Super Large Cartel Fines-Are We Really Deterring Price Fixing?
DG Competition has published its latest cartel statistics . We are now a long way from the Quinine Cartel of 1969 in which the Commission fined all the six undertakings involved in total the princely sum of ECU 490,000. By contrast the totals fines for price-fixing for the 2012-2014 were over €1 billion a year, respectively €1,875 694,000 in 2012; €1,882,975,000 in 2013 and €1,689,497,000 in 2014. Already in 2015 almost €250 million in fines have been imposed. The total amount of cartel fines in the whole of the last decade of the 20th century, when anti-cartel enforcement had already begun to be taken much more seriously amount to just over €610 million, less than half the amount of any of one of the past three years level of cartel fines.
At one level it is easy to see how DG Comp can trump these figures they appear to be bashing big business and it is clearly right to bring price-fixers to book. It is unlawful, extremely damaging and those who undertake this activity should be made to pay.
However, there are some disturbing questions in the detail. For example, who is made to pay? DG Comp essentially has one club: fines on businesses. So it uses that club. The difficulty here is that the price-fixers, individual company executives who organise the price-fixing and personally benefit through bonuses, pay increases, commissions and promotions are not penalised. They remain unpunished and often promoted. A few Member States have individual criminal penalties for price-fixing such as the United Kingdom. However, the sad British experience of trying to gaol executives for price-fixing does not inspire confidence. There was utter the failure to obtain convictions in the British Airways case and more recently in the alleged Steel Tanks cartel suggest prosecutions really are not that easy to bring to a successful conclusion. In part this may well be because European countries cannot deploy the armoury of legal weaponry and procedures that are available to the US Department of Justice; in part because of the operation of the ECHR and in part it may be also be down to lack of regulator experience.
The danger of not addressing personal culpability is that the incentives remain in place for repeat offences. Individual executives have the incentive to continue with price-fixing. Modern executives are almost never owner-managers so they have no shareholding of any size which will unduly suffer from heavy corporate fines and they can set their bonus conditions to benefit from the price-fixing.
We can of course continue with a EU version in cartel terms of the old Soviet joke ‘we pretend to work, you pretend to pay us’ which would be ‘we pretend to be deterred, you pretend to be beating cartels’. The size of the fines are so great that DG Comp gains great approval from media, public and Parliament, industry wails about the size of the fines, and the price-fixing continues. My view is that if charging executives criminally is for a host of reasons too difficult (for instance, in addition to the ones given above, once we enter the realm of criminal law the standard of proof rises dramatically as do the protections under the ECHR), then perhaps we should look again at personal civil fines and the stripping of the bonuses, commissions and promotions of executives who have benefited from the price-fixing. Alternatively we can just continue to pretend that we are dealing with price-fixing by continuing hitting corporate Europe with big fines whilst the price fixing goes on.