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Journal of Competition Law and Economics Advance Access originally published online on December 13, 2007
Journal of Competition Law and Economics 2008 4(1):61-88; doi:10.1093/joclec/nhm026
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© The Author (2007). Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org

THE GENESIS OF CARTEL INVESTIGATIONS: SOME INSIGHTS FROM EXAMINING THE DYNAMIC INTERRELATIONSHIPS BETWEEN U.S. CIVIL AND CRIMINAL ANTITRUST INVESTIGATIONS

Vivek Ghosal *

The U.S. Department of Justice has prosecuted over 1600 criminal antitrust (price-fixing and related) cases since 1970. Yet we know precious little about the true genesis of these investigations. This paper uses the vector-autoregression methodology to examine the dynamic interrelationships between the various criminal and civil antitrust enforcement variables. A key result is that the number of criminal prosecutions increases in the years immediately following an increase in the number of civil cases, suggesting that merger reviews and other civil investigations may alert the antitrust authorities to criminal antitrust activities. To the best of my knowledge, this is the first econometric analysis that demonstrates the quantitative size of this effect and the time lags in the relationship. Other findings include important dynamic interrelationships between grand jury investigations, the number of individuals and corporations prosecuted, and criminal cases, indicating that information unearthed during a given criminal investigation and prosecution often reveals information about other conspiracies leading to future investigations and prosecutions. Finally, the number of criminal cases prosecuted increases following an economic downturn. We relate this increase to the literature, which points to cartel instability during economic downturns.

* School of Economics, Georgia Institute of Technology, Atlanta, GA 30332, USA; CESifo (Munich); and ENCORE (Amsterdam). Contact: Vivek.Ghosal{at}econ.gatech.edu. This paper is part of a broader project on antitrust enforcement that I initiated when I was an economist at the Antitrust Division, U.S. Department of Justice. For helpful suggestions and discussions, I thank Andrew Dick, Norm Familant, and participants at the International Industrial Organization Conference (Atlanta, 2005), workshop on "Forensic Economics in Competition Law Enforcement" hosted by the Amsterdam Center for Law and Economics (March, 2006), Latin American Econometric Society meetings (Mexico City, 2006), European School of Management and Technology (Berlin), European University Institute (Firenze), Italian Competition Authority, and Copenhagen Business School. I am indebted to two anonymous referees and Maarten Pieter Schinkel for constructive suggestions.


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