to collect damages.They may also act as an instrument for society to publicly express denunciation of an action as being wrong, besides educating the public at large that it is not an acceptable behavior under the law. Globally, over the last 25 years, the size of penalties/fines for competition law violations has increased substantially.
Penalties are a deterrent because the possibility of a penalty enters into the calculus of enterprises considering violating the law. Competition authorities commonly face the challenge of how to ensure that penalties have a true deterrent effect. On the one hand, they should be large enough to ensure that the expected penalty for a violation is greater than the gain. The expected cost of punishment depends critically on the value of the penalty reduced for the probability of paying the fine, based on both detection and ultimate determination of a legal violation meriting that penalty. On the other ha…