A note on cartel ringleaders and the corporate leniency programme

Abstract

Cartel ringleaders can apply for amnesty in some jurisdictions (e.g., the EU), whereas in others they are excluded (e.g., the US). This note shows that ringleader exclusion loosens the incentive constraint of regular cartel members and tightens or loosens the incentive constraint of ringleaders. The latter may occur when the first firm that applies for leniency receives a sufficiently high discount.

Keywords:

• cartels
• leniency programme
• ringleader

JEL Classification:

• L1
• L4

Acknowledgments

We appreciate the comments and suggestions of seminar participants at the University of East Anglia, University of Nottingham, CISS 2011 in Marmaris, ZEW 2011 Conference on Economic Methods in Competition Law Enforcement in Mannheim, 6th Competition Law and Economics European Network Workshop, 39th Annual Conference of the European Association for Research in Industrial Economics (EARIE) in Rome. We are particularly grateful to Panayiotis Agisilaou, Subhasish Modak Chowdhury, Stephen Davies, Morten Hviid, Evgenia Motchenkova, Peter Ormosi, Ronald Peeters, Giancarlo Spagnolo and Andreas Stephan for useful comments. All opinions and errors are ours alone.

Notes

¹ This makes ringleaders trustworthy ‘partners in crime’, which is a reason not to exclude them. See Leslie (2006).

² The findings of this paper are robust to alternative penalty structures. In particular, the results would be no different when the antitrust penalty was taken to be a function of the cartel price or overcharge as in Block et al. (1981) and Houba et al. (2012).