From Economic Recession to Legal Opportunity: The Case for Cartel Criminalisation in Europe

By Anna Tzanaki (University College London)

This essay attempts to answer three questions: i) why illegal cartels persist given the existing liability regime in Europe; ii) why criminal sanctions against hard-core cartelists are a necessary supplement to the antitrust enforcement toolbox; iii) why criminal sanctions are desirable from a normative perspective. Accordingly, the analysis proceeds as follows. Part II sheds light on two prominent but underappreciated problems in the intersection of EU antitrust law and corporate governance that underlie the failures and inadequacy of the existing liability regime. Part III analyses the advantages of moving towards a mixed regime that combines corporate and individual criminal liability. Part IV explores the normative, economic and moral, arguments for cartel criminalisation. Part V concludes with some thoughts on lessons to be learnt from the crisis and the way forward for Europe.

In the aftermath of the global financial meltdown and ensuing EU crisis, the European Union still tries to agree on the causes and fine-tune its regulatory responses. Among the policy tools employed, once unimagined but now the new mainstream, have been high-powered EU state-aid laws, bank bail-in rules and aggressive intervention away from market fundamentals. Yet the crucial question remains looming upon EU policymakers: can the next crisis be prevented? Perhaps an affirmative answer partly lies with enhancing individual liability that goes beyond macro and reactive approaches and promotes deterrence of the actual wrongdoers. After all, it is people behind financial and private organisations making the actual decisions that impact our lives.

In the area of EU competition law, the time is ripe to seriously think about criminalising cartels. Despite details of implementation – EU harmonisation or decentralised enforcement, the price of another missed opportunity is too high and the challenges posed by the EU supranational structure can no longer serve as an excuse. More importantly, counter to claims that such a move is not in line with the European tradition, there is ample evidence that several Member States criminalise hard-core anticompetitive behaviour in their national laws, and the EU itself is moving to that direction in other areas (e.g. criminal sanctions for market abuse offences). In the age of corporate elites, managerial capitalism, financial and industrial globalisation the most effective way to hold accountable those at the top of the ladder is by raising the threat of criminal liability. In this way we make sure that their incentives are closely aligned with those of society as a whole. In the process we also address major problems such as agency costs, moral hazard and reinforce the effectiveness of existing leniency programmes aiming to undermine cartel stability.

What Europe mostly needs is more competition and to that goal we must make market players realise that they cannot rig the rules, as they shall have “skin in the game”. By having individuals bear at least some of the consequences of their actions, not only do we foster competition on the merits and help restore public confidence in markets but we also relieve companies and their parents from exorbitant monetary sanctions which have proved ineffectual and counterproductive and hence set the path for the natural selection of value creating firms in a healthy business environment. Criminalising hard-core cartels is the right thing to do and is also good economic policy that sets the tone for more thriving EU business and more law-abiding corporate employees. No question many challenges lie ahead and one needs to proceeds with great care in designing and implementing criminal law policy, yet the direction is clear.

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