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Abstract

The Department of Justice (DOJ) antitrust penalties have become harsher for violating individuals and firms, and the criminal enforcement of cases has become increasingly important during the last 20 years. In this study we investigate whether these changes in antitrust law led to improved effectiveness of antitrust actions with respect to price-fixing over 1981-2001. We measure effectiveness by suppressed stock market values of offending firms after successful Section 1 of the Sherman Act indictment, by duration of the deterrent effect and by the rate of recidivism. We use effectiveness of antitrust enforcement documented by Bosch and Eckard (1991) and Thompson and Kaserman (2001) for 1962-80 as a basis for comparison. Our results show that the changes in antitrust law do improve the effectiveness as measured by changes in market valuations of offenders, but the durability of deterrent effect and the rate of recidivism are left unaffected suggesting that Section 1 of Sherman Act enforcement has very little lasting effect.

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