[wslack]

There's an incentive problem here because litigation is so expensive. If the fine is large enough, it becomes more and more worth it for the company to fight it in court - and therefore more expensive to the regulatory agency's legal budget. The only folks who benefit from it going to court are private lawyers.

Whereas, settling meets the company's incentives (eliminating uncertainty), meets the regulator's incentives (bad behavior is stopped locally). The moral hazard created by making fraud seem less risky (because the punishments aren't that bad) is born by the public.

The solution here would be to limit the possible legal shenanigans that companies can use to increase the cost of taking a case to trial.