ABSTRACT
Chapter 5 notes that cartels are horizontal agreements which set prices, either directly or by manipulating output; share customers by allocating them between suppliers directly or by allocating each supplier control over customers in a specific geographical area; or agree to co-ordinate other terms and conditions of sale. Cartels in Europe were tolerated or even encouraged until the second half of the twentieth century. Attitudes have since hardened considerably and cartels are now seen as the worst form of competition law violation. The orthodoxy which underlies contemporary cartel enforcement is the concept of optimal deterrence: penalties will only deter cartel activity if they strip away the gains that a cartelist can expect from engaging in unlawful activity. This chapter considers cartel punishments in its many forms, including corporate fines, compensatory damages, individual criminal sanctions, and director disqualification. Finding the right balance between the various sanctions available is also important. One of the most important features of optimal deterrence is increasing the chance of cartels being detected. The key tool to improve cartel detection is an effective leniency policy, where cartel members are encouraged to defect and ‘blow the whistle’ on a cartel by providing evidence to the relevant authorities.
