Deterrence and Antitrust Punishment: Firms Versus Agents

Author:Keith N. Hylton
Position:William Fairfield Warren Distinguished Professor, Boston University, Professor of Law, Boston University School of Law
Pages:2069-2083
SUMMARY

Antitrust enforcement regimes rely on penalties against two groups of actors for deterrence: penalties against the violating firm and penalties against the violating firm's agents. Here, I examine the economics of punishing agents versus firms. My area of application is antitrust, but the argument applies generally to other fields in which the government has the choice of punishing the agent, the ... (see full summary)

 
FREE EXCERPT
2069
Deterrence and Antitrust Punishment:
Firms Versus Agents
Keith N. Hylton
ABSTRACT: Antitrust enforcement regimes rely on penalties against two
groups of actors for deterrence: penalties against the violating firm and
penalties against the violating firm’s agents. Here, I examine the economics
of punishing agents versus firms. My area of application is antitrust, but the
argument applies generally to other fields in which the government has the
choice of punishing the agent, the firm, or both. This analysis suggests that
whenever the firm has an incentive, given existing penalties, to engage in
some illegal act that may result in relatively modest punishment for its agents,
the firm can almost always induce its agents to carry out the illegal act. It
follows that almost any plausible effort to use penalties against agents to deter
price fixing can be undone by the firm’s own system of rewards for agents. For
deterrence, penalties against the firm sufficient to eliminate the firm’s
incentive to fix prices are necessary.
I. INTRODUCTION ........................................................................... 2070
II. INCENTIVES TO COMMIT ANTITRUST CRIMES ............................. 2072
A. AGENT UNDERDETERRENCE PROBLEM .................................... 2073
B. FIRM PREFERS TO FIX PRICES ................................................. 2074
C. FIRM DOES NOT PREFER TO FIX PRICES .................................. 2077
D. INCREASING THE SENTENCE ................................................... 2079
E. DEBARMENT.......................................................................... 2080
III. SOME POSITIVE IMPLICATIONS .................................................... 2081
IV. CONCLUSION .............................................................................. 2082
William Fairfield Warren Distinguished Professor, Boston University, Professor of Law,
Boston University School of Law. knhylton@bu.edu. This Essay was prepared for the Symposium
Honoring Herbert Hovenkamp at the University of Iowa College of Law, October 23–24, 2014.
For helpful comments I thank Roger Blair, Robert Lande, Daniel Sokol, and symposium
participants.

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