Is leniency crucial to DG Comp investigations?

Like many trustbusters around the world, the European Commission is often chastised for leaning heavily on its leniency programme to identify and prosecute cartels. While the EU's leniency programme is indeed an important tool in DG Comp's tool box, many cartel cases over the past five years have come to pass without a whistleblower.

What's more, DG Comp appears to be relatively consistent when handing out reductions in fines for companies who add valuable information to a cartel probe. Even companies who are fourth in the queue to blow the whistle may get some reduction.

To draw our conclusions, we examined each cartel case since 2005, looking for cases in which a company won a full reduction under the EU's leniency programme for blowing the whistle on a cartel. Cases in which there wasn't a full leniency winner - and, therefore, a whistleblower - the commission instead handed out reductions of less than 100 per cent for the first, second and sometimes third companies to assist with an investigation already in progress.

What we found was a commission that, according to the data, relies far less on whistleblowers to catch cartelists than some might have thought.

The commission relied on leniency applications in only 23 of its 42 cartel investigations carried out since 2005, according to data culled from DG Comp documents. In at least 18 of those cases, the commission prosecuted the cartel without the aid of a proper whistleblower.

The data also suggests that the commission has been consistent when handing out leniency reductions. In almost every case in which the commission handed out reductions for the second and third companies in queue for leniency, fine reductions have been identical: between 40 and 50 per cent for first company to hand over information that adds significant value to an investigation, and between 20 and 30 per cent for the second company to do so.

After that, however, the picture becomes slightly less clear. While many companies that submitted information to the commission later received fine reductions between 10 and 20 per cent, others received only single-digit reductions, either for cooperation or for simply not contesting DG Comp's charges. Anecdotal information also suggests that in some cases, companies who attempted to cooperate did not provide what the commission considered to be any additional value to its probe, and received no reduction for their efforts.

While we didn't comb the data to see whether leniency reduced the time it takes to investigate and prosecute cartels, others have. For example, a study conducted by Humboldt University Berlin economics professor Steffen Brenner, published in March 2009, shows that leniency programmes indeed shorten the duration of cartel cases by close to one and a half years.

That is, of course, on top of the two primary goals of the programme, both in Europe and elsewhere: to help enforcers detect cartels more quickly, and to act as a deterrent for other firms from entering into price fixing schemes.


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