Antitrust Leniency with Multiproduct Colluders † (original) (raw)

2015, American Economic Journal: Microeconomics

We use a global games approach to model alternative implementa tions of an antitrust leniency program as applied to multiproduct col luders. We derive several policy design lessons; e.g., we show that it is pos sible that linking leniency across products increases the likelihood of conviction in the first product investigated but reduces it in subse quent products. Thus, firms may have an incentive to form sacrificial cartels and apply for leniency in less valuable products to reduce convictions in more valuable products. Cartel profiling can mitigate this undesirable effect, but also reduces the probability of convic tion in the first product investigated. (JEL D43, D86, K21, L12, L41) I n recent years, antitrust leniency programs in the United States, European Union, Australia, and elsewhere have played an important role in allowing competition authorities to successfully prosecute major price fixing conspiracies. 1 A review of the European Commission (EC) decisions in cartel cases for 2001-2012 shows that a firm received a 100 percent reduction in the fine through the leniency program in 55 (54 percent) of the 101 products in which firms were prosecuted. 2 1 "The Antitrust Division's Leniency Program is its most important investigative tool for detecting cartel activity. Corporations and individuals who report their cartel activity and cooperate in the Division's investigation of the cartel reported can avoid criminal conviction, fines, and prison sentences if they meet the requirements of the program." (United States Department of Justice website, http://www.justice.gov/atr/public/criminal/leniency.html, accessed October 22, 2012). As Chairman of the Australian Competition and Consumer Commission (ACCC), Graeme Samuel stated that ACCC's Immunity Policy for Cartel Conduct was "absolutely vital" in the Australian government's efforts to crack cartels and credited it with exposing potential cases at the rate of about one a month (Beaton-Wells and Fisse 2011, 379). See also Beaton-Wells (2008a, b) and Wils (2007). 2 Some EC decisions apply to more than one product. For example, the EC decision in Vitamins covers multiple vitamin products, with a separate application of the leniency program for each product. The EC's leniency program also offers smaller fine reductions for cooperators other than the first to apply for leniency. In 87 (86 percent) of the products, a firm received some reduction in the fine. In the United States, an official at the Department of Justice (DOJ) has stated that, in addition to the initial leniency applicant, as many as four firms may receive a "substantial assistance" discount on their fine of as much as 25-30 percent.