Price fixing during a recession: Implications of an economic downturn for cartels and enforcement

The rigorous enforcement of cartel laws during a downturn has the potential to speed up an economy’s recovery by preventing artificial price hikes. Economic downturns can break up existing cartels, but empirically many collusive agreements are borne out of economic crisis. Recession may also distort normative perceptions of price fixing and force firms previously colluding tacitly, to form a hard core cartel. Despite the heightened danger of bankruptcy in troubled industries during the present crises, competition authorities generally appear to be standing strong. Greater use of criminal sanctions on the national level could counter the deterrence weakening effect of bankruptcy discounts.The likely effect of a downturn on private enforcement is mixed.