Antitrust Law Daily Wrap Up, ANTITRUST NEWS: American Antitrust Institute urges U.S. Sentencing Commission to increase antitrust fines, (Jul 9, 2013)

By Tobias J. Gillett, J.D., LL.M.

In a July 8 letter to the United States Sentencing Commission (USSC), the American Antitrust Institute (AAI) has asked the USSC to reconsider its formula for calculating penalties for antitrust offenses, potentially to at least double the current fines.

The AAI’s letter challenges an “empirical finding” the USSC has relied on in deriving its formula for calculating the amount of fines for antitrust offenses, under which the USSC “estimate[s] that the average gain from price-fixing is 10 percent of the selling price.” That 10 percent figure is later doubled before being included in the calculation to determine the amount of an antitrust penalty. The AAI notes that it does not know “how the Commission arrived at 10 percent,” but that the USSC has “never seriously re-examined this estimate.”

However, the AAI observes that later empirical studies have found that price fixing generally “raises prices by significantly more than 10 percent on average.” The letter cites a study of cartel overcharge estimates by John M. Connor and Robert H. Lande, “Cartels as Rational Business Strategy: Crime Pays,” 34 Cardozo L. Rev. 427 (2012), which concluded that the median overcharge for all time periods was 23 percent, and the median overcharge for price fixing ending since 2000 was 22.5 percent.

Therefore, the AAI suggests increasing the price fixing overcharge estimate to at least 20 percent. The letter observes that this figure would double the amount of antitrust fines, provide significantly more money to the crime victim’s fund, and “lead to more nearly optimal deterrence of price fixing and other cartel behavior.”

News: Antitrust