A leniency program is a set of rules for granting reduction of penalties to firms which are involved in cartels. The main aim is to make them discontinue with the illegal practice and cooperate with the investigation authorities to release other firms practicing the said practice. An instance of authorities which adopted this method includes the European Union. As a result, it has aided in discovering and interrupting illegal agreements among big firms. LP play an important role in deterring the growth of cartels.
How it works:
The
LP works in a way such that they give immunity from imprisonment to individuals/companies
that give out firms which are involved in a cartel. Moreover, they could also
reduce penalties and fines imposed by the relative authorities,thus making
cooperation with the authorities more attractive. The EU regulations such as
the TFEU(Treaty on the Functioning of the EU) admit the possibility of granting
penalty discounts to firms which report before or even after a formal
investigation has begun.
According to the time when the report was
given to the authorities,if it is a first reporting and the authorities had no
prior evidence against that firm,the EU could provide immunity from fines.This
is according to the European Commission 2002 Regulation.The EC 2002 regulation
further gives partial reductions of fines to other reporters because they have
provided the information late though it could be regarded important to the
authorities.
Consequently,the
LP also sets strict requirements for the reporters for instance the reporting
ought to be done in an official corporate act.However,in instances where a
company is making the report,a single individual is not expected to give the
report to the authorities on his own.Once a company has delivered information
on an ongoing cartel,they are expected to stop their participation with the
cartels.The reason behind this is so that the reporter can give full
cooperation during the investigation so as to qualify for leniency.However much
an LP can be generous, they still cannot exclude civil damages in private
suits. Hence, the risk of exposure to high damages inn private enforcements
remains but can still be reduced to the effectiveness of the LP.
The
main challenge faced by the EU leniency program is that, they run the risk of receiving many
applicants so that they can benefit partial or full immunity from the harsh
fines. Hence, the ECN(European Commission Network) competition authorities is forced to investigate on the credibility
of statements given by such providers.
In
conclusion,from the theoretical view and the enforcement of laws and policies, LPs
allow to save enforcement resources by inducing reporting.Moreover,the benefits
that come with reporting is maximum reductions in fines, with either partial or full immunity.
Therefore, companies will only be able to benefit from leniency in all relevant
jurisdictions
if
they apply for leniency with all authorities that could pursue a case against
them. As a result, the leniency program may be concluded as an important
element in prosecution of antitrust authorities against cartels.
CASESTUDY;
On
28 March 2012, the Commission fined 14 groups of companies a total of EUR169
million for participating in four distinct cartels in the freight-forwarding
sector. According to the Commission, the objective of the cartels was to fix
prices and other trading conditions for international air-freight forwarding
services. The Commission found that the freight forwarders colluded on
surcharges and charging mechanisms concerning important trade routes, in
particular the Europe to USA route, and the China and Hong Kong to Europe
routes. Deutsche Post received full immunity from fines under the 2006 Leniency
Notice for all four cartels, as it was the first to reveal the arrangements to
the Commission. Other companies benefited from reductions of 5% to 50% in the
fines imposed in relation to each of the cartels due to their co-operation
under the EU leniency programme.
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