Does European Competition Policy Really Stimulate Competition?

Abstract

In 2006, an updated version of the European Leniency Program came into effect. It has the goal to stimulate competition by being more effective against cartels. Theoretical work has shown that Leniency Programs are effective in deterring and detecting cartels. Empirical work has shown that after the implementation of such policies, the number of detected cartels increases. However, this is no valid proof the Leniency Program really stimulates competition since the cartels that are not detected are not taken into account. This research investigates the direct relationship between the 2006 Leniency Program and competition by using a proxy for competition. This study uses data from 25 European countries and 30 industries. Results from OLS regressions, Fixed effects estimations, Regression Discontinuity design and the average treatment effect reveal the 2006 Leniency Program really stimulates competition.