The problem of collusion in Chille

Lenience Programs

Definition: Is a mechanism that seeks to bring on abandonment of at least one member of a trust, which is offered a decrease or entire revocation of the punishment in exchange for squealing their engagement in the offense and give grounds to, as incontestable, accuse the other members of the organisation.

Enunciation states that use lenience plans

Advantages and disadvantages of lenience plans

Statisticss in Europe and USA since implemented the lenience plans ( Sentences and increase efficiency to turn out collusion )

Problem with collusion in Chile ( There are besides collusion and job with its cogent evidence )

Propose the legal execution of these lenience plans as a manner to extenuate collusion in Chile ( Adapting the USA and European theoretical account to the Chilean instance )

Now, Chile does non supply this legal countenance

Propose the legal execution, non in order to stop the job, but at least mitigate

Precautions that should be considered

Decision

REFERENCE ( Between 10 – 14 )

Books ( UCL Library and cyberspace )

Economic and legal Diaries ( UCL Library and cyberspace )

Collusion

ARE LENIENCY PROGRAMS THE SOLUTION TO THE PROBLEM OF COLLUSION IN CHILE?

Student: Cristian CARMONA

Coach: Jim Byrne

Date: 20th August

Universes:

Introduction

In our globalized universe, the free market economic system system has been established as the dominant economic theoretical account worldwide. In that theoretical account both providers and consumers meet themselves in a specific topographic point known as market, the former with the intent of selling their goods or services and the latter in order to get them. The basis of this economic system is the competition, which can be defined as a relevant sum of existent or possible providers and demanders, neither of them with a important influence in the sum of supply or demand, severally, all of which operate independently of other providers or demanders ( Korah 1982, 3 )[ 1 ]. For the success of this economic system system, markets should take to hone competition, which implies that the monetary values of goods and services are governed by the jurisprudence of supply and demand[ 2 ]; in other words, it means that the monetary value of goods and services can non be set unnaturally by groups of providers, consumers, or groups of both of them. But the job is that in the pattern does non exists markets runing in perfect competition, since there are state of affairss in which groups of providers or consumers have a power to influence in the public presentation of the monetary values. These defects are known as unjust competition patterns[ 3 ]and causes serious injury to the economic system of a state ; that is the ground why the authorization tries to forestall or, at least extenuate it.

The purpose of this essay is to discourse a sort of unjust competition pattern known as collusion and suggest the execution in Chile of the lenience plans. For this, antecedently reviewed assorted facets of collusion and of the lenience plans and so, will see the possibility of reforming the jurisprudence in Chile with the intent to integrate these lenience plans as a signifier of extenuation of collusion. Finally, it must be remembered that the intent of this paper is merely to propose the execution of these plans in Chile, harmonizing to the statements that will be exposed, but non intended detailing the procedure and old requirements for its formalisation.

Background

First of all, collusion or trust could be defined as ‘agreements between rivals repairing monetary values or spliting markets between themselves and corporate boycotts ‘ ( Korak 1982, 43 ) . In other words, collusion is a sort of unjust competition signifier in which a group of manufacturers with a important portion of the market for a merchandise which can non be replaced by the consumers, agree to repair the monetary values, in order to gain illicit net incomes[ 4 ]. Collusion is one of the most detrimental signifiers of unjust competition, because it unnaturally increases monetary values of goods or services and reduces the quality of them. This latter is a consequence of the deficiency of competency between manufacturers, which have so no inducement to introduce and/or better the qualities of the goods or services that they are offering. Therefore, the buyer of these merchandises must pay more and/or received less than in a competitory market.

In most of the states in which protects free competition system, collusion is considered both an offense and as the most serious signifier of unjust competition. First, collusion is considered as an offense in different topographic point in the universe, for illustration in the United States, Europe and Chile. In the United States it is considered a condemnable offense since 1890, above is regulated in the Sherman Act, which is the chief jurisprudence modulating on this affair in that state ; In Europe, the Rome Treaty establishes that the collusion as illegal and ; In Chile, the statute law provides this activity as an offense that goes against free competition. Second, the badness with this activity is sanctioned in different states, shows that collusion is the signifier serious signifier of unjust competition. This offense non merely has economic countenances but besides prison penalty, as is the instance in Australia, Brazil, Canada, Korea, United States, Britain and Japan, among others states.

However, there is consensus around the universe sing the harmful nature of collusion, this has a terrible job that hinders its penalty, which is the trouble of cognizing whether this offense was committed or non. This latter is complicated because neither the authorization nor the victims have adequate market ‘s information to enable them to cognize if the monetary values and conditions of sale are determined by free competition or by a conjunct action of members of a trust.

There are historically two ways through which can turn out collusion ; these are circumstantial grounds and material grounds. The first is to analyze the behaviour of a group of houses in a specific market, and the 2nd is to analyse different pieces of stuff grounds, such as records, paperss, informants, among others. Qualitatively, both types of grounds are non tantamount, since the first may be wrong. The circumstantial grounds may demo a form of a group of companies that presume collusion, but decidedly it is non, because this behaviour can besides happen in competitory markets, for illustration the alteration of behaviour can be caused by new cost of production. This job of circumstantial grounds makes the 2nd signifier of cogent evidence is more effectual, but the latter has a job excessively, which is the trouble to obtain it, because as in other offenses or offense, it is logical that those involved tend to conceal the grounds.

In response to this trouble of cogent evidence that presented in this signifier of unjust competition, since the ninetiess both the United States and most European states ( European Commission 2010 ) have introduced the figure of lenience plans. This figure is to relieve all or portion of the punishment to the member of a trust that betrays the other members or collaborate with the probe. In other words, lenience plans is a mechanism that seeks to bring on abandonment of at least one member of the trust, which is offered a decrease or entire revocation of the punishment in exchange for squealing their engagement in the offense and give grounds to, as incontestable, accuse the other members of the organisation. This figure corresponds to the signifier of material grounds. Lenience plans allow the grounds is provided by the same parties who know and participated in the illegal act. For this ground, this instrument creates misgiving and intuition among members of the trust, since they will be exposed to one of them accuse the other to the governments. This factor of misgiving created by the possibility of denouncement beneficial, less likely to keep cartel their cooperation in clip and hence becomes more attractive each company chooses to move in an single alternatively of colluding, which is exactly the aim of the competition authorization. The misgiving and intuition represents a displacement in the manner to prosecute trusts, it introduces inducements for companies to move separately and hand in glove.

Based on the statements of the prima economic experts Massimo Motta and Michele Polo ( Motta & A ; Polo 2009, 347-379 ) , lenience plans would hold three chief advantages and one disadvantage that must be taken into history when sing this manner of obtaining grounds of collusion. The chief advantages would be the undermentioned: First, deter this activity since its beginning because companies will non be certain whether any of them give them betray, thereby suppressing the pattern as a consequence of non being able to trust on other manufacturers, which is non given one of the indispensable elements of collusion, which is the understanding between two or more companies with market power ; Second, lenience plans attack the stableness of trusts, because if it generated this anticompetitive understanding and if the authorization investigated a group of companies, it is possible that one of them would bewray the others to to the full or partly exempted from penalty ; Third, Reduces the clip of probe of this offense because it has an of import stuff grounds and additions strong beliefs, thereby cut downing costs of judgements and inhibited this pattern among companies. On the other manus, can be a disadvantage to these lenience plans, the fact that the freedom or decrease of the countenance can be both an inducement to conspire, because companies could hold that they prefer to pay the decreased mulct. This makes it logical in those instances where the mulct is wholly exempt or the countenance is significantly reduced.

Sing the troubles to turn out collusion and benefits that have these lenience plans, many states around the universe have implemented it. Harmonizing to Director of Criminal Enforcement Antitrust Division U.S. Department Justice Scott D. Hammond ( Hammond. 2009, P.1 ) , since 1997, the United States have been punished different houses for collusion for a entire about $ 5.6 billion dollars, of which over 90 per centum were caused by these lenience plans. In add-on, more than a half of the instances of collusion presently being studied in this state have started or have advanced through this material grounds. Furthermore, although the European Commission does non give accurate statistics on the benefits that has led the execution of these plans, claims that they have been a really successful tool against collusion. ( European Commission. 2010 ) .

In Chile, as in most states, operates the free market system. The huge bulk of markets in this state are freely runing markets in the interplay of supply and demand, but in others, nevertheless, there may be state of affairss that threaten free competition, including instances of collusion. Consequently, this state neither is immune to the job of turn outing collusion. In this regard, the Tribunal de la Libre Competencia en Chile or TLDC ( Court of Defense of Competition in Chile ) , who is responsible for analysing instances against free competition, claims that since 1996 have been known 19 instances of collusion, of which 6 instances have been strong beliefs, 6 instances have been acquittals and 7 instances still unresolved, averaging the probe of each instance at least two old ages ( TDLC. 2010 ) . Furthermore, this Court states that these instances of collusion represent merely 9 per centum of all combative instances known it ( TDLC. 2010 ) .

The figures given by this Court of Defense of Competition in Chile may hold multiple readings, among which, in my sentiment, are interesting the undermentioned two: First, that instances of collusion are comparatively minor into the entire instances of unjust anti-competitive in Chile, which may be because companies have non involvement in conspiring widespread or because neither the authorization nor consumers have sufficient tools to observe it. This, there is no manner to cognize but as otherwise stated in this essay to the addition in the figure of instances detected in the United States and Europe since the application of the lenience plans, it seems that this information may be distorted by the job of cogent evidence of collusion and really be more than presently provided the Chilean authorization ; Second, of the 19 instances of collusion which is on record in Chile, merely one in three has ended in a strong belief on this day of the month, taking an norm of at least two old ages each probe. The low rate of strong beliefs and the inordinate clip of probe may besides be due to the trouble of turn outing this offense.

Bearing in head that Chile has instances of collusion and it is likely that these are more than those registered authorization, this chiefly due to the job of turn outing this offense, it is funny that the day of the month, Chile has non yet incorporated into their statute law the lenience plans or at least has a serious undertaking to make so, such as has been done in the United States and Europe. The latter must be added besides the fact that Chile, from January this twelvemonth, is a lasting member of the OECD ( OECD 2010 ) , and this organisation invariably promotes the execution of these lenience plans among its members.

In this scenario and sing the benefits it can convey which should be higher than his harm, it seems advisable to amend the bing ordinance in order to integrate these plans into the Chilean legal system. About how to transport out this suggestion, I think could be is prudent to analyze the most of import ordinances around the universe that consider these plans, with the intent to determinate the best option to accommodate it in Chile.

Decision

In drumhead, in this essay foremost has been analyzed a sort of unjust competition pattern known as collusion, revising its definition, elements, importance around the universe and the jobs to turn out this offense ; so was analyzed the figure of the lenience plans, revising its definition, advantages and disadvantage and the consequences it has given its execution in the United States and Europe ; eventually has analyzed the instance of Chile for the intent of proposing a legal reform in order to integrate the lenience plans in that state, particularly sing that Chile is now a lasting member of the OECD which promotes this pattern among its members and that the statement in this paper the benefits of its execution could be greater than the injury that might imply.

Finally, it must be remembered that the intent of this paper is merely to propose the execution of these plans in Chile, harmonizing to the statements that have been exposed, but non intended detailing the procedure and old requirements for its formalisation.