Amnesty: Can it be used as a weapon against cartels?

Cartelization is considered an antithesis to free and fair competition and the watchdogs have for decades tried to clamp down on cartels. Leniency programme has become an effective weapon used by regulators to tackle the menace of cartelization.

Cartels are inherently unstable and leniency programmes work by luring one suspect to offer information against another suspect in return for amnesty from fine and/or incarceration. To lure such a person, the authority induces what is commonly referred to as prisoner’s dilemma.

Prisoner’s dilemma

“Prisoner’s dilemma” as a concept starts from the premise that two individuals suspected of a crime are arrested and interrogated separately. The interrogator plays the prisoners against each other by an offer like this: “Give evidence against your partner and, if he does not confess, we’ll put him away for 10 years and you’ll serve no time in jail; however, if both of you confess, then you’ll each receive a five-year sentence.”

Prisoner A faces a dilemma. If Prisoner B does not confess and A does, then A will receive no jail term. If B confesses, but A does not, then A will receive a 10-year sentence. Therefore, A is forced to adopt confessing as his rational choice to receive no jail time or at least only five years. B’s position will be the same. While both parties are worse off by confessing instead of remaining silent, the prosecutors succeed in handing out five-year sentences by inducing prisoner’s dilemma.

Udwadia Udeshi & Argus Partners is a full-service law firm with offices in Mumbai, Delhi, Bangalore, Kolkata and Chennai. Arvind Gurumurthy is a managing associate at the firm. The views expressed by the author are personal and do not reflect the views of the firm.