Leniency programs for multimarket firms: The effect of Amnesty Plus on cartel formation

Abstract

We examine the effect of the Amnesty Plus policy on firms' incentives to engage in cartel activities. Amnesty Plus is a proactive antitrust enforcement strategy aimed at attracting amnesty applications by encouraging firms already convicted in one market to report collusive agreements in other markets. It has been heavily advertised that Amnesty Plus weakens cartel stability. We show to the contrary that Amnesty Plus does not always have this desirable effect. Only under specific conditions, Amnesty Plus deters a cartel which would have been sustainable under an antitrust policy without Amnesty Plus. Otherwise, Amnesty Plus is either neutral or even stabilizes a cartel. We also show that firms can exploit their multimarket contact to reduce the effectiveness of the Amnesty Plus policy.

The Rise and Fall of Cartels with Multi-market Colluders

“…The impacts are statistically significant and robust to various sample choices and specifications. Together, these findings lend some support to the recent theories that cartel formation and sustainability are linked across markets and that antitrust intervention in one market may affect cartel dynamics in the adjacent markets (e.g., Lefouili and Roux 2012;Marx et al 2015).…”

“…Notable exceptions are the theoretical papers by Lefouili and Roux (2012), Choi and Gerlach (2013), and Marx et al (2015), who study, among other things, the effects of antitrust enforcement on firms' incentives to form cartels in more than one market and the sustainability of cartels across markets. Lefouili and Roux (2012) find that firms may collude in more markets under the ''Amnesty Plus'' program than without the program. 3 Choi and Gerlach (2013) find that cartel prosecution in a market may affect cartel profit and sustainability in the adjacent markets and deter cartel formation in previously competitive markets.…”

Antitrust Leniency with Multiproduct Colluders

“…12 The theoretical literature, including Spagnolo (2000Spagnolo ( , 2004; Motta and Polo (2003); Spagnolo (2005, 2006); Aubert, Rey, and Kovacic (2006) ;Chen and Harrington (2007);Harrington (2008); Lefouili and Roux (2012) ;Chen and Rey (2013);and Choi and Gerlach (2013) has focused on repeated games models and on the self-enforcement of a cartel structure. The collusive behavior is supported as an equilibrium in a supergame without need for communication and without interfirm transactions.…”

“…In Australia, leniency applications are permitted until the ACCC has received written legal advice that it has sufficient evidence to commence proceedings in the case. 6 See Lefouili and Roux (2012) for a discussion and theoretical model of Amnesty Plus. See also Wils (2008a, Chapter 5.4.4).…”

When Can We Expect a Corporate Leniency Program to Result in Fewer Cartels?

“…Starting with the pioneering paper Motta and Polo (2003), theoretical analyses include Ellis and Wilson (2001), Spagnolo (2005), Motchenkova (2004), Aubert, Rey, and Kovacic (2006), Chen and Harrington (2007), Harrington (2008), Harrington and Chang (2009), Houba, Motchenkova, and Wen (2009), Silbye (2010), Choi and Gerlach (2012), Lefouili and Roux (2012), Sauvagnat (2013), Bos and Wandschneider (2013), Chen and Rey (2013), Gärtner (2014), Marshall, Marx, and Mezzetti (2013), Blatter, Emons, and Sticher (2014), and Marx and Mezzetti (2014). The general conclusion of this body of work is that leniency programs make collusion more difficult.…”