Survey sheds light on public attitudes towards price fixing
By: News Archive
New research from the University of East Anglia shows there is confusion among the public over whether price fixing by companies is actually illegal.
It suggests that public enforcement alone may not be making a significant impact on popular perceptions, and that competition authorities should engage in more advocacy, public awareness and compliance activities.
Price fixing is a criminal offence in the UK and can result in businesses being fined up to 10 per cent of their turnover.
The study by Prof Andreas Stephan, from UEA’s Law School and Centre for Competition Policy (CCP), involved a survey of more than 10,500 people from the UK, Germany, Italy and the United States. They were questioned about their attitudes and knowledge regarding cartel and price fixing enforcement and punishment.
The findings suggest a majority in each of the four countries expect competing businesses to calculate their prices independently of each other, lending legitimacy to the principles of open competition that underpin antitrust laws.
The study also found strong popular support for prohibiting cartel behaviour and for punishing both individuals and businesses responsible. British respondents were particularly enthusiastic about publically naming and shaming businesses and employees responsible for fixing prices. Yet there was a significant amount of confusion, especially in the United States, about whether price fixing is illegal.
Despite differences in their attitudes to government intervention in markets and the trustworthiness of the business community, attitudes were surprisingly similar between the UK, Germany, Italy and the US. European respondents were more willing to condemn price fixing as a harmful practice that should be prohibited and punished than their American counterparts. This is despite the fact the US has a much longer history of going after such practices. Respondents in the US were, however, more supportive of tough sanctions – especially the imprisoning of individuals responsible.
“Perhaps the most surprising result in the study is the similarity of public attitudes between these four very different jurisdictions,” said Prof Stephan. “We found that attitudes on matters such as the role of government do differ, yet on many of the key questions relating to price fixing the results were very similar. This may suggest enforcement has not so far had a big impact on popular perceptions. We would otherwise have observed less confusion over whether the practice is illegal, especially in the United States.”
The study, published today as a working paper by the CCP, was a follow up to a 2007 project that focused on the UK. A comparison with the 2007 CCP Cartel Survey suggests that attitudes in the UK have hardened and support for enforcement increased.
“The hardening of attitudes in the UK may be due to the financial crisis and the instances of corporate misbehaviour said to have contributed to it. This might help explain the significant increase in support for imprisonment as a cartel sanction, up from 11 per cent in 2007 to 27 per cent in 2014. The high level of awareness in Germany, apparently following significant press coverage of three high profile cases, suggests that enforcement can raise awareness, in the short term at least. However, it may also highlight the need for competition authorities to pursue greater advocacy and engagement activities with the public and business, alongside training and enforcement.”
Prof Stephan said research on public attitudes was significant because it influenced people’s behaviour and compliance. Findings from the 2007 survey also informed changes in policy in the UK and Australia.
“Public attitudes are important to individuals’ willingness to recognise, report and stop engaging in cartel and price-fixing activities,” said Prof Stephan. “They are also essential to the long-term success, funding and legitimacy of competition authorities and their enforcement powers, particularly if they are looking to increase punishments. They want to know if there is popular support for sanctions against individuals. While these can be either criminal or administrative, there appears to be a global movement towards punishing individuals as well as firms.”
Around two thirds of respondents agreed that price fixing should be a crime and were not persuaded by the suggestion that the criminal law should only be reserved for the most serious breaches of the law, such as murder, rape and the theft of property. However, when asked to compare price fixing to other forms of wrongdoing, respondents felt that assault, theft, fraud, tax evasion, insider trading and drink driving were all more serious than price fixing. Only copyright violations were considered to be less serious.
“This does not necessarily mean there is insufficient support for treating price fixing as a crime, as some of this may be a reflection of the low level of awareness that price fixing is illegal,” explained Prof Stephan. “Despite price fixing being viewed as less serious than these other practices on balance, it is notable that a significant proportion of respondents felt price fixing was comparable in severity to fraud and other financial crimes.”
Different jurisdictions have varying historical levels of enforcement against cartels and whereas some employ sanctions against individuals and businesses, criminal or otherwise, others only engage businesses. Many jurisdictions have either recently adopted sanctions against individuals or are considering doing so. There is also a strong drive to promote private claims for damages.
The working paper ‘Survey of public attitudes to price fixing in the UK, Germany, Italy and the USA’ is published online on Tuesday August 11, 2015.
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