DP9518 The Distortive Effects of Antitrust Fines Based on Revenue

Author(s): Vasiliki Bageri, Yannis Katsoulacos, Giancarlo Spagnolo
Publication Date: June 2013
Keyword(s): Antitrust, Deterrence, Fines, Law Enforcement
JEL(s): K21, L40
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=9518

In most jurisdictions, antitrust fines are based on affected commerce rather than on collusive profits, and in some others, caps on fines are introduced based on total firm sales rather than on affected commerce. We uncover a number of distortions that these policies generate, propose simple models to characterise their comparative static properties, and quantify them with simulations based on market data. We conclude by discussing the obvious need to depart from these distortive rules-of-thumb that appear to have the potential to substantially reduce social welfare.