+ 32 2 299 45 85, Leniency and Game Theory
(2007)Department of Law
- Abstract
- A powerful cartel forces customers to pay significantly more for products and eliminates competition since its participants do not need to improve their productivity or the quality of their products. Cartels have historically exercised great influence over the international economy. During the inter-war period cartels were so powerful that economists have estimated that international cartels controlled almost forty percent of world trade between 1929 and 1937. Article 81 (1) of the EC Treaty prohibits cartel agreements. The European Commission may therefore impose fines up to 10 % of the total turnover in the preceding business year on undertakings infringing the Article. However, in the fight against cartels not only the imposition of... (More)
- A powerful cartel forces customers to pay significantly more for products and eliminates competition since its participants do not need to improve their productivity or the quality of their products. Cartels have historically exercised great influence over the international economy. During the inter-war period cartels were so powerful that economists have estimated that international cartels controlled almost forty percent of world trade between 1929 and 1937. Article 81 (1) of the EC Treaty prohibits cartel agreements. The European Commission may therefore impose fines up to 10 % of the total turnover in the preceding business year on undertakings infringing the Article. However, in the fight against cartels not only the imposition of heavy fines is used. Nowadays, competition authorities around the world encourage undertakings to break the silence by applying leniency programmes reducing the fine for a member of a cartel that brings evidence to the antitrust authority. The United States was the first country to introduce a leniency programme in 1978. It took another 18 years for the European Commission to launch its first leniency programme in 1996. Since then the Commission has operated three different leniency programmes, all of which have been subject to criticism. The discussed shortcomings of the leniency programmes have especially comprised of lacking transparency and predictability resulting in a wide discretion for the Commission when deciding on immunity or the exact reduction of fines. The prisoners' dilemma is a game theoretic model that illustrates the strategic interactions of two arrested criminals who both want to minimize their time in prison, but are indifferent to how much time the other criminal spends behind bars. In the traditional prisoners' dilemma, confessing is always the dominant strategy. Regardless of how criminal 2 may act, criminal 1 is always better off confessing. Cartelization can be considered as a kind of prisoners' dilemma, the only difference compared with the traditional model lies in the absence of a provable minor crime and a dominant strategy. In such an event where the prisoners' dilemma does not give undertakings any guidance whether to confess or to remain silent, a successful leniency programme has to comprise both deterrent and appealing factors to make at least one undertaking to break the silence. In my opinion, there are three major areas for the Commission to develop in order to make more leniency applicants to confess in the future: increase the transparency and predictability of the Leniency Notice, introduce a one-stop-shop procedure and impose criminal sanctions on individuals participating in a cartel. (Less)
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http://lup.lub.lu.se/student-papers/record/1556795
- author
- Croner, Charlotta
- supervisor
- organization
- year
- 2007
- type
- H3 - Professional qualifications (4 Years - )
- subject
- keywords
- Konkurrensrätt, EG-rätt
- language
- English
- id
- 1556795
- date added to LUP
- 2010-03-08 15:55:20
- date last changed
- 2010-03-08 15:55:20
@misc{1556795,
abstract = {{A powerful cartel forces customers to pay significantly more for products and eliminates competition since its participants do not need to improve their productivity or the quality of their products. Cartels have historically exercised great influence over the international economy. During the inter-war period cartels were so powerful that economists have estimated that international cartels controlled almost forty percent of world trade between 1929 and 1937. Article 81 (1) of the EC Treaty prohibits cartel agreements. The European Commission may therefore impose fines up to 10 % of the total turnover in the preceding business year on undertakings infringing the Article. However, in the fight against cartels not only the imposition of heavy fines is used. Nowadays, competition authorities around the world encourage undertakings to break the silence by applying leniency programmes reducing the fine for a member of a cartel that brings evidence to the antitrust authority. The United States was the first country to introduce a leniency programme in 1978. It took another 18 years for the European Commission to launch its first leniency programme in 1996. Since then the Commission has operated three different leniency programmes, all of which have been subject to criticism. The discussed shortcomings of the leniency programmes have especially comprised of lacking transparency and predictability resulting in a wide discretion for the Commission when deciding on immunity or the exact reduction of fines. The prisoners' dilemma is a game theoretic model that illustrates the strategic interactions of two arrested criminals who both want to minimize their time in prison, but are indifferent to how much time the other criminal spends behind bars. In the traditional prisoners' dilemma, confessing is always the dominant strategy. Regardless of how criminal 2 may act, criminal 1 is always better off confessing. Cartelization can be considered as a kind of prisoners' dilemma, the only difference compared with the traditional model lies in the absence of a provable minor crime and a dominant strategy. In such an event where the prisoners' dilemma does not give undertakings any guidance whether to confess or to remain silent, a successful leniency programme has to comprise both deterrent and appealing factors to make at least one undertaking to break the silence. In my opinion, there are three major areas for the Commission to develop in order to make more leniency applicants to confess in the future: increase the transparency and predictability of the Leniency Notice, introduce a one-stop-shop procedure and impose criminal sanctions on individuals participating in a cartel.}},
author = {{Croner, Charlotta}},
language = {{eng}},
note = {{Student Paper}},
title = {{+ 32 2 299 45 85, Leniency and Game Theory}},
year = {{2007}},
}