The Genesis of Cartel Investigations : Some Insights from Examining the Dynamic Interrelationships between U.S. Civil and Criminal Antitrust Investigations

The U.S. Department of Justice has prosecuted over 1,600 criminal antitrust (price-fixing and related) cases since 1970. Yet, we know precious little about the true genesis of these investigations. This paper uses the Vector-Autoregression methodology to examine the dynamic interrelationships between the various criminal and civil antitrust enforcement variables. A key result is that the number of criminal prosecutions increases in the years immediately following an increase in the number of civil cases, suggesting that merger reviews and other civil investigations may alert the antitrust authorities to criminal antitrust activities. To the best of my knowledge, this is the first econometric analysis which demonstrates the quantitative size of this effect and the time lags in the relationship. Other findings include important dynamic interrelationships between grand jury investigations, the number of individuals and corporations prosecuted and criminal cases, indicating that information unearthed during a given criminal investigation and prosecution often reveals information about other conspiracies leading to future investigations and prosecutions. Finally, the number of criminal cases prosecuted increase following an economic downturn. We relate this to the literature which points to cartel instability during economic downturns