The Size of Cartel Overcharges : Implications for U.S. and E.U. Fining Policies

The purpose of this paper is to examine whether the current cartel fine levels of the European Union and the United States are at the optimal levels. The article does this by collecting and analyzing the available information concerning the size of the overcharges caused by hard core pricing fixing, bid rigging, and market allocation agreements. Data sets for United States cartels are assembled and examined (these cartels overcharged an average of 18% to 37%, depending upon the data set and methodology employed in the analysis and whether mean or median figures are used). Separate data sets for European cartels also are analyzed (which show overcharges in the 28% to 54% range). The article similarly examines cartels that had effects solely within a single European country (which showed significantly lower overcharges, averaging in the 16% to 48% range). In light of the antitrust objective of optimal deterrence, this article compares the current fine levels in both the European Union and the United States to the amounts gained on average by cartels as a result of their illegal activity. The results show that on average these cartel overcharges are significantly larger than the criminal fines of either the European Union or the United States. This means that the United States and - especially - the European Union should increase their penalties for hard core collusion substantially