Optimal Fines in the Era of Whistleblowers

Giancarlo Spagnolo and Paolo Buccirossi

No 5465, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We review current methods for calculating fines against cartels in the US and EU, and simulate their deterrence effects under different assumptions on the legal and economic environment. It is likely that European fines have not had significant deterrence effects before leniency programs were introduced. Previous simulations of the effects of fines ignore the different type of deterrence that leniency programs bring about, and, therefore, grossly overstate the minimum fine likely to have deterrence effects. With schemes that reward whistleblowers, the minimum fine with deterrence effects falls to extremely low levels (below 10% of the optimal "Beckerian" fine). Strategic judgement-proofness can and should be prevented by suitable regulation or extended liability. Criminal sanctions, in the form of imprisonment, certainly bring benefits (and costs) in terms of cartel deterrence, but the firms? limited ability to pay does not appear any longer such a strong argument for their introduction.

Keywords: Cartels; Collusion; Corporate crime; Debt; Deterrence; Extended liability; Fines; Law enforcement; Leniency; Immunity (search for similar items in EconPapers)
JEL-codes: D43 D78 G18 G33 K21 K42 L41 (search for similar items in EconPapers)
Date: 2006-01
New Economics Papers: this item is included in nep-com, nep-fin and nep-law
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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