Corporate Criminals in a Market Context : Enforcement and Optimal Sanctions

Enforcing corporate liability, governments seek to deter crime, promote corporate compliance, and secure fair competition in markets, while in practice, they face difficult trade-offs between these aims. This paper analyzes optimal enforcement for three different forms of corporate misconduct by combining approaches from the economic theory of crime and theories of industrial organization. The presented analysis shows why corporate crime is more harmful in large markets, why governments have a disinclination to sanction firms whose crime materializes abroad, and why leniency for those who self-report their crime is a complement, and not a substitute, to independent investigation and enforcement. Upon a review of 50 cases of corporate liability from five European countries, we find enforcement systems and practices are sub-optimal with respect to crime deterrence. Across the countries, enforcement in competition law cases is generally more efficient than enforcement in cases of foreign bribery and violation of anti-money laundering regulations. Europe would benefit from stronger supra-national cooperation in regulation and enforcement of transnational corporate crime