Detecting criminal behaviour in business organizations: Leniency application in detecting hard core cartels

Abstract

Criminogenesis is inherent in business organisations. Business organisations are criminogenic for various reasons such as blind loyalty and compliance, the normalisation of deviance and ambitions for profits (Glebovskiy, 2019). Especially, linking pay to performance without taking ethics into con- sideration can invite criminal behaviour in business organisations (Jurkiewicz & Giacalone, 2016; London Economics, 2011; Pinto, Leana, & Pil, 2008). Criminogenic factors in business organisations can be categorised into crime-coercive and crime-facilitative factors with the first pressuring individuals into criminal activities and the latter attracting and enabling criminal behaviour (Glebovskiy, 2019).

Hard core cartels are one manifestation of criminal behaviour in business organisations. They partake in price fixing, restricting output, market allocation or bid rigging, or a combination of these (OECD, 2020b). The basic elements of hard core cartels are widely agreed upon (ICN Working Group on Cartels, 2005). Hard core cartels cause financial, physical and environmental harm by negatively affecting competition, market legitimacy, entire countries, consumers and market participants (Chen, J., 2020; European Commission, 2019a; OECD, 2019a; Van Erp & Lord, 2020).

The detection of hard core cartels and their enforcement are top priorities shared by competition authorities worldwide (Chen, Z. & Rey, 2013; Tavares de Araujo, 2010). Hard core cartels can be prosecuted as per se illegal or for their effects (ICN Working Group on Cartels, 2005). Hard core cartels can be detected either through proactive or reactive methods. Leniency application, a reactive detection method, is considered the most important detection method and is also the most widely used (Abrantes-Metz, 2013; Jaspers, 2020).

Leniency policy is based on three main assumptions: cartelists are rational and their actions are determined by profit incentives, cartelists have accurate information on the expected benefits of the cartel and leniency is only affective if implemented alongside sufficient penalties (Jaspers, 2020) Leniency programs attempt to destabilise cartels by creating distrust between the involved parties by offering benefits for betraying fellow cartelists (Jaspers, 2020; Spagnolo, 2000).

Leniency programs have however been subject to criticism. Rewarding people who should be punished can be seen as moral dilemma (Abrantes-Metz, 2013; Motta & Polo, 2003; Spagnolo, 2000). Also, cartelists may decide together to calculatedly report their behaviour in order to receive leniency (Chen & Rey, 2013; Miller, 2009). Furthermore, it is uncertain how sophisticated cartels are detected through leniency (Schinkel, 2014).

Most notably, my thesis implies a need to possibly re-assess the reasons behind hard core cartels; leniency policy assumes cartelists as rational (Jaspers, 2020) yet they can be just as irrational (Paternoster, 2016). Finally, my thesis indicates a constant battle against criminal behaviour in business organisations such as hard core cartels for the foreseeable future (Connor, 2016; Glebovskiy, 2019).