Posted by Social Science Research Network
A Proposal for a Structural Remedy for Illegal Collusion
By Joseph E. Harrington Jr (University of Pennsylvania)
Abstract: It is proposed that competition authorities use a structural remedy for some convicted cartels. The remedy would have cartel member(s) sell productive assets such as capacity to other firms for the purpose of making the market more competitive. Compared to existing corporate penalties of government fines and customer damages, divestiture is more of a deterrent under certain conditions, can be more effective at compensating those consumers harmed, and, most importantly, is corrective by reducing the likelihood of recidivism and preventing post-cartel tacit collusion. The paper offers some guidance for the use of divestitures, examines the legal basis for such a remedy, and discusses several cases for which a structural remedy may have been feasible and appropriate.
