Leniency Programs Research Articles

Latest developments in anti-cartel enforcement in the European Union (June 2022–September 2023)

This article summarizes last year’s developments in anti-cartel enforcement by the European Commission as well as a number of selected key judgments by the EU Courts. It covers the period from June 2022 to September 2023. As in past editions, we have classified the most relevant cases by theme, starting with a general summary of the European Commission’s recent anti-cartel enforcement activity, followed by issues surrounding the European Commission’s leniency programme. It proceeds with procedural, substantive, and fining issues addressed by the Court of Justice of the European Union in the relevant time frame.

Short and Long Run Effects of Leniency Programs on Cartel Stability and Prosecution

Abstract This study investigates the effects of leniency programs on cartel duration, cartel fines, and the length of investigations, providing empirical insights that contribute to the ongoing debate regarding their theoretical and empirical implications. The introduction of leniency programs in two different jurisdictions (EU and Spain) at different times and the exogeneity of the introduction date enable us to identify their impact using difference-in-differences estimations. We empirically show that leniency programs, by destabilizing existing cartels, allow for the detection of the longer-lasting ones in the short run. In the long run, our results suggest that destabilization effects prevail, and leniency programs discourage the creation of new cartels. Specifically, our findings indicate that the duration of detected cartels almost doubles in the short run and nearly halves in the long run. Finally, our study reveals that the introduction of leniency programs results in a significant increase in the average fines per cartel case, both before and after taking into account the fine reductions resulting from these programs. This suggests that leniency programs contribute to stronger sanctions against cartels, enhancing their general deterrent effect. However, our findings also indicate that leniency programs lengthen the average duration of cartel investigations, which may hinder the ability of competition authorities to proactively pursue other cases.

Determinants of self-reporting: an experiment on corporate leniency programs

Determinants of self-reporting: an experiment on corporate leniency programs

Game Theory Applied to the Brazilian Antitrust Leniency Program

Game Theory Applied to the Brazilian Antitrust Leniency Program

Cartel leniency programme in India—why no race here?

Abstract This article evaluates the implementation of the cartel leniency programme by the Competition Commission of India (CCI) using comprehensive data covering all related decisions of the CCI from 2009 to 2021. All other things remaining the same prima facie discoveries of cartels should have resulted in a ‘shock’ to ex ante expected returns of cartels, thereby encouraging more leniency applications. But, we find no such results or rather no ‘race’ to the agency. A successful leniency programme requires a transparent and deterrent penalty, plus consistency in applying leniency provisions. However, inconsistencies in the choice of penalty base and uncertainties in determining final penalties while using mitigating and aggravating factors have led to a poor correlation of penalties with cartel gain or harm. Strategic or otherwise, this has encouraged appeals to the appellate authority, thereby reducing the effective penalty to levels below deterrence. Many acts of bid rigging have been penalized using less stringent criteria and, in a few circumstances, also provided the benefit of leniency. Further, while individuals concerned in leniency cases have always been penalized, the CCI has not been so consistent in non-leniency cartel cases. These asymmetries and ‘other’ costs create disincentives for exercising the leniency option. We offer suggestions for enhancing the possibility of a race to the agency.

Settlements in the presence of leniency programs: Costs and benefits

AbstractOver the last few decades, leniency programs have become important components of anti‐cartel policies in many jurisdictions. An extensive literature shows how such programs can destabilize cartels and even discourage their formation in the first place. Much less studied are settlement policies under which reduced fines are offered to settling parties late in the prosecution (when the probability of conviction is high). In particular, there has been little attention paid to the interaction of leniency and settlement policies. This paper examines whether the availability of late‐stage settlements could negatively impact the effectiveness of early‐stage leniency programs. Our main finding is that an appropriately designed settlement program can make collusion more difficult: In equilibrium, the adoption of an optimal settlement program by the Antitrust Authority reduces the occurrence of cartels by decreasing the long‐run gain from collusion. However, an overly generous settlement policy may undermine leniency programs and encourage the formation of more cartels.

On the sociology of cartels

We analyze 15 German cartels, focusing on the personal characteristics of the individual participants, the methods and frequency of communication as well as the internal organizational structures within the cartels and their eventual breakup. Our results indicate that cartel members are highly homogeneous and often rely on existing networks within the industry, such as trade associations. Most impressively, only two of the 158 individuals involved in these 15 cartels were female, suggesting that gender plays a role for cartel formation. We further identify various forms of communication and divisions of responsibilities and show that leniency programs are a powerful tool in breaking up cartels. Based on these results we discuss implications for competition policy and further research.

Corporate Leniency Programs for Antitrust: Past, Present, and Future

AbstractThis special issue marks the 25th anniversary of the introduction of a leniency program for antitrust in the EU and contains five original papers: Each paper examines the effects of design parameters of leniency programs on their performance. Before introducing each contribution separately, we put them in perspective by introducing readers to the existing theoretical, empirical, and experimental literature on corporate leniency programs for antitrust.

Cartel Leniency and Settlements: A Joint Perspective

This paper studies the interactions between a cartel leniency program and a settlement procedure. The EU settlement procedure gives colluding firms that do not apply for leniency an additional opportunity to cooperate with the competition authority in exchange for a reduced fine after a preliminary case has been established against them. We derive the conditions under which colluding firms apply for leniency, settle, or refuse to cooperate with the authority in equilibrium. Our policy results show that settlements can act as a complement or as a substitute to the leniency program. We also study the welfare-optimal policy and highlight a novel interdependence between the fine reductions that should be offered to leniency applicants and to settling firms.

Whither Criminal Cartel Enforcement in the EU?

Cartels have been a persistent problem in the European internal market and despite strong enforcement, cartels continue to exist and be discovered by the Commission. This article proposes that the optimal way to deal with cartels requires the imposition of criminal sanctions against corporates and responsible executives. This is not a novel proposal in itself: the US has had criminal sanctions against cartels for over a century and the UK for a decade. But the EU’s unique regulatory and governance structure requires that such a proposal must have a stronger evidentiary basis and must take into account its governance structure. This article does so by analysing statistics on cartel enforcement in the EU and the US to show that fines have not been able to sufficiently deter cartels. Second, normative reasoning based on harm theory, morality of criminalisation and public choice theory is employed to indicate that cartel activities are criminal in nature and that penalising them as such would not amount to overcriminalisation. Third, objective analysis is used to dissect the limitations of fines: when used in isolation they do not target the wrongdoers, are suboptimal and impose social costs. Fourth, it is shown that combining fines with criminal sanctions can help us redress these issues and improve the deterrence levels significantly. Lastly, principles are proposed to ensure that such a proposal considers the varying gravity of cartel activities, and is in sync with the EU’s rule of law and governance structure and the Commission’s leniency programme.

Who Blows the Whistle on Cartels? Finding the Leniency Applicant at the European Commission

Competition authorities need a better understanding of the determinants of cartel self-reporting in order to increase cartel members’ incentives to apply for the benefit from leniency programs and thus improve the effectiveness of anti-cartel policy. Using information on 683 firm groups that participated in 132 cartels that were penalized by the European Commission between 1996 and 2020, we estimate which type of cartel member is most likely to be the first or subsequent leniency applicant. Our results emphasize the role of firm groups as a driver to self-report: The higher is the proportion of firms that are part of the same group (relative to the size of the cartel), the greater is the likelihood of applying for leniency. Fines also incentivize cartelists—with the exceptions of ringleaders—to self-report. While ringleaders or instigators tend to avoid being first confessors, they appear to be more likely to self-report than are others only after someone else has revealed the cartel. Finally, cartels that do bid-rigging are less likely to be uncovered by a leniency application.

An Empirical Assessment of the European Commission’s Cartel Prosecutions, 2010–2019

This is a quantitative analysis of the European Commission’s cartel decisions in the 2010–2019 decade. It assesses the way the Commission’s 2006 guidelines on fines were applied in practice and the operation of the leniency and settlement procedures. It also provides an overview of the types of cartels prosecuted, how they were detected, and how long the Commission took to investigate a cartel. It looks at rends in the Commission’s enforcement activity and assesses some frequently made claims such as whether recidivism is rife; whether the Commission’s leniency program is excessively generous and disproportionately benefits larger, more culpable firms; how much the settlements procedure reduces the length of the Commission’s investigations; and why the Commission takes so long to conclude its investigations.

Multiproduct firm’s reputation and leniency program in multimarket collusion

The corporate leniency program is believed to be useful for antitrust authorities. Our study challenges this belief in a setting where a large multiproduct firm meets single-product firms in independent and isolated markets. We explore an adversary effect of the corporate leniency program in multimarket collusion in a reputation model. A multiproduct firm forming cartels in multiple markets can build its reputation as a tough firm that punishes any deviation by applying for leniency. We show that the multiproduct firm can manipulate the leniency program to stabilize cartels in markets without material linkages (such as demand linkages). This effect does not exist if only one market exists or the leniency-application outcome is not publicly observable. Our findings theoretically explain why the numerous leniency applications by multiproduct firms should concern antitrust agencies and imply several directions for revising the leniency policy.

The interplay between leniency programmes and private enforcement: the economist perspective on recent policy proposals

Leniency policies grant substantial fine reductions to firms that disclose their former participation in a cartel. Such policies may, thereby, destabilize existing cartels and disincentivize the formation of new ones. Alternatively, some argue that they might have the opposite effect of incentivizing collusion by reducing the punishment for former cartel participants, thereby raising the collusive payoff. The overall decline in leniency applications in the European Union since 2014 calls for an analysis of the interplay between the 2006 Leniency Policy and other competition policies, most notably the 2014 Damages Directive. This article discusses the interaction between these two competition policy tools, arguing that the liability of immunity recipients in follow-on damage claims tends to stabilize cartels, and assesses several proposals that aim to ensure that public and private cartel enforcement tools are more in sync.

Ready or not? A systematic review of case studies using data-driven approaches to detect real-world antitrust violations

Cartels and other anti-competitive behaviour by companies have a tremendously negative impact on the economy and, ultimately, on consumers. To detect such anti-competitive behaviour, competition authorities need reliable tools. Recently, new data-driven approaches have started to emerge in the area of computational antitrust that can complement already established tools, such as leniency programs. Our systematic review of case studies shows how data-driven approaches can be used to detect real-world antitrust violations. Relying on statistical analysis or machine learning, ever more sophisticated methods have been developed and applied to real-world scenarios to identify whether an antitrust infringement has taken place. Our review suggests that the approaches already applied in case studies have become more complex and more sophisticated over time, and may also be transferrable to further types of cases. While computational tools may not yet be ready to take over antitrust enforcement, they are ready to be employed more fully.

Rebating Antitrust Fines to Encourage Private Damages Negotiations

Abstract To encourage private negotiations 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 may increase the settlement amount. Yet, deterrence for those wrongdoers who are actually fined always goes down. Under a leniency program, the rebate does not affect the leniency applicant: she does not pay a fine that can be reduced. The overall effect of a fine reduction on deterrence is therefore negative.

POTENSI PENGGUNAAN LENIENCY PROGRAM DALAM PERKARA KARTEL INDONESIA: STUDI PERBANDINGAN LENIENCY JEPANG

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.

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?

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?

AVALIAÇÃO DE IMPACTO DE POLÍTICA DE DEFESA DA CONCORRÊNCIA: PROGRAMA DE LENIÊNCIA DA COMISSÃO EUROPEIA (DG-COMP) E DO CADE

Context: The article analyzes the Leniency Program of the European Commission and CADE, highlighting its positive and negative effects, considering the concepts of efficiency and effectiveness. Objective: The article seeks to undertake a critical analysis of the Leniency Program of the European Commission and CADE. Method: The article analyzes the Leniency Programs established by the European Commission and by CADE, using the available empirical and qualitative data, as well as data from OECD’s materials to verify the level of efficiency and effectiveness of both programs. Conclusions: An analysis is presented on the main challenges to be faced in Europe to improve the performance of the leniency programs, such as leniency inflation, the strategic use of leniency agreements and the effects of leniency on private damage actions. Regarding Brazil, the article provides some critical remarks. The article concludes that leniency programs have potential to become an even more powerful mechanism for fighting cartels by facing these challenges.

Harmonisation of National Leniency Programmes in the EU: Is This Mission Accomplished? Remarks on the Case of France and Poland Compared with Other EU Member States

The article critically discusses the requirements of the ECN+ Directive with regard to leniency programmes and whether the goal of this Directive – inter alia to eliminate discrepancies between national leniency programmes – has been achieved. The authors: (1) analyse in this respect the ECN+ Directive as well as the legal framework in EU Member States, focusing especially on France and Poland, but making reference also to selected other EU Member States, and (2) compare how these issues are regulated in those national legal orders to the standard required by the ECN+ Directive. The aim of this publication is to determine any potential differences in the approach taken by national legislators. The article also identifies certain shortcomings in the ECN+ Directive and national legal orders in the area under discussion and suggests amendments that could boost national leniency programmes. This research is based mainly on the dogmatic and comparative methods of analysis.