The interplay between leniency programmes and private enforcement: the economist perspective on recent policy proposals

Abstract

Leniency policies grant substantial fine reductions to firms that disclose their former participation in a cartel. Such policies may, thereby, destabilize existing cartels and disincentivize the formation of new ones. Alternatively, some argue that they might have the opposite effect of incentivizing collusion by reducing the punishment for former cartel participants, thereby raising the collusive payoff. The overall decline in leniency applications in the European Union since 2014 calls for an analysis of the interplay between the 2006 Leniency Policy and other competition policies, most notably the 2014 Damages Directive. This article discusses the interaction between these two competition policy tools, arguing that the liability of immunity recipients in follow-on damage claims tends to stabilize cartels, and assesses several proposals that aim to ensure that public and private cartel enforcement tools are more in sync.