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The Pros and Cons of Leniency and Criminalization

The Swedish Competition Authority organized an international seminar on Leniency and Criminalization in Stockholm on the 13th of November 2015.

2015 year's Pros and Cons seminar addressed the issue of Leniency and Criminalization.


Seminar summary

The seminar started with an introduction of the seminar’s topic by the moderator Ingeborg Simonsson, Judge, Stockholm City Court, Division for competition law and intellectual property. Simonsson explained the two instruments to fight cartels: leniency and criminalization. Leniency, she said, must be understood as a way to obtain immunity or a reduction of fines imposed for competition law infringements. On the contrary, criminalization targets the individuals involved, rather than the companies. She explained that there is no harmonization in the European Union of leniency, criminalization or cartels. Simonsson also mentioned the interplay existing between leniency, damages, and fines.

The keynote speaker of this pros and cons was Brent C. Snyder, Deputy Assistant Attorney General for Criminal Enforcement, US Department of Justice. In his speech entitled “Criminalization of Cartel Offenses” Snyder mentioned that the United States has the longest experience of criminalization. Snyder explained that more than 40 percent of survey respondents in the UK, Germany, Italy and the US believe that price fixing is harmful and should be subject to sanctions. Also, in his view, white collar criminals must be held accountable. He stated that the leniency programs and criminalization is not a question of either or, but both.

The first speaker was Caron Beaton-Wells Professor, Competition Law at Melbourne Law School. Beaton-Wells discussed the relationship between leniency policy and criminal sanctions in anti-cartel enforcement. She characterized such a relationship as complex and its implications as troubling. According to Beaton-Wells, the combination of leniency and criminalization yields more detection and deterrence. The discussant, Dr Katharina Krauß, Head of Unit, Special Unit for Combating Cartels, Bundeskartellamt, presented the experience at the Bundeskartellamt. According to Krauß leniency programs are the most important detection tool.

The second speaker was Andreas Stephan, Professor of Competition Law at the University of East Anglia. Stephan shared his experience of the UK steel tanks criminal cartel trial. According to Stephan an enforcement system based on corporate fines alone is flawed, hence criminalization is needed. The discussant Stephen Blake, Senior Director, Cartels and Criminal, Competition and Markets Authority, presented his views on that particular criminal case. This case has been the only to have been tried before a jury out of three prosecuted, in which three individuals were charged in with dishonesty agreeing to fix prices, share out customers, and rig bids for the supply in the UK of galvanized steel tanks for water storage. According to Blake the criminal cartel enforcement is worth the investment.

The third speaker was Robert C. Marshall, Distinguished Professor of Economics at Penn State University. Over a videoconference from the US, Marshall talked about the participation in multiple cartels through time and the potentially strategic use of leniency. He left the question of criminalization aside and focused instead on leniency programs. For Marshall, there is a disturbing pattern of how some companies make use of leniency programs as a strategic tool. He provided data which showed how some companies recurrently participating in cartels apply for leniency. “Is that a coincidence or a strategy? We do not know.” In Marshall’s opinion our knowledge of what is happening within companies is too small.

The last presentation was held by Giancarlo Spagnolo, Professor at SITE - Stockholm School of Economics, U. of Rome II, EIEF, and CEPR. In his presentation entitled “Leniency inflation, deterrence, and criminalization” he showed that the increase of fines does not mean that there is a tangible sign of a rise of leniency policies’ effectiveness. There is leniency inflation in the EU. Spagnolo argued that experimental evidence emphasizes the importance of sanctions with leniency policies. Stronger sanctions seem to be more needed than years ago; hence criminalization must be revisited, according to him.

The closing words were given by Arvid Fredenberg who presented the topic for next year's Pros and Cons. In 2016 the seminar will be on the Pros and Cons of the new sharing economy and the role of competition authorities in this emerging economy.

Presentations from the seminar