Pros And Disadvantages Of Cartels

1893 Words8 Pages
1. Introduction

Cartels have always been a potential threat to the economy and now the European Commission (EC) has fined 17 companies in the bathroom market a total of €622,250,783 for being part of a price fixing cartel. One of these companies, Masco, was the first to provide the EC with information about the cartel and it has received full immunity from fines due to the EC’s Leniency Programme (European Commission, 2010). According to Commission Vice President and Competition Commissioner Joaquín Almunia (2010) these 17 companies fixed the prices of baths, sinks, taps, etc. for 12 years in six countries, affecting 240 million people. Furthermore, Almunia (2010) claims that a number of people have been harmed by this cartel, among them businesses
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In return these companies might receive either full immunity from fines or a reduction of fines (EC, 2013). The EC also benefits from this provided information, as they receive more inside information about the cartel, which they could perhaps not obtain otherwise. Another advantage of the Leniency Programme is that it creates a situation of distrust and suspicion among cartel members, which has a negative effect on cartel formation (EC, 2013). A company that provides this information to the EC is called a whistle blower, in the case of the bathroom manufacturers cartel also known as the American company Masco. They received full immunity under the leniency policy, but to qualify for this immunity, they needed to meet a couple of requirements. “A company which participated in a cartel must be the first one to inform the Commission of an undetected cartel by providing sufficient information to allow the Commission to launch an inspection at the premises of the companies allegedly involved in the cartel.” (EC, 2013). The EC states further that if it is already in possession of sufficient information to start an inspection itself, the company (i.e. whistle blower) has to provide the required evidence for the EC to prove the cartel infringement. Finally, the company must fully cooperate with the EC throughout the whole procedure and by all means necessary help it to put an end to the cartel (EC,
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