The EU Leniency Programme and Recidivism

The EU Leniency Programme aims to encourage the dissolution of existing cartels and the deterrence of future cartels, through self-reporting and/or significant cooperation by cartel members during an investigation. However, the European Commission guidelines are vague in terms of the factors that influence the granting and scale of leniency-related penalty reductions. In this paper, the empirical analysis of the penalty reductions that have been granted shows, as expected, that the first reporting or cooperating firms receive generous fine reductions. More importantly, there is some evidence that firms can “learn how to play the leniency game”, either learning how to cheat or how to report, as the reductions that are given to repeat (and multiple) offenders are substantially higher. These results have an ambiguous impact on firms’ incentives and major implications for policy making.