The graphite electrodes cartel: fines which deter?

Abstract

Introduction Agreements between undertakings aimed at fixing prices, limiting output or sharing markets without any expectation of offsetting benefits to consumers are prohibited under Article 81 of the EC Treaty. Cartels are obviously included in this. A violation of this prohibition can for each violator attract a fine up to 10 per cent of its worldwide turnover. This fine will in the first instance be levied by the Directorate General for Competition following their investigation and is formally an administrative rather than a criminal fine. Their decision can be appealed to the Court of First Instance (CFI) and subsequently to the European Court of Justice (ECJ). In order to overcome the information problems in detecting and prosecuting cartel agreements, the EU has introduced a leniency programme which rewards cooperation by cartel members through a reduction in the fine. The law on cartels, like other areas of competition policy, is founded on principles of economics, but economists are rarely involved in its application against explicit hard-core collusive agreements. In part, this is due to the absence of evidentiary problems – direct evidence may be found from a whistleblower or in dawn raids (e.g. e-mails) – and thanks to leniency programmes, cartel members may either reveal details of their infringement in return for immunity from fines or start cooperating and providing evidence in return for a leniency discount once an investigation into their industry has been opened.