The Great Global Vitamins Conspiracy: Sanctions and Deterrence*

Abstract

When they were discovered in 1999, the 16 vitamins cartels were probably the largest, most harmful, and harshest sanctioned international cartels of the late 20th century. Still today, the vitamins cartels are cited by antitrust authorities as the outstanding example of an enforcement action likely to deter cartel formation; this episode is also often mentioned by other legal experts as an egregious example of cartels subject to supra-optimal penalties. This paper summarizes the structural conditions and price effects of the global vitamins conspiracy and analyzes the deterrence power of world-wide monetary penalties paid by the corporate members of these cartels. The paper concludes that only in North America did monetary antitrust penalties exceed the monopoly profits of the vitamins cartel, principally because of huge private settlements. Penalties in the EU were a small percentage of European overcharges, and penalties in the rest of the world were negligible. On a global basis, deterrence was sup-optimal for three major reasons: low penalties outside North America, delays in the collection of fines and private settlements (i.e., the absence of court-awarded prejudgement interest), and the low probability of discovery of hidden cartels.

Keywords: optimal deterrence, cartel, antitrust

JEL Classification: L41, L44, L65, L11, L13, N60, K21, K14