Review of Industrial Organization

, Volume 48, Issue 4, pp 405–432 | Cite as

Policy Innovations, Political Preferences, and Cartel Prosecutions

  • Vivek Ghosal
  • D. Daniel Sokol


Though antitrust cartel cases have received significant attention, the policy determinants and the political preferences that guide such enforcement remain understudied. We empirically examine the intertemporal shifts in U.S. cartel cases during the period 1969–2013. This period has seen substantive policy innovations with increasing penalties that are related to fines and jail terms. There appear to be four distinct cartel policy regimes: pre-1978, 1978–1992, 1993–2003, and 2004–2013. Our empirical estimates show significant variation in the number of cartel cases initiated and the penalties imposed across the policy regimes. The more recent regimes are characterized by far fewer cartel cases initiated, but with substantially higher penalties levied on firms and individuals. While effective deterrence is one explanation for these patterns, we are more inclined to conclude that U.S. cartel enforcement has seen an underlying shift away from focusing on smaller cartels to larger and multinational cartels. In terms of political effects, our results reveal no clear inter-political party effect, but there appear to be interesting intra-political party effects. We find that particular Presidencies matter for cartel enforcement, and variation across Presidential administrations led to marked shifts in the total number of cartel cases initiated. Overall, the shifts in the prosecution patterns portray changing policy priorities and a search for the optimal enforcement design to curtail one of the clearest sources of welfare loss, collusion.


Cartels Antitrust Leniency Penalties Antitrust Amendments Act ACPERA 

JEL Classification

K21 L41 L13 L11 


  1. Aguzzoni, G., Langus, G., & Motta, M. (2013). The effect of EU antitrust investigations and fines on the firm valuation. Journal of Industrial Economics, 61(2), 290–338.CrossRefGoogle Scholar
  2. Baker, D. (1976). To make the penalty fit the crime: How to sentence antitrust felons. Remarks before the Tenth New England Antitrust Conference 20 Nov 1976.Google Scholar
  3. Baker, J. (2002). A preface to Post-Chicago antitrust. In R. van den Bergh, R. Pardolesi, & A. Cucinotta (Eds.), Post-Chicago developments in antitrust analysis. London: Edward Elgar.Google Scholar
  4. Baker, D. (2011). Criminalizing cartels: A critical interdisciplinary study of an international regulatory movement. In C. Beaton-Wells & A. Ezrachi (Eds.). Oxford: Hart Publishing.Google Scholar
  5. Baker, J. (1989). Identifying cartel policing under uncertainty: The U.S. steel industry, 1933–1939. Journal of Law and Economics, 32, S47–S76.CrossRefGoogle Scholar
  6. Baker, J., & Shapiro, C. (2008). Reinvigorating horizontal merger enforcement. In Robert Pitofsky (Ed.), Where the Chicago school overshot the mark: The effect of conservative economic analysis on antitrust. New York: Oxford University Press.Google Scholar
  7. Becker, G. (1968). Crime and punishment: An economic approach. Journal of Political Economy, 76, 169–217.CrossRefGoogle Scholar
  8. Block, M. K., Nold, F. C., & Sidak, J. G. (1981). The deterrent effect of antitrust enforcement. Journal of Political Economy, 89(3), 429–445.CrossRefGoogle Scholar
  9. Bork, R. (1978). The antitrust paradox. New York: Basic Books.Google Scholar
  10. Bowman, W. S. (1957). Tying arrangements and the leverage problem. Yale Law Journal, 67, 19–36.CrossRefGoogle Scholar
  11. Chen, J., & Harrington, J. E. (2007). The impact of the corporate leniency program on cartel formation and the cartel price path”. In V. Ghosal & J. Stennek (Eds.), The political economy of antitrust (pp. 59–80). New York: Elsevier.CrossRefGoogle Scholar
  12. Chen, Z., & Rey, P. (2013). On the design of leniency programs. Journal of Law and Economics, 56, 917–957.CrossRefGoogle Scholar
  13. Coate, M. B., Higgins, R. S., & McChesney, F. S. (1990). Bureaucracy and politics in FTC merger challenges. Journal of Law and Economics, 33(2), 463–482.CrossRefGoogle Scholar
  14. Connor, J. M. (2001). Global price fixing: Our customers are the enemy. New York: Springer.CrossRefGoogle Scholar
  15. Demsetz, H. (1973). Industry structure, market rivalry, and public policy. Journal of Law and Economics, 16, 1–9.CrossRefGoogle Scholar
  16. Department of Justice Antitrust Division. (1977). Guidelines for sentencing: Recommendations in Felony cases under the Sherman Act 24 Feb 1977.Google Scholar
  17. Dick, A. (1996). When are cartels stable contracts? Journal of Law and Economics, 39, 241–283.CrossRefGoogle Scholar
  18. Director, A., & Levi, E. (1956). Law and the future: Trade regulation. Northwestern University Law Review, 51, 281–296.Google Scholar
  19. Eckbo, P. L. (1976). The future of world oil. Cambridge: Ballinger Publishing.Google Scholar
  20. Elzinga, K. G., & Breit, W. (1976). The antitrust penalties: A study in law and economics. New Haven: Yale University Press.Google Scholar
  21. Feinberg, R. (1980). Antitrust enforcement and subsequent price behavior. Review of Economics and Statistics, 62, 609–612.CrossRefGoogle Scholar
  22. Feinberg, R., & Reynolds, K. (2010). The determinants of state-level antitrust activity. Review of Industrial Organization, 37, 179–196.CrossRefGoogle Scholar
  23. Gallo, J. C., Dau-Schmidt, K., Craycraft, J. L., & Parker, C. J. (2000). Department of Justice antitrust enforcement, 1955–1997: An empirical study. Review of Industrial Organization, 17, 75–133.CrossRefGoogle Scholar
  24. Ghosal, V. (2006). Economics, politics and merger control. In J. P. Choi (Ed.), Recent developments in antitrust: Theory and evidence (pp. 125–152). Cambridge: MIT Press.Google Scholar
  25. Ghosal, V. (2008). The genesis of cartel investigations: Some insights from examining the dynamic interrelationships between U.S. civil and criminal antitrust investigations. Journal of Competition Law and Economics, 4, 61–88.CrossRefGoogle Scholar
  26. Ghosal, V. (2011a). The law and economics of enhancing cartel enforcement: Using information from non-cartel investigations to prosecute cartels. Review of Law and Economics, 7, 50–538.Google Scholar
  27. Ghosal, V. (2011b). Regime shift in antitrust laws, economics and enforcement. Journal of Competition Law and Economics, 7, 733–774.CrossRefGoogle Scholar
  28. Ghosal, V., & Gallo, J. (2001). The cyclical behavior of the Department of Justice’s antitrust enforcement. International Journal of Industrial Organization, 19, 27–54.CrossRefGoogle Scholar
  29. Ghosal, V., & Sokol, D. D. (2014). The evolution of U.S. cartel enforcement. Journal of Law and Economics, 57, S51–S65.CrossRefGoogle Scholar
  30. Hammond, S. (2004). Cornerstones of an effective leniency program, Address before the ICN Workshop on Leniency Programs. Accessed 22 Nov 2004.Google Scholar
  31. Hammond, S. (2005). Testimony before the United States Sentencing Commission. Accessed 12 Apr 2005.Google Scholar
  32. Hammond, S. (2010). The evolution of criminal antitrust enforcement over the last two decades, Address before the 24th Annual National Institute on White Collar Crime. Accessed 25 Feb 2010.Google Scholar
  33. Harrington, J. (2004). Cartel pricing dynamics in the presence of an antitrust authority. RAND Journal of Economics, 35, 651–673.CrossRefGoogle Scholar
  34. Harrington, J. (2008). Detecting cartels. In P. Buccirossi (Ed.), Handbook of antitrust economics. Cambridge: MIT Press.Google Scholar
  35. Harrington, J., & Chang, M. (2015). When should we expect a corporate leniency program to result in fewer cartels? Journal of Law and Economics, 58, 417–449.CrossRefGoogle Scholar
  36. Hendry, D., Pagan, A., & Sargan, D. (1983). Dynamic specification. In Z. Griliches & M. Intriligator (Eds.), Handbook of econometrics. Amsterdam: North-Holland.Google Scholar
  37. Jorgenson, D. (1986). Econometric methods for modeling producer behavior. In Z. Griliches & M. Intriligator (Eds.), Handbook of econometrics. Amsterdam: North Holland.Google Scholar
  38. Kennan, J. (1979). The estimation of partial adjustment models under rational expectations. Econometrica, 47, 1441–1455.CrossRefGoogle Scholar
  39. Klein, J. (1999). Prepared statement of Joel I. Klein, Assistant Attorney General, Antitrust Division, U.S. Department of Justice, Before the Senate Judiciary Committee, Antitrust, Business Rights and Competition Subcommittee 4 May 1999.Google Scholar
  40. Kovacic, W. E., & Shapiro, C. (2000). Antitrust policy: A century of economic and legal thinking. Journal of Economic Perspectives, 14(1), 43–60.CrossRefGoogle Scholar
  41. Landes, W. M. (1983). Optimal sanctions for antitrust violations. University of Chicago Law Review, 50, 652–678.CrossRefGoogle Scholar
  42. Levenstein, M., & Suslow, V. (2004). Studies of cartel stability. In P. Grossman (Ed.), How cartels endure and how they fail (pp. 9–52). Cheltenham: Edward Elgar.Google Scholar
  43. Levenstein, M., & Suslow, V. (2006). What determines cartel success? Journal of Economic Literature, 44, 43–95.CrossRefGoogle Scholar
  44. Levenstein, M., & Suslow, V. (2008). Cartels. In L. Blume & S. Durlauf (Eds.), The new Palgrave dictionary of economics. New York: Palgrave Macmillan.Google Scholar
  45. Levenstein, M., & Suslow, V. (2011). Breaking up is hard to do: Determinants of cartel duration. Journal of Law and Economics, 54, 455–492.CrossRefGoogle Scholar
  46. Levenstein, M., & Suslow, V. (2014). Cartels and collusion—Empirical evidence. In R. D. Blair & D. D. Sokol (Eds.), Oxford handbook of international antitrust economics (Vol. 2, pp. 442–463). New York: Oxford University Press.Google Scholar
  47. Long, W., Schramm, R., & Tollison, R. (1973). The economic determinants of antitrust activity. Journal of Law and Economics, 16, 351–364.CrossRefGoogle Scholar
  48. Marx, L. M., Mezzetti, C., & Marshall, R. C. (2015). Antitrust leniency with multi-market colluders. American Economic Journal: Microeconomics, 7(3), 205–240.Google Scholar
  49. McGee, J. S. (1958). Predatory price cutting: The standard oil (NJ) case. Journal of Law and Economics, 1, 137–159.CrossRefGoogle Scholar
  50. Miller, N. (2009). Strategic seniency and cartel enforcement. American Economic Review, 99, 750–768.CrossRefGoogle Scholar
  51. Motta, M. (2004). Competition policy: Theory and practice. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
  52. Posner, R. A. (1970). A statistical study of antitrust enforcement. Journal of Law and Economics, 365, 365–419.CrossRefGoogle Scholar
  53. Posner, R. A. (1976). Antitrust law: An economic analysis. Chicago: University of Chicago Press.Google Scholar
  54. Pitofsky, R. (2008). How the Chicago school overshot the mark: The effect of conservative economic analysis on U.S. Antitrust. Oxford: Oxford University Press.CrossRefGoogle Scholar
  55. Russo, F., Schinkel, M. P., & Gunster, A. (2010). European commission decisions on competition economic perspectives on landmark antitrust and merger cases. Cambridge: Cambridge University Press.CrossRefGoogle Scholar
  56. Scherer, F. (1980). Industrial market structure and economic performance. Boston: Haughton Mifflin.Google Scholar
  57. Schinkel, M. P. (2007). Effective cartel enforcement in Europe. World Competition, 30(4), 539–572.Google Scholar
  58. Siegfried, J. (1975). The determinants of antitrust activity. Journal of Law and Economics, 18, 559–574.CrossRefGoogle Scholar
  59. Slade, M. E. (1990). Strategic pricing models and interpretation of price-war data. European Economic Review, 34, 524–537.CrossRefGoogle Scholar
  60. Sokol, D. D. (2012). Cartels, compliance and what practitioners really think about enforcement. Antitrust Law Journal, 78, 201–240.Google Scholar
  61. Spagnolo, G. (2004). Divide et Impera: Optimal leniency programs. CEPR Discussion Paper 4840.Google Scholar
  62. Spagnolo, G. (2008). Leniency and whistleblowers in antitrust. In Paolo Buccirossi (Ed.), Handbook of antitrust economics (pp. 259–304). Cambridge: MIT Press.Google Scholar
  63. Stephan, A. (2009). An empirical assessment of the European Leniency notice. Journal of Competition Law and Economics, 5, 537–561.CrossRefGoogle Scholar
  64. Stigler, G. (1964). A theory of oligopoly. Journal of Political Economy, 72, 44–61.CrossRefGoogle Scholar
  65. Suslow, V. (2005). Cartel contract duration: Empirical evidence from inter-war international cartels. Industrial and Corporate Change, 14, 705–744.CrossRefGoogle Scholar
  66. Telser, L. G. (1960). Why should manufacturers want fair trade? Journal of Law and Economics, 3, 86–105.CrossRefGoogle Scholar
  67. Varney, C. (2009). Vigorous antitrust enforcement in this challenging era. Remarks as Prepared for the United States Chamber of Commerce. Accessed 12 May 2009.Google Scholar
  68. White, L. J. (1988). Litigation and economic incentives. Research in Law and Economics, 11, 73–90.Google Scholar


  1. Sherman Act, 15 U.S.C. §§ 1–7.Google Scholar
  2. Antitrust Amendments Act of 1990, Pub. L. No. 101–588, 104 Stat. 2879 (1990).Google Scholar
  3. Antitrust Procedures and Penalties Act, 15 U.S.C. § 16.Google Scholar
  4. ACPERA, Pub. L. No. 108–237. Tit. II. 118 Stat. 661, 665.Google Scholar
  5. General Criminal Fine Statute, Alternative Fine Based on Gain or Loss 18 U.S.C. § 3571(d).Google Scholar


  1. Antitrust Amendments Act of 1990, Pub. L. No. 101-588, 104 Stat. 2879 (1990).Google Scholar
  2. Antitrust Procedures and Penalties Act, 15 U.S.C. § 16.Google Scholar
  3. ACPERA, Pub. L. No. 108-237. Tit. II. 118 Stat. 661, 665.Google Scholar
  4. General Criminal Fine Statute, Alternative Fine Based on Gain or Loss 18 U.S.C. § 3571(d). Sherman Act, 15 U.S.C. §§ 1–7.Google Scholar

Copyright information

© Springer Science+Business Media New York 2016

Authors and Affiliations

  1. 1.School of EconomicsGeorgia Institute of TechnologyAtlantaUSA
  2. 2.CESifoMunichGermany
  3. 3.Levin College of LawUniversity of FloridaGainesvilleUSA

Personalised recommendations