Corporate Leniency Programmes Are an Effective Instrument in the Fight Against Cartels

Corporate leniency programmes have become a vital instrument in the fight against cartels in many industrialised countries. Firms involved in cartels can benefit from such leniency programmes, which allow them to receive full or partial immunity from fines imposed by the European Commission in exchange for providing evidence as a chief witness. Whether the fine is reduced or waived entirely depends on the quality of information provided and its value to the specific case. This programme can, however, create incentives for firms involved in price-fixing conspiracies to apply for leniency in exchange for providing evidence, as has been observed in the recent allegations of collusion among German car manufacturers. In an empirical study, the Centre for European Economic Research (ZEW), Mannheim, has investigated how leniency applicants differ from other cartel members who have been fined by the European Commission for cartel infringements.

The empirical ZEW analysis is based on 76 decisions made by the EU Commission on cartel infringements in the period between 2000 and 2011. A total of 442 firms and, where applicable, their legally liable subsidiaries were involved in these cases. In the study, the researchers investigated how the firms that were granted full immunity differ from those companies that were fined by the EU Commission.

“If a cartel collapses or one member withdraws from the cartel, this is the result of heterogeneous individual decisions,” explained Professor Kai Hüschelrath, head of the ZEW Research Group “Competition and Regulation” and co-author of the study. “Our analysis indicates that before the introduction of the revised leniency programme, the probability of a repeat offender becoming a chief witness only increased if the fines imposed by the Commission for previous infringements exceeded a certain amount.”

Since the Commission’s revision of the leniency programme in 2002, repeat offenders are much more likely to become chief witnesses. “The higher the basic amount of the fine, the more likely a cartel member is to apply for leniency and submit evidence against its former accomplices,” explained Hüschelrath.

In addition, there is a positive correlation between leniency applications and the degree of multinationality of the company group as well as the size of the company’s market share in the sector in which the cartel operates. “In other words, if a company participating in a cartel is active in several countries and has a dominant position in the market, this company is more likely to become a chief witness”, said Hüschelrath.

For further information please contact

Prof. Dr. Kai Hüschelrath, Phone +49 (0)621/1235-384, E-mail kai.hueschelrath@zew.de