Effectiveness Of Leniency Programs Research Articles

The effectiveness of leniency programs when firms choose the degree of collusion

An antitrust authority grants leniency pre- and post-investigation. It chooses the probability of an investigation. Firms pick the degree of collusion: The more they collude, the higher are profits, but so is the probability of detection. Firms thus trade-off higher profits against higher expected fines. If firms are sufficiently patient, leniency is ineffective; it may even increase collusion. Increasing the probability of an investigation at low levels does not increase deterrence. Increasing the probability of an investigation at high levels reduces collusion, yet never completely. With bare pre-investigation leniency, deterrence is better than without leniency. If firms are sufficiently impatient, granting leniency pre- and post- is better than merely pre-investigation.

The Effectiveness of Leniency Programs when Firms choose the Degree of Collusion

An antitrust authority deters collusion using fines and a leniency program. It chooses the probability of an investigation. Firms pick the degree of collusion: The more they collude, the higher are profits, but so is the probability of detection. Firms thus trade-off higher profits against higher expected fines. If firms are sufficiently patient, leniency is ineffective; it may even increase collusion. Increasing the probability of an investigation at low levels does not increase deterrence. Increasing the probability of an investigation at high levels reduces collusion, yet never completely.

Effects of Leniency Programs on Cartel Stability

This paper studies the effect of leniency programs on the stability of cartels under two different regimes of fines, fixed and proportional.We analyze the design of self-reporting incentives, having a group of defendants.Moreover, we consider a dynamic setup, where accumulated (not instantaneous) benefits and losses from crime are taken into account.We obtain that cartel occurrence is less likely if the rules of the leniency programs are more strict and the procedure of application for leniency is more confidential.Moreover, we conclude that, when the procedure of application for leniency is not confidential and penalties and rate of law enforcement are low, leniency may increase duration of cartel agreements.Surprisingly, under a fixed penalty scheme the introduction of a leniency program cannot improve the effectiveness of antitrust enforcement when the procedure of application for leniency is not confidential.

Effects of Hostile Tradition in Antitrust: Active Repentance versus Cooperation Agreements?

The article focuses on the effects of leniency programs when the antitrust authority is capable of making errors in classifying agreements between competitors. The research confirms that the application of the program can impede the growth of social welfare by destroying and preventing horizontal cooperation agreements. The obtained results can help explain the peculiar properties of the cases that have been investigated with the use of the leniency program in Russia.

Anti-Competitive Agreements: The Meaning of 'Agreement'

In the classic cartel, supposed competitors meet in the proverbial smoke-filled hotel room and agree to fix prices at supra-competitive levels. Even though the “agreement” is unlikely to be legally binding on the parties (i.e., the agreement could not be enforced against one of the cartelists that began to “cheat” by offering lower prices), virtually all modern economies would treat such a cartel as unlawful under their national antitrust laws.Despite the effectiveness of leniency programs in encouraging confessions from cartel members, there are still cartels (both domestic and international) that operate under a cloak of secrecy, and therefore governments must continue to use more conventional tools to seek them out and prosecute them. Sometimes these traditional investigatory tools will yield the confession or the hot documents that will make prosecution easy, but not always. So the question arises: in the absence of a video-taped cartel meeting, a cooperating participant, or incriminating documents, can a cartel be successfully prosecuted based primarily on “circumstantial” evidence? However, it is not just a question of what kind of circumstantial evidence can be used to establish the existence of a hard-core cartel – that question might best be described in these circumstances as akin to an economic detective story. A more complicated substantive question underlies the effort to describe the type and quantity of the circumstantial evidence necessary to obtain a successful prosecution, namely, what precisely do we mean to include under the category of an illegal “agreement” or “conspiracy” or “concerted practice?” The plan of this chapter is to begin by describing how the U.S. treats classic cartel behavior when proof of the existence of a cartel agreement is not an issue. Then we turn to the task of establishing the existence of an illegal agreement primarily or entirely through circumstantial evidence. This will quickly get us into the question of what constitutes an unlawful agreement under U.S. law and in particular, the recently renewed debate about whether classic oligopoly behavior can be prosecuted as an unlawful agreement. In the process, we will refer to how similar issues are dealt with in other jurisdictions, most notably the European Union.

Global cartels, leniency programs and international antitrust cooperation

In this paper we analyze cartel formation and self-reporting incentives when firms operate in several geographical markets and face antitrust enforcement in different jurisdictions. We are concerned with the effectiveness of leniency programs and the benefits of international antitrust cooperation between agencies. When international antitrust prosecution is uncoordinated, multi-market contact allows firms to reduce the amount of self-reporting in equilibrium and sustain cartels more effectively. We then discuss the effects of information sharing among antitrust authorities as a function of how much and which type of information is exchanged. We show that extensive information sharing might have an adverse effect on self-reporting by cartel members.

Global Cartels, Leniency Programs and International Antitrust Cooperation

In this paper we analyze cartel formation and self-reporting incentives when firms operate in several geographical markets and face antitrust enforcement in different jurisdictions. We are concerned with the effectiveness of leniency programs and the benefits of international antitrust cooperation between agencies. When international antitrust prosecution is uncoordinated, multi-market contact allows firms to reduce the amount of self-reporting in equilibrium and sustain cartels more effectively. We then discuss the effects of information sharing among antitrust authorities as a function of how much and which type of information is exchanged. We show that extensive information sharing might have an adverse effect on self-reporting by cartel members.

Going Once, Going Twice, Reported! Cartel Activity and the Effectiveness of Leniency Programs in Experimental Auctions

We experimentally examine the effectiveness of antitrust policies against bidding rings in the English auction (EN) and the first-price sealed-bid auction (FP). We consider both traditional antitrust policy (without a leniency program) and modern antitrust policy (with a leniency program). In EN, neither antitrust policy has a significant effect on cartel deterrence, cartel stability, cartel recidivism, and winning bids. In FP, traditional antitrust policy deters cartel formation, destabilizes cartels, reduces the probability that a cartel re-establishes, and reduces the average winning bid. In contrast, while a leniency program has no additional effect on cartel formation or cartel recidivism, it makes cartels more stable and reduces the winning cartel bid.