‘Reconceptualising deterrence within competition policy’

Only three more sessions remain in our Autumn seminar series, including the tantalising prospect of some distinguished guest speakers. On Friday 11th December, we are delighted to welcome back the ever-enthralling Jonathan Galloway (Newcastle Law School), who presented at our Annual Conference back in 2007. Jonathan is a Senior Lecturer in Law at Newcastle University and an expert in Competition Law. His research interests include the intersections of competition law (particularly its relationship with politics, innovation, and industrial policy), international convergence, and cooperation between competition authorities.

Jonathan will be presenting one of his current research projects, entitled ‘Reconceptualising deterrence within competition policy‘. An abstract for his paper can be found below.


Competition authorities, and the politicians who hold them to account, primarily rely upon deterrence theory in order to achieve their objective of preventing anti-competitive behaviour. Broad trends of increased severity of sanctions, particularly for cartel behaviour, are easily observable and yet it is far from clear that the deterrence led approach is effective. Heightened severity of sanctions, and heightened probability of sanction, facilitated in part through the operation of leniency, ought to prevent recidivism and also lead to lower levels of infringements as part of a successful deterrence strategy, yet there is little evidence to suggest this is taking place. Efforts to ‘double down’ on deterrence through introducing individual sanctions in jurisdictions such as the UK can be useful but are unlikely to provide a complete answer in order to prevent anti-competitive behaviour. This paper will argue that deterrence should continue to be an important driver of competition authorities’ enforcement strategy, but that it should be framed within an overarching strategy of regulatory compliance, which affords greater priority to individual accountability, and embraces insights from behavioural economics in order to foster the creation of a competition culture and so as to align the incentives between corporation and individual.

The seminar takes place from 13:00-14:00 in the Thomas Paine Study Centre, Room 1.03. Tea will be provided directly afterwards in the MBA Café (TPSC, Floor 2).

‘The relationship between the Commission’s leniency programme and the Directive on damages regarding breach of the competition rules (Directive 2014/104/EU)’

The Autumn edition of the CCP Seminar Series is well under way – check out our programme here. On Friday 30th October, we have the double pleasure of welcoming two outstanding PhD researchers from the University of Bergen, Ingrid Halvorsen Barlund and Ignacio Herrera-Anchustegui. Ingrid is our first presenter in this special double-session, and will be exploring ”The relationship between the Commission’s leniency programme and the Directive on damages regarding breach of the competition rules (Directive 2014/104/EU)”. An abstract for her paper can be found below.


This abstract is based on a chapter of my PhD-project on ‘the Commission’s leniency programme within EU competition law – With emphasis on the regulatory framework, scope and effects of the Commission’s leniency programme as a public enforcement instrument of secret cartels, and the interplay with private enforcement through damages claims following infringements of the competition rules’ (working title). The chapter examines whether the Directive on Damages succeeds in balancing the public leniency enforcement of secret cartels with subsequent private damages claims arising from that same cartel activity from an optimal enforcement perspective. In this regard, the chapter looks into the situation of private enforcement of cartel activity through follow-on damages claims in the EU starting with Courage until now, going through the relevant case law and the Commission’s documentation leading up to the Directive. Concerning the Directive, the chapter focuses on the rules on disclosure and liability. Based on these analyses, the chapter questions whether there are other solutions to this interaction which possibly promotes a more efficient enforcement of Article 101 of the Treaty on the Functioning of the European Union (TFEU).

By leniency in EU competition law, this thesis refers to an enforcement tool that provides a cartel participant, who confesses and delivers evidence against their co-conspirators to the Commission, an immunity from or reduction of administrative fines, depending on the time and value of the evidence provided. The most recent leniency programme of the Commission is from 2006 and is called the ‘Commission Notice on Immunity from fines and reduction of fines in cartel cases’.

According to Article 1, the Directive seeks to ensure the right for anyone who has suffered harm caused by an infringement of the competition rules to claim full compensation, which is a codification of the right for compensation established by the Court’s case law, and the responsibility for each Member State to ensure this. Concomitantly, it emphasizes the importance of an effective public enforcement of cartels, referring inter alia to leniency programmes. The Directive thus seeks to establish a common standard in all Member States for the interaction between public and private enforcement of the competition rules at the EU level, stressing that to achieve an optimal enforcement of the competition rules this interaction has to be taken into consideration. To assure an effective enforcement of the competition rules, different – and to a certain degree “opposing” – interests of parties need to be protected when competition authorities publicly enforce competition laws and later on when private actors file claims for damages before the courts. By “opposing interests” this abstract specifically refers to the conflict that arises in a private follow-on damages suit resulting from a cartel infringement between a leniency recipient and the victims of that cartel activity seeking compensation. The risk of follow-on damages claims after having received lenient treatment from the competition authorities undermines the effectiveness of a leniency programme. To understand these conflicting mechanisms, the abstract will start by explaining the rationale of a leniency instrument.

The Commission’s leniency programme enforces Article 101 TFEU. Article 101 prohibits “all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market”. The Notice is only directed at “the most serious violations” of Article 101, which accordingly are “secret cartels”, cartels being defined as “agreements and/or concerted practices between two or more competitors aimed at coordinating their competitive behaviour on the market and/or influencing the relevant parameters of competition […]”. The secret nature of these infringements demands for non-traditional enforcement measures like leniency programmes. Because these infringements are very difficult to detect and because the cartel participants often go to great lengths in maintaining and keeping the cartel secret, the Commission’s leniency programme is based on a ‘carrot and stick’-strategy. Cartel participants are profit driven, meaning that their incentives are oriented towards what gives the highest economic gain. This economic orientation, in addition to the secrecy, explains the “carrot and stick”-strategy, where the balance between creating deterrence through tough sanctions on the one hand (the stick) and offering on the other hand a lucrative leniency regime (the carrot) is vital for the detection and prevention of cartel activity. The risk of follow-on damages claims threatens this interaction by undermining the ‘carrot’-effect as it diminishes the attractiveness of the leniency programme by adding to the ‘stick’-effect. The value of receiving immunity from fines from the competition authorities will decrease if the leniency applicant still risks damages claims in front of the courts. Despite the fact that the object of these damages is to compensate the victims of cartel activity, the damages will be perceived as adding to the fines escaped by the immunity recipient during the public enforcement. The controversy of juxtaposing damages with fines in the European enforcement tradition will be briefly commented on at the end of this abstract.

The impression of this thesis’ studies so far is that the Directive has tried to handle the conflict by outlining a compromise between the conflicting interest of an immunity recipient and the victims of cartel activity which arguably leads to both sides losing. This thesis therefore argues that the Directive’s solution might not be the way to go, and that it seemingly fails in seeking the objective of an optimal balance between public leniency enforcement and private follow-on damages enforcement. On the contrary, the outcome seems to be neither optimizing the public leniency enforcement nor the private follow-on damages enforcement of the competition rules. The abstract will outline the rules on disclosure and liability in the Directive as these are of particular interest and illustrating of why the Directive might not have found the solution.

Concerning disclosure of documents, the PhD-chapter analyses the case law on disclosure of evidence in the Commission’s file before the Directive’s entry into force, emphasizing what seems to have been different views of the Commission and the Court concerning the protection of the immunity recipient’s interests on the one hand versus protection of the victim of cartel activity’s interests on the other. The Court arguably was more in favour of protecting the latter and therefore promoted a pragmatic approach to disclosure of leniency information. However, Article 6 (6) of the Directive now states that “for the purpose of actions for damages, national courts cannot at any time order a party or a third party to disclose […] leniency statements”. Further, Article 7 (1) provides that “Member States shall ensure that evidence in the categories listed in Article 6 (6) which is obtained by a natural or legal person solely through access to the file of a competition authority is either deemed to be inadmissible in actions for damages or is otherwise protected under the applicable national rules”. According to Article 2 (16) of the Directive “statements” are defined as

an oral or written presentation voluntarily provided by, or on behalf of, an undertaking or a natural person to a competition authority or a record thereof, describing the knowledge of that undertaking or natural person of a cartel and describing its role therein, which presentation was drawn up specifically for submission to the competition authority with a view to obtaining immunity or a reduction of fines under a leniency programme, not including pre-existing information“.

The prohibition does not regard “pre-existing information” which according to Article 2 (17) is defined as “evidence that exists irrespective of the proceedings of a competition authority, whether or not such information is in the file of a competition authority”. The fact that leniency statements are exempted from disclosure at all times is said to preserve the incentive for undertakings to provide information to the competition authorities as it hinders the leniency applicant from becoming an easy target for damages claims. This thesis agrees with the fact that revealing this type of information could hinder the effectiveness of a leniency programme. However, to assure both efficient leniency enforcement and efficient private enforcement of follow-on damages claims, maybe the solution is not to have detailed rules on disclosure. Instead, maybe focus should be on changing the rules on liability outlined by the Directive.

The immunity recipient is according to paragraph 11 of the Directive only jointly and severally liable for the losses the undertaking has caused to its own direct and indirect purchasers and/or providers. If the cartel has caused harm towards others in addition to the cartel’s providers or customers, the leniency recipient is only responsible for a relative part proportionate to the losses directly linked to the undertaking. Only when the claimants cannot obtain full compensation from the other participants, will the immunity recipient be responsible for the whole loss. The loss shall according to Article 3 of the Directive be fully recovered. Member States are obliged to follow the European principle of full compensation, including compensation of overcharges according to Article 12. According to Article 10 (3) limitation periods shall be at least five years, starting to run from the moment the infringement has ceased and the claimant “knows, or can reasonably be expected to know” of the behaviour, that this behaviour constituted an infringement of competition law which caused harm to the claimant, and the identity of the infringer, see Article 10 (2).

The point of this discussion is to highlight the fact that even if the liability of an immunity recipient is limited, this liability read together with the rules on quantification of harm and limitation periods implies that the immunity recipient still risk facing damages claims of an unknown number and size. This creates uncertainty, and has made this thesis question how attractive the compromise outlined in the Directive is not only for the immunity recipient, but also for the victims of cartel activity. The leniency applicant on the one hand still risk an unknown number and size of claims in front of national courts, whereas the victims of cartel activity on the other hand are denied access to evidence.

That is why this thesis has looked into an alternative solution to the one outlined in the Directive. This proposal, inspired by among others a comment by Paolo Buccirossi, Catarina Marväo and Giancarlo Spagnolo on ‘Leniency, damages and EU competition policy’, is to further limit the immunity recipient’s liability for damages, possibly abolish it, and give the victims of cartel activity full access to the Commission’s file. This would mean revealing the identity of the immunity recipient, which initially constitute a disincentive for the cartel participants to cooperate with the authorities. However, this disincentive will be outweighed by the reduced liability which will make the carrot juicier and the stick more painful if the cartel participant does not confess. With this solution, the cartel participants not cooperating with the competition authorities face a greater risk as jointly and severally liable with the disclosure of the leniency information. Full access to the Commission’s file, including leniency statements, will on the victims’ part facilitate the ability to obtain compensation.

This chapter of the PhD-thesis will also as already mentioned contrast the Directive to the US system, highlighting the issue of classifying damages more or less as a sanction in relation to the immunity recipient, juxtaposing damages with fines. This is questionable in the European enforcement tradition where damages are perceived as a compensatory measure. The classification problem therefore adds to the traditional role of damages in European private enforcement. The US does not follow the principle of full compensation. In the US, claimants are entitled to sue for three times the losses suffered. This is called ‘treble damages’, providing the damages with a punitive element. Concerning the interaction between leniency and follow-on damages, section 213 of the Antitrust Criminal Penalty Enhancement and Reform Act of 2004 ‘detrebles’ damages for the immunity recipient, in addition to providing an exemption from joint and several liability. This means that the immunity recipient is only liable for the actual damages attributable to its own conduct, and that rather than being liable for three times the damages caused by the entire unlawful cartel, the immunity recipient only risks single damages. Furthermore, the US has a different antitrust enforcement tradition than in Europe, relying more on private enforcement and on public criminal enforcement. The US system is therefore to a higher degree based on deterrence and punitive elements than what traditionally has been the case in Europe. Despite these fundamental differences, but also because of these differences, seeing as the US is considered to be the ‘pioneer’ in antitrust enforcement, this thesis finds it interesting to contrast the EU system with the US system with the purpose of suggesting changes and improvements de lege ferenda to the interaction between the public leniency enforcement of secret cartels and follow-on damages claims arising from that same cartel activity.

This chapter will conclude with a summary of its findings and a discussion of its most relevant aspects. Still a work in progress, any feedback is very much welcome.


Ingrid’s presentation takes place from 13:00-13:45 in the Thomas Paine Study Centre, Room 0.1. Please note this seminar is part of a double-session which includes an additional presentation by Ignacio Herrera-Anchustegui from 13:45-14:30. 

‘Do Competition Authorities’ Cartel Investigations exhibit a Life-Cycle?’

The Spring Seminar Series continues on Friday 27th February with our master empiricist Prishnee Armoogum (CCP & ECO) asking ‘Do Competition Authorities’ Cartel Investigations exhibit a Life-Cycle?‘. Prishnee is a PhD researcher and Associate Tutor in the School of Economics at the University of East Anglia. Her thesis topic explores the experiences of competition enforcement across different competition authorities around the world, with a particular interest in small economies. Prishnee is also a member of the Competition Commission of Mauritius. An abstract for her paper can be found below.


Although there are numerous recent papers which have studied the relationship between deterrence and cartel formation, there is not much literature on the empirical assessment of the Competition authority’s behaviour in the presence of deterrence. The purpose of this paper is to investigate the presence of deterrence on cartels during the life cycle of a competition authority (CA). The intuition of proposed theory developed in this work is used to study the lifecycle of the CA and the impact of competition law and policy deterrence on its cartel activities. A yearly panel data set of 32 countries (33 competition institutions) for period 2006-2012 is used empirically to test the model. Choosing the most preferred model, we find that the number of cartel investigations do not have a life cycle. However, the results show that tools used to deter cartels, i.e. cartel fines, years of imprisonment and number of leniency applications, do have an influence on the number of cartel investigations. The number of phase II merger investigations is also found to be negatively related to the number of cartel investigations.

The seminar takes place from 13:00-14:00 in the Thomas Paine Study Centre, Room 1.03.

Policy Briefing: Is the Korean Innovation of Individual Informant Rewards a Viable Cartel Detection Tool?

Policy Briefing of CCP Working Paper 14-3:

Stephan A, ‘Is the Korean Innovation of Individual Informant Rewards a Viable Cartel Detection Tool?’. (Available to download from our Working Papers pages on the CCP website).


  • The defining characteristic of modern cartel enforcement is the use of leniency programmes. This innovation, first employed by the US in the late 1970s, has been emulated by the vast majority of competition law enforcement regimes around the world.

  • The basic principle of these programmes is to offer immunity to the first firm to report a cartel infringement to the competition authority.

  • It is thought leniency programmes have been instrumental in destabilising and uncovering cartel infringements, thereby undermining the trust that exists between cartel members and increasing the rate at which cartels are detected.

  • Despite the offer of leniency and the increasing levels of fines imposed on cartels, competition authorities continue to uncover a high volume of infringements. This might suggest that more could be done to strengthen deterrence in cartel enforcement. It has been suggested that the next logical step in advancing antitrust enforcement may be the use of rewards or bounties to individual whistle-blowers.

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Anti-trust and the Beckerian Principle: the Effects of Investigation and Fines on Cartels

This Spring seminar series concludes in style on Friday 12th July as our very own Frederick Wandschneider (CCP and ECO) presents his latest research on ‘Anti-trust and the Beckerian Principle: the Effects of Investigation and Fines on Cartels‘ which he has undertaken alongside Subhasish Modak Chowdhury. An abstract for his seminar can be found below.


In order to deter collusion and punish wrongdoers, antitrust authorities employ different combinations of ‘magnitude of fine’ and ‘likelihood of detection’. According to Becker (1968) these tools are substitutable. Since detection depends on costly investigation, it is optimal to minimize detection efforts and impose high fines. Recently the UK Office of Fair Trading followed this proposition and increased the maximum fine that it can impose on a colluding firm from 10% to 30% of its relevant turnover. It is not known, however, from a behavioral perspective how effective this type of policy design would be in a market. We address this issue through a market experiment to study the effects of magnitude and likelihood of fines on cartel activity, prices and collusive stability. We find support for the Beckerian principle only when leniency is not present. In the presence of a leniency program, however, a regime encompassing low detection rates and high fines is even more desirable as this reduces the propensity to collude and lowers the overall incidence of cartelized markets. It also achieves higher consumer welfare and triggers price defections.

CCP academic profiles: Frederick Wandschneider; Subhasish Modak Chowdhury

The CCP seminar series will return in Autumn 2013 with a new line-up of presenters from a variety of disciplines. The Autumn programme will be available to download from our CCP seminar page in the coming weeks and you can also revisit previous seminar series by following the relevant links.