Rewarding Betrayal

The battle against the supreme evil of antitrust-cartels-is comprised of two main pillars: the leniency program and class actions. Leniency programs facilitate public enforcement. They offer immunity from prosecution to the first cartel member who discloses the cartel to the authorities, thereby creating a 'race to the authorities' amongst cartel members. Class actions enable private enforcement by allowing cartel victims' claims to be aggregated. Unfortunately, the interaction between these two enforcement measures has defeated both. A successful leniency application invariably triggers a class action against the applicant, which in turn disincentivizes leniency applications. Recent years have seen a sharp decline in leniency applications, allowing many cartels to continue unabated. Attempts to rectify the problem have proven unsuccessful. The current article offers a counter-intuitive but simple fix. Under the rule proposed here, a cartel member who has been found eligible for immunity from public prosecution will also be allowed to assume the role of class plaintiff against its former co-conspirators. In line with common practice, its remuneration will be a derivative of the class's compensation. The leniency applicant will thus be incentivized to obtain the largest possible recovery for the cartel's victims. And as the leniency applicant possesses all relevant information and evidence, the proposed rule will increase cartel victims' compensation. Instead of undermining leniency applications, the prospect of a follow-on class action will spur such applications. The proposed rule will also destabilize existing cartels and deter the formation of new ones.