Reflections On Leniency Programs: in Search For Effectiveness

2014/2015
Reflections on Leniency
Programs: in search for
effectiveness.
MASTER THESIS
L. ARNAL RODRIGUEZ
Electronic copy available at: http://ssrn.com/abstract=2801707

REFLECTIONS ON LENIENCY PROGRAMS: IN SEARCH FOR
EFFECTIVENESS.
Master thesis.
LLM International and European Law.
Track: EU Law.
Subtrack: EU Economic and Competition Law.
Tilburg Law School
Tilburg University.
Student: Lucia Arnal Rodriguez.

ANR: 475042
Supervisor: Nicolo Zingales.
Second reader: Zlatina Georgieva.
Electronic copy available at: http://ssrn.com/abstract=2801707

I
Abstract.
Competition law’s main objective is to maximize consumer welfare by ensuring the competitive
functioning of the markets. In particular, competition law has to address anticompetitive agreements
between competitors or firms at different levels, abusive behaviour of dominant firms, mergers and public
restrictions of competition. This master thesis will focus on hard-core cartels considering that they are the
most serious violation of competition law. The instruments used to fight against this anticompetitive
behaviour (leniency programs) have resulted to be fairly effective. Many modifications and developments
have taken place since the leniency program was first established in the European Union in order to make
it an optimal tool to fight hard-core cartels. However, it is submitted that a significant margin of
improvement remains for several features of the program. Discussion throughout this thesis about the
pitfalls of this leniency system will remark the need for further changes enabling these programs to
become the ultimate solution against hard-core cartels. The thesis concludes with a study case of the
Spanish competition law that will reflect the strengths and weakness of the leniency programs in the
practice.
II
Contents
LIST OF ABBREVIATIONS .............................................................................................................................. IV

INTRODUCTION. ............................................................................................................................................ 1
CHAPTER 2: ORIGIN AND EVOLUTION OF LENIENCY PROGRAMS. ............................................................... 4
2.1 Introduction ........................................................................................................................................ 4
2.2 Glance at past ..................................................................................................................................... 4
2.2.1 The Romans, the pioneers. .......................................................................................................... 4
2.2.3 Early Europe. ................................................................................................................................ 5
2.3 Modern Ages. ...................................................................................................................................... 6
2.3.1 US antitrust and leniency policy: the forefather.......................................................................... 6
2.3.2 The European leniency system: following US steps..................................................................... 8
2.4 Rationale of the leniency programs. ................................................................................................. 12
2.4.1 The Prisoner’s Dilemma. ............................................................................................................ 13
2.5 Preliminary conclusions. ................................................................................................................... 14
CHAPTER 3: TECHNICAL FEATURES OF THE LENINCY PROGRAMS.............................................................. 15
3.1 Introduction. ..................................................................................................................................... 15
3.2 Full immunity .................................................................................................................................... 15
3.4 Lenient treatment (reduction in fines). ............................................................................................ 17
3.5 Marker system .................................................................................................................................. 18
3.6 Hypothetical applications ................................................................................................................. 19
3.7 Confidentiality obligations on both the applicant and the competition agency. ............................. 19
3.7.1 Oral procedure. .......................................................................................................................... 20
3.8 Amnesty Plus. .................................................................................................................................... 20
3.8.1 Penalty Plus ................................................................................................................................ 22
3.9 Criminal sanctions for hard-core cartel members. ........................................................................... 22
3.10 Preliminary conclusions. ................................................................................................................. 23
CHAPTER 4: COLLATERALS EFFECTS AND PITFALLS OF THE LENIENCY PROGRAMS. .................................. 24
4.1 Introduction. ..................................................................................................................................... 24
4.2 Collateral effects. .............................................................................................................................. 24
4.2.1 Fear of retaliation by other cartel members. ............................................................................ 24
4.2.2 Negative reputation effect......................................................................................................... 26
4.2.3 Private enforcement. ................................................................................................................. 26
III
4.3 Pitfalls................................................................................................................................................ 28
4.3.1 Uncertainty. ............................................................................................................................... 28
4.3.2 Confidentiality. ........................................................................................................................... 29
4.3.3 Ne bis in idem. ............................................................................................................................ 31
4.4 Moral issues. ..................................................................................................................................... 32
CHAPTER 5: EFFECTS OF THE LENIENCY PROGRAMS IN THE PRACTICE: The Spanish Case........................ 34
5.1 Introduction. ..................................................................................................................................... 34
5.2 Emergence of the Spanish leniency program. .................................................................................. 34
5.3 Collateral effects of the Spanish leniency program. ......................................................................... 35
5.3.1 Fear of retaliation by other cartel members. ............................................................................ 35
5.3.2 Negative reputation effect......................................................................................................... 36
5.3.3 Private enforcement. ................................................................................................................. 37
5.4 Pitfalls of the Spanish leniency program........................................................................................... 39
5.4.1 Uncertainty. ............................................................................................................................... 39
5.4.2 Confidentiality. ........................................................................................................................... 40
5.5 Crisis in the Spanish Competition Authority. .................................................................................... 41
CONCLUSION. .............................................................................................................................................. 44
Bibliography ................................................................................................................................................... i
IV
LIST OF ABBREVIATIONS
AD US Antitrust Division
CNC National Commission for Competition
CNMC National Commission for markets and Competition
Commission European Commission
Directive Directive on certain rules governing actions for damages under national
law for infringements of the competition law provisions of the Member
States and of the European Union
ECJ European Court of Justice
EU European Union
LCD Association of American Geographers
Leniency Notice of 1996 Commission Notice on the Non-Imposition or Reduction of Fines in
Cartel Cases
Leniency Notice of 2002 Commission notice on immunity from fines and reduction of fines in
cartel cases of 2002
Leniency Notice of 2006 Commission notice on immunity from fines and reduction of fines in
cartel cases of 2006
OECD Organization for Economic Co-operation and Development
Rec. Recital
Regulation 1/2003 Council Regulation on the implementation on the rules on competition
laid down in Articles 81 and 82 of the Treaty
SCJ Supreme Court of Justice
TFEU Treaty of the Functioning of the European Union
Treaty of Paris Treaty establishing the European Coal and Steel Community
Treaty of Rome Treaty establishing the European Economic Community
UK United Kingdom
U.S United States
Vol. Volume
WW II Second World War
1
INTRODUCTION.
Hard-core cartels are any secret agreements between competing undertakings that include price fixing,
restrictions on the output, market allocation and/or bid rigging. The main aim of these anticompetitive
associations is to reduce the competition in that specific market. As a result, the undertakings involved
have little or no competition at all. The fact that the parties are detach from all competitive pressure
results in no need to offer new products, improve their quality or lower the prices1. They manage to rise
their market power and their profits thereby damaging customers, which in the end will pay more for the
products or the services provided by the members of the cartel. The main consequence of these
agreements is that consumer welfare is jeopardized.
One could say that those undertakings that participate in hard-core cartels swap competition for clients
for competition “against clients”. In fact, the following statement was recorded during the meetings of
the lysine cartel “our competitors are our friends, our customers are the enemy”2. This illustrates that
these agreements affect in a negative manner consumer welfare, which is the main objective of
competition law. In this context, it is understandable that the fight against hard-core cartels remains a
core task for competition authorities.
This kind of anticompetitive behaviour is difficult to uncover due to its secretive nature. As already
mentioned, concealment is the defining characteristic of hard-core cartels. This specific feature facilitates
its establishment and permits these agreements to continue active during long periods of time (statistics
show that the average duration of a cartel is around 8 years3). As a result of the undisclosed nature of
these conducts between competitors, hard-core cartels are particularly difficult to track down and require
lots of investigative resources to do so. Moreover, is essential to hold a system that will assure sanctions
against these behaviours that result proportionate to damages caused not only to competitors and
consumer, but to the general public interest too.
1
Ec.europa.eu, 'Competition - Cartels - Overview - European Commission' (2015)
http://ec.europa.eu/competition/cartels/overview/index_en.html accessed 10 April 2015.
2
United States v Archer Daniels Midland Co and Minnesota Corn Processors, LLC [2003] United States District Court
for the District of Columbia, (1:02CV01768). Price fixing agreement between five companies that managed to raise
70% the price of lysine (animal feed additive) within the cartel’s first six months of operation.
3
F. Smuda, 'Cartel Overcharges and the Deterrent Effect of EU Competition Law' (Center of European Economic
Research, 2015) http://ftp.zew.de/pub/zew-docs/dp/dp12050.pdf accessed 11 April 2015.
2
The tool that has been adopted against the fight of hard-core cartels is the leniency programs. Given that
these agreements between competitors are secret, the leniency programs have resulted to be pretty
effective in breaking the silence of its members by rewarding them for revealing information about the
cartel that they are part of. This is mainly because, providing they meet the requirements established, the
parties of the cartel can benefit from immunity 4 (if they were the first to report the cartel to the
authorities and have already stepped out of the agreement) or from a reduction of the administrative
sanction if they cooperate with the competition authorities.
The effectiveness of cartel prosecution has increased in the past years within the European Union and this
is due to certain amendments on the leniency policy in order to make it an optimal tool against these
practices. For instance, the European Commission (hereinafter the Commission) has increased its cartel
cases decisions; from 1990 to 1999, 20 cases were decided by the Commission and from 2000 up to
nowadays already 94 cartel cases have been decided 5 . One could say that this increase in cartel
prosecution is a result of the improvements made to the leniency program but, without detracting the
actual effectiveness of this system, many aspects of this tool remain contentious, meaning that the
program could turn out to be even more efficient if certain deficiencies were addressed.
In the light of the above mentioned, is the aim of this master thesis to conduct an analysis about the
present leniency program in the European Union (taking into account that different leniency programs
are in play in the EU) and provide an answer to the following research question:
‘Is the current leniency system sufficiently effective?”
The motivation for this research question is to contribute to the active discussion on the effectiveness of
the leniency programs in the practice. As already mentioned, these programmes have resulted to be
effective in the detection of hard-core cartels but are still far from being optimal tools for the deterrence
of the incriminated conduct. This is partly because there are still some collateral negative effects of the
leniency policies that have not been dealt with yet and that will be discussed throughout this work.
The methodology used for analysing the research question will be based on the review of legal academic
literature on leniency programs6. Different case law concerning agreements between competitors that
4
Immunity will also be referred as amnesty in this work.
5
For more statics about cartel cases decisions see ec.europa.eu, 'Cartel Statistics'
<http://ec.europa.eu/competition/cartels/statistics/statistics.pdf> accessed 12 April 2015.
6
The paper will not exclusively consist on the review of academic literature on the EU leniency program but also
on the US system.
3
result on restricting competition will also be assessed. Other materials such as statistic created by the
Commission and different national competition authorities 7 will be used in this study. This research
method is found to be the most suitable to make available all the necessary information in order to
provide an adequate analyse of the research question.
The analysis necessary to answer the research question will be conducted in the following manner.
Section 2 will deal with the origin and evolution of the leniency programs and what is the rationale for the
existence of these programs in order to have an overview on how this system has developed over the
years. The reason of this choice is demonstrate the crucial influence of the U.S antitrust policy in the EU
competition law. In Section 3 different common general features of the leniency programs will be
explained in order to have a better understanding on how this systems works. Section 4 will deal with the
negative collateral effects and the pitfalls that leniency programs in general contain and that, as result,
dissuade potential whistle-blowers to apply for leniency. In Section 5 it will be analysed the impact of
these collateral effects and pitfalls on the Spanish leniency system.
7
Spanish national competition authority’s database will be one of the main sources used in this work.
4
CHAPTER 2: ORIGIN AND EVOLUTION OF LENIENCY PROGRAMS.

2.1 Introduction
One could say that Adam Smith, the father of classical economics, was a pioneer on pointing out the
phenomenon of hard-core cartels. He described this behaviour in the following manner:
“People of the same trade seldom meet together, even for merriment and diversion, but the
conversation ends in a conspiracy against the public, or in some contrivance to raise prices”.8
It would be naïve to believe that Smith was the first one to discover these conducts. Anticompetitive
behaviours have taken place and been fought against throughout history. The aim of this section will be
to demonstrate that the battle against anticompetitive behaviours has been a major concern for
governments for over 2000 years and how the competition policies (in particular the leniency system) has
develop during the years to , therefore, proving the importance of having an effective system to fight
against hard-core cartels.
2.2 Glance at past

2.2.1 The Romans, the pioneers.
One of the first examples of Competition law that can be found is Lex Julia de Annona in 50 BD. Under the
ruling of Julius Caesar during the Roman Republic severe sanctions were imposed to those responsible of
maintaining the high prices of corn by stopping supply ships of this good.9
In 301 DC Roman Emperor Diocletian issued the Edict fixing maximum prices for food and services. This
measure was adopted in response to the high increases of prices. This statute established price limits and
traders that did not comply with these limits will face death penalty.10
Later on, Byzantine Emperor Zeno created in 483 AD the first consumer protection law, this was known
as the Constitution of Zeno. Sanctions were imposed to those that limited the food market by means of
collusive behaviours or monopolies. All exclusive rights that had been granted previously were withdrawn
and the penalties imposed included the confiscation of property and banishment.11
8
A. Smith, ‘The Wealth of Nations’ (1976) Book I, Ch.10, 82.
9
B. Hawk, ‘International and Antitrust Law & Policy’ (Annual proceedings of the Fordham Corporate Law Institute,
2003) p. 13 ff.
10
Id.
11
Id.
5
It follows that the fight against anticompetitive behaviours has been of paramount importance over the
years as explained above. This reflects is the relevant significance of competition law in general and the
fight against hard-core cartels in particular not only in modern legislations, but throughout history.
2.2.3 Early Europe.
The English common law has influenced the development of modern competition law as we know it
nowadays. As Senator Sherman said to the Senate, the Sherman act (US antitrust statute that will be
studied in Section 1.3) “does not announce a new principle of law, but applies old and well-recognized
principles of the common law”12.
The first case that appears to be reported concerning a non-compete agreement took place in England in
1414 and is known as the Dyer’s case. The English court considered that a contract prohibiting the
defendant from practicing his activity for six months in a particular area (in this case the dyer was
prevented from working in London in order to be discharged from a debt) was deemed to be void)13.
Furthermore, the court said that “[t]he obligation is void because the condition is against the common law,
and by God, if the plaintiff were present he should go to prison till he paid a fine to the King”14.
Even though common law has lost relevance today, from the above mentioned we can infer that, modern
competition law was inspired by the principles of the common law, being the latter the predecessor of
the former.15
On the other hand, before the Second World War (WW II) German competition law was designed to
regulate cartels rather than prohibiting them. Cartels where recognised as a “fundamental component of
the German economy”16. The German’s court decision of 1897 in Saxon Wood Pulp case found that the
prohibition on a cartel member to decide to whom he could sell its products was not an excessive
restriction of business freedom. The cartel agreement included, inter alia, penalties to those cartel
members that did not comply with the agreement, making it difficult from them to deviate from the cartel
behaviour. The reasoning of this ruling was based on the idea that these agreements were good for the
public interest since by maintaining ‘adequate prices’ those undertakings concerned will not be driven to
12
21 Congressional Record 2456 (1890)
13
S. Marco Colino, ‘Competition Law of the UK and the EU’ (7th ed., Oxford University Press, 2011) Ch. 23, p.454.
14
‘Dyer’s case’ (1414) YB 2 Hen 5, fo.5, pl.26.
15
Supra n.13 at p. 453.
16
H. L. Buxbaum ‘German Legal Culture and the Globalization of Competition Law: A historical perspective on the
expansion of private antitrust enforcement’, (Berkeley Journal of International Law, Vol. 23, Iss. 2 [2005], Art. 10)
p.477
6
economic ruin. In other words, cartels were seen as necessary agreements to protect domestic industries
and, therefore, the cartel agreement (not even the fact that cartel members were penalized from not
complying with the collusive pact) did not go against the principle of business freedom.17
These examples show that the fight against anticompetitive behaviours has been of paramount
importance through history, and not only in modern democracies. The next sections illustrate how the
concept evolved up to our current understanding of competition.
2.3 Modern Ages.

2.3.1 US antitrust and leniency policy: the forefather.
The Sherman Act 1890.

The Sherman Act is the cornerstone of the current competition law, during decades governments around
the world have used it as a reference to build up their own competition policies. The Sherman Act was
adopted in 1890 in response to the general discontent that trusts were causing in society18. Companies
were engaged in agreements that had the aim of artificially fixing the prices and/or market allocation. As
an example, Standard Oil in 1882 formed a trust to control the production, marketing and processing and
the transportation of oil in the US and, once the Sherman Act was enacted, the US Supreme Court found
the company to be guilty of monopolizing the oil industry through a series of anticompetitive actions19.
While Section 2 of the Sherman Act deals with monopolization, Section 1 of the antitrust statute deals
with agreements that restrain trade. For the purpose of this work we will focus on Section 1 as it prohibits
any agreement that will cause an unreasonably20 restraint of competition such as price-fixing, market
allocation or bid rigging. Section 1 of the Sherman Act reads as follows:
“Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade
or commerce among the several States, or with foreign nations, is declared to be illegal. Every
person who shall make any contract or engage in any combination or conspiracy hereby declared
to be illegal shall be deemed guilty of a felony […]”21.
17
D. Gerber, ‘Law and Competition in Twentieth Century Europe: Protecting Prometheus’, (Oxford: Clarendon
Press, 1998) p. 91-94
18
L.M Friedman, ‘A History of American Law’, (1974) p.405.
19
‘Standard Oil Co. of New Jersey v. United States’, 221 U.S. 1 (1911)
20
It was interpreted by the courts that the agreement has to “unreasonably” restraint competition, this is known
as the Rule of Reason. See for example case ‘Standard Oil Co. of New Jersey v. United States’, 221 U.S. 1, 31 S. Ct.
502, 55 L. Ed. 619 (1911).
21
Section 1 Sherman Act, 15 U.S.C. § 1
7
In addition and accordingly to the above, the Sherman Act of 1890 prohibits the establishment of cartels
by declaring illegal any horizontal agreement (agreement between competing firms) that restrict
competition. Different jurisdictions around the world, such as the EU (as it will be seen in section 2.3.2),
followed the US antitrust policy and established their own competition policies which differ in different
ways from the US model but were inspired by it.
The US Corporate Leniency Program

But Sherman Act was not the only US policy in matter of competition law that was used as a model of
inspiration by the rest of the world. In 1978 the first Leniency program was adopted by the US Antitrust
Division (hereinafter AD) whereby members of a cartel could report to the authority their illegal behaviour
and they might, as result of disclosing the cartel and cooperating with the authorities by revealing
information, be granted amnesty. This program did not result to be as effective as it was expected, as the
AD only received one leniency application per year. The failure of the first leniency program was due to
the lack of certainty and transparency of the system, those who decided to confess were not ensured to
be granted amnesty (even if they were the first ones to uncover the cartel).22
The Antitrust Division learned from the fiasco of the program of 1973 and this led to the US Corporate
Leniency Program of 1993 which was more transparent and provided more certainty to the whistle-
blower23 than its predecessor. This program offered automatic amnesty to those undertakings that reveal
their participation on a hard-core cartel before the AD has started an investigation. Amnesty was assured
if the firm fulfils several conditions, namely (1) not to be the instigator of the activity, (2) end with the
activity by the time they blow the whistle, (3) provide to the AD with all relevant information, (4) make
restitution of damages to third parties, where possible, and (5) be the first one to disclose the illegal
activity (i.e., the company has to be the first one to turn to the AD). All of these conditions are cumulative,
in other words, the relevant firm has to fulfil all the requirements above mentioned in order to be granted
immediate amnesty. But even if the undertaking fails to accomplish all of these five conditions reductions
on the potential economic sanction will still be granted, even if investigations have already started, when
meeting the prerequisites established by the Corporate Leniency Program. These prerequisites are namely,
the information provided has to be new for the AD, that the AD had no evidence against this particular
22
S.D Hammond, ‘Cornerstones Of An Effective Leniency Program’, (ICN Workshop on Leniency Programs,
Australia, 2004)
23
Whistle-blower is the name used for any person that reports an illegal activity to the competent authority.
8
firm, the company is no longer engaged in this illegal conduct and, if possible, restitution to injured parties
has to be done.24
In response to the success of the US Corporate Leniency Program of 1993 (applications received per year
multiplied by twenty in comparison with the prior program25), other jurisdictions around the world, such
as the EU, have adopted similar leniency programs.
2.3.2 The European leniency system: following US steps.
The antitrust provisions in the EU treaties.

After WW II, the US gave a substantial aid to the European countries in order to help them build back their
economy, this economic recovery program was known as the Marshall Plan. Amongst the conditions for
receiving these economic aid, the European countries concerned had to implement competition policies
inspired in the US antitrust law that will lead to a free market economy. Nevertheless, the Marshall plan
had little impact on the development of EU competition law, which came into being with the
establishment of the European Coal and Steel Community.26
The Treaty establishing the European Coal and Steel Community (hereinafter the Treaty of Paris) was
signed in 1951 by Germany, France, Italy, the Netherlands, Luxemburg and Belgium. The most interesting
provisions on this treaty, for the purpose of this work, are those that banned cartels and monopolies,
creating in this sense (as J. Monnet said) “Europe’s first major antitrust law” 27 . This lead to the
development of national competition laws in Europe.
Chapter VI of the Treaty of Paris, named “Agreements and Concentrations”28, contained articles 65 and
66 that dealt with cartels and mergers. These articles are seen by many authors29 as the descendants of
U.S antitrust law (they were specially inspired in the Sherman Act provisions) as unfair anticompetitive
practices are forbidden, namely those involving cartels or monopolies as they restraint competition, and
any violation of these provisions will result in economic sanctions for those that breach them (in contrast
24
For more information about the US Corporate Leniency Policy see
http://www.justice.gov/atr/public/guidelines/0091.htm accessed 14 April 2015.
25
See Scott Hammond, Supra note 22.
26
L. McGowan, ‘The antitrust revolution in Europe : exploring the European Commission's cartel policy’,
(Cheltenham [etc.]: Edward Elgar, cop. 2010)
27
E. Goldstein, ‘Effect of foreign Antitrust Laws on United States Business’, (Southwestern Law Journal, Vol. 2, Issue
4, 1958) p.428
28
See ‘Treaty Establishing the European Coal and Steel Community’ (Paris, 18 April 1951).
29
See for example S. Martin ‘Coal and Steel: First Steps in European Market Integration’ (2004) p.6. Available at
http://www.krannert.purdue.edu/faculty/smartin/vita/EI5060D.pdf accessed 15 April 2015.
9
with the U.S antitrust system the EU competition policy did not impose criminal penalties). In particular,
Section 1 and Section 2 of the Sherman Act dealt with the same unfair competitive practices as the ones
contained in articles 65 and 66 of the Treaty of Paris.
For the purpose of this work, only article 65 of the Treaty of Paris will be assessed. Under this article, any
agreement between undertakings that involved price-fixing, restriction on outputs or market allocation
where deemed to be illegal unless the concerned practice was not liable to jeopardize effective
competition. Therefore, under this provision, hard-core cartels are prohibited as they restrict competition
in order to benefit their members.
Under the Treaty establishing the European Economic Community (Treaty of Rome) the previous article
65 of the Paris Treaty above mentioned remained the same in essence but a new numbering was given,
anticompetitive agreements where now regulated under article 85. The same line was followed with the
consecutives Treaties, no amendments on the provision were made but the numbering changed, these
were: article 80 under the Treaty of Amsterdam amending the Treaty of the European Union and new
article 101 under the Treaty of the functioning of the European Union (hereinafter the Treaty of Lisbon).
These articles remained in the light of EU antitrust law.
Even though the Marshall Plan only had little impact on the content of EU competition law, it is evident
that the U.S antitrust law was indeed a reference for the EU, as it served as inspiration for the creation of
its own competition law. Even though the two systems differ, for instance for the reason that the U.S
imposes criminal and civil sanctions while the EU system just imposes administrative and civil ones, the
Sherman Act had a big influence on the elaboration of EU antitrust law.
The EU Leniency Notices and Council’s Regulation 1/2003.

In order to increase the number of uncovered cartels, and following the U.S steps, the Commission
introduce in 1996 a system that granted an exemption on the fine or a reduction of them to those
companies that collaborated with the competition authorities on the prosecution of a cartel which they
were members of. The U.S Amnesty program, after its amendment of 1993, resulted to be pretty
successful on the detection of hard-core cartels. Motivated by the positive results of the U.S program the
EU decided to launch their own leniency policy, thereof the Commission introduced the leniency notice
of 199630.
30
‘Commission Notice on the Non-Imposition or Reduction of Fines in Cartel Cases’ (96/C207/04).
10
Even though the introduction of a leniency program in the EU was a huge step forward in the protection
of competition in general and the fight against hard-core cartels in particular, the Leniency Notice of 1996
did not result to be as effective as it was expected, mainly because it was not sufficiently clear and
therefore lacked certainty31. Uncertainty was provoked on one hand by the fact that the Commission did
not assure full immunity to the member of cartels that reported the illegal conduct to the competition
authorities (even if fulfilling all the requirements established) and, on the other hand, the conditions that
the whistle-blower had to meet were far from being clear 32 . The Commission admitted latter, in its
Memorandum of 2002, that certain terms used in the Leniency Notice of 1996 were unclear provoking a
lack of certainty and comprehensibility that exposed the effectiveness of the system33.
This perceived lack of effectiveness, however, did not prevent the success of the first EU leniency program:
in fact, the European Competition Commissioner Mario Monti said ‘[t]he 1996 leniency policy played an
important role in uncovering and punishing secret cartel […]’. The statement of the EU Commissioner was
based on the observation that 16 cartels were discovered and over more than 80 Leniency applications
were filed34. Without downplaying the importance of the achievements reached by the Leniency Notice
of 1996, the system seemed to share the same imperfections that the U.S antitrust program had in its
beginnings; uncertainty and lack of transparency (see Section 2.3.1.2).
Due to the deficiencies of the leniency program of 1996 the Commission made a number of significant
changes in its policy and in 2002 introduced the Notice on immunity from fines and reduction of fines in
cartel cases35 (hereinafter Leniency Notice of 2002). The new leniency program dealt with the pitfalls that
the prior system contained by offering greater certainty for those undertakings involved in a hard-core
cartel that were willing to give information to the competition authorities in exchange of immunity.
The changes introduced in the Leniency Notice of 2002 in order to create greater certainty made the EU
system more analogous to the U.S antitrust policy as it was heavily influenced by it. These modifications
were the following: (1) immunity was guaranteed to the first applicant if he met all the requirements
(previously, no immunity was assured even if the firms met the conditions established). In this respect,
the new rule, followed the U.S system where automatic amnesty was granted for successful applicants,
31
A. Stephan, ‘An empirical assessment of the 1996 Leniency Notice’, (CCP Working Paper 05-10, ESRC Centre for
Competition Policy and The Norwich Law School, University of East Anglia, 2005)
32
See Supra n. 30 at Section B.
33
European Commission’s Memorandum ‘Question & Answer on the Leniency Policy’ (MEMO/02/23) (Brussels, 13
February 2002)
34
Id.
35
See ‘Commission notice on immunity from fines and reduction of fines in cartel cases’ (2002/C 45/03).
11
(2) a written conditional immunity from the fines will be granted to the undertaking, (3) higher reductions
on the fine will be assured to those that, even when they are not the first to report the cartel to the
competent authority, provided they meet the requirements established by the Commission, (4) the
requirements that a company had to fulfil in order to be a qualifying applicant where now less
subjective.36
It was evident that the present system was more successful than the previous one as the number of cartels
followed by the Commission increased considerably. Under the Leniency Notice of 2002, the Commission
received 107 applications for immunity (58 of these application were granted conditional immunity) and
116 applications for reduction of fines.37 Despite the modifications made to the EU leniency policy in order
to make it more effective, there was still room for improving, in fact, in 2006 a new Commission Notice
on immunity from fines and reduction of fines in cartel cases (hereinafter Leniency Notice of 2006) was
adopted. Modifications on the Leniency Notice included: (1) the introduction of a ‘marker system’ (see
section 3.2.2) that allowed the applicants to report to the competent authority the existence of a cartel
in which they were involved, without the need to have all the relevant information at that time, and having
the chance of remaining in a priority position with respect to other members of the cartel that reported
later while they obtained more information, and (2) an oral evidence-taking procedure was also
introduced in this modified leniency system to avoid the situation where the corporate statement were
produced and used against the company concerned in private litigation.
Between the Commission’s Leniency Notice of 2002 and the Commission’s Leniency Notice of 2006 a
Council Regulation on the implementation on the rules on competition laid down in Articles 81 and 82 of
the Treaty (hereinafter Regulation 1/2003)38 was adopted.
Regulation 1/2003 establishes that national jurisdictions can apply, in a parallel manner, their national law
and the EU law but national law can never prohibit any agreement that does not infringe Article 101.1 or
that satisfies the conditions under Article 101.3 of the Treaty of the Functioning of the European Union
(TFEU). In the same way, agreements that breach article 101.1 or do not fulfil the conditions established
in article 101.3 TFEU cannot be allowed under national jurisdiction.39 In other words, cartels must be
36
Id.
37
European Parliament, ‘Parliamentary questions: Joint answer given by Ms. Kroes on behalf of the Commission to
written questions E-0890/09, E-0891/09, E-0892/09’, (2 April 2009).
38
Council Regulation (EC) No. 1/2003 of 16 December 2002 on the implementation of the rules on competition laid
down in Articles 81 and 82 of the Treaty.
39
See Id. Article 3.
12
prohibited under national law in the same way as they are under EU law, this means that anticompetitive
agreements must be null and void, and subject to fines. But still, this Regulation does not give any guide
on which particular competition authority will be competent in a specific cartel case.40
The only rule on jurisdiction contained in Regulation 1/2003 is the one that establishes that national courts
can deal with cases that the Commission is also dealing with, at the same time or even after, as long as
their decision will not result in contradiction with what the Commission will decide or has already decided.
The national court can also, in order to assure legal certainty and not submit a contradictory decision,
suspend its proceedings until the Commission formulates its decision. In the last section of this work, the
impact of Regulation 1/2003 above mentioned on the Spanish national law will be analysed.
As we have seen, U.S antitrust law did play an important role on the appearance and evolution of EU
competition law. Despite the fact that EU leniency program is inspired by the US leniency model, some
features form the former differ from the latter system (i.e., EU leniency programs does not impose
criminal sanctions, the US model does). Whether, in spite of the evident improvement of this system, the
leniency program still presents flaws that require further corrections or amendments is something that
will be addressed in section 4.
2.4 Rationale of the leniency programs.
The Commission, in Recital 3 of the Leniency Notice of 2006, justified the establishment of the leniency
system based on social interest, considering that the interest in detecting hard-core cartels is more
important that actually sanctioning these illegal activities. The Commission stated the following:
“[…] the Commission considers that it is in the Community interest to reward undertakings
involved in this type of illegal practices which are willing to put an end to their participation and
co-operate in the Commission's investigation, independently of the rest of the undertakings
involved in the cartel. The interests of consumers and citizens in ensuring that secret cartels are
detected and punished outweigh the interest in fining those undertakings that enable the
Commission to detect and prohibit such practices.”41
One could see this more as a justification for rewarding violators of the law than an actual rationale for
the existence of the leniency program. So, having said that, what is the actual mechanism underlying
leniency policy?
40
S. Brammer, ‘Concurrent Jurisdiction Under Regulation 1/2003 And The Issue Of Case Allocation’, (Common
Market Law Review 42: 1383-1424, 2005) p. 1385
41
See ‘Commission Notice on Immunity from fines and reduction of fines in cartel cases’ (2006/C 298/11), Recital 3.
13
2.4.1 The Prisoner’s Dilemma.
The system that awards immunity to the first whistle-blower member of a hard-core cartel (leniency
program) has its origins in the ‘prisoner’s dilemma’, economic theory established by the American
mathematician Albert Tucker42.
The prisoner’s dilemma works as follows: two criminals are arrested and imprisoned in differed cells so
that they cannot communicate with each other. The authorities suspect that both have participated in a
specific major crime, they are accomplices, but the authorities have no evidence to charge them. The only
evidence that they have is for their participation in a minor crime, which has a less severe sanctions that
the crime that the authorities have no evidence of. The authorities will promise a reduction on the
penalties to whoever provides first enough evidence to convict the other suspect for the major crime.43
The three different possible situations that can occur are as follows: (1) if both suspects decide to confess
they will get a penalty of 2, (2) if only one of the suspects confesses the confessor will get a penalty of 0
and the accomplice a penalty of 3, and (3) if none of them decide to confess they will both get a sanction
of 144 (Table 1).
Table 1: Possible outcomes of the prisoner’s dilemma.

Don’t Confess Confess
Suspect A Suspect B Suspect A Suspect B
Don’t Confess Suspect A 1 0
Suspect B 1 3
Confess Suspect A 3 2
Suspect B 0 2
The suspects, if pursuing their own interest, will individually be better off if they decide to confess as they
will get either a penalty of 0 or 2. On the other hand if one of them decides not to confess he faces the
risk that his accomplice does confess, this will mean that the non-confessor will face a penalty of 3. In
other words, the best strategy will be to confess as the risk of not confession can turn out being the worst
42
A. W. Tucker, 'The Mathematics Of Tucker: A Sampler' (1983) 14 The Two-Year College Mathematics Journal)
43
N. Zingales, ‘European and American Leniency Programmes: Two Models Towards Convergence?’, (The
Competition Law Review, Vol. 5 Issue 1, 2008) p. 9
44
C.R. Leslie, ‘Antitrust amnesty, Game Theory, and Cartel Stability’, (Journal of Corporation Law, Vol. 31, 2006) p.
55.
14
choice. However, if instead of pursuing their own self-interest the suspects will cooperate, the outcome
would be the most favourable for them as they will both get a penalty of 1.
In the case of hard-core cartels, suspects will be the members of the anticompetitive agreement and the
authority will be the competition authority, the competition authorities will have no evidence at all to
convict the members because the conduct is secret and the authority has no information to start
investigations complicating the prisoner’s dilemma. In order for the competition authorities to create a
prisoners dilemma in the cartel cases the ‘confessing strategy’ should give better pay off than the ‘non-
confessing strategy’. Furthermore, distrust must be created between its members by creating a fear that
they each will pursue their own interest and disclose their behaviour before the competition authorities,
simply because confessing is the best pay off strategy. The parties of a cartel have incentives not only for
confessing but also to be the first ones to do it, making the ‘non-confessing strategy’ less attractive than
the ‘confessing strategy’. The risk of staying silent will, if someone confesses to the authorities, be higher
than the risk taking for confessing.45
In the light of the above, leniency programs are based on the prisoner’s dilemma. This theory explains the
rationale for these programs; destabilizing cartels by creating distrust between its members so that
confessing becomes their best strategy.
2.5 Preliminary conclusions.
Competition law has been a big concern for Governments all over the world for thousands of years.
Maintaining the markets competitive and consumer’s welfare are, both, the main objectives of
competition law nowadays therefore, turning hard-core cartels into the most severe violation of
Competition law (it destroys the competition in the markets and jeopardises consumer’s welfare). This is
why many jurisdictions have adopted leniency program, inspired in the US model, in order to terminate
with these anticompetitive agreements by incentivising hard-core cartel participants to confess their
conduct that other ways would had remained secret.
45
Id.
15
CHAPTER 3: TECHNICAL FEATURES OF THE LENINCY PROGRAMS.

3.1 Introduction.
Once that the origin, evolution and rationale of the leniency programs has been explained we will focus
on the different features that build up these kind of policies. As already explained in the previous chapter,
leniency programs apply to companies that form part of a cartel and that report to the competition
authorities this anticompetitive behaviour so that, in exchange, they will be rewarded with immunity or a
reduction from the fine that would had been imposed on them if they had not made use of the program.
In other words, the aim of these programs is to destabilize and uncover cartels by creating incentives for
infringers that self-report their wrongdoing so that the rest of the cartel member can be convicted.46 This
creates deterrence and distrust between the parties of a hard-core cartel which provokes the detection
and eradication of these conducts.
This chapter will analyse the different features that compose a leniency program in order to understand
how it works. As it is known, different jurisdictions have different leniency policies, therefore they present
diverse features. However, what would be assessed in the following sections are the most common
features of leniency programs seen in a general way.
3.2 Full immunity
Leniency programs often offer a 100% reduction from the fine, which would have been otherwise imposed
on the members of a cartel, if one of the undertakings participating in the illegal conduct uncovers the
anticompetitive behaviour by providing relevant information to the competition authorities. This
immunity will only be granted to the first participant of the hard-core cartel that reports this
anticompetitive agreement to the relevant authority, meaning that the competition authority has no
evidence on the existence of the cartel, therefore, investigations have not begun yet. In other words, the
undertaking should inform the competition authority before the latter has any evidence of the exiting
hard-core cartel.47
In order for a company involved on a hard-core cartel to be rewarded with immunity for being the first
one to disclose the existence of the prohibited activity, some requirements must be fulfilled by the
46
P. Buccirossi and G. Spagnolo, ‘Leniency Policies and Illegal Transactions’, (Journal of Public Economics, Vol.90,
Issue 6-7, p.1286-1297, August 2006)
47
See, for instance, Supra n.41 at Art. 8 and Supra n.24 at Section A.
16
company concerned. These requirements will vary depending on the different existing leniency policies.
Under the EU leniency program, these prerequisites are; (1) the applicant has to be the first one to disclose
the existence of the hard-core cartel to the authorities, (2) not being the instigator of the hard-core cartel,
companies that started the cartel or instigated other undertaking to participate in it will not meet the
conditions for immunity, (3) the undertaking must provide to the Commission a corporate statement and
any evidence other evidence under its possession (4) the applicant must cooperate in a continuous basis
with the competition authority, (5) end the illegal conduct immediately (unless stated otherwise) and, (5)
do not disclose the content of the application. On the other hand, the EU leniency program shares the
same prerequisites as the EU model but adds one more; (6) if required, make restitution for damages to
third parties
It should be noted that in some jurisdictions, like China for instance, full immunity to the first whistle-
blower under their leniency policies may be granted but is not assured, even when the undertaking
concerned meets all the requirements established by that jurisdiction48. Therefore, full immunity is not
automatic for the whistle-blower, even if meeting all the established requirements, under some leniency
programs.
The EU itself did not assure full immunity for those companies that, in spite of being the first ones to
report to the competent authority, fulfilled all the requirements established by the Commission in the
first leniency program of 1996. But as we saw in the previous chapter, this changed with the establishment
of the Leniency Notice of 2002 (See section 2.4.2.2).
As a matter of fact, the Spanish National Competition Authority (CNMC) has imposed a total of 4 million
euros fine for four companies that were members of a cartel involving industrial bearings for trains, known
as the RENFE cartel49. One of the companies involved was the first one to report their participation in the
agreement and provided sufficient information to the authorities which resulted in a full exemption of the
0.12 million euros fine that the CNMC had imposed to it. This is just one of the multiple examples where
companies can see themselves incentivized by turning to the competent authorities as soon as possible.
48
A.W Einchner, ‘Battling Cartels in the New Era of Chinese Antitrust Enforcement’, (Texas International Law
Journal, Vol. 47, Issue 3, 2012, p. 588-616) p. 611.
49
See ‘Resolucion expte. S/0453/12, RODAMIENTOS FERROVIARIOS’, 4th December 2014.
17
For those jurisdictions that criminalise the participation on a hard-core cartel by imposing prison penalties
to its members50, full immunity will also apply to criminal penalties, meaning that the amnesty applicant,
if meeting the requirements established by the leniency program of the jurisdiction that he is applying to,
will be free from imprisonment.
3.4 Lenient treatment (reduction in fines).
Even if a leniency applicant does not satisfy the requirements necessary to qualify for full immunity from
the fines that would otherwise have been levied (this could happen if, for example, the applicant is not
he first to report the existing hard-core cartel which he is member of to the authorities), the company
could still benefit from a reduction of the administrative sanctions. This ‘lenient treatment’ will be granted
if the applicant meets the conditions established by the leniency program of the jurisdiction concerned.
These prerequisites are, in the case of the EU leniency program, the following; (1) that the evidence
provided by the applicant must be of added value to the information that the competition authority
already has51, (2) that the competition authority has to have no proof at that time that the company that
is applying for the reduction from a fine was involved in the concerned hard-core cartel, 52 (3) Must
collaborate in a continue basis with the competition authority and, (3) do not disclose the content of its
application except to other competition authorities when necessary. 53 In the case of the US leniency
system the prerequisites are more numerous, it includes the one above mention and; (4) take ‘prompt
and effective action’ to end the misconduct, (5) if required, make restitution for damages to third parties.
As already stated in the previous section, the conditions will vary depending on the jurisdiction concerned,
but normally the conditions that the whistle-blower has to fulfil are cumulative, meaning that if one of
the requirements established in the leniency program is not met, a reduction in the fine will not be applied.
The percentage of reduction on the administrative fine, once again, will depend on the jurisdiction. In this
case we will take as an example EU leniency policy in order to calculate the amount of reduction of the
administrative fine for those applicants that are not the eligible for full immunity but they are qualified to
be granted `lenient treatment´. Article 26 of the Commission’s Leniency Notice of 2006 establishes that
the first undertaking to provide any evidence of added value will benefit from a reduction from the fine
50
This is the case of the U.S antitrust law, where the participation in a cartel is seen as felony with a penalty of a
maximum of three years imprisonment according to Section 1 of the Sherman Act.
51
See, for example, Supra n. 41 at Article 24.
52
Id.
53
Id. Articles 12(a) and 12(c) in relation with article 25.
18
of at least 30% and a maximum reduction of 50%. The second undertaking to provide valuable evidence
will see their fine reduced between 20%-30% and the subsequent undertaking that also provide some
kind of relevant information will benefit from a reduction of up to 20%.
3.5 Marker system
Many jurisdictions include in their leniency policies the so called ‘marker system’. The purpose of this
system is to guarantee the applicant’s position in the list of applicants for leniency, in other words, if the
applicant is the first to uncover its illegal behaviour to the authorities but does not have all the necessary
information to be eligible for immunity, the competent authority will give the undertaking concerned
some time to gather all the information required for it to be qualified for full immunity. The authorities
will grant the whistler-blower with a marker that will assure his position as the first applicant while the
undertaking compiles all the necessary relevant information.
The grant of a marker is not automatic and it will be granted according to the circumstances of each case.
The marker will not be granted by the competition authority for an infinite period of time; once the
granted time has expired, if the undertaking with the marker has not gathered all the necessary
information, the marker will be withdrawn and the concerned firm will lose its position in the leniency
line.
In the case of the EU leniency system 54, a marker will only be provided to the first applicant for full
immunity, not the subsequent applicants that seek a reduction from the final fine. In fact, markers for
subsequent applicants are not granted in the majority of the prevailing leniency policies. Those countries
that appear to offer this possibility include Canada, France, Germany, Japan, Korea, Mexico, Switzerland,
Turkey, UK, Brazil and Lithuania.55
The rationale behind the general rule of granting a marker only to those that apply for immunity in the
first place is that the aim of this system is to allow the detection of a hard-core cartel so that it can be
investigated. This is only possible when a whistler-blower turns to the authorities to report its
participation on the anticompetitive conduct when the latter has no information on the existence of such
behaviour. So, once the cartel has been detected there is no need, according to this point of view, to grant
54
Id. at Article 15
55
See OECD report on the ‘Use of Markers in Leniency Programmes’ (DAF/COMP/WP3(2014)9), (Directorate for
Financial and Enterprise Affairs (Competition Committee), (Working Party No. 3 on Co-operation and Enforcement,
24-Mar-2015) p.20
19
more markers as the purpose of the marker system, which is the detection of hard-core cartels, has
already been accomplished.
3.6 Hypothetical applications
Hypothetical applications allow the leniency applicant to provide evidence only in hypothetical terms
when applying for immunity for the fine that would had otherwise been imposed. In other words, the
undertaking concerned can be ensured by the competition authority conditional immunity without the
need of providing actual evidence. Therefore, when using hypothetical applications the undertaking
concerned can find out if it will be eligible for immunity before actually revealing its identity or the details
of the anticompetitive practice that it is carrying out. In order words, it allows the potential applicant to
assess the chances he has of obtaining immunity under the leniency program.
Even though, at first, the already mentioned ‘marker system’ and the hypothetical application could seem
identical they present some differences. The difference is that actually, in the hypothetical application,
the undertaking applying for immunity from the fine must have in its hands all the relevant information
that he is providing (although, in hypothetical terms), to the authorities. On the other hand, markers are
provided to those applicants that do not have yet the necessary evidence to provide to the authorities,
this is why their place in the queue is protected while gathering all the necessary evidence required to be
eligible for immunity.56
Moreover, both features, a marker and a hypothetical application, are alternative application routes and
therefore cannot be combined. This is due to, according to the Commission, the different purposes and
features that each of them present. For that reason, an applicant that has been granted with a marker will
not be able to provide the information to the authorities in hypothetical terms, or vice versa (hypothetical
applications will not be granted with a marker), as they “cannot be combined due to their different
purposes and features”57
3.7 Confidentiality obligations on both the applicant and the competition agency.
Leniency agreements often include confidentiality clauses which assure that the competent authority will
not disclose the identity of the leniency applicant or the information provided by it. As a counterpart, the
56
The differences were explained by the Commission in ‘Competition: revised Leniency Notice – Frequently asked
questions’, Commission MEMO/06/469.
57
Id.
20
applicant might be requested to keep secret its application and the information that it provided to the
authorities.58
Nevertheless, authorities can disclose information to third parties if there is an authorisation on the part
of the applicant.59 The information provided by the applicant will also be disclosed to those concerned
when legal proceedings are initiated, in order to guarantee the right of dense of third parties affected.
This will be assessed in detail in the next chapter.
The rationale behind the confidentiality obligations is to strengthen the willingness of competition law
infringers to step forward and admit their guilt, with an assurance that the evidence provided will not
become public.
3.7.1 Oral procedure.
Some jurisdictions introduced in their leniency system the so called ‘oral statement procedure’. Under
this procedure applicants do not have the need to hand in written information about their participation
in a hard-core cartel, they can do it orally before the competent authority. The Commission, for instance,
introduced the oral statement procedure under the Leniency Notice of 2006.
The reason for some jurisdictions to introduce the oral statement procedure is that it works as another
incentive for the participant in a hard-core cartel to report its behaviour to the competition authorities,
since there are less chances for private litigants to find hard evidence that can be used against the
concerned company. In other words, oral statements provide a better guarantee of confidentiality than
those corporate statements done in paper. Whether this really works in practice or not will be analysed
in Section 4.
3.8 Amnesty Plus.
Some of the current leniency programs have introduced the Amnesty Plus system. For instance, the U.S
antitrust policy established this program in 1999. Amnesty Plus contains incentives for those undertakings
that are already under investigation for their participation in a hard-core cartel to consider providing the
competent authority with information of their participation in other anticompetitive practices, so that
58
S. J. Mobley and R. Denton, ‘Global Cartels Handbook: Leniency: Policy and Procedure’, (Oxford University Press,
2011)
59
See for example waiver of confidentiality that applicants should provide when applying for leniency to the
Commission, available at http://ec.europa.eu/competition/cartels/leniency/full_confidentiality_waiver.pdf accessed 28
April 2015
21
they might benefit from immunity in the latter case and from a reduction from the fine in the case that is
already under investigation. 60 Therefore, leniency plus is designed for those undertakings that have
presence in more than one market.61
It is a fact that when companies collude to restrict competition in a particular market there is a reasonable
probability that they will be limiting competition in a different market too, therefore, more than one
infringement is at issue. This is in fact what competition authorities have experienced during their existing
years.62 The fact that companies collude in more than one market can be due to their corporate culture
(the company’s way on doing business). It might ignore that collusive agreements are illegal or it does but
prefer to take the risk in order to maximise its profits. One of the main examples of companies
participating in more than one cartel involving the markets that they compete in is Hoffmann-La Roche
and BASF case63. These two companies were found guilty of participating in eight different hard-core
cartels affecting vitamins products.
The EU, for example, has not implemented Amnesty Plus in their leniency policy, even though the
Organization for Economic Co-operation and Development (hereinafter OECD) suggested that they should
have done so in their Leniency Notice amendments.64 The reason behind the refusal of the EU to include
the Amnesty Plus in their leniency programs is that it fears that the implementation of this program will
encourage infringers that already participate in one hard-core cartel to engage other smaller
anticompetitive agreements so that in case they get caught they can provide the authorities with
information about the minor illegal conducts that they are carrying out and, still, benefit from a reduction
of the fine for their first uncovered cartel and full immunity from their other minor anticompetitive
agreements.65
60
See G.R Spratling, ‘Making Companies an Offer they Shouldn't Refuse: The Antitrust Division's Corporate Leniency
Policy -- An Update’, Presented at The Bar Association of the District of Columbia's 35th Annual Symposium on
Associations and Antitrust, 16th February 1999. Available at http://www.justice.gov/atr/public/speeches/2247.htm
61
M. Martyniszyn, ‘Leniency (Amnesty) Plus: a Building Block or a Trojan Horse?’, (SSRN Journal, Paper No.2014-10)
p.10.
62
Y. Lefouili and C. Roux, ‘Leniency Programs for Multimarket Firms: The Effect of Amnesty Plus on Cartel
Formation’ (International Journal of Industrial Organization 30, 2012, p.624–640).
63
Commission Decision of 21 November 2001 relating to a proceeding pursuant to Article 81 of the EC Treaty and
Article 53 of the EEA Agreement (Case COMP/E-1/37.512 — Vitamins).
64
See OECD report, Supra note 63 at p. 625.
65
C.D. Ehlermann and I. Atanasiu, ‘European Competition Law Annual 2006: Enforcement of Prohibition of Cartels’,
(1st edition, Oxford, 2006) p.523
22
According to the US AD, Amnesty Plus has been really effective in their fight against hard-core cartels since
half of the cartel cases it dealt with during the past years were discovered under Amnesty Plus.66 Despite
its apparent effectiveness, there are some authors that do no support, in the same way as the EU does,
this system since they believe amnesty plus has the effect of stabilizing cartels. 67 Others believe that
competition authorities might be seeking their own purposes. Competition authorities will introduce
leniency plus into their systems, even when it is not god for consumers, if it helps to discover more hard-
core cartels in order to show how successful they are. 68
3.8.1 Penalty Plus
If an undertaking that has the chance to disclose a hard-core cartel under Amnesty Plus but refuses to do
so, the penalty imposed to the undertaking for not uncovering a cartel when it had the opportunity will
be higher. In other words, “If Amnesty Plus is the carrot, Penalty Plus is the stick”69.
As already mentioned above, the rationale under Amnesty Plus is to incentive members of a hard-core
cartel to disclose other anticompetitive agreements that they are part of by granting them with full
immunity from the fine of the revealed cartel and a reduction from the fine for the infringement that is
already under investigation by the competition authorities. On the other hand, Penalty Plus is seen as the
counterpart of Amnesty Plus since a company that fails to report an anticompetitive behaviour under the
Amnesty Plus will be strictly fined if the competition authority finds out that the cartel was not disclosed
when it should have.
3.9 Criminal sanctions for hard-core cartel members.
Some countries do not only impose economic sanctions to the undertakings that are found to be guilty of
restricting competition, but also to the individuals of those companies that participated in a hard-core
cartel. Individuals might not only face administrative sanctions but also jail penalty under some
jurisdictions.
66
See S.D Hammond, ‘A Summary Overview of The Antitrust Division's Criminal Enforcement Program’, (New York
State Bar Association Annual Meeting, 23rd January 2003)
67
Authors that see Amnesty Plus as a tool to stabilize cartels, for example, Supra note 62 and P.T Dijkstra and L.
Schoonbeek, 'Amnesty Plus and Multimarket Collusion' (2009), available at
http://www.webmeets.com/files/papers/EARIE/2009/201/paper.pdf
68
See Y. Lefouili and C. Roux , Supra note 62.
69
See G.R Spratling and D.J Arp ‘A New Paradigm for Counsel Responding to International Cartel Investigations’,
(Global Competition Review, Vol. 6, Issue 9, October 2003) p.29
23
This is the case, as already stated before, of the U.S since it has supported criminalisation in respect of
hard-core cartels. Many jurisdictions in the EU70 do also impose criminal sanctions to competition law
offenders but the EU itself does not foresee to apply imprisonment as a punishment for competition law
violations. In the case of Germany, for instance, individuals that form part of an anticompetitive
agreement that involves bid-rigging will face up to a maximum of 5 years of imprisonment.71
In the case of the U.S, for example, under the Antitrust Criminal Penalty Enhancement and Reform Act of
2004 individuals involved on a hard-core cartel can face economic sanctions of up to 1 million USD and
prison sentences of up to 10 years.72 Prison sentences for participants of hard-core cartels where justified
by Scott Hammond73 as follows, “[…] participation in a cartel is viewed in the United States as a property
crime, akin to burglary or larceny, and it is properly treated accordingly”74.
In fact, it appears that that the rationale under including this particular feature to leniency program is that
it will strengthen deterrence as individuals will be less keen on participating in anticompetitive practices
if they risk facing individual fines or even prison sentences.75
The rationale for not imposing criminal sanctions to individuals that participate in a hard-core cartel is
that individuals are not, in the end, the ones benefiting from the participation on the anticompetitive
agreement, the company does. So, one could say that it does not seem fair to punish an individual for an
activity that they are not benefiting of.76 On the other hand, it seems difficult to believe that company’s
directors are not enriching themselves by engaging anticompetitive agreements.
As already seen in this chapter, leniency programs around the world are similar in essence but differ in
their details or their features. The features above mentioned are just some of the characteristics that the
many jurisdictions include in their leniency system but that not all of them share. The effectiveness of
some of the features referred in this section will be analysed in the following chapter.
70
Some of these EU jurisdictions are, for instance, Austria, Cyprus, Czech Republic, Denmark, Estonia, France,
Germany, Greece, Hungary, Ireland, Latvia, Malta, Norway, Poland, Romania, Slovak Republic, Slovenia and UK.
71
See Section 298 of the German Criminal Code.
72
See ‘Antitrust Criminal Penalty Enhancement and Reform Act’, (SEC. 215. Increased Penalties for Antitrust
Violations) 2004. Available at http://www.gpo.gov/fdsys/pkg/PLAW-108publ237/html/PLAW-108publ237.htm
73
Scott Hammond is the former Deputy Assistant Attorney General of the US Department of Justice.
74
G. J. Werden, S. D. Hammond and B. A. Barnett, 'Deterrence And Detection Of Cartels: Using All The Tools And
Sanctions' (The Antitrust Bulletin, Vol. 56, 2011) p.2
75
See ‘OECD Policy Roundtable : Cartel Sanctions against Individuals’ (DAF/COMP(2004)39)
76
Id. P.21
24
CHAPTER 4: COLLATERALS EFFECTS AND PITFALLS OF THE LENIENCY

PROGRAMS.
4.1 Introduction.
As already stated in the previous sections, the effectiveness of the leniency systems on detecting and
dismantling hard-core cartels cannot be understated. The main achievement of these programs is that, by
granting cartel members with incentives for uncovering these anticompetitive agreements, they lead to
the destabilization of cartels, making it easier to uncover them and, therefore, eliminate them.
Despite the big success of these programs however, there is still room for improving the leniency policies
in order to turn them into the ultimate solution against hard core cartels. A leniency program will achieve
such effectiveness when discovering the illegal behaviour to the competition authorities turns out to be
the best option for the hard-core cartel members, as this will result in a higher number of discoveries of
competition law infringements. This section will deal with the pitfalls and weakness of these programs
that might dissuade potential whistle blowers form applying for leniency.
4.2 Collateral effects.

4.2.1 Fear of retaliation by other cartel members.
One could say that leniency programs do not take into account the potential threat of convicted cartel
members to boycott those undertakings that have collaborated with the competition authorities. This
possible counterattack of cartel members, which have been punished for their misconduct, has been
underestimated and it can seriously work as a strong disincentive to blow the whistle and, therefore,
lower the effectivity of leniency programs.
The fear of retaliation by other cartel members can significantly increase in companies that are smaller
than the other cartel members who, as a consequence, have substantial power to take ‘revenge’ against
the whistle-blower. In fact, the company must be big enough in order to remain sufficiently powerful in
the market as to retaliate even after facing the fine.77
Not only fear of retaliation by other cartel members acts as a disincentive, but it might also strengthen
hard-core cartels by increasing trust between its members and, therefore, reducing the probability of any
77
See N. Zingales, op cit, n 40.
25
of its participants to self-report their misconduct by discovering the cartel to the authorities.78 An example
of how a punishment threat, between and against hardcore cartels members, can increase trust amongst
them can be found in the Bitumen Cartel case79. In this case, the companies involved in the cartel had
designed a collective punishment strategy which strengthened trust between its members by means of
intimidation, if they acted contrary to what they had agreed they will face retaliation. Moreover, one of
the companies involved in this case alleged that “it did not apply for leniency because it […] feared
retaliation by the three market leaders”80.
According to the above, leniency programs might have in certain markets (for instance those industries
with high barriers to entry or those composed by powerful companies) an opposite result to the one aimed
by the competition authorities. In other words, leniency programs can have the effect of stabilizing hard-
core cartels if the fear of retaliation by cartel partners is still present between its members. This is a
negative collateral effect of leniency programs that should be dealt with in order to turn it to a more
efficient one. Some authors suggest that an option of mitigating this negative effect might be to give the
whistle-blower protection under the competition authorities against the possible punishments that the
undertaking concerned might suffer by those that used to be its hard-core cartel partners. These authors
have compared this kind of protection to the “witness protection program” where the whistle-blower
receives immunity from the penalty and also protection against the possible payback of those that were
convicted thanks to the information provided by the witness to the competition authorities.81
It is obvious that cartel members that confess their misconduct and help the competition authorities,
providing them with information to convict their former partners, are not in life danger. Therefore,
“witness protection program” should not be interpreted in a strictly manner, but rather as way of
compensation to the leniency recipient for the damages caused by other cartel members. For instance,
Taiwan has recently proposed to create an antitrust fund that will be used to provide whistle-blowers with
economic incentives. 82 This could be an appropriate alternative to mitigate the harm caused to
undertakings, inflicted by their former cartel partners, which decide to deviate from the illegal conduct
and, in this sense, create a bigger incentive for them to confess.
78
D. Leliefield and E. Motchenkova, ‘To Protect in order to Serve; adverse effects of leniency programs in view of
industry asymmetry’ (Discussion paper TILEC, Tilburg University, 2007) p.4
79
European Commission Decision of 13 September 2006, Case COMP/F/38.456, (Bitumen – NL)
80
See Supra note 72, Para.594.
81
See, for instance, D. Leliefield and E. Motchenkova, op cit, n.71.
82
See C. Wei-ting and K. Chung-han ‘Legislative committee paves way for anti-trust fund’, (18.05.2015). Available
at http://focustaiwan.tw/news/aeco/201505180025.aspx#.VVqUJImGc8s.linkedin Accessed 21 May 2015
26
4.2.2 Negative reputation effect.
When referring to the collateral effects of the leniency programs, mentioned should be made also to the
negative reputation effect that confessing a collusive behavior has on the company concerned. This will
specially be an issue for those companies that are present in various markets, as confessing the illegal
conduct to the competition authorities will be costly, not only because of the cost of the fine itself, but
because of the loss of the company’s sales (not only in the concerned market, but in every market the
undertaking is present). The loss of the sales will be due to negative reputation effect that confessing a
collusive conduct has on the colluder.83
In other words, companies that confess being part of a collusive agreement will also face extralegal
sanctions for their misconducts, this is known as ‘reputational penalties’. This will occur when news about
the participation of the concerned company in a hardcore cartel reach to the consumers, they might
decide then to end any dealings with the supplier as they are o trustable any more.84
This collateral effect of the leniency programs result in additional expenses to the cartel members, and
will act as a deterrence to cartel participants against turning to the competition authorities and confess
their misconduct. A way of mitigating the negative reputation effect of confessing the participation in a
hardcore cartel could be compensating the whistle-blower for the possible losses due to ‘reputational
penalties’. This solution was already been suggested in the previous section as a possible solution for the
retaliation by other cartel members effect, therefore, adopting this measure will actually mitigate these
two negative collateral effects of the leniency programs and, making the leniency system mare attractive
to potential leniency applicants (therefore, a more effective system).
4.2.3 Private enforcement.
Colluding firms that decide to disclose their anticompetitive behaviour before the competition authorities
might not only face the fine imposed for the infringement of competition law, but they might also be
involved in civil proceeding against third parties that claim damages. If parties proof that the concerned
companies did in deed cause damages to them by establishing a hard-core cartel, infringers will also face
economic civil sanctions. Private enforcement is really related to the disclosure of leniency documents
(section 4.3.2) considering that if third parties can access the documents that evidence the infringement,
83
E. Motchenkova and R. van der Laan, ‘Strictness of leniency programs and cartels of asymmetric firms’, June
2015, (CentER Discussion Paper; Vol. 2005-74, Tilburg University: Microeconomics).
84
Cindy R. Alexandre, ‘On the Nature of the Reputational Penalty for Corporate Crime: Evidence’, (Journal of Law
and Economics, Vol. 42, No. S1, 1999)
27
it will be easier for them to claim damages for loss before the courts (they will have the leniency
documents as evidence).
Direct effect of article 101 and 102 TFEU was recognised by the ECJ in Courage and Crehan case85 and
latter was reassert in Manfredi case86. The Court held that article 101 TFEU should be directly effective,
meaning that individuals can invoke this provision before the relevant court, and that individuals should
be enabled to claim damages caused to them as a result of an infringement of those provisions.
Furthermore, as a result of the opinion given by the ECJ in the above mentioned cases, the Directive of
the European Parliament and of the Council on certain rules governing actions for damages under national
law for infringements of the competition law provisions of the Member States and of the European
Union 87 (hereinafter the Directive) was adopted in 2014 88 . This Directive establishes the right of
individuals to claim compensation before national courts when individuals have been harmed by an
infringement of article 101 or 102 TFEU.
Some options on how to alleviate the negative effect that private enforcement has on the attractiveness
of leniency programs for cartel members where proposed by the Commission in its Green Paper on
‘damages actions for breach of the EC antitrust rules’89. One of the options proposed by the Commission
was to grant a rebate on damage claims against successful leniency applicants if they provided the
claimants with evidence to help them bring damage actions against the other hard-core cartel members90.
Even though this was the best alternative when trying to protect the effectiveness of leniency programs
(i.e., claimants will still get compensation for the damage caused by the infringers and leniency applicants
will still be incentive to disclose the illegal conduct), there where many opinions against this solution and
finally the rebate on damages for the leniency applicant was not included in the Directive.
One other possible alternative solution is the one taken by the Hungarian authorities and now introduced
in the EU by the Directive on antitrust damages actions91 which Member States have to introduce in their
85
See Case C‐453/99 Courage Ltd. v. Crehan [2001] ECR I‐6297.
86
See Joined Cases C‐295/04 to C‐298/04 Manfredi and Others [2006] ECR I‐6619.
87
Directive of The European Parliament and of The Council on certain rules governing actions for damages under
national law for infringements of the competition law provisions of the Member States and of the European Union,
of 24 December 2014, (Directive 2014/104/EU).
88
Member States need to implement it in their legal systems by 27 December 2016.
89
Green Paper - Damages actions for breach of the EC antitrust rules {SEC (2005) 1732}.
90
Commission staff working paper accompanying the Green Paper, n° 235.
91
Supra n. 87 at rec. 38.
28
jurisdictions by the 27 of December of 2016.92 Under Hungarian competition law, leniency recipient will
benefit from the removal of joint and several liability in those situations where the other hard-core cartel
members will be able to pay for the cost of the fine for damages.93
4.3 Pitfalls.
4.3.1 Uncertainty.
Transparency and certainty are the main features for an effective leniency program. The fact that
potential whistle-blowers can predict the consequences that they will face, when applying for leniency or
lenient treatment under the leniency program, is crucial. If a member of a cartel cannot predict the
outcome of disclosing an illegal conduct to the competition authorities then it would not take the risk,
meaning that the cartel still remain.
Decisions like the one taken by the AD in Stolt-Nielsen S.A case94 does nothing but reaffirm the lack of
certainty in the leniency programs. Examples like this make the decision for undertakings to apply for
leniency unattractive. In this case, Stolt Nielsen S.A had been awarded in February 2003 with conditional
immunity under the U.S corporate leniency program, after applying for amnesty to the AD in regards of
their collusive behaviour with respect to parcel tanker operations. Two months later, the AD announced
to the company that the conditional amnesty had been cancelled, and the undertaking became the first
one ever to be removed from the U.S Corporate Leniency Program.
Stolt-Nielsen S.A was removed from conditional amnesty agreement, according to the AD, because it
failed to take prompt and effective action to terminate its anticompetitive behaviour, which is one of the
prerequisites to be granted with immunity under the US Corporate Leniency Policy (see Section 3.2). The
controversial issue that creates uncertainty in this case is the fact that the opinion of the Court made some
contradictory statements and did not address certain terms that needed to be clarified in order to create
transparency. The Court, in this case, did not explain what was meant by “prompt and effective”
termination of the collusive conduct and declared that the AD did not say that the company failed to
92
The UK Office of Fair trading and Solidarity has also proposed this measure, see ‘Private Actions in Competition
Law: Effective Redress for Consumers and Business’, (2007), p. 48.
93
P. Buccirossi, C. Marvão, and G. Spagnolo ‘Leniency and Damages’, (Stockholm Institute of Transition Economics,
WORKING PAPER February 2015) p.3
94
See Stolt-Nielsen S.A. v. United States, 352 F. Supp. 2d 553, 568 (E.D. Pa. 2005).
29
cooperate with the division while, contradictorily, one of the AD claims for revoking the conditional
amnesty was, actually, that Stolt-Nielsen had failed to cooperate with them95.
In essence, unclear terms or conditions of the leniency program or even unclear opinions of the courts, as
the one in Stolt-Nielsen S.A, reflect the lack of transparency than, in the end, leads to uncertainty. This is
probably one of the most relevant pitfalls of the leniency programs in general that necessitates to be
addressed in order to create an even more effective leniency policy. Uncertainty causes the opposite
effect than the one pursued under the leniency programs, participants in hard-core cartels will not apply
for leniency if they are not sure of what the outcome of doing this will be.
4.3.2 Confidentiality.
In order to turn a confession of a participation in a hard-core cartel as the best option for the infringer, a
promise on confidentiality on the information, evidence and documents provided by the leniency
applicant should be made by the competition authorities. Confidentiality, as we saw in the previous
chapter, is one of the common features of most of the current leniency systems.
In the EU, for instance, the Commission highly supports the idea, in theory, of guaranteeing confidentiality
of the leniency applications and all the evidence provided since otherwise this “could seriously undermine
the effectiveness of the Leniency Programme and jeopardise the European Commission’s investigation of
cartels”96. In other words, without a promise of confidentiality, hardcore cartel members will not disclose
their illegal conduct.
Moreover, the Commission has, as stated in the previous chapter, introduced oral statements under its
leniency program. These acts as a safeguard to whistle-blowers inasmuch as it protects them from
disclosing corporate statements when there is an existing judicial order that mandates them to do so. This
is because the Commission is the one responsible for turning the oral statements into written documents,
therefore, the company concerned is not obliged to hand in these documents to third parties under
judicial order because they are not documents that belong to the company concerned, but to the
Commission. This is a way of assuring the confidentiality of the applications that the authorities promise
to the whistle-blowers.
95
J. Walden and K. Dawes, ‘The Curious Case of Stolt-Nielsen S.A. v. United States’, Available at
http://www.americanbar.org/content/dam/aba/publishing/antitrust_source/02_mar05_walddawe323.authcheckdam.pdf
Accessed 14 of May 2015.
96
Declaration of former Director-General of DG-Competition, ‘In re Flat Glass Antitrust Litigation’. (Flat Glass II),
No. 08-180 (Doc. No. 200-3), at 5 (Oct.7, 2009)
30
Furthermore, under article 15 of Regulation 1/200397, the Commission will not provide national courts
with information that the leniency applicant submitted to it in a voluntary manner unless the applicant
gives its consent.
Hence, if strict confidentiality existed, as the one that the Commission applies in theory, leniency
programs will be more effective as it will be difficult for third parties to find the documents necessary to
provide evidence that they were damaged as a result of the collusive behavior. But as seen in Pfleiderer
case98, for instance, the confidentiality on leniency documents guaranteed by the Commission is not as
absolute as it seems. In this case, the court denied the absolute confidentiality of leniency documents,
and decided that national courts are the ones to decide, in a case-by-case basis and under their national
law, if those document should be disclosed to third parties. This ruling has been used as basis to allow the
disclosure of documents that are considered confidential under Regulation 1/200399 by national courts.
Event tough it seems, in theory, that complete confidentiality is guaranteed, in practice, this promise of
unconditional nondisclosure of leniency materials is not absolute since is dependent on national courts.
As stated at the beginning of this chapter, a leniency program will be effective when turning to the
authorities constitutes the best option for cartel members. Consequently, absolute confidentiality of
leniency documents is not recommended as it will be more difficult for third parties to demonstrate that
actual damage has been cause to them. But, on the other hand, leniency applicants should not be more
exposed to civil sanctions than the rest of the cartel participants by the disclosure of leniency documents,
a midpoint should be reached in these situations.
One possible solution could be, once again, the one adopted by the Hungarian authorities. The position
adopted by Hungary is that leniency documents will not remain confidential since leniency recipients are
exempt from compensating cartel victims if the rest of the cartel participants can pay for the damages. In
this case, leniency applicants will not be more exposed to by the disclosure of the leniency documents as
they are partly protected from the civil fine (section 4.2.3).
97
See Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition
laid down in Articles 81 and 82 of the Treaty.
98
See Judgment of the Court of 14 June 2011, ‘Pfleiderer AG v Bundeskartellamt’, (Case C-360/09).
99
See, for instance, Judgment of the English High Court of Justice Chancery Division, ‘National Grid Electricity
Transmission Plc v ABB & others’, (Case No: HC08C03243, 4th April 2012)
31
4.3.3 Ne bis in idem.
It is a fact that nowadays most hard-core cartels have an international presence, therefore, ne bis in idem
principle remains as a core issue for leniency policies. For example, let’s imagine that a company that has
been involved in an international hard-core cartel that has affected the EU and US market decides to apply
for leniency in the EU, proceedings related to this hard-core cartel will start under the EU jurisdiction and
cartelists will be punished. But what about the US? Can they also punish the members of the cartel under
their jurisdiction even though this collusive agreement has already been punished under the EU law?
If the answers to the above questions were positive, cartel members will be deterred to confess their
misconduct to the competition authorities because, even though they might benefit from immunity from
the fine under that particular jurisdiction, another country where the hard-core cartel was present, could
start proceedings against them too.
The EU-US Cooperation Competition Agreement of 1991 100 regulates the cooperation between the
Commission and the U.S regarding the application of their competition laws. Moreover, article V of the
agreement specifically deals with the “cooperation regarding anticompetitive activities in the territory of
one Party that adversely affect the interests of the other Party”. Under this article, whenever a hard-core
cartel is discovered under one of the two jurisdictions the other party should be informed in those cases
where the infringement could also affect the interests of the that party so that appropriate enforcement
activities can be initiated. Therefore, those participants of a cartel that has restricted competition in the
US and in the EU could be deterred of confessing to the competition authorities under the leniency
program due to the fear of a double sanction if the other competition authority (US of EU competition
authority, depending where the cartelist applied for leniency) is informed of the misconduct.
As an example on how the ECJ deals with the ne bis in idem principle when fines are imposed to a hard-
core cartel by jurisdictions outside the European Union reference will be made to the opinion of the ECJ
in Boehringer Mannheim GmbH v Commission101. This case dealt with an agreement that had already been
100
Agreement between the Government of the United States of America and the Commission of the European
Communities regarding the application of their competition laws - Exchange of interpretative letters with the
Government of the United States of America.
101
Case 7/72, ‘Boehringer Mannheim GmbH v Commission of the European Communities’ [1972] ECR 1281
32
penalized in the US that in this case, since the ‘object and the geographical emphasis’ was different to the
one prosecuted by the Commission, there was no violation of the ne bis in idem principle.102
Now, within the EU jurisdictions, the ne bis in idem principle is considered as a general principle of EU law
(meaning that it does not just apply to criminal sanctions but it should apply to competition cases too).
Nevertheless, the ECJ has not been keen on giving the ne bis in idem principle a broad interpretation when
it refers to proceedings related to infringements of competition law. In Walt Wilhelm v
Bundeskartellamt 103 , the ECJ that parallel proceeding are admissible if when imposing administrative
sanctions for an anticompetitive agreement consideration is taken to the sanctions already imposed by
other jurisdictions. Therefore, as contained in article 13 of Regulation 1/2003, double prosecution it is
allowed under the EU competition Law establishes that it is not mandatory 104 for Member States to
suspend or reject proceedings against a cartel that is, or has, already been dealt with105 as long as the final
fine takes into account the sanctions imposed by other jurisdictions in previous decisions.
Despite the limits of the transfer of information above mentioned, the issue remains that when a cartel is
uncovered in one jurisdiction the competition authorities of another jurisdiction will try to start
proceeding against those members of the hard-core cartel concerned (regardless of the evidence that can
be transferred for the former to the latter).
Taking into account the above mentioned, ne bis in idem principle should apply to competition law
infringements too in order to make leniency programs effective. The fact that hard-core cartel members
can be fined in more than one country for the same hard-core cartel makes the leniency system weak as
potential applicants of these programs will not be willing to confess since these choice will be extremely
costly.
4.4 Moral issues.
Rewarding the infringer with leniency in exchange for uncovering a hard-core cartel is, in essence, how
leniency programs work. What about justice? This is one of the main objections made against leniency
102
R. Nazzini, ‘Some Reflections on the Dynamics of the Due Process Discourse in EC Competition Law’, (The
Competition Law Review, Vol. 2, Issue 1, 2005)
103
Case 14/68 Walt Wilhelm v Bundeskartellamt [1969] ECR 1, para 11.
104
This is due that the text in article 13 of Regulation 1/2003 is not written in mandatory terms since Member
States “may reject” a claim on a carte that is already been dealt with.
105
John A.E. Vervaele, ‘The Transnational Ne Bis In Idem Principle In The EU Mutual Recognition And Equivalent
Protection Of Human Rights’, (Utrecht Law Review, Vol. 1, Issue 2 (December) 2005) p. 106
33
programs since infringers of the law should be sanctioned by those authorities that should monitor
compliance with the law and not reward those that offend it.
Even though the objections made at this regard are understandable, so too is the fact that priorities should
be established when enforcing the law. If by granting hard-core cartel members with leniency results in
the eradication of great violations of competition law (cartels) then one could still believe justice is being
made. Although, it might seem unfair that hard-core cartel participants can dodge the consequences of
their misconduct by confessing while this leads to the conviction and prosecution of the rest of the
participants of their anticompetitive agreement, the effectiveness of the leniency program will outweigh
injustice.106 In other words, type II errors107 are accepted under the leniency program since detecting a
higher number of collusive agreements and granting with leniency to some of its members is a better
choice than convicting all of its participants but, in result, detecting less numbers of hard-core cartels.
There are still some areas of the leniency programs that should be improved by competition authorities
in order to maximize the effectiveness of these programs. Even though some of the pitfalls and negative
collateral effects of the leniency systems seem inevitable other are, as seen already, easier to solve. The
next chapter will analyse how these collateral effects and pitfalls of the leniency program affect the
effectiveness of the Spanish leniency system.
106
OECD Policy Brief, ‘Using Leniency to Fight Hard Core Cartels’, September 2001.
107
Type I errors refers to those situations where innocent people are convicted and Type II errors refers to those
situations where guilty people are set off free.
34
CHAPTER 5: EFFECTS OF THE LENIENCY PROGRAMS IN THE PRACTICE:

The Spanish Case.
5.1 Introduction.
The European leniency model has been the one followed by the great majority of EU countries. Those
Members States that already had implemented their own leniency program adapted those to the terms
referred in the Commission’s Leniency Notices. Meanwhile, those Member States that did not have
leniency programs by that time (i.e., Spain), implemented these programs in the spirit of the European
model.
This chapter will deal with the consequences that the recent implementation of the Spanish leniency
program has had in the fight against hard-core cartels and it will assess how the collateral effects and
pitfalls of these programs, explained in the previous chapter, affect the effectiveness of this leniency
program. The reason for analysing the effectiveness of the Spanish leniency program is that in times of
economic crisis, such as the one Spain is going through since 2008 until nowadays, companies will be more
keen to engage in anticompetitive agreements in order to save their own businesses from their losses that
are produced, mainly, due to the economic situation of the country. 108 At this critical times, where
collusion agreements are more likely to bloom, it is essential to have an effective leniency program in the
Spanish legislation in order to detect and bring to an end those competition law offences.
5.2 Emergence of the Spanish leniency program.
The first Spanish competition law dates back to 1963 and since then the fight against hard-core cartels
has been a priority for the Spanish competition authority. Even so, it was not until the implementation of
the Spanish leniency program where effective results against collusive agreements were appreciated. The
Spanish leniency program was introduced by the Law n. 15/2007 (hereinafter LCD) on the protection of
competition 109 . Although the LCD introduced the leniency programs 110 into the Spanish competition
system, it was not until February 2008 that the program entered into force under Royal Decree
261/2008111 which establishes the Competition Regulation that implements the aforementioned Law.
108
P. Perez, ‘A Importancia del Derecho de la Competencia para el Correcto Funcionamiento de la Economía,
Especialmente en Épocas de Crisis’, (Strategy & Management Business Review, VOL. 3(1), pp. 59-64, 2012) p. 61.
109
Law 15/2007 of 3 July, de Defensa de la Competencia, (BOE n. 159, 4 July de 2007, p. 28848-28872)
110
Id. At Articles 65 and 66.
111
Real Decreto 261/2008, de 22 de febrero de 2008, por el que se aprueba el Reglamento de Defensa de la
Competencia (BOE n. 50 de 27/2/2008)
35
Before the Spanish leniency program was introduced in the Spanish system, an average of four cartel
investigation per year were initiated by the National Competition Commission (CNC), a number which rose
to 14 from 2007 onwards.112 It is worth noting that the same day the Royal Decree entered into force, two
of the five undertakings participants of the Shower Gel cartel applied for leniency before the national
competition authority. Particularly, during its first day of existence, the leniency program managed to
disclose a hard-core cartel between five big companies that where incrementing prices of shower gels by
reducing in 15% the size of the bottles while maintaining the original prices. This demonstrates that
leniency programs are, indeed, powerful instruments against hard-core cartel since, in its very first day of
existence, sufficient evidence was provided to the CNC to start investigations against participants of the
Shower Gel cartel that had been active since 2005.
In this case, under the leniency program, both undertakings that confessed the existence of the cartel
where granted with leniency. The first one that provided the necessary evidence to start investigations
was granted with immunity, while the second one benefited from a 40% reduction from the fine.113
Even though the Spanish leniency system mostly follows the European model, there are still some
differences between them. The main difference is that, in the Spanish system, natural persons are also
considered infringers when participating in a hard-core cartel, so they can also apply for leniency or for
lenient treatment under the Spanish leniency program.
5.3 Collateral effects of the Spanish leniency program.

5.3.1 Fear of retaliation by other cartel members.
Fear of retaliation by other cartel members, as seen in the previous chapter, is a negative collateral effect
that those that decide to confess their anticompetitive behavior might have to face. A practical example
on how this collateral effect can discourage hard-core cartel members from applying to leniency can be
seen in the Spanish case.
As already stated when analyzing the collateral effects of leniency programs, fear of retaliation will be
stronger for those companies that are not as powerful as their cartel partners. For stronger companies,
fear of retaliation is not as dissuading as for smaller companies when it comes to leniency applications;
even if counterattack measures are taken against them by their convicted cartel partners, it is probable
112
J. M. Gonzalez-Orus and P. M. Marin, ’50 Años De Lucha Contra Los Carteles En España’, (Institute of European
Studies, San Pablo CEU University, June 2013) p.7.
113
CNC decision on the Shower Gel cartel, 21 January 2010, (Expediente S/0084/08 Fabricantes de Gel)
36
that the undertaking concerned will still remain with market power, contrary to what will happen to less
powerful companies. In other words, the more powerful the cartel partners are, the more damaging can
the retaliatory penalties be.
In this light, the vast majority of leniency applications received by the CNC are either filed by
multinationals or by Spanish companies that have presence in more than one Member State market, in
other words, by big companies. The reason for this is the one already explained; small cartelist companies
feel dissuaded to apply for leniency, especially when their hard core cartel partners are more powerful
than them, this is because, when confessing the collusive behavior to the competition authorities and,
therefore, deviating from the cartelist conduct, they fear the response of the rest cartel members.114
We can find an example on how fear of retaliation by other cartel members dissuade infringers from
applying for leniency in the SDD cartel115, just in the same light as seen in Scolt-Nielsen case addressed in
the previous chapter. Six insurance companies where convicted for their participation in the SDD cartel,
where they fixed prices and imposed uniform terms and conditions for certain insurance contracts for
construction companies. The CNC imposed on the cartels members the highest fine in its history until that
time, this is due to the fact that the cartel had been active throughout many years partly because the
participants of the hard-core cartel where threatened by their partners with retaliatory measures and
boycotts to those who decided to deviate from the anticompetitive agreement, as one of the cartel
participants confessed to the authorities. This is, once again, a case where leniency programs had the
effect of stabilizing hard-core cartels (i.e., the SDD cartel lasted for over seven years) as the fear of
retaliation by other cartel members turns the idea of confessing the misconduct, or the idea of leaving
the agreement, as the last alternative.
5.3.2 Negative reputation effect.
It was studied in the previous chapter that companies that confessed to the authorities to be part of a
hard-core cartel could face losses in sales since consumers will prefer to switch to other suppliers that
have a better reputation than the infringers and, therefore, can be trust by them. Moreover, the negative
reputation effect of admitting to be part of an anticompetitive agreement will disincentive hard-core
cartel members to uncover their agreements before the competition authority under the leniency
114
C. Guzman Zapater, 'The Leniency Program In The Spanish Competition Act: A Practical Vision' (SSRN Journal,
2012) p.18
115
See CNC Report VS/0037/08 Compañías de Seguro Decenal.
37
program since they will face extra costs and, as a result, the effectiveness of the program will be
jeopardised.
According to reputational analysis done in Spain by consultancy firms such as Reputation Institute116, good
or bad reputation does affect company’s success. For instance, companies that improve their reputation
in 5 points will increase consumer’s intention on buying their products in a 6%. 117 This also affects
companies in the opposite way, the more reputation points the company losses, the less intention will
consumers have on buying their products.
Recently, the CNC has fined two companies, for their participation in hard-core cartels, which are
considered to have the best reputation according to consumers. In the annual report118 published by
Reputation Institute in 2014, DANONE (a multinational food-products company) was ranked in the first
position (81/100 points) and becoming the company with best reputation according to Spanish consumers.
Central Lechera Asturiana (Spanish company that produces milk products) was ranked 9th under the same
report (75.46 points) This year, the CNC fined both undertakings, amongst other companies, for
participating in the Raw Milk cartel were cartelist exchanged sensitive information on the supply and
purchasing price of milk.119
The reputation report for 2015 has not been published yet, but it will be interesting to see until what
extent the reputation of these two companies is going to be affected by their participation in the Raw
Milk cartel.
5.3.3 Private enforcement.
Civil sanctions act as a disincentive to potential whistle-blowers, the fear of getting involved in civil
proceedings before third parties that have been harmed by the existence of a hard-core cartel will make
the participants of such agreements step back on the idea of disclosing the misconduct since they will
have to face extra costs (possible administrative fine for their misconduct plus probable civil fine
compensating the damage caused to third parties).
116
See for example, RepTrak@ Pulse España 2014, available at http://reputationinstitute.es/reputacion/danone-
empresa-con-mejor-reputacion-para-los-consumidores-espanoles/ Last accessed 25.5.2015.
117
See Reputation Institute article on companies with best reputation according to consumers, 12.06.12, available
at http://reputationinstitute.es/reputacion/danone-empresa-con-mejor-reputacion-para-los-consumidores-espanoles/
118
See RepTrak@ Pulse España 2014, Supra note 112
119
See CNMC decision, Resolucion S/0425/12 Empresas lacteas 2, (26.02.15)
38
Nevertheless, in Spain, there has only been one judgement of the Spanish courts involving compensation
to third parties for the damages caused by a cartel (the Sugar cartel120, where several companies where
found guilty of fixing the price of sugar sold for industrial uses). The Spanish Supreme Court of Justice
(hereinafter SCJ) decision revoked the previous decision of the Court of first Instance of Valladolid where
the claim of third parties had been rejected. The SCJ ruled in this case that the ‘passing on’ defence is
admissible only in those situations where third parties have transferred all the damages to their
customers.121 By all damages the SCJ includes, not just the excess of price paid, but also the losses in sales
for having to raise the price; importantly, the burden of proof for this defence is on the defendant, who
has to demonstrate that the third party did transfer these losses downstream.122
Although there has only been one judgement in Spain, to the moment, relating compensation of damages
caused by a cartel, the possibility of third parties initiating civil proceedings against cartel members can
still deter potential leniency applicants from disclosing these anticompetitive agreements. In particular,
deterrence is even more present after the SCJ decision as the ‘passing on’ defence will be difficult to proof
by the defendants.
To the difficulty of succeeding with the ‘passing on’ defence, one must add the obligation for the Member
States, since December 2014, to implement the EU Directive on antitrust damages before 2016, which is
expected to “improve the conditions for consumers to exercise the rights they derive from the internal
market”123. Presumably, this will translate to better options for consumers claims to be admitted by the
courts. Spain has not yet implemented this Directive in its legal system but, when it does, it is probable
that third parties will be more willing to claim compensation of damages from hard-core cartel members.
It is important to note in this regard that the ECJ has recently ruled that those that suffered damages
produced by a cross-border hard-core cartel can claim compensation to all the cartel members in any of
the jurisdictions where any of the parties has their place of residence. The ECJ added in its decision that if
the claimant decides to nolle prosequi before the only party that has its place of residence in the
jurisdiction where the civil proceeding is taking place, it will not affect the competence of that court to
120
See CNC decision, RTDC 426/98, Azúcar, (15.05.99).
121
See SCJ decision, STS Sala de lo Civil, Sección 1ª, sentencia n. 651/2013, (7.11.2013).
122
See analysis of the SCJ decision of the Competition Department of Gomez-Acebo & Pombo ‘Reclamaciones de
daños causados por cárteles: el Tribunal Supremo somete la defensa del “passing on” a requisitos estrictos’ (2014).
Available at http://www.gomezacebo-pombo.com/index.php/en/knowledge/legal-analysis/item/1325-reclamaciones-de-
da%C3%B1os-causados-por-c%C3%A1rteles-el-tribunal-supremo-somete-la-defensa-del-%E2%80%9Cpassing-on%E2%80%9D-a-
requisitos-estrictos
123
See Supra n. 87, rec. 9.
39
continue with the proceedings regarding the rest of parties, even when none of the remaining parties
have their place of residence in the court’s jurisdiction.124 This decision facilitates to cartel victim’s the
initiation of civil proceedings against hard-core cartel members since they have a wide range of
jurisdiction to decide where to initiate the civil actions. As the chances of facing a civil fine grow cartelist
will be less willing to disclose their anticompetitive practices to the competition authorities.
5.4 Pitfalls of the Spanish leniency program.

5.4.1 Uncertainty.
As already stated in Section 4.3.1, transparency and certainty are the main features of an effective
leniency program. Important details such as what constitutes a cartel, what are the conditions for
immunity and until what extent will the leniency applicant be exempted from sanctions are, inter alia,
critical issues that should leave no room to uncertainty.
Uncertainty is probably one of the biggest pitfalls of the Spanish leniency program, especially when it
refers to the concept of ‘cartel’. Under article 65 (1) of the LCD, it is established that the program will only
apply in cartel cases. The definition of cartel is contained in the Fourth Additional Provision of the same
law, and it reads as follows:
“For the purpose of this Law a cartel will be any secret agreement between two or more
competitors which has the objective of fixing prices, restriction on productions or sales, market
allocation, bid rigging, or the restriction on imports or exports”.125
According to the text of the LCD, the leniency program will only be applicable when engaging those types
of agreements. Nevertheless, the CNC has accepted the use of the term cartel in other type of conducts
that do not fall under the cartel definition contained in the LCD. For instance, in Professional Hairdressers
case126 a company was granted with full immunity from a fine, under the Spanish leniency program, since
it had disclosed to the competition authority the existence of an agreement of exchange of information
between competitors. The CNC understood that the agreement on exchange of information done by the
parties concerned referred to future increments on the price of hair care products, and that under the
Commissions Notice on horizontal co-operation agreements127 such an exchange of information between
124
See ECJ decision in Cartel Damage Claims (CDC) Hydrogen Peroxide SA v Akzo Nobel NV and Others (C-352/13).
125
Own translation of the Fourth Additional Provision of Law n. 1/2007.
126
See CNC Report S/0086/08, Peluqueria Profesional, 02.03.11.
127
Commission’s Notice, ‘Guidelines on the Applicability of Article 101 of The Treaty on The Functioning of the
European Union to Horizontal Co-Operation Agreements’, (2011/C 11/01).
40
competitors could be considered as having the objective of restricting competitions and, therefore, would
fall under the definition of cartel.
The decision of the CNC has been highly criticised by many authors.128 Criticism arise from the fact that,
contrary to the broader definition given by the EU leniency program, the cartel definition contained in the
LCD precisely defines what kind of conducts are to be considered as cartels and, therefore, can benefit
from leniency under the leniency program. The CNC decided to consider as a cartel an agreement of
exchange of information even though these kind of agreements are not contained in the definition of
cartel under the LCD. By adopting a decision like the one in Professional Hairdressers, the CNC has turned
the Spanish leniency program into an unclear text that creates uncertainty on the potential leniency
applicants as it is not clear which agreements are to be considered cartels and, therefore, under what
situations can the participant of an anticompetitive agreement apply for leniency.
5.4.2 Confidentiality.
It has already been assessed the importance of maintaining the confidentiality of the leniency documents
since those undertakings that benefit from leniency will not be protected from civil actions taken against
them by third parties that resulted damaged by the creation of the hard-core cartel. This could have a
dissuading effect on the leniency applicant if, when providing information in a voluntary basis, this one
can be provided to claimants of damages as the leniency applicant will be more exposed to economic civil
sanctions than the rest of its hard-core cartel partners.
In the Spanish civil procedure law, those documents that compose the judicial report have to be handed
to the parties of the proceedings, therefore, there was no assurance that leniency documents provided
to the competition authority in a voluntary basis by the leniency applicant will still remain confidential if
civil proceedings where initiated. In order to follow the European leniency model, a new provision was
included under the civil procedure law. Article 15 establishes that the CNC, when participating in civil
proceedings as amicus curiae, will not provide any data or documents obtained under the application of
the leniency program.
128
See, for instance, A. Gutierrez Hernandez and A. Guerra Fernandez, “Primeras experiencias en la aplicación del
programa de clemencia en España por parte de la Comisión Nacional de la Competencia”, (Actualidad Jurídica Uría
Menéndez, 2011) pp. 135-141.
41
As regards to the rest of the parties of the litigation, there are no provisions in the Spanish legal system,
nor any case-law, regulating the access to leniency application documents yet.129 However, since as above
mentioned, it will be up to the national court after Pfeiderer to decide to what extent are the leniency
documents in the hand of the leniency applicant confidential, there is a risk that this will generate
uncertainty and undermine further applications for leniency.
5.5 Crisis in the Spanish Competition Authority.
Almost two years ago the CNC (National Commission for Competition) was transformed in the CNMC
(National Competition for Markets and Competition). Although the implications of this change does not
have to do with the effectiveness of the Spanish leniency program itself, it is worth commenting how this
new regulator works after law n. 3/2013130 came into force, since the effectiveness (or the lack of it) of
the competition authorities is likely to have an effect on the leniency tool itself.
This new law brought together the National Commission for Competition, the National Commission for
Energy, the Commission for Telecommunication Market, the Committee for Railway Regulation, the
National Commission for the Postal Sector, the Committee for Airport Economic Regulation and, the
Audio-visual Media State Council. Spain has been the first Member State to join in one single body not
only all its major regulators together but, also, their competition authority. The European Commission
was sceptic about the Spanish move since the autonomy and resources of the new ‘super-regulator’ will
be at risk and will affect, specially, consumers since the reason for creating just one big body was, mainly,
to economize resources (which were already scant).
After almost two years of functioning of the new CNMC it is fair to say that the European Commission
seems to have proved right in their scepticism about the new ‘super-regulator’. In fact, the former
president of the defunct CNC declared that the competition inspectors are insufficient and that it is
estimated that only 20% of the existing hard-core cartels are uncovered.131
129
P. Pérez, ‘La Problemática Relación Entre Los Programas De Clemencia Y Las Acciones Privadas De Resarcimiento
De Los Daños Derivados De Ilícitos Antitrust’, (Revista Para El Análisis Del Derecho, 2013)
130
Ley 3/2013, de 4 de junio, de creación de la Comisión Nacional de los Mercados y la Competencia (2013).
(CNMC)
131
Statement made by the former CNC President in an interview done by a Spanish television channel on the ,
available at http://www.lasexta.com/programas/sexta-columna/luis-berenguer-%E2%80%9Cen-cnc-dabamos-opiniones-que-
gustaban-empresas-gobierno%E2%80%9D_2014041100335.html
42
Moreover, the recent CNMC has decided to adopt a new policy where imposing big fines is not a priority.
The President of the CNMC that stated that fining companies that participate in hard-core cartels is not
the main priority of the CNMC, fining companies will be a failure for the system and the markets132 since
agreed settlements bring more benefits to authorities, consumers and undertaking. In other words,
reaching a settlement is preferred since it bring more benefits to authorities, consumers and undertakings
because they are a way of adopting quick and precise solutions to the problems detected in the market.
In fact, if we take a look to the amount of fines imposed by the CNMC in their first seven months of
functioning the amount is of 27.8 million euros, which contrasts with the 203 million euros in fines
imposed by the defunct CNC in its last seven months of existence. This is due to the to the interest of the
CNMC on reaching settlement agreements with the infringing companies motivated, perhaps, by the lack
of resources of the regulator since this mean it is faster than fining the cartelists, which takes more time
and resources.
Avarage amount in millions of fines imposed per decision.

14
12
10
0
2011 - 2012 (CNC) 2012 - 2013 (CNC) 2013 - 2014 (CNMC)
2011 - 2012 (CNC) 2012 - 2013 (CNC) 2013 - 2014 (CNMC)
Source: Own elaboration based on the information published in the CNC and CNMC websites.
132
See hearing of the CNMC President at the Economic and Competition Commission of the Congress of Deputies,
13.05.14, available at
http://www.congreso.es/portal/page/portal/Congreso/GenericPopUp?next_page=/wc/verEmisionAudiovisual&idOrgano=306&
idSesion=52&fecha=13/05/2014&secuencia=559750&legislatura=10
43
One of the cornerstones of an effective leniency program, as stated by Scott H. Hammond, is “the fear of
sever sanctions”133, but if the rewards of being part of a cartel outweigh the possible fines, cartelist will
not be incentivised to apply for leniency. This new policy followed by the CNMC is far from deterring
companies since fining infringers is not, apparently, one of its main aims. Leniency programs on their own
have little effect on cartel prosecution since it is necessary that competition authorities engage in deep
investigations once the misconduct is uncovered, but without sufficient resources, the Spanish leniency
program cannot give its best.
The Spanish leniency program is a relatively new tool for the CNMC. Seven years have passed since it was
implemented and the results were positive. Nevertheless the program presents some pitfalls such as the
lack of certainty that need to be dealt with. Solving these downsides is likely to raise the number of
whistle-blowers and, therefore, turn the leniency program into a more effective tool.
On the other hand, the lack of sufficient resources at the CNMC probably prevent the Spanish leniency
program from reaching its highest level of effectiveness as long as fines keep reduced and the CNMC is
not provided with higher and better resources.
133
See Scott Hammond, Supra note 22.
44
CONCLUSION.
The main objectives of Competition Law are to assure the competitiveness in the markets and to protect
consumer’s welfare. Competitive markets stimulates the efficiency of undertakings, driving companies to
offer a wide range of products or services at good quality and low prices, in order to prevent consumers
from switching suppliers.
Hard-core cartels have the aim of restricting or eliminating competition between competing firms by fixing
prices, allocating markets or bid rigging. In the light of the object of these collusive agreements, they are
considered to be the most severe violation for competition authorities all around the world.
However, due to the secret nature of hard-core cartels they are extremely difficult to detect and,
therefore, eradicate. In order to end break the secrecy of these agreements, a variety of jurisdictions
around the world have introduced the leniency programs in their legal framework. Under these programs,
competition authorities grant total or partial immunity to those undertakings that have participated in a
cartel in exchange for information that will permit the detection of the collusive agreement and the
conviction of the other parties involved. Leniency programs first came into play under the US antitrust
system and it was proved to be so effective in the detection of cartels that the rest of jurisdictions around
the world started to adopt their own leniency tools in the light of the US model.
Given these developments, this master thesis has assessed the common pitfalls and collateral effects of
leniency programs which prevent these tools from reaching their full potential. Three negative collateral
effects and three pitfalls were identified in Section 4 and some possible solutions to them were suggested.
In a nutshell, these suggestions were;
1) Compensating whistle-blowers for confessing their participation in, and the existence of, a
hardcore cartel to the competition authorities. This way, the fear of retaliation from other cartel
members and the negative reputation effect caused by informing to the authorities the
misconduct, under the leniency program, will be mitigated as the losses caused by the confession
will be compensated.
2) Exempting the leniency recipient from civil fines on the condition that the other hard-core cartel
participants are able to pay for compensation for the damages caused to the cartel victim. In this
sense, the deterrent effect that private enforcement has on potential leniency applicants will be
eased and the effectiveness of this system will be consolidated.
45
3) Establishing clear terms and conditions to become an eligible leniency applicant: if the
consequences that the concerned undertaking might face are not clear, a hard-core cartel
member will not risk to confess the existence of the illegal conduct.
4) Ne bis in idem principle should apply to competition law rules since the fear of being punished
more than once for the same misconduct will deter cartel participants from applying for leniency
and the effectiveness of the leniency tool will be diminish.
When addressing the moral hazards of the leniency programs it has been made clear that benefiting the
infringer by no punishing its conduct is a small sacrifice when compared to the results of doing so. In
exchange for not convicting the member of a hardcore cartel, which provides the authorities with
information, many other infringers are sanctioned and the concerned anticompetitive practice terminates,
instead of having the misconduct remain active and invisible to the eyes of the authorities. Therefore, the
pros for rewarding an infringer are, in this respect, bigger than the cons.
Leniency programs are, without doubts, essential tools for competition authorities, especially at a time
where collusion between companies tends to increase. The economic crisis is likely to lead the appearance
of hard-core cartels, as companies try to survive to bankruptcy no matter what it costs. But it is in these
moments of economic crisis where, more than ever, markets should be competitive. Economic recovery
depends on competitive markets because if companies will have to innovate in order to remain in the
market, those active and efficient undertakings are likely to bring about economic growth.
It should not be forgotten, as seen in the Spanish case, that leniency programs cannot be effective if
competition authorities lack sufficient resources to start and conduct investigations when necessary.
These, complementary measures, such as sanctions that are sufficiently sever to deter undertakings from
participating in these anticompetitive agreements, are essential measures that, jointly with the
application of leniency programs, will terminate with creation of hard-core cartels. In the Spanish case,
the implementation of the improvements suggested throughout this paper, an improved functioning of
the CNMC and the imposition of sever sanction stand out as key factors for making the Spanish leniency
program effective.
Once every aspect (negative and positive) of the leniency programs has been analysed, an answer to our
research question can be given: Is the current leniency system sufficiently effective? There is no doubt that
the answer is positive, leniency programs have proven to be effective tools in the fight against hard-core
cartels. Nevertheless, there is still room for improvements on the application of these programs and if
46
appropriate measures for enhancing the effectiveness of the leniency systems are taken, these tools might,
in the end, be the ultimate solution against hard-core cartels.
i
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Reflections On Leniency Programs: in Search For Effectiveness

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2014/2015

Electronic copy available at: http://ssrn.com/abstract=2801707

Student: Lucia Arnal Rodriguez.

Electronic copy available at: http://ssrn.com/abstract=2801707

LIST OF ABBREVIATIONS .............................................................................................................................. IV

‘Is the current leniency system sufficiently effective?”

CHAPTER 2: ORIGIN AND EVOLUTION OF LENIENCY PROGRAMS.

2.2 Glance at past

2.2.3 Early Europe.

2.3 Modern Ages.

The Sherman Act 1890.

The US Corporate Leniency Program

2.3.2 The European leniency system: following US steps.

The antitrust provisions in the EU treaties.

The EU Leniency Notices and Council’s Regulation 1/2003.

2.4 Rationale of the leniency programs.

2.4.1 The Prisoner’s Dilemma.

Table 1: Possible outcomes of the prisoner’s dilemma.

2.5 Preliminary conclusions.

CHAPTER 3: TECHNICAL FEATURES OF THE LENINCY PROGRAMS.

3.2 Full immunity

3.4 Lenient treatment (reduction in fines).

3.5 Marker system

3.6 Hypothetical applications

3.7.1 Oral procedure.

3.8 Amnesty Plus.

3.8.1 Penalty Plus

3.9 Criminal sanctions for hard-core cartel members.

3.10 Preliminary conclusions.

CHAPTER 4: COLLATERALS EFFECTS AND PITFALLS OF THE LENIENCY

4.2 Collateral effects.

4.2.2 Negative reputation effect.

4.2.3 Private enforcement.

4.3.3 Ne bis in idem.

4.4 Moral issues.

4.5 Preliminary conclusions.

CHAPTER 5: EFFECTS OF THE LENIENCY PROGRAMS IN THE PRACTICE:

5.2 Emergence of the Spanish leniency program.

5.3 Collateral effects of the Spanish leniency program.

5.3.2 Negative reputation effect.

5.3.3 Private enforcement.

5.4 Pitfalls of the Spanish leniency program.

5.5 Crisis in the Spanish Competition Authority.

Avarage amount in millions of fines imposed per decision.

2011 - 2012 (CNC) 2012 - 2013 (CNC) 2013 - 2014 (CNMC)

5.6 Preliminary conclusions.

Buccirossi P, Marvvo C and Spagnolo G, 'Leniency and Damages' SSRN Journal.

Congreso.es, 'Congreso De Los Diputados' (2014)

Dijkstra P and Schoonberk L, Amnesty Plus and Multimarket Collusion (2009).

Ec.europa.eu, 'About the Cartel Leniency Policy - European Commission' (2015)

Ec.europa.eu, 'Cartel Statistics'

Ec.europa.eu, 'Competition - Cartels - Overview - European Commission' (2015)

EU/US Competition Cooperation Agreement, 'Agreement Between the Government of the

European Commission, 'Commission Notice on the Non-Imposition or Reduction of Fines in

European Commission, '‘Competition: Revised Leniency Notice – Frequently Asked Questions

European Commission, 'COMMISSION DECISION Of 21 November 2001 Relating To A Proceeding

European Commission, 'Commission Decision of 13 September 2006, Case COMP/F/38.456,

European Council, 'Council Regulation (EC) No 1/2003 of 16 December 2002 on the