Leniency and Damage Liability for Cartel Members in Brazil

A recent debate on leniency policies is the interplay between the public and the private competition law enforcement. The lack of a well-established set of rules regarding damage claims may be harming the effectiveness of the Brazilian Leniency Program, either by discouraging the wrongdoers from applying for leniency in already formed cartels or by not being threatening enough to deter the cartel formation. The paper objective is to analyze the best policies for leniency applicants regarding the damage liability in Brazil. We conclude that the optimal policy is providing immunity to the leniency applicant, and after that the damage claim lawsuits can be encouraged with no undesirable effects. Extensions confirm the following: the immunity is even more effective when there is risk of betrayal; the immunity is the best policy in the case of ex-post leniency; the immunity is the optimal policy when there is no bankruptcy, otherwise the applicant liability should be the minimum necessary to avoid the bankruptcy; immunity regarding criminal sanctions for individuals is the optimal policy; for international cartels, the optimal policy is a combination of immunity regarding damage claims in all jurisdictions. JEL codes: L13; L41; L44

Cartel Formation in Cournot Competition with Asymmetric Costs: A Partition Function Approach

In this paper, we use a partition function form game to analyze cartel formation among firms in Cournot competition. We assume that a firm obtains a certain cost advantage that allows it to produce goods at a lower unit cost. We show that if the level of the cost advantage is “moderate”, then the firm with the cost advantage leads the cartel formation among the firms. Moreover, if the cost advantage is relatively high, then the formed cartel can also be stable in the sense of the core of a partition function form game. We also show that if the technology for the low-cost production can be copied, then the cost advantage may prevent a cartel from splitting.

Die Oberschlesische Kohlenkonvention – eine «kleine Familienvereinigung»?

The Upper Silesian Coal Convention – a «family affair»?This article presents new evidence on the Upper Silesian Coal Convention, a coal-mining cartel in Upper Silesia, in existence from 1898 to 1925. The cartel had evolved from collusive agreements dating back to 1890 and accounted for approximately one fourth of Germany’s coal supply. Yet, market coverage and longevity of the convention, as well as the economic importance of the Upper Silesian industrial district in general, imply that this cartel has been understated in historical research so far. Aristocratic industrialists, the leading group of entrepreneurs in Upper Silesia, shaped the formation and operation of the cartel. They induced an oligopolistic market structure and social homogeneity among cartel members that facilitated cartel formation in Upper Silesia.