The Failure of Leniency as a Regulatory Transplant in Hungary

Abstract

While leniency has become the main pillar of EU cartel enforcement, its expediency can be questioned, particularly if we consider that the vast majority of leniency applications arrive after the first dawn raids or failed cartels. Leniency can be criticized not only for uncovering only cartels that are already doomed, but also for its cartel-inducing effect, where periodic whistle blowing or the mutual threat of disclosure stabilizes anti-competitive agreements. The effectiveness of leniency policy is strongly influenced by the regulatory mix of incentives (immunity from or reduction in fines, anonymity), sanctions (criminal sentences, disqualification from public procurement), and compensatory measures (private enforcement) introduced in the given jurisdiction. However, certain extra-legal factors may also play a key role: the success of leniency policies differs across company size, whistle-blowing cultures, and awareness of leniency throughout the Member States. In our paper, we analyse Hungarian leniency policy as a legal transplant, describing its design and comparing it to the ECN Model Leniency Programme. We arrive at the conclusion that its failure in Hungary can be explained by extra-legal factors, such as market structure, leniency awareness, company culture, and ingrained attitudes towards competitors and the state.