Antitrust Sanctions (reprint)

In this article, we first discuss traditional deterrence theory as applied to optimal criminal antitrust penalties. Then we evaluate both the U.S. and EU experience with ever-increasing corporate fines and the available empirical evidence on the deterrent value of cartel sanctions. In the next part we turn to our claim that the conventional wisdom of ever-increasing corporate fines to solve the problem of under-deterrence is misguided. The determination of the optimal sanction for price-fixing should be guided by two principles: (1) the total sanction must be great enough, but no greater than necessary, to take the profit out of price-fixing; and (2) the individuals responsible for the price-fixing should be given a sufficient disincentive to discourage them from engaging in the activity. We propose altering the distribution of criminal sanctions for corporations and the individuals who fix prices on their behalf, and introducing sanctions for negligent officers and directors consistent with our two fundamental principles. Finally, we discuss the experience with debarment as a sanction in other contexts, and how it might operate in the context of U.S. antitrust enforcement.