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Introduction of Leniency Programs for Cartel Participants: The Russian Case

Andrey Shastitko, Svetlana Avdasheva, Aug 30, 2011

Collusion of market participants is one of the most dangerous forms of restriction of competition, adversely affecting incentives and, as a consequence, allocation and production efficiencies. According to some estimates, the average price rise under price-fixing is 10 percent ; several studies give even higher estimates. For example, according to Connor & Bolotova, the median cartel overcharge over the competitive price is 25 percent, and for an international cartel-32 percent. A similar premium set by a cartel operating on the domestic market is 18 percent. In their heyday cartels set bonuses twice the median value. Authors of a study covering about 395 cases of cartelization in the period from the 18th to the early 21st century, report an average price bonus of 19 percent, and a median of 16 percent.

It is no accident that a price-fixing agreement qualifies as one of the most serious violations of antitrust laws and is prohibited per se. One of the important prerequisites for a price-fixing agreement is trust among the parties; that is why trust-busting is not a bad thing in this case. Leniency programs are a way to destroy and prevent cartel agreements through the trust-busting among their participants-existing or potential. Similar programs exist in many countries.

The Russian practice of introducing a leniency program is of interest because it reflects experiences of other countries as well as the mistakes made while designing the program. Evaluating the program is complicated by the fact that, in Russia, its introduction coincided with the fundamental restructuring of antitrust legislation, substantial tightening of penalties for the violations, and emergence of new norms. In this article we examine the history of changes to the norms governing the exemption from liability for participating in cartel agreements (Section 2) and the characteristics of competition policy in Russia, which objectively hinder the effectiveness of the program (Section 3).

 

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