An empirical study of the European corporate leniency program

Abstract

Leniency programs are widely used as instruments of competition policy. They are supposed to serve two purposes: in the short-run to facilitate the detection of cartels and thereby to reduce cost of legal enforcement, and in the long-run to deter firms from antitrust abuse. In our empirical study of the 1996 EU Leniency Program, we find strong evidence that the program provides incentives to reveal information on criminal activities in the sense that agencies are better informed about the cartel conduct than they would be absent the program. Despite of that, investigation and prosecution cost reductions seem to be rather modest.On deterrence, we neither find that the leniency program stabilizes cartels through facilitating punishing strategies, nor do we find that cartels are destabilized because defecting from a cartel becomes less costly. The sharp rise in the number of convicted cartels after introducing the program may be attributed to a rise of cartel activity caused by an accelerated market integration in the EU in the beginning of the 1990s.Journal of Economic Literature Classification: K21, K41, L4

Prosecuting Cartels without Direct Evidence of Agreement

“…On the same point, see also , Motta and Polo (2003), Spagnolo (2003), , Motchenkova (2004), and . However, some authors have questioned the effectiveness of amnesty/leniency programmes to deter and desist cartel behaviour (see, for example, Brenner 2009 and, both on the EC leniency programme). through such programmes 23 are not devoting enough attention and resources to pro-active, independent anti-cartel enforcement.…”

Evaluating Leniency with Missing Information on Undetected Cartels: Exploring Time-Varying Policy Impacts on Cartel Duration

“…The key question addressed here is how to assess the deterrent effect of such a program on the population of cartels when information from undiscovered cartels is not available. This is worthwhile because, on the one hand, such programs have become increasingly popular instruments for destabilizing existing cartels and deterring new cartels in many jurisdictions around the world (OECD 2002(OECD , 2003 and have enjoyed proven success in the U.S. (Miller 2009); On the other hand, a burgeoning empirical literature (Brenner 2009;De 2010) is ambiguous about the efficacy of the EC's leniency. Because the EU and US leniency programs are similar in some important respects but different in others, 3 conclusion about the performance of the former may not be drawn directly from that of the latter.…”

“…2 The exception is Miller (2009). 3 For example, cartel ringleaders can apply for amnesty in the E.U., whereas in the U.S. they are excluded.…”

Minority Share Acquisitions and Collusion: Evidence from the Introduction of National Leniency Programs

“…5 The anticompetitive effects of MS acquisitions could be even larger if the acquisition gives the acquirer some degree of control over the target firm, because then the acquirer can also soften the target's behavior in addition to its own behavior.…”

“…4 See European Commission (2013) and O'Brien and Waehrer (2017) for recent literature surveys. 5 Interestingly, Farrell and Shapiro (1990) show that in the context of a Cournot model, the acquirer's softer behavior induces rivals to expand their output; if rivals are more efficient than the acquirer, the output shift can actually enhance welfare. Brito, Cabral and Vasconcelos (2014) study the welfare effects of different forms of a divestiture of a firm's partial ownership in a rival.…”