DOJ Has the Power to Crush Price-Fixers

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2616775

Albert Foer, American Antitrust Institute (AAI)

Douglas H. Ginsburg, U.S. Court of Appeals for the District of Columbia Circuit;
George Mason University School of Law

Robert H. Lande, University of Baltimore - School of Law

Joshua D. Wright, Federal Trade Commission; George Mason University School of Law

May 29-31, 2015

USA Today Weekend, May 29-31, 2015, Page 11A.
University of Baltimore School of Law Legal Studies Research Paper

Abstract:
The four of us are known in antitrust circles for the points on which we disagree. We do agree, however, that price fixing among competitors is inadequately deterred, is often profitable despite existing fines and damages actions, and that it's time to focus more on the individuals who participate in illegal cartels. We propose that, as part of its plea agreements, the Department of Justice should insist that corporate defendants agree not to hire or rehire anyone who has been convicted of price fixing. This re-employment often occurs today. In addition, the Department should insist that corporations agree not to pay the fines of their convicted employees, either directly or indirectly, or compensate them for serving time.

No new legislation would be needed to implement these measures, and there would be no significant budgetary consequences for taxpayers. These policies are logical extensions of a long-term bipartisan agreement on the necessity of tough anti-cartel enforcement, something that both conservatives and liberals support.

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There’s nothing like Wednesday’s announcement of a $5.6 billion penalty in the Libor currency manipulation case to make us feel good, secure in the knowledge that the Department of Justice (DOJ) is getting tough on illegal corporate collusion. This was the amount JPMorgan, Citigroup, Royal Bank of Scotland, UBS and Barclay’s just agreed to pay for participating in a cartel that fixed the prices of international foreign currencies in violation of antitrust laws.

Should we really sleep more securely on account of this huge fine? Realistically, will even a fine this large be likely to stop other firm s from engaging in similar activities?

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Unfortunately, in spite of the DOJ’s best efforts, corporate collusion is often still profitable net of fines and damages. Moreover, evidence suggests that many companies encourage their employees to engage in this lucrative but illegal activity by reemploying them upon their release from prison. The prospect of a one to two year “timeout” at a white-collar clink is not too much to pay, it seems, for job security and other benefits.

The four of us are known in antitrust circles for the points on which we disagree. We do agree, however, that price-fixing among competitors is bad for consumers who pay artificially elevated prices and is inadequately deterred, with too many price fixing cartels continuing to opera te despite ever increasing sanctions. Indeed, two careful event studies covering 40 years of price fixing indictments of publicly traded firms in the United States show that the stock prices of 80 percent of the companies rebounded to pre-indictment levels in less than one year.

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