Business Cartels Research Articles

Embracing policy innovations from abroad: the role of learning in Chile’s anti-cartel reforms

Why and how do policymakers initially sceptical of policy innovations from abroad eventually transfer them to their own countries? Focusing on Chile’s reforms to combat business cartels in 2009 and 2016, this article answers that question. Policy diffusion and transfer literatures maintain that coercion, competition, learning or emulation could account for foreign inspirations in policymaking. However, these literatures overplay the role of coercion and emulation in policy transfer to countries in the global south, and have difficulty distinguishing between different mechanisms in empirical studies. To address these limitations, I suggest analysing three intermediate causal steps in policy transfer: first, policymakers’ motivations in initiating policy reforms, second, their reflections on how the foreign-inspired model responds to the policy problem at hand, and third, their reflections on the fit between the foreign model and domestic conditions. Through process-tracing of two anti-cartel reforms in Chile, I find that policymakers introduced foreign-inspired policy measures to combat business cartels through a process of learning from other countries and international organisations, rather than coercion or emulation. Learning was evident in three ways. First, in the initiation of the reform, as policymakers responded to a clearly identified policy problem; second, in policymakers’ careful reflection on how the foreign-inspired model responded to these problems; and third, in the adjustments made to fit the foreign model to domestic conditions. The analysis demonstrates the utility of analysing intermediate causal steps in policy transfer, and of paying more attention to local actors and political processes.

Cooperation Against the Law. Criminological Study of the Social Organization of Business Cartels

Cooperation Against the Law. Criminological Study of the Social Organization of Business Cartels

Optimal deterrence: Exploring business cartels in Indonesia and their impact on the economy

A business cartel is a business that is carried out by business actors to obtain market power by regulating the market by fixing prices, for example, by limiting the availability of commodities on the market. This paper examines in detail business cartel practices in Indonesia, explores their impact on the economy, and analyzes KPPU as an unfair business eradication body. In so doing, this paper analyzes eight business cases in Indonesia to describe and evaluate the practices of economic cartels in the industry. Those cases were randomly chosen for different periods and different industrial sectors. Using a qualitative analysis method, it is found that business cartels, unfortunately, are still rather common practice in Indonesia. It is also found that business cartels harm economic development, citizens and customers, since they tend to be monopolistic practices so that the customers will have to pay high prices for limited commodities. In addition, KPPU needs to be reformed, and the amendment of current antitrust law also needs to be executed. Consequently, judges and lawmakers should understand the balance of business interest and public interest at the same time.

Prohibitions Against Anti-Competitive Agreements in Pakistan - A Country Where Business Cartels Thrive

Pakistan’s Competition Act, 2010 (CA ’10) and Competition prohibits anti-competitive agreements, and provides elaborate substantive guidelines to suppress and sanction anti-competitive agreements. More specifically, CA '10 prohibits: 1. Any undertaking from entering into any agreement with the object or effect of preventing, restricting or reducing competition within the relevant market; 2. Any association of undertakings to enter into any agreement with the object or effect of preventing, restricting or reducing competition within the relevant market; or 3. Any association of undertakings from making any decision in respect of the production, supply, distribution, acquisition or control of goods or the provision of services; which have the object or effect of preventing, restricting or reducing competition within the relevant market. This article highlights the must to know thresholds for the reader.

Leniency in exchange for cartel confessions

Leniency offers corporations the possibility to come clean about their involvement in cartel conduct (for example, price-fixing, bid-rigging) in exchange for immunity or reduction of financial penalties. In Europe, nearly 60 percent of detected cartels are discovered through leniency. This makes leniency the most applied detection tool for uncovering cartel conduct violations. What are the considerations in applying for leniency or refraining from doing so? How do those considerations relate to private law enforcement through civil liability regarding business cartels? These questions are discussed based on semi-structured interviews ( n = 34) with cartelists, competition lawyers and in-house legal counsel to study theoretical assumptions underpinning leniency arrangements in the Netherlands. This study investigates four scenarios on the use of leniency suggested in the literature and finds empirical support for only two. Strategic use of leniency and false confessions occur in the Netherlands, but to a lesser extent than the existing literature suggests. Moreover, various disincentives, and especially the rise of private enforcement, make leniency an unattractive and uncertain option for cartelists.

Strong by concealment? How secrecy, trust, and social embeddedness facilitate corporate crime

This article examines how corporate crime is organised through studying the longevity of illegal business cartels. Previous studies demonstrate cartels can remain undetected for years or decades. Similar to criminal networks, cartel participants need to communicate in order to collaborate effectively, but operate covertly at the same time. The case study analysis of fourteen Dutch cartel cases in this study demonstrates two main findings. First, cartel participants communicate frequently and elaborately, and the need for trust and communication impedes concealment. Second, the longevity of cartels cannot be explained by isolation from but by embeddedness in their social environment. The context of legitimacy and a facilitating environment are significant factors. Criminal collaboration is studied extensively in literature on organised crime, however gained little attention in the literature on corporate crime. Hereby, this study contributes to an understanding of how corporate criminal conduct is organised, by applying relevant theory on criminal networks gleaned from the literature on organised crime.

Business cartels and organised crime: exclusive and inclusive systems of collusion

In this article, two case studies of large-scale bid rigging in the construction industry in Canada and the Netherlands are analysed to explore why business cartels sometimes do and sometimes do not involve organised crime. By combining concepts from both organised crime and organisational crime, an integrated understanding of the organisation of serious crimes for gain is applied. Across time and space, businesses in the construction industry are known to fix prices, use collusive tendering and divide market shares in illegal cartel agreements. In order to stabilise cartels, participants need to ward off new competitors and prevent cheating within the cartel. The question why we see a system of collusion involving organised crime and violence in Canada as opposed to the Netherlands is answered through analysing two comparable cases. This article finds two systems of bid rigging emerge under different cultural conditions: inclusive and exclusive collusion. The exclusive system makes use of the violent reputation provided by criminal groups and distinguishes from the inclusive system that uses sophisticated administration of mutual claims in shadow bookkeeping.

Reimagining the Hajj

Throughout the Middle East and the Islamic world, political and religious leaders are being pulled into sharpening debates over rival approaches to reforming the Hajj. For at least two decades, Hajj controversies have deepened with rising death tolls among the pilgrims and with soaring complaints about corruption and incompetence against pilgrimage managers in Saudi Arabia and dozens of other countries. Demands for Hajj reform are reaching new peaks after Saudi officials recently revealed stunning details of the scope and magnitude of pilgrim fatalities during the last 14 years. The Saudi data leave little doubt that the quality of care for Hajjis varies enormously depending on several key factors which policy makers and religious leaders must address with greater honesty and determination. Year in and year out, the most vulnerable pilgrim populations are poor people, women, and children from across Africa and Asia as well as foreign workers, refugees, and illegal migrants living in Saudi Arabia. Most of the current proposals for Hajj reform ignore these high-risk groups. Saudi planners focus on promoting year-round pilgrimage to boost tourism revenues and high-end infrastructure. In most other countries, government-run Hajj agencies are busy cutting market-sharing deals with private business cartels and their political patrons. The combined effect of these policies is to weaken what remains of already inadequate regulations that are vital to the protection of all Hajjis. Meanwhile, support is also growing for more sweeping proposals to reimagine and reinvent the Hajj instead of fine-tuning the status quo. Some of these reforms are particularly likely to test the ingenuity and influence of leaders from all backgrounds because they challenge longstanding custom. A few of the most unconventional suggestions include lengthening the Hajj season to several months as well as linking the Hajj to pilgrimages and festivals of other world religions throughout the year.

Sanction Accumulation in the Context of Business Offending: The Full Force of the Law?

Over the past thirty years or so the regulation of business cartels in an international context has provided an interesting site for the application of legal sanctions—both criminal law and otherwise, both penal and otherwise—in a way which is wide-ranging and with some impressive accumulation in quantity, although without much systematic and considered reflection on the theoretical basis or practical impact of this practice. From the point of view of both policy and justice, the calculation and critical assessment of such sanction accumulation might appear to be an important and worthwhile exercise. Yet the theory and the methodology of such an assessment appears to be insufficiently considered and worked out. It will be argued here that this is a matter which deserves some reflection and clarification, with some endeavour to work out principle and method for the purpose of calculating sanction accumulation and the matching of the latter with victimhood in this context.

Managing Cartels: how Cartel Participants Create Stability in the Absence of law

Firms enter cartels (e.g. price-fixing; bid-rigging) in order to control market uncertainties and gain collusive profits, but face challenges in controlling the cartel itself. A challenge for business cartels is how to organise collective illegal activities without the use of formal control, such as binding legal contracts or arbitration. While one might expect that a lack of formal legal control leads to mutual conflicts and opportunistic behaviour resulting in short-lived cartels, firms often manage to continue their illegal conduct for years. This raises questions as to how firms organise their cartels in the absence of legal means. This article addresses how informal coordinating mechanisms enable cartel stability outside the scope of formal legal control. Based on an in depth study of 14 Dutch cartels, this article shows the importance of informal social mechanisms to coordinate, monitor, enforce, and compensate for the longevity of business cartels. Furthermore, the results emphasise that in order to explain cartel stability, social mechanisms that induce trust need to be considered.

Effects of the environment on illegal cartel activity

Purpose – Using resource dependency theory, the purpose of this paper is to examine what elements in the business environment may be associated with the formation and continuance of cartels. Design/methodology/approach – The authors employ a unique data set of 148 cartel data points from the 1970s to 2008 which have at least one American company involved to quantitatively test causal relationships. The authors also interview key class action anti-trust attorneys for their views and opinions on the impact of these environmental factors on cartel formation and continuance. Findings – The authors find statistically significant relationships between the pursuit and maintenance of industry profits and the dynamism in the industry, and illegal behavior as represented through price fixing by business cartels. The authors find that in the attorneys’ opinion, it is also the pursuit of individual corporate profits and munificence that are associated with these cartels. Practical implications – This research furthers the understanding of organizational deviance which is critical given its impact on organizations, individuals, regulators, law enforcement, and the general public. Originality/value – This research is a first step in considering cartel activity in a way that encompasses external influences in a new and innovative manner and as a tool to help researchers and practitioners better understand how organizational deviance, as manifested through illegal corporate activity, can be anticipated, identified, and prevented.

Game-playing and understanding decision-making within legal frameworks: the use of computerised simulation

The use of hypothetical factual situations to explore and discuss the way in which ‘real-life’ events and problems occur and develop is an established and valuable predictive method for understanding such events and testing the resolution of problems. In so far as such simulation employs hypothetical events and itineraries of action as a way of arriving at conclusions and solutions, it may be described as a kind of game-playing, and the discussion in this paper first explores the value of simulation exercises in legal and other contexts. Then, taking the example of a simulation based upon a board game involving strategies and risks arising in the legal regulation of business cartels, it reports on the testing of a more powerful computerised version of the board game. Examining the outcome of a large number of moves around the game board, this served as a pilot study for considering the value of further development of such a computational model for possible application in research, educational, and training contexts.

Hard Core Cartel Conduct as Crime: The Justification for Criminalisation in the European Context

This paper explores further the rationale for criminalisation of involvement in the activity of business cartels and addresses both the reasons which may be put forward to justify use of criminal law in this context and also the risks in following such a strategy of legal control. The discussion is located in the context of the emergent EU policy on the use of criminal law, as summarised in the EU Commission's Communication on EU criminal policy of September 2011, and sketches some main points for consideration in carrying out a criminalisation impact assessment in relation to cartel conduct, focusing on a number of issues: cost, legitimacy, the search for convincing retributive and deterrent argument, and the risk of both desistance and enforcement deficits.

Cartel Deterrence: The Search for Evidence and Argument

Discussion and argument concerning the deterrent impact of anticartel enforcement measures have gained in significance and controversy as the whole regulatory enterprise and rhetoric of cartel regulation has expanded and developed. Regulators have become ever more emphatic in the denunciation of business cartels, and deterrence has therefore assumed a significant role in the justification of a stronger and more determined effort of legal control. In particular, cartelists need to be deterred into whistle blowing for leniency programs to work, and businesses need to be deterred into compliance to achieve the ultimate regulatory goal. Deterrence (rather than, for instance, economic redistribution or retributive justice) then becomes a leading, perhaps the leading objective within the legal control of cartels. Yet claims of deterrent effect are notoriously difficult to measure and assess. The discussion here examines the underlying problems of penetrating and measuring the deterrent impact of anticartel policies and sanctions and considers the possible methodologies for assessing deterrence in this context.

A Pathology of Business Cartels: Original Sin or the Child of Regulation?

Over the last 10 to 15 years there has been a significant movement towards criminalisation of involvement in business cartels in a number of jurisdictions around the world, outside of the US and Canada where such conduct has been a criminal offence since the end of the nineteenth century. In particular there is now an emphasis on individual or personal as distinct from corporate liability and on the use of severe sanctions such as imprisonment. For European jurisdictions, this represents a significant shift in enforcement strategy and the perception of activities such as price fixing, market sharing and bid rigging. Observation of these legal developments inevitably gives rise to the question: what is so bad about cartel conduct as to merit censure and sanctioning through the processes of criminal law? However, a clear consensus on the specific nature of cartel delinquency remains elusive. The American approach has been to identify an element of conspiracy in the criminality of what are now commonly referred to as hard core cartels. Elsewhere, there are ill-thought out analogies put forward with theft, fraud and dishonesty. The argument in this paper seeks a justification for criminalisation in the upward spiral of enforcement activity and consequent cartel defensiveness, turning cartelists into ‘cognisant, contumacious and covert’ actors who are evolving an increasingly determined outlaw identity in the face of an increasingly assertive global enforcement enterprise.

Business Collusion as a Criminological Phenomenon: Exploring the Global Criminalisation of Business Cartels

Over the last dozen years or so there has been a burgeoning of criminal law for purposes of dealing with business cartels in a number of jurisdictions (for instance, the new ‘cartel offence’ introduced under the Enterprise Act 2002 in the UK). The discussion here provides first of all some account of this process of criminalisation, mapping it in terms of jurisdictions and the legal character of this category of cartel offending. It then seeks to explain and account for the phenomenon and more particularly to determine the extent to which it may be seen either as an element of more forceful prosecution strategy, or alternatively as a sea-change in moral perception and evaluation. Put another way, is this a development led by legal policy, or a genuine shift in outlook, which has produced a new legal policy? It will be argued finally that, in a more pragmatic perspective, the success of the criminalisation project in any case depends on the emergence of a genuine sense of ‘hard core’ delinquency, without which effective regulation by means of criminal law is unlikely to be achieved. In this respect, a manufactured sense of moral censure, fostered by prosecutors to facilitate leniency programmes, may (outside the US) eventually prove to be a point of vulnerability in such strategies.

Business Cartels as a Criminal Activity: Reconciling North American and European Models of Regulation

Business Cartels as a Criminal Activity: Reconciling North American and European Models of Regulation

The Cultural Arms of the Corporate Establishment: Reflections on the Work of Herb Schiller

If New York glitters like gold and has buildings with 500 bars, let me leave it written that they were built from the sweat of the canefields: the banana plantation is a green inferno so that in New York they may drink and dance (Neruda, 1974). Herbert Schiller, who died on January 29, 2000 at the age of 80, was one of the most widely recognized and influential political economists of communication. For four decades he represented the center of gravity in the global debates on cultural imperialism, the power of the media, and many persistent and pervasive themes in international communication. As a leader, scholar, and teacher he strived for a just and fair society and a passionate belief in social justice and social accountability ran through all his writings. Schiller was one of the first analysts to realize that in the late 20th century the Marxist formula for capitalist rule had changed to something at once more pervasive and less visible. The classic Marxist formulation referred to ownership of the means of production. It evolved toward monopoly or conglomerate ownership and eventually to what Bertram Gross described as friendly fascism. Gross (1980) maintained that the governing mechanisms in America were obscured by facades behind which the decisions were made by intricate networks of business cartels working closely with military officers and their own people in civilian government (p. 31). According to Schiller, the new driving force, vanguard of the old, is less visible precisely because it is more pervasive. Does the fish in the ocean know that it is swimming in salt water? Today children are born into a commercial media (mostly television) environment that defines their world and their role in it. Lacking alternative for comparison and judgment, the media-dominated cultural environment seems natural, inevitable, and unalterable. That condition is the prime requirement for ideological control at home and imperial policy abroad. Corporate rule becomes identified with democracy. The citizen is given no alternative vision of the good society. Wealth is extol led, the gap between the rich and the poor widens, and poverty increases unreported and unobserved. At the dawn of the 20th century, Ambrose Bierce (1946) in The Devil's Dictionary defined the corporation as an ingenious device for obtaining individual profit without individual responsibility (p. 216). The definition still holds. But near the end of this century, the profits--and grim consequences--of this ingenious device went beyond anything the Bierce could have imagined. A recent study (Hoynes, 1999) of news and public affairs programming by the media watchdog-group FAIR found that the voice of business on television was much louder than all others even on the Public Broadcasting Service (PBS). More than one-third of all on-camera sources were representatives of corporate America or Wall Street. The 1999 study also indicated that the recent findings almost doubled the percentage found in a similar 1992 study. Schiller (2000, p. 101) observed that corporate influence pervades nearly every aspect of society. From simple things, like our daily diet and the clothes we wear, to matters of larger scale, like the way we communicate with each other. Schiller had foreseen and critiqued all that. He had concluded that the two party system and control of information were inherent in and necessary for the perpetuation of the corporate order. He had lived through the brutality of the Great Depression. In 1929 his father lost his job as a jeweler and was unemployed until 1940, when war production created new jobs. In Living in the Number One Country: Reflections from a Critic of American Empire Schiller (2000) recalled the sense of the period: There was always the money worry ... There were frequent quarrels, most of which had economic origin.... This atmosphere penetrated my being with sadness and resentment. …

The Costs of Cooperation

Public goods production is not necessarily desirable and involves higher costs than is often recognized. Specifically, public goods production may require that a small minority of individuals can collude at the expense of others or impose strategic sanctions on non-contributors. These facilities may have negative as well as positive effects. The same conditions that support public goods production also support business cartels and racial discrimination, for instance. We examine the implications of this perspective for modern debates on economic policy, civic virtue, communitarianism, and libertarianism.

Russia in Asia in 1997: Moving beyond the "Strategic Partnership"

The Russian Federation's policy in Asia has changed dramatically in just a few years. From a blustering, unsophisticated, and largely unwelcome intruder to the Asian club, Russia has recently emerged as one of the more active and accommodative players in post-Cold War Asia. While Russia lacks the clout the Soviet Union once wielded in world affairs, the Yeltsin government has begun to gain respect for its steady diplomatic efforts to mend relations with its neighbors. In the early 1990s, Russia focused mostly on restoring ties with China. But in the mid-1990s, it has begun to diversify its contacts across Asia, putting into action Russian official declarations regarding the multipolar post-Cold War world. This new, balanced policy may also reflect the growing domestic weight of Russia's powerful business cartels in steering the Yeltsin administration toward a greater focus on economics, investment, and trade over politics. In the past year, Russia has made considerable efforts to upgrade economic links with Japan, the Republic of Korea, and India. Thus, while the strategic partnership with China may anchor Russian policy in Asia, that relationship no longer dominates or rules out mutually beneficial ties with other capitals. On a broader political front, the team of Foreign Minister Evgeniy Primakov and Deputy Foreign Minister for East Asia Grigoriy Karasin has ushered in an active policy of shuttle diplomacy. They have turned from one summit to another in 1997 in an attempt to smooth over long-standing territorial disputes and put a more solid footing under several still-tentative relationships. Prime Minister Viktor Chernomyrdin and Deputy Prime Minister Boris Nemtsov played active roles in bringing the weight of the Russian govern-