The Leniency Programme in Malaysia’s Competition Regime

Over the last few decades, leniency programs recorded a successful history of identifying and dismantling cartels. The essential idea is simple, that authorities will reward a cartel member who self-reports. It is instructive to consider why authorities have relied so heavily on leniency in the past. First, it is not particularly resource intensive to implement. It doesn’t require collecting large amounts of data and employing economists and data analysts to sift through the haystack in hopes of finding the occasional needle. Second, almost by definition leniency is likely to have a high success rate of prosecution, among those applications selected to be fully investigated. It is noteworthy though that authorities are reluctant to produce statistics on the overall efficacy of their leniency programs. We should have a better idea of how many leniency applications are reviewed and investigated (among all those filed), and of those, how many lead nowhere. But we are not privy to such valuable information. Can authorities continue to almost exclusively depend on leniency programs going forward? There is no other area of criminal investigation which essentially waits for the guilty to confess as its key detection tool, yet the advantages of resource and success of such “passive detection” would equally apply to robbery or homicide: it doesn’t cost much to wait for a confession, and if someone confesses, the case will almost certainly be closed successfully. But while the police surveil neighborhoods to monitor possible illegal conduct, ready to not only detect ongoing conduct but also hopefully to deter such conduct from even getting started, several competition authorities still tend to lack the proactive nature of detection and deterrence through screening or market monitoring, relying (almost or entirely) on leniency programs. Hence, cartel detection appears, at least at first, to be a uniquely passive area of law enforcement. In this short paper we explore the role of leniency programs in the next generation of cartel detection, and ultimately deterrence. Will it continue to be the dominant source of cartel detection, or will advances in data collection and analysis – so-called “big data” and “machine learning” – reduce the cost and increase the effectiveness of screening and artificial intelligence techniques? Will traditional leniency and whistleblower programs even remain effective in a future which may keep no “paper trail” of communications proving the necessary intent? Have we learned the lessons from extensive rigging in financial markets? Do we need to revisit the entire detection approach?

The US introduced the cartel leniency program in 1978. In the past two decades, there has been a surge in the implementation of leniency programs in more than sixty jurisdictions. Although there have been numerous scholarly discussions to support the cartel leniency program, inconsistent views exist among different jurisdictions and stakeholders as to the effectiveness of the leniency program in practice. In evaluating new leniency programs, scholars and commentators have typically referred to the US and the EU models as benchmarks, but little attention has been paid to the question of whether it is desirable to apply these models in designing various leniency programs in different jurisdictions and societies. Given that Australia has recently revised its cartel immunity program for the third time, and that China’s competition authorities have proactively relied on the leniency concept to combat cartels in the past few years and are currently drafting a guideline for more effective implementation of the cartel leniency program, the time is now ripe for an apple-versus-pear comparison of these two immunity/leniency programs so as to provide more insights into the different institutional designs of immunity/leniency programs.

Leniency programs have become widespread and are generally quite active as reflected in the number of applications. What is not well-understood is how they affect the number of cartels. This paper develops and explores a theoretical framework to help understand when leniency programs are likely to be effective in reducing the presence of cartels. Plausible conditions are derived whereby a leniency program can result in more cartels. On a more positive note, we identify situations and policies that a competition authority can pursue that will make it more likely that a leniency program will have the intended effect of reducing the number of cartels.

Leniency programs have become widespread and are generally quite active as reflected in the number of applications. What is not well understood is how they affect the number of cartels. This paper develops and explores a theoretical framework to help understand when leniency programs are likely to be effective in reducing the presence of cartels. Plausible conditions are derived whereby a leniency program can result in more cartels. On a more positive note, we identify situations and policies that a competition authority can pursue that will make it more likely that a leniency program will have the intended effect of reducing the number of cartels.

Leniency programmes in competition law make it possible to grant immunity from fines, or a reduction of any fine that would otherwise have been imposed on an undertaking who was a party to an unlawful agreement restricting competition. This immunity or fine reduction is granted as a reward for the cooperation with the competition authority and the provision of evidence of an unlawful agreement restricting competition. Legal rules regarding the application of leniency programmes have been introduced at the EU level as well as in the national legislations of numerous countries, including Polish law. The author makes an attempt to establish the degree to which the Polish leniency programme is an effect of the impact of EU law or the application of law within the EU (for instance, by its institutions). The analysis has been made on three levels. Examined first was the degree to which the Polish leniency programme is a result of spontaneous harmonisation. Second, the impact of legislative harmonisation in the area of leniency programmes was taken into consideration. Finally, it was verified whether those Polish authorities that apply Polish competition law are inspired by judgements issued by EU courts in cases regarding leniency programmes.

Should the EU Competition Damages Directive Be Revised to Grant Companies that Have Received Immunity from Fines under the Competition Authorities’ Leniency Programmes also Immunity from Damages?

This chapter is concerned with cartel detection, through market monitoring, inspections, or well-designed leniency programs. It analyses three methods competition authorities regularly use to detect, and adduce evidence about, cartels. First, competition authorities can detect cartels by monitoring and screening markets. Second, competition authorities can conduct inspections at the business premises or private homes of cartel participants. Third, given the limitations of the first two methods, competition authorities can incentivize companies to report the cartels in which they may be involved by rewarding them for their cooperation. Pursuant to so-called leniency programmes, companies that choose to cooperate will, depending on the quality of the information provided and the time at which it is provided, benefit from full immunity from fines or significant fine reductions (partial immunity). Following in the footsteps of the US Department of Justice, the European Commission adopted a Leniency Notice in 1996, the application of which has allowed it to uncover a vast number of cartels.

The Netherlands Competition Authority (“NMa”), a fairly new authority (established in 1998), recently published its first policy guidelines on fines and leniency. The article gives insight into how the NMa developed the said guidelines and discusses both documents in detail. In view of this, the article sets out the legal framework within which the NMa operates and explains why it was considered important to develop a transparent policy on fines and leniency. An important part of the article analyses the policy and experience of other competition authorities (in particular, the US Department of Justice and the European Commission) and discusses to what extent the NMa was able to follow their approach. As regards a fining policy, it was concluded that existing schemes of foreign competition authorities did not offer a ready-made fining system suitable for the NMa; the NMa therefore developed its own Fining Guidelines. The article furthermore explains how the NMa acknowledged the importance of leniency as an instrument for competition law enforcement and developed its Leniency Guidelines. To a large extent, the NMa Leniency Guidelines follow the leniency rules applied by the US Department of Justice and the new notice on leniency of the European Commission. As explained, leniency programmes that comply with certain basic principles stimulate co-operation between competition authorities. The article concludes with a brief discussion of the NMa’s first experience with its new policy guidelines and some final remarks. The article covers fining decisions of the NMa up to August 2002.

Cartels, or secret agreements between competitors, are universally recognized as the most harmful of all types of anticompetitive conduct. Facing the challenges associated with globalization of the market economy, competition authorities in all parts of the world are increasing their efforts to design and implement modern instruments, effective enforcement procedures and adequate sanctions in order not only to detect and punish, but also to deter cartels.In this paper, we analyze the deterrent properties of the competition policy within the legal framework of the European Union. Applying the classical deterrence theory based on the model of criminal activity, we identify two key factors that affect the degree of deterrence of anticompetitive behavior: adequate sanctions and the probability of detection. We further discuss the level of fines, leniency programs and direct settlement procedures, both the latter as instruments to enhance the probability of cartel detection.By employing the methods of meta-analysis and meta-synthesis of economic and legal literature, cartel case studies, and descriptive statistical analysis, our attempt is to show that during the past decades the European competition authorities have focused on efforts to increase the effectiveness of cartel prosecution and to achieve better deterrence by numerous alterations in the European competition law, such as extensions of the fine spectrum or leniency programs or introduction of a direct settlement procedure, and that these efforts have proven to be rather successful for preventing the formation of anticompetitive agreements.

This chapter examines the first step in any damage claim, which is to establish the existence of a cartel or, more precisely, an infringement of Article 101(1) TFEU. The claimant will typically rely on an infringement decision of a competition authority to bring a follow-on action. Without an infringement decision, proving that a cartel exists will be difficult. This is because cartels operate in secrecy, rarely leave a paper trial, and potential claimants have no right to inspect the internal documents and emails of firms they suspect are colluding. As such, competition authorities use leniency programmes to detect cartels, which offer reduced fines and other protections to encourage whistleblowing and cooperation. In addition, economic theory and statistical techniques can assist in the detection of cartels. This will become a more prominent feature of cartel enforcement in the future as competition authorities become less reliant on leniency programmes.

This paper characterizes the optimal investigation and leniency policies when the Competition Authority is privately informed about the strength of a cartel case. I show that the Competition Authority can then exploit firms’ uncertainty about the risk of conviction to obtain confessions even when the case is weak. More generally, I show that offering full leniency allows the Competition Authority to open more successful investigations (what I refer to as the ‘activism effect’ of leniency), which overall raises both cartel desistance and cartel deterrence. Finally, I discuss the policy implications of the model.

This chapter examines the first step in any damage claim, which is to establish the existence of a cartel or, more precisely, an infringement of Article 101(1) TFEU. The claimant will typically rely on an infringement decision of a competition authority to bring a follow-on action. Without an infringement decision, proving that a cartel exists will be difficult. This is because cartels operate in secrecy, rarely leave a paper trial, and potential claimants have no right to inspect the internal documents and emails of firms they suspect are colluding. As such, competition authorities use leniency programmes to detect cartels, which offer reduced fines and other protections to encourage whistleblowing and cooperation. In addition, economic theory and statistical techniques can assist in the detection of cartels. This will become a more prominent feature of cartel enforcement in the future as competition authorities become less reliant on leniency programmes.

In order to facilitate national competition authorities (NCAs) in their application of EU competition rules, the EU legislator adopted Directive 2019/1/EU. The Directive’s aim is to empower the competition authorities of the Member States to be more effective enforcers of competition law and to ensure the proper functioning of the internal market. The so-called ECN+ Directive introduces minimum harmonisation rules allowing competition authorities to have common investigative, decision-making (notably fining decisions) and enforcement powers. The Directive, furthermore, sets minimum safeguards for the NCAs’ independence, accountability and resources as well as harmonizes leniency programmes including the coordination of national leniency programmes with each other and with that of the European Commission. This paper critically analyzes the legal and policy developments that paved the way for the adoption of this Directive. Moreover, it examines the changes the implementation of the Directive is likely to generate in current Hungarian law and policy of competition protection. The focus of the paper’s assessment is on the institutional aspects of the Directive and the enforcement of Articles 101 and 102 TFEU, in particular the mechanisms for ensuring independence and accountability of the NCAs. Through the assessment of the Hungarian implementation, the paper aims to shed light on a broader context of the Directive and the enforcement of EU competition law in EU Member States. The paper shows that the implementation of the Directive may fail to translate into (more) effective enforcement without an effective institutional capacity on the side of the NCAs, and in the broader legal and constitutional context of competition law and its multilevel enforcement

The March 2011 Department for Business, Innovation and Skill's Consultation on reforms to the UK's competition regime are an attempt by the government to improve on the UK's ?world class competition regime.? In this paper, I examine the consultation, Government's Response and the resulting Bill in an effort to determine the extent that the suggested reforms improve the regime as a whole. I argue that the reforms resulting from this process are far from an improvement to the UK's regime. This is primarily due to the piecemeal approach taken during the process, with the assumption that ?improvements? to one aspect of the regime will not have consequences for other aspects. By considering only reforms to the Cartel Offence, and failing to examine the interaction of this offence with leniency programmes and private enforcement, the project fails to improve on a world class regime.

The leniency program is a pardon mechanism that allows cartel members to complain to the business competition authorities about cartel operations and receive partial or whole exemption from the penalties and/or fines that should be imposed. In Japan, the Leniency Program is in use. This article's formulation of the problem is how to create a leniency program in Japan based on the Antimonopoly Act and what are the chances of doing so to expose cartels in Indonesia's competition law system. This article offers a normative legal analysis of Indonesia's prospective use of leniency schemes in cartel proceedings. The research is descriptive-analytical in character, and data collecting through literature reviews and interviews, whereas data processing is qualitative. The findings of the research and debate indicate that it is highly likely that Indonesia will implement the leniency program by enacting the bill as the new Business Competition Law. The research's finding is that the leniency program is likely to be implemented in Indonesia by passing the bill as the country's new Business Competition Law because it is comprehensively implemented in Japan, from reporting procedures to sentencing reductions. It is suggested that Law No. 5/1999, whose provisions include a leniency program system, be amended, and that the KPPU then work with the LPSK to offer protection for reporters in the leniency program system.