Pros And Cons Of Cartel

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These fines are mostly millions of euros to avoid companies to form cartels. In the European Union the fines for being part of a cartel is 10% of the company’s revenue. The punishment should be greater than 10, it should be large enough so no company would start or be part of a cartel (Chavda & Jegers, 2007, p. 242-243). Another reason is the lenience policy of the Commission. When the EC can prove a company is active in a cartel it will receive a fine. The height of the fine depends on how much the cartel, and the company, benefits. The leniency policy holds that the first firm who provides information about the cartel receives full immunity or a reduced fine. Only the first company who shares information with the EC gets a lower fine or immunity. Mostly, it is a matter of time when the first company goes to the EC. The Commission is monitoring because cartels form great disadvantages for consumers. In the bathroom cartel case was an area involved where 240 million people lived. When prices are fixed, consumers spent unnecessary money on products. The Commission is monitoring on cartels due to the welfare loss cartels create. The welfare loss consists of two dominant groups; market costs and regulatory costs. Market costs are divided in less competition, less innovation and barriers to enter the market. Regulatory costs are fines, negative publicity and governmental policy costs (Chavda & Jegers, 2007, p. 231). Consumers and producers Regarding the different forms of
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