Cartels and Leniency: Taking Stock of What We Learnt

SITE Working Paper Series, 39/2016

32 Pages Posted: 12 Oct 2016 Last revised: 16 Jan 2017

See all articles by Giancarlo Spagnolo

Giancarlo Spagnolo

Stockholm School of Economics (SITE); Centre for Economic Policy Research (CEPR); University of Rome 'Tor Vergata'; EIEF

Catarina Moura Pinto Marvão

Economics Department, University College Dublin; Stockholm School of Economics - Stockholm Institute of Transition Economics (SITE)

Date Written: September 9, 2016

Abstract

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.

Keywords: Collusion, Leniency Program, Competition Policy, Deterrence

JEL Classification: K21; K42; L40; L51

Suggested Citation

Spagnolo, Giancarlo and Marvão, Catarina Moura Pinto, Cartels and Leniency: Taking Stock of What We Learnt (September 9, 2016). SITE Working Paper Series, 39/2016. Available at SSRN: https://ssrn.com/abstract=2850498 or http://dx.doi.org/10.2139/ssrn.2850498

Giancarlo Spagnolo

Stockholm School of Economics (SITE) ( email )

P.O. Box 6501
Stockholm
Sweden

HOME PAGE: http://https://sites.google.com/site/giancarlospagnoloshomepage/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

University of Rome 'Tor Vergata' ( email )

Faculty of Economics - DEI
Via Columbia 2
Rome, RM 00133
Italy

EIEF ( email )

Via Due Macelli, 73
Rome, 00187
Italy

HOME PAGE: http://WWW.EIEF.IT

Catarina Moura Pinto Marvão (Contact Author)

Economics Department, University College Dublin ( email )

Belfield, Dublin 4 4
Ireland

Stockholm School of Economics - Stockholm Institute of Transition Economics (SITE) ( email )

P.O. Box 6501
S-113 83 Stockholm, 11383
Sweden

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