Determinants of U.S. Antitrust Fines of Corporate Participants of Global Cartels

Abstract

For criminal violations of the Sherman Act, although guided by federal sentencing guidelines, U.S. Department of Justice has great latitude in recommending corporate cartel fines to the federal courts, and its recommendations are nearly always determinative. In this paper, we analyze the determinants of variation in size of criminal fines imposed by the Antitrust Division of the DOJ on 118 corporate participants of hard-core global cartels. Our behavioral model provides the first direct test of the optimal deterrence theory of antitrust crimes. Regressions are fitted to a sample of the corporations that participated in international cartels and that were fined between 1996 and March 2010. The predictive power of the optimal-deterrence model is quite good. We find that U.S. corporate cartel fines are strongly directly related to economic injuries from collusion. However, U.S. fines do not conform to the theory’s predictions about the probability of detection and conviction of clandestine cartels. We also find that fines complement other antitrust penalties: the number of months that a corporate defendant’s managers are sentenced to prison and private damages paid.