Document Type

Article

Rights

This item is available under a Creative Commons License for non-commercial use only

Disciplines

Economics

Publication Details

Concurrences N° 4-2020, Art. N° 97086, p.19-24

Abstract

Cartel recidivism has been discovered among many convicted firms and is often perceived as a result of the limited efficiency of competition policy. The incentives for managers to collude have been linked to the firm’s organizational structure, the corporate culture, and the type of executive compensation packages in place.

To the extent that undetected cartels differ from detected ones in relevant dimensions, the current empirical results on illegal cartels are biased. To tackle this issue, we use a novel dataset of a population of cartels, which were legal in Sweden up until 1993. We contribute to the current debate on the importance and extent of recidivism, exploiting managers’ willingness to collude (repeatedly), absent law enforcement. This is a particularly important issue in the current climate of (potentially) weak law enforcement in terms of detected cartels and lack of optimal enforcement tools.

We illustrate how recidivism is, in a legal setting, a widespread phenomenon. We show that: (i) cartel members tend to be multiple colluders (MCs), i.e., participate in many cartels (up to 63 in a 46-year period); (ii) MCs tend to collude with similar firms, refuse entry and/or exit from the agreement and have less-strict governance rules (fewer meetings, fewer voting mechanisms and a less delineated hierarchy); and (iii) contrary to the current literature, there is no clear trend between the MCs and the involvement of a trade association.


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