By Catarina Moura Pinto Marvão (Economics Department) & Giancarlo Spagnolo (Stockholm School of Economics)
There is a considerable debate on whether the introduction of criminal penalties in the EU, for individuals who engage in cartel activity, can strengthen antitrust enforcement. In this article we examine the recent changes to the antitrust enforcement scenery and the newly available empirical, theoretical and experimental evidence on fines and leniency, since the previous debate on criminalization. We also document a recent phenomenon that we name “leniency inflation” at the EU level. Our empirical analysis of the criminal sanctions imposed in the US suggests that repeat offenders are less likely to receive a prison sentence. In the EU, prison sentences are rare but seem to be on the rise and it appears that the current level of EC sanctions has a modest effect on corporate governance and needs to be strengthened. These results indicate that there is a need to introduce criminalization, in particular for infringements in the financial industry, possibly complemented by a moderate use of more expensive but proactive enforcement tools, such as screens and whistleblower rewards.