Problems with Prison in International Cartel Cases

DOI10.1177/0003603X1105600205
Published date01 June 2011
Date01 June 2011
Subject MatterArticle
Problems with prison
in international cartel cases
BYJOHN M. CONNOR*
Around 2000 the Antitrust Division announced a new policy that
would substitute more frequent and more severe prison sentences for
heavier corporate fines in criminal cartel cases. This article
documents that the Division has imprisoned more cartel managers
and obtained longer sentences, but failed to achieve other goals. The
elimination of no-jail plea deals has not been realized; the number of
imprisoned executives per firm has not risen appreciably; adoption
of criminalization by other jurisdictions is glacial; almost half of those
executives who go to trial are acquitted; extradition is rare and
problematic; and the number of fugitives is growing. The optimal
mix of corporate and individual sanctions for deterrence remains
elusive.
There is a trend among countries to accept as self evident that indi-
vidual sanctions, including imprisonment, can be a useful part of
successful anti-cartel enforcement.1
THE ANTITRUST BULLETIN:Vol. 56, No. 2/Summer 2011 :311
* Professor of Industrial Economics, Purdue University.
1ORGANISATION FOR ECONOMIC CO-OPERATION & DEVELOPMENT (OECD),
POLICY ROUNDTABLES, CARTEL SANCTIONS AGAINST INDIVIDUALS, at Overview
(2005), available at http://www.oecd.org/dataoecd/61/46/34306028.pdf (a
debate held under the auspices of the OECD’s Competition Committee in
October 2003).
© 2011 by Federal Legal Publications, Inc.
I. INTRODUCTION
Although an uncommon sentence elsewhere, the United States fre-
quently and increasingly resorts to imprisonment of executives
responsible for criminal price fixing. In the past decade, policy state-
ments of the Antitrust Division of the U.S. Department of Justice
(DOJ) assert that the most effective sanction available for destabiliz-
ing operational cartels is the threat of imprisonment of cartel man-
agers.2Indeed, the DOJ at times seems to suggest that incarceration is
the best tool in its arsenal of anticartel sanctions for deterring the for-
mation of cartels in the first place.3Since the early 1990s, the number
of custodial sentences for both U.S. nationals and foreigners has
increased faster than the number of corporate criminal fines for price
fixing.4The U.S. stance on the salutary effect of imprisonment for
hard-core cartel cases has prodded other jurisdictions, notably the
United Kingdom and Australia, to criminalize their antitrust penal-
ties;5the European Union (EU) and other jurisdictions are debating
the issue of criminalization.6
In particular, it is the DOJ’s position that it is the prospect of
imprisonment that deters executives from joining price-fixing con-
spiracies more strongly than the corporation’s leaders’ fear of large
312 :THE ANTITRUST BULLETIN:Vol. 56, No. 2/Summer 2011
2See, e.g., Thomas O. Barnett, Former Assistant Att’y Gen., U.S. Dep’t of
Justice, Antitrust Div., Seven Steps to Better Cartel Enforcement, Presentation
to the 11th Annual Competition Law & Policy Workshop (June 2, 2006),
available at http://www.justice.gov/atr/public/speeches/216453.htm.
3See id. at § II(2) (“Our investigators have found that nothing in our
enforcement arsenal has as great an effect as the threat of substantial
incarceration in a United States prison”).
4See U.S. Dep’t of Justice, Antitrust Div., Antitrust Division Workload
Statistics FY 2000–2009, available at http://www.justice.gov/atr/public
/workload-statistics.html and Antitrust Division Workload Statistics FY 1990–1999,
available at http://www.justice.gov/atr/public/246419.pdf (showing that the
average number of prison sentences per corporation convicted rose steadily each
semi-decade from 0.25 in 1990-1994 to 1.73 in 2005–2009).
5See id. at Adoption of Legislation and Agreements to Foster Cooperation.
6See generally Wouter P.J. Wils, Is Criminalization of EU Competition Law
the Answer?, in CRIMINALIZATION OF COMPETITION LAW ENFORCEMENT 60
(Katalin J. Cseres, Maarten Pieter Schinkel & Floris O.W. Vogelaar eds., 2006).
monetary fines and civil penalties.7Because the cartel managers and
the company’s leaders tend to overlap, this argument boils down to a
trade-off between the individual’s subjective evaluation of the utility
of a given number of months of incarceration compared to the indi-
vidual’s utility of a given number of dollars of corporate penalties.
Even if the conspiring executives are not top executives, the CEO or
board of directors might rationally be willing to allocate millions of
dollars of stockholders’ cash to pay criminal fines rather than incur
the negative publicity associated with their officers’ incarceration.
There are problems with a heavy reliance on prison sentences as a
means of deterring cartels, particularly international ones. First, it is
more difficult to persuade managers of cartels who reside abroad to sub-
mit to U.S. jurisdiction. While indictments of foreign residents have
increased, improvements in the ability of U.S. authorities to extradite
individuals for price-fixing crimes have not kept pace.8There are large
numbers of indicted cartel managers who are fugitives residing abroad.9
Second, obtaining convictions of cartel managers who exercise their
rights to a jury trial and who are within U.S. jurisdiction has proven
challenging for the DOJ.10 Prosecutorial losses at trial are frequent. Third,
even though the most effective mix of corporate and individual sanc-
tions is not well understood, the relative importance of U.S. government
fines on corporations has, as a matter of policy, dwindled. Are they com-
plements or substitutes in practice, and if so, how strong is the relation-
ship? If the number of incarcerated executives per firm increases from
one to N, the marginal effect on deterrence of the Nth person must
decline, but by how much? Is the deterrent effect of imprisonment of the
Nth executive typically equivalent to $1 million in corporate fines, to $1
PROBLEMS WITH PRISON :313
7See, e.g., Barnett, supra note 2; Makan Delrahim, Former Deputy
Assistant Att’y Gen., U.S. Dep’t of Justice, Antitrust Div., Antitrust
Enforcement Priorities and Efforts Towards International Cooperation at the
U.S. Department of Justice, Remarks made in Taipei, Taiwan (Nov. 15, 2004),
available at http://www.justice.gov/atr/public/speeches/208479.htm.
8See Julian M. Joshua, Peter D. Camesasca & Youngjin Jung, Extradition
and Mutual Legal Assistance Treaties: Cartel Enforcement’s Global Reach,75
ANTITRUST L.J. 353, 395 (2008).
9See id. at 361.
10 See id. at 360 n.26.

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