The Economist discusses the incentives to join a cartel – even while trustbusters are getting better at breaking them up. In the article, they discuss methods to uncover cartels, including the use of screens, citing our colleague Rosa Abrantes-Metz:
“Some countries are employing eggheads to search for suspicious price patterns by screening markets. These statistical tests have proved most effective in markets with lots of data, such as financial benchmarks and derivatives, though they have also been useful in cement and fishing: they provided the first evidence of manipulation of the London Interbank Offered Rate (LIBOR) in 2008 and, last year, of foreign-exchange rates.
Not everyone is convinced by screening. The DoJ ditched it after concluding that it produced too many false positives. Grand-jury subpoenas can rock companies, says Scott Hammond, a former DoJ cartel-enforcement chief, now with Gibson, Dunn & Crutcher, another law firm. It is a mistake to unleash them based on tests that have falsely pointed to wrongdoing.
Rosa Abrantes-Metz of New York University’s Stern School of Business, whose number-crunching helped expose the LIBOR affair, thinks the Americans are too sceptical. She argues that market screening, like the medical sort, is useful as an indicator that prompts further investigation.”
Read the entire article here.