Cartel Leniency and Settlements: A Joint Perspective (original) (raw)

The Effects of Leniency Programs and Fines on Cartel Stability

Metroeconomica, 2007

Using a stylized oligopoly model, we analyze the effect of cartel deterring fines, taking into consideration exemptions granted to cartel members cooperating with the competition authorities. We conclude that the fines can act as a deterrent to breaking collusive agreements, thus stabilizing the cartel. * Constructive comments by Pierre Régibeau, two anonymous referees and Neri Salvadori, the editor, are gratefully acknowledged. In particular, one of the referees should be credited for having brought to our attention the homo economicus point made in the Introduction and in the section on Permanent Cartel Disruption. For all remaining errors, of course, we are to be blamed. Note that Ankur Chavda co-authored this paper while at the Vrije Universiteit Brussel, MICE, and is currently a Product Planner at Microsoft Corporation.

Leniency programs and cartel prosecution

International Journal of Industrial Organization, 2003

We study the enforcement of competition policy against collusion under leniency programs, which give reduced fines to firms that reveal information to the Antitrust Authority. Leniency programs make enforcement more effective but they may also induce collusion, since they decrease the expected cost of misbehaviour. We show that in the optimal policy the former effect dominates, calling for leniency programs when the Antitrust Authority has limited resources. We also show that these programs should apply to firms that reveal information even after an investigation is started. 

Cartels and leniency: Taking stock of what we learnt

2018

Cartels remain widespread and constitute a major problem for society. Leniency policies reduce or cancel the sanctions for the first firm(s) that self-report being part of a cartel and have become the main enforcement instrument used by competition authorities around the world in their fight against cartels. Such policies have shown to be a powerful tool in inducing firms to self-report or cooperate with a cartel investigation in exchange for a reduction in sanctions. Since they reduce sanctions for successful leniency applicants, these programs may also be abused to generate many successful convictions for the competition authority at the expense of reduced cartel deterrence and social welfare. Hence, it is vital for competition authorities and society to understand how leniency programs affect firms' incentives, in order to optimize their design and administration. A rich theoretical, empirical and experimental economic literature developed in the last two decades to meet the challenge. In this chapter, we review some of the key studies which have been undertaken to date, with emphasis on more recent contributions and without claiming to be exhaustive (we apologize in advance to the authors of papers we could not discuss), highlighting and comparing the main results, and setting out their limitations. We conclude with a general assessment and an agenda for future research on this topic at the core of competition policy.

The Effects of Leniency on Cartel Pricing

SSRN Electronic Journal, 2000

We analyze how leniency affects cartel pricing in an infinitely-repeated oligopoly model where the fine rates are linked to illegal gains and detection probabilities depend on the degree of collusion. A novel aspect of this study is that we focus on the worst possible outcome. We investigate the maximal cartel price, the largest price for which the conditions for sustainability hold. We analyze how the maximal cartel price supported by different cartel strategies adjusts in response to the introduction of (ex-ante and ex-post) leniency programs. We disentangle the effects of traditional antitrust enforcement, leniency, and cartel strategies on the maximal cartel price. Exante leniency cannot reduce the maximal cartel price below the price under antitrust without leniency. On the other hand, for ex-post leniency, improvement is possible and granting full immunity to single-reporting firms achieves the largest reduction in the maximal cartel price. To reduce adverse effects under both leniency programs, fine reductions to multiple-reporting firms should be moderate or absent. Finally, ex-post leniency should provide less generous fine reductions to multiple-reporting firms, which is supported by the current practice in the US and the EU.

Strictness of Leniency Programs and Cartels of Asymmetric Firms

SSRN Electronic Journal, 2000

This paper studies the effects of leniency programs on the behavior of firms participating in illegal cartel agreements. The main contribution of the paper is that we consider asymmetric firms. In general, firms differ in size and operate in several different markets. In our model, they form a cartel in one market only. This asymmetry results in additional costs in case of disclosure of the cartel, which are caused by an asymmetric reduction of the sales in other markets due to a negative reputation effect. This modeling framework can also be applied to the case of international cartels, where firms are subject to different punishment procedures according to the laws of their countries, or in situations where following an application for leniency firms are subject to costs other than the fine itself and where these costs depend on individual characteristics of the firm. Moreover, following the rules of existing Leniency Programs, we analyze the effects of the strictness of the Leniency Programs, which reflects the likelihood of getting complete exemption from the fine even in case many firms self-report simultaneously. Our main results are that, first, leniency programs work better for small (less diversified) companies, in the sense that a lower rate of law enforcement is needed in order to induce self-reporting by less diversified firms. At the same time, big (more diversified) firms are less likely to start a cartel in the first place given the possibility of self-reporting in the future. Second, the more cartelized the economy, the less strict the rules of leniency programs should be.

Cartel Settlement in European Union

International Academy Journal Web of Scholar, 2020

This article points out the first steps of the cartel settlement and Leniency Program in European Union and positive sides of the mentioned tool for the companies participating in the anticompetitive agreements. Cartel Settlement and Leniency Program played an enormous role for the market to be undistorted and free from any type of anticompetitive practices. It is also worth to mention that introducing of Settlement notice as well as Leniency Program played crucial role for Commission and as well for undertakings to find fastest way out from the anticompetitive practices to settle and protect free and undistorted competition on the market. Both tools are very beneficial and useful for competition and its further development.

Collusion in Industrial Economics and Optimally Designed Leniency Programmes - A Survey

This paper provides a critical and systematic overview of the most influential contributions to the economics literature on collusion and leniency programmes in antitrust. It also reviews the literature on the economics of (generic) law enforcement, with a focus on self-reporting schemes, for crimes committed either by individuals or groups of individuals. The principal objective of the survey is to enhance our understanding of how leniency policies impact on cartel formation and sustainability. JEL-Classification: K42, K21, L41

Maximal Cartel Pricing and Leniency Programs

SSRN Electronic Journal, 2000

For a general class of oligopoly models with price competition, we analyze the impact of ex-ante leniency programs in antitrust regulation on the endogenous maximalsustainable cartel price. This impact depends upon industry characteristics including its cartel culture. Our analysis disentangles the e¤ects of traditional antitrust regulation and the leniency program. Ex-ante leniency programs are e¤ective if and only if these o¤er substantial rewards to the self-reporting …rm. This is in contrast to currently employed programs that are therefore ine¤ective.

The Effects of Leniency on Maximal Cartel Pricing

SSRN Electronic Journal, 2000

We analyze maximal cartel prices in infinitely-repeated oligopoly models under leniency where fines are linked to illegal gains, as often outlined in existing antitrust regulation, and detection probabilities depend on the degree of collusion. We introduce cartel culture that describes how likely cartels persist after each conviction. Our analysis disentangles the effects of traditional antitrust regulation, leniency, and cartel strategies. Without rewards to the strictly-first reporter, leniency cannot reduce maximal cartel prices below those under traditional regulation. Moreover, in order to avoid adverse effects fine reductions should be moderate in case of multiple reporters. Our results extend the current literature and partially support existing leniency programs.

Denying Leniency to Cartel Instigators: Costs and Benefits

International Journal of Industrial Organization, 2015

A large number of countries have introduced successful leniency programs into their competition law enforcement to encourage colluding firms to come forward with evidence that will help detect cartels and punish price-fixers. This paper studies a feature of some of these programs that has received relatively little attention in the literature: the inclusion of "No Immunity for Instigators Clauses" (NIICs). These provisions deny leniency benefits to parties that instigate cartel behavior or function as cartel ringleaders. Our results show that NIICs can lead to increased or decreased levels of cartel conduct. By removing the instigator's benefit from cooperating with the authorities, a NIIC undoes some of the destabilizing benefit the leniency program was intended to generate and thereby furthers cartel stability. On the other hand, the instigator faces an asymmetrically severe punishment under a NIIC and this can reduce the incentive to instigate in the first place.