Transcript An Empirical Assessment of the European Leniency Notice

An Empirical Assessment of the
European Leniency Notice
Andreas Stephan
Norwich Law School &
ESRC Centre for Competition Policy
www.ccp.uea.ac.uk
The European Leniency Notice
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Cartels are secretive agreements
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Leniency programmes enhance deterrence: inducing self-reporting
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Immunity to first firm to come forward (only)
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Introduced in US in 1978; not effective until 1993 reforms
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DG Comp adopted leniency in 1996. Reformed in 2002 and 2006.
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By April 2007, 23 cases opened by 1996 leniency notice and 8 under
2002 notice. Fines exceeding €6 billion
As early as 2001, leniency notice heralded as ‘indisputable success’
RESEARCH QUESTION: Has the leniency notice succeeded in
uncovering active cartels, or failed ones?
Sources of data / information

DG Competition press releases and final decisions
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DOJ press releases
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Industry journals / newspapers
1996 Notice: Distilling US enforcement success
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DOJ press releases: US equivalent investigations usually precede
(and sometimes contemporaneous with) EU investigations.
Incentives to reveal much stronger in the US
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Imprisonment of individuals – immunity
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Some anonymity for revealing firm
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Plea bargaining
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34 EC investig. opened after July 1996, but before 2002 reforms.
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23 opened as a result of leniency applications
1996 Notice: Distilling US enforcement success
Proportion of US leniency success (Jul 1996 – Apr 2007)
No of Cases
Cases Triggered By Leniency
Applications
But where International Cartels
with prior/simultaneous US
policy success
EC Only Leniency
Investigations
Fines (€
million)
Proportion of
Total Fines %
(€4.5 billion)
23
3,459
76.9
15
2,179
48.5
8
1,279
28.4
• 63% of leniency success (in terms of fines) on back of US
1996 Notice: Distilling US enforcement success
A closer look at EU only leniency success (8):
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4 involved Brewers – First failed a year before DG Comp
investigation opened.
Carbonless Paper had also failed.
Needle cartel had failed – revealing firm had been forced to join
by ringleader.
First of two Copper Plumbing Cartels revealed by Mueller, which
joined the cartel a decade after it was formed.
1996 Notice: Cartels in the chemicals industry
1996 Leniency Success Industry Breakdown (Jul 1996 – Apr 2007)
Industry
No of Cartels
Fines (€ million)
Proportion %
Fine Arts
1
20.4
0.6
Chemicals
11
1,778.6
51.4
Beer
4
368.4
10.7
Metals, Carbon & Metal
Manufacturing
6
977.8
28.3
Other Manufacturing
1
313.7
9.1
• In all 11 cases, leniency applications made after cartels ceased
VITAMINS
AVENTIS SA
AVENTIS SA
Animal Feed Methionine
BASF AG
AVENTIS SA
(F. Hoffman-La Roche)
Animal Feed Vitamins
Methylglucamine
Citric Acid
ARCHER DANIELS MIDLAND
AKZO NOBEL
DEGUSSA
Amino Acids - Lysine
Sodium Gluconate
CHIEL JADANG CORP, DAESANG CORP & AJINOMOTO
AKZO NOBEL
Food Flavour
AKZO NOBEL
Organic Peroxides
ATOFINA
MCAA Chemicals
HOECHST
Sorbates
1996 Notice: Cartels in the chemicals industry
The Failing Chemicals Cartels
1.
Links to other cartels
2.
New Entry from China
3.
Arbitrage
4.
Decline, overcapacity, and rising costs
5.
Barriers to entry, substitutability, distrust
6.
Asia Crisis
7.
Mergers, acquisitions and restructuring
The revised 2002 Leniency Notice
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2002 reforms increased clarity and certainty
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Replaced ‘determining role’ with ‘coerce others’
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Immunity available after investigation opened
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But, firms still required to put immediate end to involvement
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2006 reforms have remedied this, made immunity criteria easier to
satisfy, and introduced marker system for leniency
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ECN Model ‘Leniency Program Programme’
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European Leniency design brought into line with US
2002 Notice: More of the same?
2002 Leniency Success: Fines (to April 2007)
No of Cases
Cases Triggered By 2002
Leniency Applications
But where International Cartels
with prior/simultaneous US
policy success
EC Only Leniency
Investigations
Fines (€
million)
Proportion of
Total Fines (%)
8
2,692
74.8
3
983
27.3
5
1,709
47.2
• Less dependence on prior / simultaneous US policy success
2002 Notice: More of the same?
2002 Leniency success industry breakdown (to Apr 2007)
Industry
No of Cartels
Fines (€ million)
Proportion %
Chemicals
4
1,327.6
49.3
Petrolium
1
266.7
9.9
Metal Manufacturing
2
1,041.4
38.7
Agriculture
1
56
2
•
But still high proportion in Chemical industry – same old faces?
1996 Leniency Notice
2002 Leniency Notice
MCAA Chemicals
ATOFINA
(now Arkema)
Acrylic Glass
Organic Peroxides
Methionine
VITAMINS
Animal Feed Vitamins
Sodium Gluconate
Citric Acid
DEGUSSA
Hydrogen Peroxide
SOLVAY
Rubber Chemical
AKZO NOBEL
BAYER AG GROUP
(Haarman & Reimer)
Synthetic Rubber
Key Findings / Implications
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Leniency notice has largely uncovered failed, not active cartels
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Discounting the cost of collusion; taming the end-game
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Harming competitors (former cartel partners)
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Priority to leniency applications from active cartels
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Design of leniency appears close to optimal (2006 reforms)
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Problem may be inadequate sanctions