CORPORATE CRIME REPORTER
Connor
Says Antitrust Division Becoming Increasingly Irrelevant In Fight Against Cartels
22 Corporate Crime Reporter 29, July 20, 2008
The Department of Justice’s Antitrust Division is becoming increasingly
irrelevant in the international crackdown on cartel activity.
That’s the take of John Connor, a professor of economics at Purdue University.
Connor has just completed a report for the American Antitrust Institute titled The United States Department of Justice Antitrust Division’s Cartel Enforcement: Appraisal and Proposals.
In an interview with Corporate Crime Reporter, Connor said that the Antitrust Division has been responsible for only 20 percent of the fines and settlements recovered by all antitrust agencies and private plaintiffs around the world since 1990.
“The Antitrust Division had no peers at all in the area of punishing international cartels through the 1960 and 1970s,” Connor said. “They were the only game in the world. The rest of the world has started to catch up, however. There are at least 100 countries that have active cartel enforcement today. At the end of World War II, there were only three or four countries that had these laws. Germany and Japan had them by virtue of being occupied by the United States authorities.”
“So, it has gone from three countries in 1937 to more than 100 today. And they are learning through observation, through imitation of what the Department of Justice has done historically. They are learning to become better and better at detecting cartels and teaching the court system how to deal with them. The position of the Department of Justice has been going down relatively speaking. The European Union began punishing cartels in 1969. By the 1980s, it was about equal to the United States in the amount of fines and the number of cartels that it was punishing. And in the last ten years or so, it has surpassed the Department of Justice.”
“So, looked at in this global context, the Department of Justice is becoming increasingly irrelevant in terms of discouraging cartel formation,” Connor said.
Connor said that fewer than 20 percent of the world’s cartels are being investigated and prosecuted.
The report found that the number of criminal cartel cases brought by the Division has dropped 49 percent from 1995-99 to 2004-06.
And the number of corporations charged annually dropped continuously from1995 to 2007.
“There now is a significant and growing backlog of criminal investigations and unresolved matters,” the report found.
Part of the problem lies with the fact that the Antitrust Division is underfunded and understaffed, Connor said.
“It is a pretty small agency as federal government agencies go,” Connor said. “Something like 210 to 240 attorneys and economists in the Antitrust Division are devoted to anti-cartel enforcement. That’s a small number. That includes the ones working in Washington, as well as the prosecutors working in the regional offices. It represents about 29 percent of the Division’s total employees. That’s also true of its budget allocation. The Division allocates about 29 percent of its budget to cartel enforcement.”
“We had thought it would be higher. In speech after speech, one hears the leadership of the Division saying that cartel enforcement is our number one priority. Well, it may be. But it doesn’t account for the major portion of the resources being used in the Division.”
The report calls for a doubling of the Antitrust Division’s budget.
The report also presented an interested paradox. Despite increased corporate fines, the report found that the corporate recidivism rate was high. More than 200 companies were found guilty of participating in two or more cartels since 1990.
And 53 companies were found to have participated in five or more cartels.
The report found that corporate fines are greatly outweighed by settlements secured by private litigants.
When the report was presented last month at an American Antitrust Institute conference in Washington, D.C., Deputy Assistant Attorney General Scott Hammond stood up to defend the Division. He took particular offense at the suggestion that the private plaintiffs’ bar was leading the way against cartels in the United States.
“I will make this assertion to you,” Hammond told the group. “I have been with the Division for 20 years. I am familiar with every single international cartel investigation that we have opened. I can tell you that there is not a single example, not one, where we have learned about an international cartel that was detected by the private bar before we began an investigation. There is not a single case where the private bar has detected the cartel activity before we did where we subsequently brought a criminal prosecution. Furthermore there is not a single case brought by the plaintiff bar where as the result of their discovery they have advanced one of our international cartel prosecutions or investigations.”
(Listen to audio of the session here.)
The report also recommends that the government study implementing a bounty provision similar to the one used under the False Claims Act. And it recommends increasing corporate fines for cartel crimes from $100 million to $1 billion.
[For a complete transcript of the Interview with John Connor, see 22 Corporate Crime Reporter 29(10), July 21, 2008, print edition only.]
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