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Penalizing on the Basis of the Severity of the Offence: A Sophisticated Revenue-Based Cartel Penalty

27 Pages Posted: 18 May 2017  

Yannis Katsoulacos

Athens University of Economics and Business

Evgenia Motchenkova

VU University Amsterdam - Department of Economics; TILEC

David Ulph

University of St. Andrews - School of Economics and Finance

Date Written: May 18, 2017

Abstract

In Katsoulacos, Motchenkova and Ulph (2015) we examined the welfare properties of a number of monetary penalty regimes for tackling cartels, including revenue-based penalties (the most widely used regime), illegal gains-based penalties, and overcharge-based penalties. We showed that the latter regime welfare-dominates the others. However it is subject to criticism on the grounds of legal uncertainty and high implementation costs. In this paper we focus on analysing an alternative regime: a sophisticated revenue-based penalty regime in which the penalty base is the revenue of the cartel but the penalty rate depends on (and increases with) the cartel overcharge rate. Thus, in contrast to the currently employed simple revenue-based regime, the proposed regime penalises cartels taking also into account the severity of their offence in terms of the height of their overcharge. We show that this hybrid regime can effectively replicate the desirable welfare properties of an overcharge-based penalty structure while having very low levels of legal uncertainty and implementation costs.

Keywords: Antitrust Penalties, Antitrust Enforcement, Antitrust Law, Cartels

JEL Classification: L4, K21, D43

Suggested Citation

Katsoulacos, Yannis and Motchenkova, Evgenia and Ulph, David, Penalizing on the Basis of the Severity of the Offence: A Sophisticated Revenue-Based Cartel Penalty (May 18, 2017). TILEC Discussion Paper No. 2017-014. Available at SSRN: https://ssrn.com/abstract=2970395 or http://dx.doi.org/10.2139/ssrn.2970395

Yannis Katsoulacos

Athens University of Economics and Business ( email )

Evgenia Motchenkova (Contact Author)

VU University Amsterdam - Department of Economics ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands

TILEC ( email )

Warandelaan 2
Tilburg, 5000 LE
Netherlands

David Ulph

University of St. Andrews - School of Economics and Finance ( email )

University of St Andrews
St. Andrews, Scotland KY16 9AR
United Kingdom

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