US Sentencing Commission plans to look at size of price-fixing fines

Posted July 07, 2014, at 9:33 p.m.

WASHINGTON — A U.S. government body that sets the recommended ranges for criminal fines and prison sentences is kicking off a process that could result in bigger fines for corporations that conspire to fix prices in violation of antitrust laws.

The U.S. Sentencing Commission, made up mostly of judges, said in a notice last month that it had identified price-fixing fines as a tentative priority area for study. The notice, which received little attention, was published June 2 in the Federal Register, a journal of U.S. government proceedings.

Although the biggest fines reach into the hundreds of millions of dollars, some economists and antitrust lawyers have said the fines are not nearly large enough on average to deter businesses from trying to juice their profits through collusion.

A 2012 study of 75 U.S. cartel convictions between 1990 and 2010 found that penalties would need to be about five times what they were to counter the overcharge to consumers.

“There’s reason to think that the level of fines imposed on miscreants is not as high as it ought to be, given the harm that is done,” said Bert Foer, president of the American Antitrust Institute, a group in Washington, D.C., that favors aggressive enforcement of competition laws. The institute asked the Sentencing Commission to re-examine fines a year ago.

A part of the U.S. judiciary, the Sentencing Commission publishes a manual to advise judges, prosecutors and defense lawyers about appropriate criminal penalties.

It moves slowly, amending the manual about once a year, and it sometimes studies a subject for several years before acting.

The commission expects feedback about a price-fixing study from law enforcement, members of Congress and corporations before a July 29 deadline, a spokeswoman said.

Under the current sentencing manual, corporate fines for price-fixing are based on a presumption that a cartel raises prices by 10 percent on average above what prices would be in a competitive market.

That average, though, was based on research on a small sample of U.S. domestic cases from the 1970s and 1980s, said John Connor, a semiretired Purdue University economist who studies price-fixing.

Working with Robert Lande, a University of Baltimore law professor, Connor examined a larger sample. “We’re finding that the average overcharge is in the 40 to 50 percent range,” Connor said in an interview. “Cartels are not being deterred.”

A spokesman for the U.S. Justice Department’s antitrust enforcers had no immediate comment on the Sentencing Commission’s plans.

The Justice Department obtained more than $1 billion in criminal antitrust fines in its most recent fiscal year. Its biggest fine ever was $500 million, leveled twice: in 1999 against Roche Holding AG for vitamin price-fixing and in 2012 against AU Optronics Corp for fixing the price of liquid crystal display panels.

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