Abstract
To encourage private actions for damages in antitrust cases some jurisdictions subtract a fraction of the redress from the fine. We analyze the effectiveness of this policy. Such a rebate does not encourage settlement negotiations that would otherwise not occur. If, however, the parties settle without the rebate, the introduction of the reduction increases the settlement amount, yet at the price of reduced deterrence for those wrongdoers who are actually fined. Under a leniency program the rebate has no effect on the leniency applicant: she doesn't pay a fine that can be reduced. The overall effect of a fine reduction on deterrence is, therefore, negative.
Highlights
Antitrust rules are enforced publicly by competition agencies, typically by way of fines
If parties settle without the reduction, the rebate increases the settlement amount— at the price of reduced deterrence
The rebate makes it less attractive for a cartel member to blow the whistle under a leniency program
Summary
Antitrust rules are enforced publicly by competition agencies, typically by way of fines They can be enforced privately by the victims of an infringement through damage actions. “Member States shall ensure that national competition authorities may consider compensation paid as a result of a consensual settlement when determining the amount of the fine to be imposed for an infringement of Article 101 or 102 TFEU, in accordance with Article 18(3) of Directive 2014/104/EU.”. The competition authority subtracts a fraction of the settlement payment from the wrongdoer’s fine. If they do not reach a settlement, the victim can take the case to court. If parties settle without the reduction, the rebate increases the settlement amount— at the price of reduced deterrence. The rebate makes it less attractive for a cartel member to blow the whistle under a leniency program
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