Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

Fine and Punishment

with one comment

In the article that  kept me working during my otherwise summer holidays last year Luis Ortiz Blanco and myself wrote for the Fordham Conference held last September [the final version is published here; a draft version is available for free here] we quoted one of our “Friday Slotters”, Ian Forrester, (actually, he was the one who proposed “The Friday Slot” as a name for the section) saying that competition fines imposed by the Commission “exceed fines imposed by the public authority in any democracy of which I am aware for any offence“.

Some evolution is apparently taking place in this regard. Look, for instance, at the  $3 billion fine that GlaxoSmithkline has agreed to pay for promoting its best-selling antidepressants for unapproved uses and failing to report safety data. Take a look also at this very interesting graph, which points out at the largest corporate fines and settlements in the past seven years, and also presents the fine as a percentage of the yearly income of the sanctioned companies.

During a Paris-Brussels train trip last night I read an interesting piece on The Economist that deals precisely with the recent increment in corporate fines using international cartel fines (which reportedly “rose by a factor of one thousand between the 1990s and 2000s”) as the main example. 

The Economist‘s piece draws on economic research to justify the conclusion that “to deter bad behavior fines need to rise”.

You may recall that our guest Benoît Durand dealt with this same issue some posts ago and came to a contrary conclusion: that deterrence would be better served by envisaging individual sanctions (fines, disqualification and/or prison penalties) for the executives directly involved in cartel meetings. We haven´t really thought this through, but we’re not big fans of prison penalties, nor would we favor the imposition of disproportionate individual fines. A well designed disqualification sanction, however, would appear to us as a reasonable measure. Any views?

Written by Alfonso Lamadrid

23 July 2012 at 3:08 pm

One Response

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  1. I seem to agree with Benoît Durand. During my 15 yrs of competition compliance audit, I definitely face this question (in different shapes) “what is my personal liability?” in each case… (In jurisdictions where individual sanctions are not deterrent) Individual performance stress (mortgage payments, children’s tuition, etc…), almost always over-weights shareholders’ expectation that they hold shares of a competition compliant company.

    Dr. M. Fevzi TOKSOY

    25 July 2012 at 10:21 am


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