On the Effectiveness of Leniency Programs in Cartel Enforcement
Houba, Harold, Motchenkova, Evgenia, Wen, Quan
Abstract: Recently, antitrust policies in the US and the EC have undergone substantial reforms and currently include leniency programs as a key ingredient, see US Department of Justice (1993) and EC (2006). Leniency programs grant total or partial immunity from fines to cartel members collaborating with the antitrust authority (AA) by revealing information about the cartel. Leniency programs are based upon the economic principle that firms, which broke the law, might report their illegal activities if given proper incentives. Effective leniency programs might dissolve existing cartels or, even better, a priori deter such illegal activities. US Department of Justice claims big success of these programs in practice. Also the recent conviction of the Dutch chemical company Akzo-Nobel was the result of an application for leniency several years ago. Despite claimed successes, we raise some theoretical reasons for concern.