Working Paper: CEPR ID: DP10682
Authors: Paolo Buccirossi; Catarina Marvo; Giancarlo Spagnolo
Abstract: Damage actions may reduce the attractiveness of leniency programs for cartel participants if their cooperation with the competition authority increases the chance that the cartel?s victims will bring a successful suit. A long legal debate culminated in an EU directive, adopted in November 2014, which seeks a balance between public and private enforcement. It protects the effectiveness of a leniency program by preventing the use of leniency statements in subsequent actions for damages. Our analysis shows such compromise is not required: limiting the cartel victims? ability to recover their loss is not necessary to preserve the effectiveness of a leniency program and may be counterproductive. We show that damage actions will actually improve its effectiveness, through a legal regime in which the civil liability of the immunity recipient is minimized and full access to all evidence collected by the competition authority, is granted to claimants, like in the US.
Keywords: cartels; competition policy; leniency program; private enforcement; public enforcement
JEL Codes: C72; C73; D43; D81; H11; K21; K42; L13; L44; L51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| limiting the ability of cartel victims to recover damages (K21) | preserve the effectiveness of a leniency program (K21) |
| damage actions (H84) | enhance the LP's effectiveness (D78) |
| EU's approach restricting access to leniency statements (K21) | counterproductive (D61) |
| full access to evidence while minimizing liability for leniency applicants (K21) | maximize both deterrence and victims' compensation (K13) |
| optimal legal framework reducing liability of the first reporting firm (K13) | improve both deterrence and compensation outcomes (K13) |
| Hungarian solution limiting liability to situations where other cartel members are unable to pay (G33) | optimal under certain conditions (C61) |
| current EU directive (F18) | suboptimal (H21) |
| proposed changes (O30) | improved outcomes for both public and private enforcement (L49) |