Cartel Leniency and Settlements: A Joint Perspective

This  paper  studies  the  interactions  between  a  cartel  leniency  program  anda  settlement  procedure.   The  EU  settlement  procedure  gives  colluding  firmsthat do not apply for leniency an additional opportunity to cooperate with thecompetition authority in exchange for a reduced fine once a preliminary case hasbeen established against them.  We derive the conditions under which colludingfirms  apply  for  leniency,  settle,  or  refuse  to  cooperate  with  the  authority  inequilibrium.  Our policy results show that settlements can act as a complementor  a  substitute  to  the  leniency  program.   We  also  study  the  welfare-optimalpolicy and highlight a novel interdependence between the fine reductions thatshould be offered to leniency applicants and settling firms.