Ideas@TheCentre
The Folly of Criminalising Cartels
The federal government has proposed a bill introduce a maximum jail term of 10 years for individuals found guilty of serious cartel conduct because it thinks that existing civil penalties alone cannot adequately deter cartel formation.
Yet, existing penalties for cartels include fines of a maximum of $10 million, up to 10 percent of a cartelist’s annual turnover, or three times the gains to the cartel, whichever is higher, and were only recently increased from a mere maximum of $10 million. It is a trivialisation of current penalties to dismiss them as a mere cost of doing business.
The arguments in support of provisions such as those presented in the bill are not as strong as they appear and that the government should reconsider the introduction of criminal penalties for cartelisation.
It is often asserted that cartelisation is morally equivalent to theft or fraud, yet some long-term cooperative agreements between firms are not only tolerated under the law, but recognised as being of public benefit.
Recent post-mortems of successful cartel prosecutions have not found that the market reaped any benefits in terms of lower prices after prosecution.
On top of this, the chances of a cartel being detected are higher now with whistleblower programs such as the Immunity Policy used by the ACCC, which grants immunity from prosecution for corporations and individuals who are the first to ‘squeal’ on a cartel.
Given the fragile and unstable nature of cartels, measures to introduce criminal penalties for cartelisation are like cracking open a nut with a sledgehammer.
Jason Soon is a Visiting Fellow at the CIS. His report The Folly of Criminalising Cartels was released by CIS this week.
