Essay: Cartel behaviour

Index
1. Introduction ……………………………………………………..3
2. Problems in the Indian Position …………………………………4
3. The Case for Criminalisation in India …………………………..7
4. Comparative Studies …………………………………………….8
a) The Position in the US …………………………………………8
b) The Position in the EU ………………………………………..11
c) The Position in the UK ………………………………………..13
d) The Position in Australia ………………………………………14
5. Conclusion ……………………………………………………….17
1. Introduction
The Organisation for Economic Co-operation and Development (OECD) has labelled cartel behaviour as among ‘the most egregious violations of competition law’. It has identified that cartels offer no genuine economic or social benefits that could justify them. They result in a reduction in productivity and an increase in the price above the appropriate market level, resulting in customers purchasing less of the cartel product and paying more for what they do purchase. This causes a misallocation of resources and a reduction in efficiency. It protects cartel members from a necessary exposure to market forces, meaning that they are not incentivised to control costs and pursue innovation.
The discussion regarding whether to place criminal sanctions as part of anti-cartel enforcement is slowly growing around the world. It is the objective of this article to show that there is a strong case in its favour. We use the term “cartel” to refer to particular types of horizontal collusion and the criminal sanctions sought to be imposed are directed specifically towards the most unambiguous and socially harmful (also referred to as “hardcore”) forms of price fixing, bid-rigging, and market allocation. Criminalization is a policy choice that reflects a pragmatic governmental intervention in a market that has an especially heavy reliance on free markets. It is intuitively understandable that such economic systems that are characteristically in favour of free markets would be very concerned about the cumulative effects of market power and the fair operation of big businesses. As an aside, it may be considered that if India aims to take such a course, criminalization of cartels would serve an important role. Such policies are based on social experience and rigorous reasoning supported by appropriate moral strictures. One of the most important features of the history of legal stances towards business cartels (involved in such activities as price-fixing, market sharing and bid-rigging) was the differentiation in the approaches taken by the two leading jurisdictions for legal innovation— North America and Europe. However, during the final years of the twentieth century a marked shift of attitude has been seen within European legal systems, suggesting a shift towards the American approach towards cartels. This increasing consensus has resulted in criminalization as part of competition law alongside more traditional procedures of administrative control.
The concept of introducing criminal sanctions for cartel behaviour is not an altogether new one, though modern jurisprudence swerved away from the previous stance. A substantial number of civilisations and kingdoms, including Mesopotamia, India, China and Israel, had brought to force laws prohibiting price-fixing and monopolization from antiquity. The practice of criminalizing such activity dates back to the 1200s even in the common law system. This is understandable given the apparent in res nature of many competition rules. In England, the common law competition rules were backed up with statutes. By 1548, English law had in place a statute criminalizing hard core cartels. The English legal system came to be subsequently exported to the colonies, including America, which then resulted in a number of statutes prohibiting forestalling and monopolies. Taking into account these historical circumstances and the actual market impact of the damage caused by the cartels in question, legal sanctions varied from civil fines to criminal penalties. For example, in war-time or in a period of famine, the act of exploiting the masses for personal gains have also been known to attract the death penalty.
This project surveys various legal frameworks for anti-cartel enforcement in various jurisdictions of the world, focussing especially on the ones that have instituted criminal sanctions. It tries to explain the legal framework regulating cartels in India, US, EU, UK and Australia and shows how the legal systems in the above jurisdictions function to the market’s advantage. The intention is to build a case for criminalising cartels in India given the need for stricter penalties and enforcement against such cartels.
2. Problems in the Indian Position
The Indian legal position regarding anti-cartel enforcement has been drawn largely from the EU and US experiences. India has put in place a combination of both the systems in its own competition law regime. The Competition Act, 2002, imposes civil sanctions against such price-fixing arrangements, horizontal collusions etc. The Competition Commission of India (“CCI”) is empowered to act upon information received or reference made. It may also take suo motu cognizance of suspected activity. When it is satisfied that the impugned activity mandates further investigation, it forwards the necessary inputs and evidence to the office of the Director General which is in turn responsible for undertaking the said further investigation. On receiving a positive report of illegality, the CCI under S. 27 of the Competition Act, 2002 may impose “a penalty of up to three times of its profit for each year of the continuance of such agreement or ten percent of its turnover for each year of the continuance of such agreement, whichever is higher”. What is more, the individuals responsible for the conduct of the company may also be liable for punishment.
The present system for imposing sanctions against cartels may be criticised on a number of fronts. Primarily, the most significant concern is the reality that most cartels are secretive in nature, making investigations into their existence difficult. It is easy for a cartel to cover its own tracks to successfully avoid leakage of evidence sufficient for a finding of infraction. Jurisdictions that have actively worked to impose higher penalties have found themselves capable of increasing the chances of detection as well as the reduction in the rates of infraction.
The ease of detection rises specifically because of what are referred to as “leniency provisions”. Leniency provisions have been found to be a rather effective tool aiding detection and enforcement. The present debate surrounding criminalisation was initiated with Australia’s recent imposition of criminal penalties for cartel activities. A crucial finding has been that this has given rise to an increase in applications under the leniency programme concomitant with the criminalisation. In contrast, the Indian leniency system has not resulted in the filing of proportionate numbers of applications. While it may be too hasty to jump the boat and consider the low rate of leniency applications to indicate a defective system plagued by high levels of undetected cartels (awareness of the law, clarity in the law and sheer low numbers of cartels may as well be the case), this would give us strong reason to consider the case for criminalisation.
Cartel activity may be actively deterred by employing a number of methods. Here are some brief suggestions as to some of the methods that may be employed:
(a) Detection and Investigation
The CCI is primarily in charge of investigating and following up on credible leads towards cartel activity. One of the modes by which to raise deterrence is sanctioning greater funds and resources to the Commission, thus providing it with a heightened ability to detect cartels. Investment may be made in procuring technical assistance from other agencies involved in market research and analysis so as to detect cartels. However, this method of raising deterrence results in additional financial burdens on the government, which may not always be capable of ploughing in those funds for various considerations.
(b) Leniency Programme
As mentioned above, a most effective way to detect cartels is to put in place an effective leniency programme. The proviso to section 46 of the Competition Act, 2002, provides for such leniency. Here, the Commission may impose a lower penalty where it is convinced by certain findings. This is extended in the so-called Lesser Penalty Regulations, 2009. As per these, the Commission can impose a lower penalty on a cartel member that has made a “vital disclosure”. This means that the member must proffer information or evidence that is adequate for a prima facie finding of a cartel by the Commission. Alternatively, it may help establish some other violation of the Competition Act.
The Regulations also distinguish a further possible penalty reduction on the basis of applicant’s “priority status.” As per these rules, the applicant that is the first to provide a “vital disclosure” may be granted even a 100% penalty cut. The second and third applicants would receive only up to 50% and 30% respectively. These applicants apart from the first applicant are required to provide significant evidence in connection with the details of the alleged activity so as to be entitled for any reduction in penalty.
(c) Fines
The American antitrust framework has had lengthy previous experience of imposing extraordinary fines that amount to as much as 300% of the annual turnover of the company. Nonetheless, many have argued that these high fines have not always achieved the desired deterrent results and have thus become disproportionate and unfair. The primary reason for criticism has been that a majority of companies would simply not be in a position to pay such high fines as even the profits generated from anti-competitive practices are not always in liquid form. Such liquid assets are not always available because, generally, annual turnover of these companies may exceed net assets.
3. The Case for Criminalization in India
Thus it appears that there is a stark necessity for criminal sanctions in India as is evident from documented arrangements characteristic of cartels. The persuasiveness of the argument for criminalization is further backed when we consider the usefulness of the pecuniary liabilities which are, at present, being imposed on companies in contravention of the Competition Act. What is more, as a matter of pure reasoning, it is improbable that such fines have the deterrent effect that may be delivered from even standalone criminal punishments. Members colluding would take calculate the likely profits from the anti-competitive activity and weigh it against the probable loss through legal enforcement. Having done this, they may proceed where detection possibilities remain low and profit margins appear higher than losses weighted with probability of detection.
The American system of placing criminal sanctions has given rise to optimism with respect to the increased impact of deterrence. It is important to note that any introduction of a criminal sanction must be accompanied by a determination that there is strong moral justification. Thus, the grounds for turning to criminalization would need a convincing argument that cartel behaviour is not merely behaviour that requires a strong deterrent but also behaviour that is morally reprehensible at the same time. The American model bases its moral legitimacy on the analogy drawn that the conspiracy cartels engage in is a deliberate and exploitative act of planning with others so as to attain unfair profits. The Indian legal system needs to perceive the legitimacy of these grounds in any move towards the criminalization of such activities
The most pragmatic ground forwarded for placing criminal sanctions for cartels remains that, for a first time infraction, such sanctions would ensure strong deterrence in contrast to civil penalties. There has been a growing consensus that civil penalties do not meet the requirements of the necessary deterrence since these fines, when taken along with the probability of detection, do not compare to the attraction of gains achieved from cartelisation.
A third ground for criminal sanctions with respect to cartelization is to bring India in line with international legal experience and practices. While cartels are recognized as illegal in more than a hundred jurisdictions around the world, the sanctions range from civil pecuniary fines to criminal punishments like imprisonment. In time, a majority of advanced nations, including Australia, the United States, Canada, United Kingdom, Ireland, France, Germany, Norway, Japan and South Korea, have enacted criminal sanctions provisions as an effective supplement to their existing regimes of civil remedies.
4. Comparative Studies
(a) The Position in the United States
USA has been the forerunning innovator in imposing criminal penalties under its antitrust law. A cartel is a kind of monopoly, that “[p]roducers form… with the goal of limiting competition so as to increase profits.” When cartel-members maintain the secrecy of their collusion as they continue to present themselves as market rivals, a cartel is merely a monopoly masquerading as a free and fair market. The US has long taken a strict stand on the elimination of fair play by such market agents so as to maintain its free market stand.
The US has often been considered to be the driver of antitrust law evolution but it is worth recalling that these credentials came after more than a century had passed since independence and after a number of years of mercantilist exploitation. This long experience with free markets and their effects has held it in good stead. The US possesses one of the first and soundest legal foundations for competition law. This is built around the 1890 Sherman Act as well as the later Clayton Act and Federal Trade Commission Act. In short, US antitrust law emerged as an effort to defend small individual entrepreneurs against large corporations and especially collaborations between such large businesses. There were innumerable protests surrounding the damage being done by cartelisation from other businessmen affected by such agreements as well as from the wider public, suffering under price exploitation. Fears were made known regarding the power of corporate opportunists and large companies with near-monopolies over such sectors such as sugar, oil and steel. It was because of these protests that the first anti-cartel or anti-trust legislations arose in 1887 through state legislations and came to be followed by Congress’s passing of the Sherman Act in 1890
The US system as under the Sherman Act built in criminal sanctions. We may note the somewhat paradoxical fact that the US stepped up an approach that may originally be traced to European provisions governing trade malpractices in the sixteenth and seventeenth centuries. Criminal sanction itself has distinguishing and interrelated characteristics. In the case of the US, penalties for breaching the competition rules are usually directed under criminal enforcement frameworks more towards individuals rather than corporations as it has been seen that personal repercussions for anti-competitive decision-making has a lasting impact. Such criminal sanctions produce a clearer message as to the consequences for cartels than any administrative penalties can possibly manage. In fact, the aim behind criminal law is not to recognise particular prices that a business can pay for various ranges of anti-competitive behaviour but it is meant to prevent it altogether. It may also be assumed that criminal offences in general arise when a deliberate sequence of actions is taken in contravention of laws in force and is not , generally, the outcome of negligent or accidental actions.
Criminal intention is the first point for the investigation and consideration of criminal penalties under US law and price fixing arrangements are seen as deliberate strategies to be viewed as immoral and tantamount to theft. Any changes furthering criminal enforcement also have the result of altering the structure of competition law governance itself. Primarily, it is to be noted that such change is accompanied by the granting of stronger investigative tools to the appropriate competition officials and, secondly, such change finds the inclusion of greater procedural protection to avoid conviction of innocent players. A further intriguing matter for the EU regime is that criminal enforcement regimes usually operate with clearly set territorial applicability. In other words, the decision-making roles are carried out by players who are distinct from those carrying out the investigation and subsequent prosecution.
Sections 1, 2, and 3 of the Sherman Act provide for both criminal and civil penalties. Following judicial pronouncements and executive policy formulations, the Antitrust Division makes a decision as to whether to treat a matter as criminal or civil and therefore only brings criminal charges in limited cases where the behaviour in question is a per se offence. Federal criminal enforcement is used to punish and deter anticompetitive behaviour and such usage may be traced back to the enactment of the Sherman Act in 1890, where a penalty of $5000 and even punishment of imprisonment for one year were set as the maximum permissible penalties for a violation. As time has passed, the criminal provisions of the Sherman Act have only come to be strengthened further. In 1955, the maximum fine was raised up to $50000 for a single violation. The Antitrust Procedures and Penalties Act of 1974 made felonies of any violation of the Sherman Act, and further raised the maximum penalty to $1 million for corporations and $100,000 for individuals. The maximum incarceration term was raised to three years. Ten years later came the Criminal Fine Enforcement Act which raised maximum fines for individuals convicted of such a felony to $250,000. In 1990, the US Congress further strengthened antitrust criminal penalties by pushing up the maximum Sherman Act fine for a convicted corporation to ten million dollars and for convicted individuals to $350,000.
The decision to criminalize anti-competitive behaviour like cartels may be viewed as the cornerstone of the US antitrust tradition and practice since the Sherman Act as it makes a vast difference to the manner in which such cases are dealt with. In practice, this stance has resulted into the imposition of penalties on companies and individuals and also pursued the use of imprisonment as a deterrent tool within the US system. Both weapons have been updated regularly so far as the maximum levy on firms is concerned, with increases of the penalty to $100 million by 2004 concomitant to the rise in the length of imprisonment which was raised from the original term of a year in 1890, to three years after 1974 and even further to 10 years after 2004.
The carrying out of the leniency policy for cartels may be traced back to the initial instance of the introduction of an Amnesty Programme by the US in 1978. Under the scheme, firms that were part of illegal cartels and came forward with evidence of the same were eligible to receive immunity from criminal prosecution (amnesty) as long as no investigation had been begun. This initial discretionary policy had little impact (perhaps because of the fact that a lack of clarity did not make the scheme appear attractive to prospective whistle-blowers) but it was widened in 1993 to make the immunity automatic instead of discretionary for a firm reporting a cartel that was not already being investigated for evidence at the time of the reporting. Also to be noted is that such amnesty remains possible even where the cartel is already under review by the authorities but there isn’t sufficient evidence. Individual immunity was also brought in for directors and employees coming forward to provide evidence regarding the cartel firm and a specific leniency scheme was brought into force in 1994 as a supplement to the personal sanctions that are placed under the US system.
The increased applicability of the leniency scheme and the reduced uncertainty about a prospective grant of immunity greatly increased the policy’s effectiveness. In 2000, Scott Hammond, the Director of Department of Justice’s Criminal Enforcement Antitrust Division identified the policy as, without a doubt, the ‘single greatest investigative tool available’ to ant-cartel enforcers. An ‘amnesty plus’ provision was introduced in 1999 that allows a firm not the first in providing evidence of cartelisation in one market that nonetheless provides evidence in a second market instead to receive amnesty in that second market as well as favourable treatment in a plea bargain for allegations regarding the first market. 2004 onwards, it may be noted that successful leniency applicants also enjoy mere single instead of a hefty treble damages along with concessions on the matter of their liability in follow-on private damages actions. This truly creates a formidable system of incentives and disincentives for the promotion of a fair and free market.
(b) The Position in the EU
The leniency policy initiated by the Antitrust Division of the Department of Justice in the United States also came to be adopted by the EU in 1996. The notification of the most recent in 2006 has also backed up the fundamental change in business approaches to competition issues and created a growing acceptance for the leniency schemes. This Notice stands as another significant move towards better detection and termination of hard core cartel activity. Hard core infractions (that break up markets, engage in price fixing and/or make conditional sales advantageous to the seller) are considered under Article 81 to be infringements even where theoretically they might be able to make a case that there are efficiency benefits.
Generally speaking, a leniency policy is a set of regulations that offers to provide greater lenient treatment, including total immunity, against all forms of punishments and penalties as long as the cartel member is ready to provide information regarding the wrong to the competent authority. It is now used extensively in cartel schemes as an incentive to cartel businesses to get them to break secrecy and inform authorities of the activities of the cartel, providing evidence for successful prosecution. The introduction of leniency rules within EU competition laws from 1996 was a major step in the EU’s embrace of a technique that had previously been utilised by the US antitrust authorities, creating a sound body of experience from which to draw from. The EU came to form rules that did not merely imitate the US rules. Instead, it brought in its own form of a leniency system, which it has adapted over the course of years drawing both from subsequent experiences in the US, as well as from the EU’s own developing trials. It also came to be adopted more widely by supranational body recommendations (e.g. OECD).
Under EU policy, rather than simply rewarding only the quickest firm to apply for immunity along with the chance that immunity becomes available even when an investigation has started, (as is the case with the revised US policy), all rewards were discretionary in the EU and the highest exemptions (a cut in fines by 75-100%) was only possible if the investigation into the cartel had not as of then been initiated. Other whistle-blowers would receive immunities under the leniency rules with a number of categories of fine-cuts designed so as to be concomitant with the value of the materiality and timeliness of the evidence being supplied by the applicant. The threshold limit for a leniency application with full cooperation remained markedly low as compared to the more drastic US scheme.
As per Article 23 (5) of Regulation 1/2003, the EC’s decisions ‘shall not be of a criminal nature’ which, on first reading, appears to suggest that there is no criminalization permissible within EU competition law. However, a closer look at the functioning and practice of competition law along with an appreciation for the EU regime’s modalities would make clear that there can be almost no second opinion as to whether the EU competition regime is drawing ever closer to the identification of cartel behaviour as involving criminal intent. Thus, we are witnessing what may be referred to as a growing `creep’ of criminalization which was not previously contemplated. Fundamentally, however, a turn towards criminalization (or criminal sanctions and enforcement) in antitrust gives rise to a moral tone that not only projects such acts as wrong but that allows individual citizen to be put under the scanner of the law. This in turn allows them be imprisoned for knowingly pursuing anti-competitive behaviour. Evidence of the growth of criminalization in antitrust law into the domestic arenas is already evident in various member states of the EU such as Finland, Ireland and the United Kingdom.
Within the context of EU law, the European Commission was and continues to be empowered for the levy of fines on undertakings (which are economic units with a legal identity) for infringements of Articles 81 and 82 (now Article 101 & 102 of the Lisbon Treaty) but not to be imposed on individuals. Interestingly, however, criminal intent is not really an issue to be debated as Regulation 1 mandates that such penalties would not be considered to be of a criminal law nature.
(c) The Position in the UK
In the UK, the criminalisation of cartels came to be incorporated into the Enterprise Act, 2002. The Competition Act, 1998 of the UK did not specifically criminalise cartels and, as of 2001, the Office of Fair Trading (OFT) had introduced the proposed criminalisation in a report regarding its findings for reform. In this report, cartels i.e., hard core cartels involving price fixing, market sharing, bid-rigging etc, have come to be criminalised. The essence of a cartel offence consists of an understanding between the parties to the cartel and the construction of the provisions of the offence would require an incorporation of the concept of some kind of an agreement or combination.
In the abovementioned report, the OFT provided for the prosecution of these offences as well as for an empowerment of the relevant authorities, such as the public prosecutors, SFO etc. Additionally, the OFT is given an option to carry out the prosecution in-house.
For the purpose of carrying out investigations the procedure and the authorities are laid in the Competition Act, 1998. The Director General is given the power under the Act to carry out such investigations. The proposal by the Government to criminalise such behaviour brings with it a requirement for investigators to abide by all the statutory procedures currently required under the criminal law generally so as to ensure that the evidence collected is admissible and capable of proving the guilt at the criminal evidentiary standard of ‘beyond reasonable doubt’ just as in the case of India.
The Director General in the UK also encourages members of cartels to come forward and provide evidence on the activities of cartels as well as their existence. Once again, this is done by providing favourable regard to the undertaking whose members provide information of their involvement as well as cooperate fully with subsequent inquiries. Further, with the present leniency scheme in the UK, the individual who is first to step forward with information of such cartel activities shall be given full lenient treatment and receive total immunity from pecuniary penalties.
To draw a comparison, the Anti-trust Division of the US Department of Justice introduced a new leniency policy that grants amnesty from all prosecutions and immunity from all fines. This model, as has been mentioned, has been highly successful in incentivising cartel members to inform of its existence. In contrast, the EC Model does not criminalise cartels specifically in the first place and does not have a robust leniency programme which gives clear motivation to members to come forward with information. With the criminalisation, the cartel members have an extra boost to step forward.
Coming to the question of the nature and conduct of civil and criminal investigative procedures and strictures under Competition Act, 1998, the DG has the power to conduct investigation under Chapter I of the said Act for any infringement and to require production of document, enter premises without a warrant and enter and search premises with a warrant. Under the Competition Act, 1998 only civil proceedings can be instituted and only undertakings are subject to penalties. The proposed criminalisation of hard core cartels by OFT also allows instituting civil and criminal proceedings at the same time. It further distinguishes the practical problems in carrying out such investigations and also recommends all the investigations likely to proceed towards a possible criminal prosecution to be conducted as per criminal law standards from the outset.
Moving on to the matter of the penalties which are imposed in the instance of criminalisation of cartel, the government of UK has declared that hard core cartels are serious collusions which defraud business partners and consumers and have extensive economic implications which merit a strict sentence. UK felt the need to have powers ordinarily provided for offences for which arrest is possible, which ordinarily needs maximum sentence of a minimum of five years and the need of sending a strong message to the courts that hard core cartels are very grave offences, which can have important and harmful economic impacts. It has obtained the support of the cases where such fines imposed in Ireland, US, Japan, and Canada prior to the finalisation of the prison term imposed for such wrongs.
The Criminal Cartel Offence was adopted in the UK to enhance deterrence in competition law enforcement. Under s.190 of the Enterprise Act, an individual who agrees to cartel conduct (“dishonestly” or with fraudulent intent) can be burdened with imprisonment for up to five years, and/or an unlimited fine calculated from the profits accrued.
(d) The Position in Australia
Criminalization of cartel conduct became a game-changing modification to the rules in Australia when the Cartel Conduct Act was brought into force in mid-2009. The Chairman of the ACCC, as far back as 2001, had been advocating for the introduction of such criminal penalties for ‘hard-core’ cartels that were already identified in Part IV of the Trade Practices Act (“TPA”). The rationale provided by the ACCC was clear: that the civil penalties were simply insufficient in deterring cartels and thus the fear of criminal penalties and punishments would be the most efficient way to induce further compliance with the statutory prohibitions. The Trade Practices Amendment (Cartel Conduct and Other Measures) Bill 2008 proposed the introduction of criminal penalties and punishments for certain cartel behaviour, though this change was accompanied with no shortage of controversy. Most critics of the move cite the specific moral side-effects of such criminalisation in a society that has special implications for criminal law
The Cartel Conduct Act of Australia was directed towards the definition of cartelisation and conduct along the lines of a cartel so as to bring in clarity and specific understanding with respect to the wide range of aspects involved. Thus, s. 44ZZRD came to define a ‘cartel provision’ as a clause or provision in a contract, arrangement or understanding between certain parties that stand, or are likely to stand, in the position of market competitors as against each other. This has, or is likely to have, among other things, the purpose or effect of fixing prices for the relevant market.
S. 44ZZRF of the same Act declares the standard to be met for a finding of mens rea and thus criminalizes any contracting for an arrangement that contains a cartel clause or provision. According to the section,
(1) “A corporation commits an offence if:
(a) the corporation makes a contract or arrangement, or arrives at an understanding; and
(b) The contract, arrangement or understanding contains a cartel provision.
(2) The fault element for paragraph (1) (b) is knowledge or belief.”
Further, S.44ZZRG ensures that any attempt to give effect to such agreements is met with the imposition of criminal sanctions through counter-applications. Clearly, these provisions have been put in place as an addition to the civil penalties placed in the Act through sections 44ZZRJ and 44ZZRK. The only factor creating a difference between these two civil and criminal sanctions is that the criminal sanction place a requirement for a mental ‘fault’ element to be established as a prerequisite, whereas in the other no fault is really needed.
A cartel clause or provision is one relating to fixing prices, restricting production or creating barriers in a supply chain, engaging in market allocation for customers, suppliers or by territories, or in the rigging of bids, by parties competing with one another in a particular market. A cartel provision must thus hold both (a) a condition that there must be a purpose or effect in relation to prices, the restriction of supply chains etc. and (b) a provision for competition, in that a minimum of two parties to the contract are in competition with one another. There has been growing concern around the world regarding the gravity of cartel behaviour. Following the position of the United States, a number of countries which include Canada, France, Ireland, Germany, Norway, Austria, Japan and the United Kingdom have also come to criminalise such behaviour.
Given that cartels can as well be operating across country territorial and legal limits, it is plausible that there should remain international coherency of our approach to dealing with such behaviour. Co-operation between national authorities can better the prospects of identifying and enforcing laws against those engaged in behaviour like this. Given how the extradition process generally operates only in relation to a single country, if an offender is presently in a country that also identifies the conduct as an alleged offender of criminal laws, the enforcement is made sure since a greater number countries now make cartel behaviour as criminal.
Another reason why fixing of prices needs to be dealt with through criminal law is that it is inherently improbable that any of the victims of such arrangements will seek to obtain redress by private means as the damage suffered is often dispersed across a large group and in small fractions as opposed to the litigation costs involved. They are also probably not aware of the arrangement to start with, and it may be prohibitively costly for them to engage with a large corporation’s legal team. There are likely to be a vast number of victims, and for each of these victims the enforcement would be practically difficult. This fact might push us towards the conclusion that public sanctions are necessary for such behaviour, especially criminal penalties and punishments.
Cartel behaviour is detrimental to the free market but also to society with the creation of greater class divides. While a proposal for criminalisation is difficult to support on evidence that such a stance will actually reduce the extent of cartel behaviour, and so may not be justified in the utilitarian sense, the case stands on a stronger pair of legs when argued that cartelisation is morally reprehensible, and is morally tantamount to other forms of behaviour generally considered criminal in nature. Such argument on principles may draw a better theoretical footing for the proposal if it should go forward.
5. Conclusion
Cartels are extremely harmful for consumers in the market. There is a global need for criminalising cartels and imposing stringent penalties against such behaviour. The criminalization of cartel behaviour reflects the universally acknowledged moral reprobation of conspiracy, deceit and fraud. It can be concluded from the above project that global trend of criminalising cartels is on the rise.
India’s competition law framework lacks effectiveness and it is recommended to impose criminal penalties against such behaviour. Competition Act contains leniency provisions to provide immunity from penalties in India but is not exercised by many individuals because of lack of motivation existing in bringing forward the informants. With the criminalisation of cartels the stringent penalties shall draw the informants towards vital disclosure regarding the existence of cartels and better enforcement by the authorities. The US Model shows India a path towards achieving effectiveness and transparency and welfare of consumers in the market. India’s competition law regime is still in its nascent stage but with the developments in the global markets and international cooperation among nations the need for criminalisation of cartels is essential in curbing the dangers posed by such associations to the national and the international markets.