To Enforce and Comply Inside the Antitrust Agency - Two Perverse Effects of Leniency Programmes -

1. To Enforce and ComplyInside the Antitrust Agency- Two Perverse Effects of Leniency Programmes - Martijn Snoep 5 March 2009

2. 1. The Bandwagon Effect

3. The Bandwagon Effect (1) • The Bandwagon Effect in Microeconomics • The Bandwagon Effect arises when people's preference for a commodity increases as the number of people buying it increases. • This effect disturbs the normal results of the theory of supply and demand, which assumes that consumers make buying decisions solely based on price and their own personal preference.

4. The Bandwagon Effect (2) • The Bandwagon Effect in International Cartel Enforcement • The Bandwagon Effect arises when competition authorities preference for prosecuting a cartel increases as the number of competition authorities prosecuting the same cartel increases. • This effect disturbs the normal results of sound competition policy, which assumes that enforcement agencies make enforcement decisions solely based on the goal of maximizing consumer welfare in the jurisdiction for which they are responsible.

5. The Bandwagon Effect is further stimulated by Leniency Programmes • Increase in number of leniency programmes and multi-jurisdictional leniency applications • Global law firms offering assistance in multi-jurisdictional leniency applications • companies are often rather safe than sorry; costs are no issue • Self interest of competition authorities and inter agency competition stimulate multi-jurisdictional leniency applications • oral statements, markers, dropping language requirements. • BUT is spending public money on this low hanging fruit efficient and in the best interest of the tax payers?

6. How to limit the Bandwagon Effect? • International soft law (ICN/OECD) • Guidelines on case allocation • Acceptance that larger jurisdictions are better suited to prosecute international cartels • Co-operation in multi jurisdictional investigations • but not the same number of fines as there are jurisdictions involved • sharing the glory and the fine.

7. 2. The Overconfession Syndrome

8. Overconfessing infringements • No confession of infringements when there was none, but • Interpretation of evidence, for example only suggesting information exchange (with anticompetitive objective or effect) • Duration of infringement on the basis of first meeting with competitors • Structural character of infringement.

9. Incentives to overconfess are strong • Amnesty applicant risks loosing amnesty if he fails to report • given the amnesty overconfession is often better safe than sorry • relief at some companies/employees to wash sins away. • 2nd or 3rd in applicant is granted leniency if he can provide information of additional value to the investigation • leniency race to the finish • spirit of co-operation with agency.

10. Disincentives to overconfess are not strong enough • Competition authorities have never sanctioned overconfession. • Civil damage claims • not on top of everybody’s mind • weak in most jurisdictions.

11. How to limit the Overconfession Syndrome? • Reliance on contemporaneous evidence rather than after the fact corporate or witness statements. • Allow third party defendants to cross examine witnesses early on in the process. • Prosecute clear cases of overconfession by different agency and withdraw amnesty/leniency granted.