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de Azevedo, Paulo Furquim; Henriksen, Alexandre Lauri --- "Cartel Deterrence and Settlements: The Brazilian Experience" [2010] ELECD 240; in Zäch, Roger; Heinemann, Andreas; Kellerhals, Andreas (eds), "The Development of Competition Law" (Edward Elgar Publishing, 2010)

Book Title: The Development of Competition Law

Editor(s): Zäch, Roger; Heinemann, Andreas; Kellerhals, Andreas

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781848444461

Section: Chapter 8

Section Title: Cartel Deterrence and Settlements: The Brazilian Experience

Author(s): de Azevedo, Paulo Furquim; Henriksen, Alexandre Lauri

Number of pages: 24

Extract:

8. Cartel Deterrence and Settlements:
the Brazilian Experience
Paulo Furquim de Azevedo* and
Alexandre Lauri Henriksen**

1 INTRODUCTION

There is not much controversy that settlements are an important part of
a policy of cartel deterrence (Hammond, 2006a; Connor, 2007). Some
authors emphasise the win­win feature of negotiated procedures to abbre-
viate the administrative and judicial disputes related to cartel prosecution
as opposed to fully adversarial procedures (Landes, 1971; Scott and Stuntz,
1992; Wils, 2008). This almost consensus1 in the literature is absolutely
expected, provided that parties are rational and do not have significant
cognition problems. In as much as litigation costs may be avoided and
the fully adversarial procedure is always an alternative to the settlement,
parties must be at least better off if they opt to settle a case.
More relevant and with important policy implications is the discussion
about the appropriate design of this type of contract, particularly because it
is not a trivial solution given the information asymmetry between the compe-
tition authority and defendants, and the complex interaction among settle-
ments and other investigative mechanisms, such as leniency agreements. This
chapter addresses this issue both theoretically, by means of a simple game
theoretical model, and empirically, by means of the Brazilian experience.
A quite straightforward model explores the relationship among three
alternatives available to cartel participants: pursuing the trial, engaging
in a leniency agreement, or settling the case. The model leaves out the


* Commissioner at CADE-Brazil and Professor of Economics at Getúlio
Vargas ...