Determinants of self-reporting under the European corporate leniency program

Abstract

Die Dis cus si on Pape rs die nen einer mög lichst schnel len Ver brei tung von neue ren For schungs arbei ten des ZEW. Die Bei trä ge lie gen in allei ni ger Ver ant wor tung der Auto ren und stel len nicht not wen di ger wei se die Mei nung des ZEW dar.Dis cus si on Papers are inten ded to make results of ZEW research prompt ly avai la ble to other eco no mists in order to encou ra ge dis cus si on and sug gesti ons for revi si ons. The aut hors are sole ly respon si ble for the con tents which do not neces sa ri ly repre sent the opi ni on of the ZEW. DETERMINANTS OF SELF-REPORTING UNDER THE EUROPEAN CORPORATE LENIENCY PROGRAMCung Truong Hoang  , Kai Hüschelrath  , Ulrich Laitenberger * and Florian Smuda # July 2014 AbstractWe empirically investigate the determinants of self-reporting under the European corporate leniency program. Applying a data set consisting of 442 firm groups that participated in 76 cartels decided by the European Commission between 2000 and 2011, we find that the probability of a firm becoming the chief witness increases with its character as repeat offender, the size of the expected basic fine, the number of countries active in one group as well as the size of the firm's share in the cartelized market. Our results have important implications for an effective prosecution of anti-cartel law infringers. Corresponding author. We are indebted to Eric Helland and an anonymous reviewer for valuable comments and suggestions on an earlier version of the paper. We are further grateful to Dominic Cucic, Amery Gülker, Bastian Sattelberger and Anne Zirngiebl for excellent research assistance. The usual disclaimer applies. Keywords

Who Blows the Whistle on Cartels? Finding the Leniency Applicant at the European Commission

“…Our study is closely related to the studies of Brenner (2011), Marvão (2014), Koh and Jeong (2014), Hoang et al (2014), Kim and Kim (2016), and Rosenboom 1 It is worth highlighting that when a company applies to the leniency program, it is acknowledging its liability as a participant in the cartel and, at the same time, providing solid evidence of the involvement of other companies. This decreases the likelihood of successful appeals against the competition authorities' penalty decision (Motta, 2009).…”

“…Third, we explore the determinants of self-reporting, in line with previous studies (e.g. Hoang et al, 2014). The larger and enriched database allows us to include a more comprehensive set of explanatory variables than previous studies.…”

“…This will serve as a proxy for a cartel's and each firm group's expected fines. If cartel members are rational, they will weigh the expected costs and benefits of reporting cartel conduct versus non-reporting (see Hoang et al, 2014;Rosenboom, 2020). Based on the information that has been provided by the EC on the method for setting fines and its implementation, 8 a cartel member could be expected to estimate the expected level of fines if detected and penalized by the EC without reporting.…”

“…Second, we follow Hoang et al (2014) when considering a firm group instead of a firm as a decision-making unit. We should not ignore the fact that where various firms that belong to the same group are involved in a cartel infringement, one leniency application is usually made on behalf of all of them, and all of the firms benefit from immunity or fine reductions based on that leniency application.…”

Cartel Cases and the Cartel Enforcement Process in the European Union 2001 2015: A Quantitative Assessment

“…In order to qualify for a category (1) Although admittedly speculative, one reason for the temporary decrease in the application rate could be seen in the uncertainties created by the substantial revision of the leniency notice in 2002 described above. Once the Commission clarified these issues through a consistent application of the new rules, the respective firm groups again more and more decided to apply for leniency (see generally Hoang et al (2014) for an econometric approach to the question of determinants of self-reporting as part of the EC leniency program). Before we turn to a discussion of a further and more recently introduced tool promising further fine reductions -the settlement procedure -our assumption in Section 4.2 above that the leniency program is creating a certain tension in cartel agreements -possibly leading to a race to the enforcer's door -deserves a further investigation.…”