Enhancing International Cartel Enforcement: Some Modest Suggestions

Donald Klawiter, Sep 28, 2011

International cartel enforcement is the centerpiece of the antitrust world today and is certainly a subject of concern and anxiety for corporate boards and executives throughout the world. While it seems that this very powerful enforcement program has long dominated antitrust practice, it has been active and effective for less than twenty years.

Twenty years ago, the European Commission and the Antitrust Division of the U.S. Department of Justice were aggressively pursuing national, regional, and local cartels within their own borders, but there was little effective action beyond those borders. There was virtually no cooperation or coordination among enforcement agencies. Indeed, there were blocking statutes to prevent such cooperation and a high degree of suspicion among enforcers.

In the United States, penalties were calculated and assessed, but the Antitrust Division seemed content with the $10 million statutory maximum, and little thought was given to invoking the relatively new “twice the gain, twice the loss” alternative fine statute, 18 U.S.C. § 3571(d). Some defendant executives faced short jail sentences, but many executives steered through the system successfully with probation or home detention sentences. In Europe, corporate fines were assessed regularly, but the fines were within the range that corporations could reasonably afford. Cartel cases in other countries were rare and very limited. Only a few visionaries-such as Eleanor Fox and John Shenefield-saw a major international movement to rid the world of multinational cartels that many thought did not exist at all.

Today, we live in an enforcement environment of coordinated multi-jurisdictional raids, interrelated leniency programs, and truly draconian corporate and individual penalties. The drama of the lysine and marine hose cartels, both caught on surveillance video, demonstrated the powerful tools at the command of the enforcers and the powerful images and words that were uttered at actual cartel meetings. The explosion of stiff sentences-both corporate and individual-has enhanced the deterrence calculation considerably; yet, at the same time, more and more cases continue to be uncovered and investigated.

This brief essay will attempt to answer two important questions that affect the current state of international cartel enforcement: (1) Are individual criminal penalties reaching the tipping point, i.e. the point where non-U.S. executives will not submit to U.S. jurisdiction and U.S. executives will take their chances at trial, thus changing the enforcement calculus considerably; and (2) Is U.S. case selection limited only to a few industries at a time, and does that affect deterrence?