Leniency in Antitrust: Risk, Reward, Deterrence & Justice

Leniency policy has become a central tool in antitrust enforcement against cartels. Leniency regimes encourage cartel members to blow the whistle on cartel activity, by increasing the risk of cartel detection, by rewarding the first cartel member to blow the whistle with the reward of immunity from enforcement proceedings, be they civil or criminal in nature. Some European States have moved to criminalise cartel activity in order to increase deterrence and the risks associated with cartel activity, and therefore also increase the rewards associated with a successful leniency application. Criminal penalties apply to individual cartelists and are in addition to significant financial penalties for the companies involved. The theory that underlies the operation of antitrust leniency policies is the classic game theory analysis of the prisoners’ dilemma, where the dominant strategy is confession, particularly where there is a risk that another party may also have an incentive to confess. The paper examines challenges to the classic prisoners’ dilemma analysis in criminal proceedings, where concerns about the award of immunity to an equally ‘guilty’ party create new problems in the prosecution of the other cartelists; especially where convictions require findings on moral questions such as dishonesty. Are judges and juries more hesitant to convict or severely punish cartelists where equally culpable, or arguably more culpable, parties have escaped sanction through the operation of leniency? Is this an example of a sense of fairness or equality in criminal justice threatening the amoral calculation of game theory?