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35 World Competition 511 (2012)
Price Fixing in Crisis: Implications of an Economic Downturn for Cartels and Enforcement

handle is hein.kluwer/wcl0057 and id is 531 raw text is: Price Fixing in Crisis: Implications of an
Economic Downturn for Cartels and
Andreas STEPHAN*
Abstract: The rigorous enforcement of cartel laws during a downturn has the
potential to speed up an economy's recovery by preventing artificial price hikes.
Economic downturns can break up existing cartels, but empirically many collusive
agreements are borne out of economic crisis. Recession may also distort normative
perceptions of price fixing and force firms previously colluding tacitly, to form a hard
core cartel. Despite the heightened danger of bankruptcy in troubled industries
during the present crises, competition authorities generally appear to be standing
strong. Greater use of criminal sanctions on the national level could counter the
deterrence weakening effect of bankruptcy discounts. The likely effect of a downturn
on private enforcement is mixed.
This proposed contribution has not been published or submitted for publication elsewhere.
Cartels 'exacerbate [the] economic problem in a recession, namely that production
in the overall economy is well below capacity'.' They also protect inefficient firms
from the dangers of bankruptcy; something that will normally be a natural
consequence of an economic downturn and should result in a more efficient -
albeit more concentrated - market. In contrast to historical reactions to economic
crises, competition authorities say they are resisting the temptation for soft
enforcement in the wake of the credit crunch and sovereign debt crises.2 The
former Competition Commissioner Neelie Kroes stated, 'We are clear that cartels
are harmful no matter what current economic growth rates are' and warned,
Senior Lecturer in Competition Law, UEA Law School and ESRC Centre for Competition Policy,
University of East Anglia, Norwich NR4 7TJ, UK. Email: a.stephan@uea.ac.uk. The support of the
Economic and Social Research Council (UK) is gratefully acknowledged.
C Shapiro, Speech, Competition Policy in Distressed Industries (Washington D.C. May 13, 2009) Speech
to ABA Antitrust Symposium.
2   See A. Fiebig, Crisis Cartels and the Triumph of Industrial Policy over Competition Law in Europe, 25 Brook.
J. Intl. L. 607 (1999), arguing that the European Commission has, in effect, turned a blind eye to crisis
cartels in the past.
Stephan, Andreas. 'Price Fixing in Crisis: Implications of an Economic Downturn for Cartels and
Enforcement'. World Competition 35, no. 3 (2012): 511-528.
© 2012 Kluwer Law International BV, The Netherlands

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