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In the past 20 years, the Leniency Programmes have been included in the competition laws of most jurisdictions, because they are considered as the most effective tool in the fight against cartels.
Aware of the important damages that cartels inflict in the competition environment of the markets as well as in the living conditions of the population, and of the difficulty to detect and stop them, modern competition authorities around the world have implemented the Leniency Programmes, which create an economic incentive to obtain full immunity or a reduction in the penalties imposed for the breach of the competition laws, which benefit those applicants who decide to self-report their conduct and fully cooperate with the authorities in the dismantlement of the cartels.
As a result of this incentive and pursuant to the dynamics of game theory, the Leniency Programmes represent an important deterrence for the formation and functioning of cartels, because in the presence of an effective Leniency Programmes, businessmen are in constant fear that one of the members of the cartel will take the initiative to report it to the authority in order to obtain immunity with the consequence that the rest of the participants will have to bear stiff sanctions.
On top of the already mentioned benefits of the Leniency Programmes, they are also important because they help the competition authorities save time, effort and resources in their permanent war against cartels. In fact, pursuant to the Leniency Programmes, the applicants will not only help in discovering the cartel, but they will also help in the gathering of the evidence, allowing the authorities to conduct more robust investigations and to reach quicker and firmer decisions, that will enhance the reputation of the authority and the public policy as a whole.
As a result of all of this, society is benefited, first because of the dismantlement of the cartel and second because the authority will increase its efficiency by reducing the time and cost of the investigations.
In sum, it can be said that leniency programmes generate profits for society, for the authority, and alas, also for the leniency applicants.
The leniency program was first introduced in Colombia in article 14 of Law 1340, 2009 (hereinafter Law 1340). This law was initially developed by Decree 2896, 2010, reformed by Decree 1074, 2015 (hereinafter Decree 1074), known as the Colombian Unified Decree for Commerce, Industry and Tourism (UDCIT), which was reformed in the Leniency Chapter (Chapter 29) by Decree 1523, 2015 (hereinafter Decree 1523).
Most jurisdiction that have included a leniency program share the same main principles that ensure their effectiveness. According Scott Hammond “guiding principle is what makes leniency effective”.
Economic agents must perceive the authority as strong and effective, so that those companies that break the law fear there is a high risk of detection, and also that if they apply for leniency, the authority will be able to protect them. If the authority is not strong and effective, the perpetrators will not take it seriously, will not fear detection and will not trust the leniency programmes.
Sanctions should be substantial, so that they can be perceived as a deterrent for companies that may be tempted to breach the law; and also in order to create an important economic incentive for companies that consider participating in the Leniency Programmes.
It is clear that one of the important features of an effective Leniency Programmes is that potential wrongdoers feel they have a lot to lose if they are caught and actual lawbreakers feel they are in great danger of being caught, because someone else will apply for leniency before they decide to do it, which has the potential of creating an stampede or race of the members of the cartel, in order to seize the first position as a leniency applicant.
As said before, leniency is all about benefit: in the first place for society at large, but also for the authority and for the leniency applicants. As a matter of fact, to a large extent the success of the Leniency Programmes depends on the fact that applicants that are accepted into the program can secure the total or partial immunity promised by the law, according to their position in the case. In is clear that in the absence of an economic incentive that is certain and achievable, the participants in the cartel will prefer to wait for the authority to investigate instead of accepting responsibility.
There has been a tendency in the last years to increase the sanctions of the anti competitive conducts in Latin America, which increases the possibility of success of the Leniency Programmes in the region.
Companies will be more inclined to participate in the leniency programme if they perceive that the authority can be trusted because it acts with transparency and good faith and there is predictability in the application of the programme, so that they know in advance the chances they have to obtain the benefits promised by the law.
If there is no certainty that the participants in the Leniency Programme will receive the promised benefits, the trust in the authority will be broken and the program will fail, because companies that in the future would be in a position to file for leniency will not take the important risks that entail to participate in the program, for eventual benefits that at the end they will not receive (Hammond, 2014),
According to Felipe Serrano, one way to increase the transparency of the program is by issuing guidelines that will help future applicants to effectively participate in the Leniency Program.
It is important to say at this point, that in Colombia,the benefits of the Leniency Program are confirmed by the Superintendent only at the end of the investigation. So, the applicants can only be sure that they have secured the benefits at the very end of the procedure.
As a result of the principle related to transparency, predictability and good faith, in case of doubt, the Leniency Programmes should favour the applicants, who have taken the risk of abandoning their presumption of innocence and good faith in order to cooperate with the authority and seek the benefits that the law offers. Otherwise, perpetrators will not apply because they will not trust the authority or the program.
It is important to convince the companies to apply to the program and to stay in the program. The program is meant to be seen by the companies as a solution and not as another problem.
The Golden Rule is perhaps the most important principle of the Leniency Programme. According to the Golden Rule the leniency applicants cannot be left in an inferior or worse situation than those who did not cooperate with the authority.
Confidentiality is a very important factor for the success of the Leniency Programmes, because the leniency applicants renounce to their presumption of innocence and confess to the authority their participation in the cartel, which implicates damages to the consumers and to the economy in general; and also because by nature of the program they have to present evidence and information regarding the participation of third parties in the illegal conduct.
All these situations present inherent dangers to the reputation of the leniency applicant and create the potential for litigation against him from the side of the consumers and the other participants in the cartel.
Confidentiality of the identity of the leniency applicants is consistent with the application of the Golden Rule. In fact, Hammond argues that lack of confidentiality will affect the leniency applicant in two ways:first because his reputation will suffer even more than the one of those who deny the charges; and second, because he will not have the same opportunities to defend himself in case of private damages actions, since in the absence of confidentiality the plaintiffs may have better information and access to evidence against him than in regard to other participants in the cartel, which will lead to a disadvantage in the defence.
In the US, for example, the information gathered within the leniency application will only will be disclosed in case of litigation, but not before.
Main Principles of the Leniency Programme in Colombia
The so called Leniency Programmes could be described as procedural tools that allow the competition authorities to grant full or partial immunity to participants in a horizontal anti-competitive agreement - Cartel. This applies to those who chose to confess to their illegal conduct and provide the authority with relevant information and evidence about the identity of the participants and the functioning of the cartel. This helps the authority to quickly put a stop to the conduct and create an important deterrence for its occurrence.
Alfonso Miranda Londoño
Alfonso Miranda Londoño is a graduate from the Javeriana University Lawschool. He specialized in Socioeconomic Sciences at the same University, in Banking Law at Los Andes University and obtained his Masters Degree in Law (LL.M) from Cornell University, where he pursued his studies under a Fulbright Scholarship. From 1987 to 1988 he worked as an Attorney at the Latin American Caribbean Division of Bank of America, based in Miami and Los Angeles. Mr. Miranda started his private practice in Colombia in 1989, mainly in the areas of Competition Law and Mergers & Acquisitions. He has acted as advisor and represented numerous clients in some of the most important cases related to anti competitive practices, unfair competition, consumer protection and merger control. He has advised public and private entities in Colombia and abroad on telecommunications issues and has taken part in judicial and arbitration proceedings in business and corporate affairs.