Deterrence and Detection of Cartels: Using all the Tools and Sanctions

• Published date: 01 June 2011
• DOI: 10.1177/0003603X1105600202
• Date: 01 June 2011
• Subject Matter: Article

Deterrence and detection of cartels:

Using all the tools and sanctions

BYGREGORY J. WERDEN,*SCOTT D. HAMMOND**

AND BELINDA A. BARNETT***

The United States applies a diverse array of tools and sanctions to

deter and detect cartels. Because cartel activity is treated as a serious

crime, a formidable array of criminal investigative tools is available,

and convicted individuals are imprisoned. Private damages actions

also yield substantial recoveries. The many tools and sanctions sup-

port each other in various ways, making each significant. But the

claim that private damages actions provide the most important deter-

rent to cartels in the United States ignores the enormous assistance

provided by criminal enforcement, misses much that is critical in

deterring cartels, and mistakenly assigns credit for detecting cartels.

THE ANTITRUST BULLETIN:Vol. 56, No. 2/Summer 2011 :207

* Senior Economic Counsel, Antitrust Division, U.S. Department of

Justice.

** Deputy Assistant Attorney General for Criminal Enforcement,

Antitrust Division, U.S. Department of Justice.

*** Deputy General Counsel–Criminal, Antitrust Division, U.S.

Department of Justice.

AUTHORS’ NOTE: Jim Fredricks of the Antitrust Division’s Appellate Section

provided helpful comments.

© 2011 by Federal Legal Publications, Inc.

I. INTRODUCTION

The basic framework for deterring and detecting cartels in the United

States remains that established in 1890 by the Sherman Act: Corpora-

tions that participate in cartels are subject both to criminal fines and

civil actions for damages,1and culpable individuals are subject to

criminal prosecution and imprisonment.2The applicable sanctions,

however, have evolved substantially since 1890, and the arsenal of

enforcement tools has been significantly enlarged in recent decades.

This article details the tools and sanctions used in the United States to

deter and detect cartels and explains how they work together in pur-

suit of a common goal. Even though more than a hundred countries

now have anticartel laws, including many moving in the direction of

the U.S. model, the United States remains the only jurisdiction that

has extensive experience utilizing both incarceration and private

damages litigation.

II . CARTEL DETERRENCE IN THEORY

Cartels have no legitimate purposes and serve only to rob con-

sumers of the tangible blessings of competition. Cartels, therefore, are

not properly redressed with just a liability rule designed to compen-

sate victims.3Rather, participation in a cartel is viewed in the United

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1Section 7 of the Sherman Act provided that “any person” injured by a

violation of the Act “may sue” in federal court and “recover three fold the

damages by him sustained, and the costs of suit, including a reasonable

attorney’s fee.” Ch. 647, § 7, 26 Stat. 210 (1890). This provision was replaced

by identical language (except for making “three fold” into a single word) in

section 4 of the Clayton Act, now codified at 15 U.S.C. § 15 (2006).

2Section 1 of the Sherman Act declared that “[e]very contract,

combination . . . , and conspiracy, in restraint of trade . . . is a misdemeanor.”

Ch. 647, § 1, 26 Stat. 209 (1890). As highlighted below, violations are now

felonies. See infra note 47 and accompanying text. When the Sherman Act

became law, thirteen of the states already had criminal laws prohibiting

cartels. See HENRY R. SEAGER & CHARLES A. GULICK, JR., TRUST AND

CORPORATION PROBLEMS 342 & n.1 (1929).

3On the basic rationale for criminal prohibitions rather than reliance on

liability rules, see Guido Calabresi & A. Douglas Melamed, Property Rules,

Liability Rules, and Inalienability: One View of the Cathedral, 85 HARV. L. REV.

1089, 1124–27 (1972).