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Europe’s cartelbusters get tough
26th January 2008
Europe’s cartel busters get tough
“Over the past three years I have made a priority of the fight against cartels. Cartels artificially increase prices of products at the expense of the European consumer, whether as direct purchasers or because companies in the middle of the supply chain have to increase their prices to pay for unfair price rises further up the chain. That’s not just illegal, it’s also deeply unfair.” (Neelie Kroes)
From condom manufacturers to producers of car windscreen-wipers, the European Union Competition Commission has been spreading its net widely in a bid to unearth and punish businesses guilty of anti-competitive behaviour within the single market. Last year alone the competition authorities levied fines on cartels of several billion Euro, the money goes into the general pot of finance available to fund EU spending.
Peter Day’s In Business programme this week interviews Neelie Kroes, the Dutch-born Competition Commissioner. It is well worth listening to. It was interesting to hear Neelie Kroes spell out very clearly how they made a conscious decision to increase the scale of the fines on firms guilty of cartel behaviour in order to change the incentives for businesses – they wanted to tip the balance between the rewards from price-fixing (higher profits during the duration of a producer cartel) set against the cost of being found out and exposed. Businesses can be fined up to 10 per cent of their annual turnover (in the USA there is also the risk of imprisonment for executives caught up in individual cases) and there is also the risk of a loss of business reputation and goodwill from being flagged up as guilty of price collusion to the detriment of the consumer.
The programme can be listened to here: http://www.bbc.co.uk/radio4/news/inbusiness/archive.shtml
EU Competition Commission http://ec.europa.eu/comm/competition/index_en.html
Rubber firms fined over condoms http://news.bbc.co.uk/1/hi/business/7129480.stm
BBC Radio 4 In Business http://www.bbc.co.uk/radio4/news/inbusiness/inbusiness.shtml
Geoff Riley
Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.