Cartels, Markets and Crime: A Normative Justification for the Criminalisation of Economic Collusion
Author: Bruce Wardhaugh
Cartels, Markets and Crime advances a normative justification of the criminalisation of cartel conduct based on Rawls’ Theory of Justice. It is an interesting addition to the literature, much of which is dominated by law and economics theories and contentions.
The main arguments advanced in Cartels, Markets and Crime may be summarised as follows:
The Rawlsian analysis presented in Cartels, Markets and Crime is far-reaching and ambitious. Not all readers are likely to be convinced by it.
First and most fundamentally, why wed the analysis of cartel criminalisation to Rawls’ Theory of Justice? What if one rejects that theory? What are the implications of competing theories of justice including Nozick’s Anarchy, State and Utopia and Sen’s The Idea of Justice? (Consider eg H.A. Al-Ameen, Antitrust: The Person-Centred Approach (2013)). What if one takes the view that the Theory of Justice relates to distributive justice and is opaque or incoherent on corrective justice? (See further M Tonry (ed), Retribution has a Past: Has It a Future? (2011) ch 9; A Amatrudo, “Other Theories of Justice” (2016) 8(1) Journal of the Theoretical & Philosophical Criminology, 18).
Secondly, many agree that cartels cause serious harm and undermine the important institution of the market but deny that cartel criminalisation is justified. They contend that civil or administrative penalties against corporations and individuals would be a more cost-effective and less drastic means of prevention. Cartels, Markets and Crime does not answer that question squarely. The analytical tack taken by the author is essentially: (a) to put utilitarian normative justifications to one side as being “contentious” (pp 21-22); (b) to advance a Rawlsian normative justification for cartel criminalisation (to protect the market as a fundamental social institution) as a “supplement or substitute” for Mill’s approach (p 23); and (c) to flesh out the operational implications of that normative justification by canvassing “pragmatic grounds” and “practical justifications” (p 13). Those last-mentioned pragmatic grounds and practical justifications are vital to coming up with a workable approach to the control of cartel conduct but are not derived from Rawls’ Theory of Justice.
The analysis in Cartels, Markets and Crime would be more persuasive if it were thoroughly to explore the application of the utilitarian principle of least drastic means as a constraint on how Rawlsian harm by cartels is to be prevented. In particular, under what circumstances is it necessary to use criminal sanctions rather than civil sanctions in order to achieve the deterrence of cartel conduct and/or to reflect a retributive theory of punishment in relation to cartels?
Thirdly, cartel offences generally are considered to be workable only if they create per se liability (i.e., do not require assessment of competition effects or the application of a rule of reason). This is largely because of the greater complication that juries would face if required to make an assessment of competition effects or to apply a rule of reason. On one possible view, a Rawlsian approach is inconsistent with per se liability (see A Ayal, “Counter-Intuitive Fairness in Antitrust” (2012) 8(3) Journal of Competition Law & Economics 627–662 at 654-59). These and other questions of legal design are not answered in the Theory of Justice; they are outside the scope of that work.
Fourthly, the insight that cartel conduct causes harm to the institution of a market is not new and does not depend on whether or not one proceeds from a Rawlsian position (see eg A MacCulloch, “The Cartel Offence: Defining an Appropriate ‘Moral Space’” (2012) 8(1) European Competition Journal 73-93). From a utilitarian perspective, the market is a key driver for generating benefits efficiently, and cartel conduct seeks to distort and manipulate that process. That approach is reflected in the Australian cartel offence (see C Beaton-Wells & B Fisse, Australian Cartel Regulation (2011), 220.127.116.11).
Fifthly, the concept of “hidden rules” is difficult to fathom. It is contended that:
The conduct of the hard-core cartelist strikes at our expectations for a fair environment for exchange. By agreeing on prices, quantities and markets with illusory ‘competitors’, the cartelists have created hidden rules, known only to themselves, but by which all [i.e., all of them] are expected to play. (p 45)
It is difficult to understand why the principle of fairness should be limited in that way. Overt rules that flagrantly breach a principle of distributive justice are of no less obvious concern than hidden rules and possibly may be of greater concern given the bad example they set for others. In the context of cartels, overt cartel conduct may be severely anti-competitive, as is illustrated by the OPEC oil cartel. The UK cartel offence now requires secrecy as an element but that is inconsistent with the approach taken under US, Canadian and Australian law and is ill-considered.
Sixthly, much of the analysis of corporate criminal liability echoes law and economics analyses of this topic. This seems odd in a work that seeks to offer a normative justification for cartel criminalisation. The literature on normative justifications for corporate criminal liability includes detailed explorations of the concept of corporate fault and how that concept might be expressed in a workable way (see e.g., C Beaton-Wells & B Fisse, Australian Cartel Regulation (2011), 7.4).
Seventhly, the treatment of individual criminal liability takes Becker’s economic theory of deterrence as its starting point. Individual liability is treated as a useful complement to corporate liability because it can close the deterrence gap that results from corporate fines that are lower than the amount computed using Becker’s calculus. This approach is difficult to reconcile with the widely held utilitarian and non-utilitarian view that individual accountability is a prime means of social control and not merely a tool ancillary to corporate responsibility (see B Fisse & J Braithwaite, Corporations, Crime and Accountability (1993)). It is more plausible to surmise that individual actors in a Rawlsian original position would be repelled by the postulate that individual responsibility is merely a backstop to corporate liability in cases where corporate liability alone is unlikely to be effective.
Finally, while intriguing philosophically, the quest in Cartels, Markets and Crime for a fundamental norm that justifies the criminalisation of cartel conduct is unlikely to persuade lawmakers. The prime question in their eyes is whether or not subjecting corporations and/or individuals to criminal liability rather than civil liability is likely to increase the deterrence of cartel conduct in a cost-effective way. Answers to that question can be informed by sociological research, including empirical studies of attitudes to deterrent threats and managerial behaviour within corporations. They are difficult to discover from behind a veil of ignorance.
Brent Fisse, Brent Fisse Lawyers, Sydney, Adjunct Professor of Law, University of Sydney