Rebating Antitrust Fines to Encourage Private Damages Negotiations

Abstract

Abstract To encourage private negotiations for damages in antitrust cases some jurisdictions subtract a fraction of the redress from the fine. We analyze the effectiveness of this policy. Such a rebate does not encourage settlement negotiations that would otherwise not occur. If, however, the parties settle without the rebate, the introduction of the reduction may increase the settlement amount. Yet, deterrence for those wrongdoers who are actually fined always goes down. Under a leniency program, the rebate does not affect the leniency applicant: she does not pay a fine that can be reduced. The overall effect of a fine reduction on deterrence is therefore negative.