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Enforcement of Anti-Collusion Laws Against Domestic and Foreign Firms

Pierre Cremieux Managing Principal, Analysis Group and Edward A. Snyder I ndra K. Nooyi Dean William S. Beinecke Professor of Economics Yale University School of Management

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Enforcement of Anti-Collusion Laws Against Domestic and Foreign Firms

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  1. Pierre Cremieux Managing Principal, Analysis Group and Edward A. SnyderIndra K. Nooyi Dean William S. Beinecke Professor of Economics Yale University School of Management These slides were presented at the Yale School of Management Conference , Problems in Global Antitrust Enforcement, February 19-20, 2016 to brief participants on our working paper of the same title. Enforcement of Anti-Collusion Laws Against Domestic and Foreign Firms

  2. With extension of economic activities beyond jurisdictional boundaries, antitrust authorities must decide whether and how to account for the national identities of firms in the enforcement activities Three hypotheses: If an authority is neutral in its enforcement actions, then national identity is irrelevant to a firm’s likelihood of being fined and the size of the fine If an authority focuses its enforcement on foreign firms, then foreign firms are more likely to be fined and receive higher fines If an authority is domestically-focused in its enforcement, then domestic firms are more likely to be fined and receive higher fines None of these hypotheses can be ruled out on an a priori basis. Introduction

  3. With more than 120 antitrust regimes capable of bringing a wide range of actions, many inquiries into the role of the national identities of the firms in global antitrust enforcement are possible Here we focus on One area of law: anti-collusion laws Two authorities: the EU and US Three Types of firms: EU firms, US firms, and Rest-of World (ROW) firms Our data on EU and US enforcement span a twenty-one year period (1994-2014) and include 938 fines Area of Focus

  4. Data: For each enforcement action against a firm, we identified the fine imposed, the location of the firm’s parent company, the infringement period, the relevant product-market, and affected sales Methodology: Identified cartels that may span the EU and US jurisdictions and investigated differential enforcement against EU, US, and ROW firms by the two authorities Examined firms fined in one jurisdiction with relevant sales in both and asked whether the other authority fines the firm and, if so, what the size of the fine is We assign no temporal meaning to the decision to impose a fine by one jurisdiction or the other and refer to them as atemporal conditionalprobabilities We analyze the likelihood of a fine by evaluating the aggregate data and by estimating a Probit regression using the set of over 500 firms that were fined by at least one jurisdiction and had sales in both jurisdictions. We evaluate the influence of national identity on the size of fine based on a sample of 237 firms with affected sales volumes and non-zero fines. Data and Methodology

  5. EU Aggregate Fine Amounts by National Origin of Firm, 1994-2014

  6. US Aggregate Fine Amounts by National Origin of Firm, 1994-2014

  7. EU Average Amount of Fine by National Origin of Firm, 1994-2014

  8. EU Average Amount of Fine by National Origin of Firm, 1994-2014

  9. Marginal Effect of National Origin on Likelihood of Fine (Probit Analysis)

  10. Overlap: Predicted Probability of Fine Based on National Origin (From Probit Analysis)

  11. Both the EU and US tend to target ROW firms – consistent with a relaxed retaliation constraint EU also has a domestic focus All conditional probabilities are substantially below 100% overlap Conclusions on the Likelihood of a Fine

  12. Overlap: Marginal Effect of National Origin on Size of Fine (From Linear Regression Analysis)

  13. EU Seems neutral (driven only by the size of relevant sales) US is foreign focused (after controlling for the size of relevant sales) Conclusions on the Size of Fines Imposed

  14. Our inquiries constitute a weak test for the role of national identities given that law and policy are more convergent and given long history of trade and enforcement. Limitations: We don’t observe the underlying cartel activity Sales data are limited However: Our results suggest that national identities play an influential role in the global antitrust “enforcement space”. Conclusion

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