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Countering cartels to end corruption and protect the consumer
Transparency International
Transparency International
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pp_4.pdf
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"Globalised cartel activity has assumed renewed prominence over the last three decades, aided by advances in international communication and supply chains. Even the most trusted household brands, from Bayer to Intel, have been found and fined for participating in price-fixing.1 Between 1990 and 2005, 283 private international cartels were exposed. These cartels enjoyed aggregate sales topping US$ 1 trillion and overcharged consumers more than US$ 300 billion.2 Unfortunately, these figures likely represent a mere fraction of the total economic drain cartels exert on consumers. Estimates suggest that perhaps only one in every six cartels is ever detected.3 With weaker antitrust laws and fewer resources for enforcement than industrialised nations, developing countries are especially hard hit by both domestic and international cartels. These countries seem to have received little support from industrialised nations to protect themselves from price-fixing: a 2005 study found that 51 countries, the majority of which belong to the Organisation for Economic Co-operation and Development (OECD), have regulatory frameworks that either explicitly or implicitly tolerate cartels which engage in price-fixing outside national borders and export their illegal practices abroad. Shortcomings in both domestic and international cartel enforcement have resulted, for example, in Latin America and Asia experiencing higher overcharges from global cartel networks than North America or Europe. By one estimate, just 19 industries involved in international price-fixing schemes were found to have cost developing countries — as a result of inflated prices for key imports — the equivalent of at least 15 per cent of what they had received in foreign aid. With the majority of cartels evading detection, it has been suggested that the economic losses for developing countries could approach or exceed the total amount received through international development assistance.4 2. Towards collaborative and innovative solutions Like bribery, cartels flout the rule of law, undermine standards of business ethics and breed a corporate culture of reckless opportunism. Collusion relies on systematic forms of illegality and deception (e.g. the use of hidden budgets, covert communication or the exchange of confidential information by companies or rogue employees) and opens the door for further corrupt activity. Dismantling both cartels and the channels for private sector corruption requires greater coordination between antitrust institutions and the anti-corruption movement. As antitrust regulators share information on corporate violators, anticorruption authorities can be warned early of potential offenders and vice versa. For example, a firm’s attempt to bribe officials to obtain a public tender may be a sign of other corrupt activity by the offending company or point to possible collusion in the wider marketplace. Enhanced communication between anti-corruption and competition authorities also creates opportunities for mutual learning on effective enforcement strategies. With a growing set of innovative tools to confront cartels, competition regulators have particularly valuable strategies and experiences that could be adapted to anti-corruption efforts."
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2009-09-04
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With permission of the license/copyright holder