Optimal Enforcement and Decision Structures for Competition Policy
Lead Research Organisation:
University of St Andrews
Department Name: Economics and Finance
Abstract
Abstracts are not currently available in GtR for all funded research. This is normally because the abstract was not required at the time of proposal submission, but may be because it included sensitive information such as personal details.
Publications
Bageri V
(2013)
The Distortive Effects of Antitrust Fines Based on Revenue
in The Economic Journal
Katsoulacos Y
(2016)
Optimal Substantive Standards for Competition Authorities
in Journal of Industry, Competition and Trade
Katsoulacos Y
(2015)
Penalizing cartels: The case for basing penalties on price overcharge
in International Journal of Industrial Organization
Katsoulacos Y
(2015)
Optimal Enforcement Structures for Competition Policy: Implications of Judicial Reviews and of Internal Error Correction Mechanisms
in European Competition Journal
Katsoulacos Y
(2015)
Legal uncertainty, competition law enforcement procedures and optimal penalties
in European Journal of Law and Economics
Katsoulacos Y
(2017)
Regulatory decision errors, Legal Uncertainty and welfare: A general treatment
in International Journal of Industrial Organization
Katsoulacos Y
(2013)
Antitrust Penalties and the Implications of Empirical Evidence on Cartel Overcharges
in The Economic Journal
Katsoulacos, Y. And Ulph, D.
(2010)
Towards an Optimal Enforcement of Competition Rules in Europe: Time for a Review of Regulation 1/2003 ?
Katsoulacos, Y. And Ulph, D.
(2010)
Competition Law and the Enforcement of Article 102
Katsoulacos, Y. And Ulph, D.
(2013)
Handbook on European Competition Law: Enforcement and Procedure
| Description | The first aim of this project was to extend in a number of important directions a 2009 paper by the investigators that gave a rigorous evaluation of the conditions under which Effects-Based procedures - now very widely adopted by most competition authorities over past 20 years - are superior to Per Se Procedures. The second aim was to engage closely with two competition authorities - the Office of Fair Trading (UK) and the Autorite de la Concurrence (France) - to explain our emerging research findings and identify issues of concern to them on which our research could shed light. Both were undertaking major reviews of their penalty policies and guidelines. Some key findings: (i) Appeals procedures reduce deterrence which is good if actions are on average benign but bad if actions are on average harmful. They make effects-based procedures more attractive in former case and less attractive in latter. (ii) Contrary to received legal scholarship: (a) effect-based procedures need not entail legal uncertainty; (b) if penalties are set appropriately welfare may be higher with some degree of legal uncertainty than with none; (c) effects-based procedures unambiguously welfare dominate per se; (d) appropriate penalties may be higher the greater the degree of legal uncertainty. Contrary to Economic scholarship appropriate penalty may be zero if legal uncertainty is very great. (iii) Existing theory of optimal penalties ignores possibility that competition authorities sometimes stop on-going actions. This can lead to penalties being 25% lower than existing theory suggests. (iv) This supports OFT's proposal to raise penalties to 30% of revenue. (v) Imposing penalties on revenue creates a distortion that raises prices. This can be greater the tougher the penalty regime. |
| Exploitation Route | Our analysis of penalties has been further developed by ourselves and is also influencing the thinking of other leading scholars in the field - e.g. Harrngton (2014). |
| Sectors | Government Democracy and Justice |
| Description | Our research contributed to the thinking of the Office of fair Trading as to whether or not to increase penalties from 10% to 30%. Our research on legal uncertainty - on which we did a presentation to them - convinced them that thsi was not an argument against rasising penalties. Our subsequent analysis of the optimal penalty rate suggested that their proposed penalty of 30% lay within the range that could be supported by good theoretical and empirical evidence. Similarly the French Competition Authority (Autorite de la Concurrence) found our research on legal uncertainty and penalties helpful in formulating their new guidelines on penalties. |
| First Year Of Impact | 2011 |
| Sector | Government, Democracy and Justice |
| Impact Types | Economic |
| Description | Influence on Penalty Guidelines by French Competition Authority |
| Geographic Reach | National |
| Policy Influence Type | Citation in other policy documents |
| Impact | The impact helped shape the formal penalty guidelines that the Frnch Competition Authority introduced for the first time. Their Chief Economist wrote: : "Discussion on the topic of fine setting was extremely interesting and timely as the Autorité was in the middle of a process to write its own sentencing guidelines (this was ultimately done in May 2011). Although our guidelines on the setting of fines for anticompetitive behaviour were primarily driven by the legal requirements of the French Code of Commerce and our past case law, all the discussions that we have had with - among other - academic economists (and therefore with Professors Katsoulacos and Ulph) have greatly influenced our discussions internally and helped thus drafting our guidelines." |
| Description | Influence on Penalty Setting Policy by Competition Authority |
| Geographic Reach | National |
| Policy Influence Type | Citation in other policy documents |
| Impact | Our research influenced the decision by OFT to go out to consultation on higher penalties. The Chief Economist wrote that our presentation "was helpful in clarifying our thinking about the role of legal uncertainty and ultimately helped confirm our decision to propose higher starting point penalties." Our calculations also influenced OFT's thinking about scale of proposed penalty increase. The Chief Economist wrote: "We found this helpful in terms of contributing to a balanced range of views on our proposals because many of the submissions were arguing against our proposals to raise the penalty starting point, whereas in their submission Professors Katsoulacos and Ulph put forward arguments and calculations that suggested that the optimal baseline penalty might if anything be somewhat higher than the 30% proposed in our consultation document, in particular for infringements that suffer from low detection rates." |
| Description | Collaboration with ESRC Centre for Competition Policy |
| Organisation | University of East Anglia |
| Department | Centre for Competition Policy |
| Country | United Kingdom |
| Sector | Academic/University |
| PI Contribution | We presented our work to the Centre - including at their annual conference in 2012 - and also funded some of their PhD students to attend the annual CRESSE Workshop on Competition Policy Enforcement that we funded through our ESRC grant |
| Collaborator Contribution | They hosted us and we benefitted from interaction with a group with very considerable experience in Competition Policy Issues. They also provided Discussants to some of our Workshops |
| Impact | The collaboration was multi-disciplinary. CCP has a mixture of economists and lawyers and we particularly benefitted from discussions with one of their legal experts. |
| Start Year | 2011 |
| Description | Engagement with French Competition Authority - Autorite de la Concurrence (AdeC) |
| Form Of Engagement Activity | A formal working group, expert panel or dialogue |
| Part Of Official Scheme? | No |
| Geographic Reach | National |
| Primary Audience | Professional Practitioners |
| Results and Impact | Over the course of the project we made 5 presentations on our research to the Chief Economist and his team and, sometimes, the Deputy Director. The presentations sparked questions and reflection on both sides and lead us to both re-think some details of our models and to undertake more work on penalty setting - a major concern to AdeC. Our work shaped thinking by AdeC on penalty guidelines. The Chief Economist wrote "Discussion on the topic of fine setting was extremely interesting and timely as the Autorité was in the middle of a process to write its own sentencing guidelines (this was ultimately done in May 2011). Although our guidelines on the setting of fines for anticompetitive behaviour were primarily driven by the legal requirements of the French Code of Commerce and our past case law, all the discussions that we have had with - among other - academic economists (and therefore with Professors Katsoulacos and Ulph) have greatly influenced our discussions internally and helped thus drafting our guidelines." |
| Year(s) Of Engagement Activity | 2010,2011,2012 |
| Description | Engagement with UK Competition Authority (Office for Fair Trading) |
| Form Of Engagement Activity | A formal working group, expert panel or dialogue |
| Part Of Official Scheme? | No |
| Geographic Reach | National |
| Primary Audience | Professional Practitioners |
| Results and Impact | There were three major results: (i) we better understood the importance of penalties to OFT; (ii) our work on legal uncertainty was of enormous interest to OFT since they were having a review of their penalties and lead to our giving a presentation to a very wide audience inside OFT and to being invited to submit evidence when they went out to consultation on proposal to increase penalties from 10% of revenue to 30% of revenue. There were two notable impacts: (i) our conclusion that legal uncertainty could be a reason for raising penalties - rather than lowering them as had previously been asserted in legal literature influenced their decision to go out to consultation on raising penalties - by factor of 3 (ii) our calculations of optimal penalties - subsequently published in Economic Journal gave then confidence that their proposed penalty of 30% was well supported. |
| Year(s) Of Engagement Activity | 2010,2011,2012 |