Does amnesty deter organized crime?The case of the European corporate leniency program

In this paper we test the deterrence effect of leniency programs on organized white-collar crime. We use data on the formation and break-up of international cartels prosecuted by the European Commission before and after the EuropeanCorporate Leniency Program (1996) was adopted. Our estimation results are consistent with the view that this program does only weakly destabilize existing cartelsand does not deter the creation of new ones. In the majority of cases in which cartel members self-revealed their misconduct, preceding U.S. investigations appear to have triggered this process. Although the overall deterrence effect of this programis of low magnitude, we also document that the level of potential fines significantly increases the likelihood of self-revelation. Thus, the leniency program tends to destabilizeparticularly the more severe cartel organizations that face harsher financial sanctions.