14. Juli 2011. Via SSRN.
Based on an analysis of cartel prosecutions since 2007, the way the European Commission has built up its fines in practice is assessed. The fines are compared with those imposed by the European Commission over the period 1999-2006. The main findings are that while fines have increased significantly, this is due not to harsher fines but less generous reductions under the European Commission’s leniency programme. In some areas the European Commission has not followed its own guidelines – fines are generally lower than set out, many aspects of the fining process are unexplained or redacted. Our estimates of the fines to sales ratios together with new research on overcharges and profit margins suggest that fines may be closer to those for optimal deterrence than previously thought.
Cartel fines 2007-2010
Pre-leniency fines were between 0% and 73% of total sales, with an average of 23%, and most below 30%.
Fines are largely determined by the cartel’s collective market share, sales in the last year of the cartel, and the duration of the cartel.
The penalty surcharge was considerably less than a 100% for each prior offence.
The Commission offered no evidence of the level of overcharges, and in a significant number of cases accepted that the agreement had not or had only been partially implemented.
The Commission is excessively secret redacting key information including information on how fines were calculated.
The higher fines are at levels which are restitutionary, and possibly provide optimal deterrence, for many cartels.
Comparison with pre-2007 Commission prosecutions
The average post-leniency fine per firm was 84% greater than that prior to 2007.
The average pre-leniency fine per firm was the same at around €58 million implying final fines were higher because of less generous reductions under the Commission’s leniency programme – 18% reduction compared to 36% prior to 2007.
The Commission’s prosecutions were more reliant on whistleblowers – full immunity was given in 73% of cartels compared to 48% prior to 2007.
Ability to pay was taken into account more often but resulted in relatively minor reductions overall.
The average duration and size of cartels was greater than prior to 2007.