Problems of competition enforcement and redress: EU trends and new

solutions

Professor Dr Christopher Hodges

Head of the CMS Research Programme on Civil Justice Systems

Centre for Socio-Legal Studies, University of Oxford

Erasmus Professor of the Fundamentals of Private LawErasmus University, Rotterdam

Issues

1. Damages

2. Enforcement Policy

The Orthodox ApproachCompetition Enforcement is about

Deterrence, achieved by large finesPenalties on individuals?

The Public Authority imposes FinesDamages can be delegated to private actors

Design Choices for Enforcement

Actors: public or private?

Law: public or private

Procedures: public or private?

Time of control technique: ex ante or ex post?

Enforcement policy?

Differing Policies on Enforcement

U.S.A.

Private enforcement of both public norms and

private rights

Deterrence Theory

Damages = Fines

EU

Public enforcement of public law:

sanctions + fines

Deterrence Theory

Private enforcement of private rights:

damages

Choice of enforcement policyDeterrence: competition

Responsive: tit-for-tatPyramid: escalationRisk-based: prioritisationRestorative Justice

Hodges 2 articles 2011

Removal of Liberty

EU Public Enforcement Theory:

Fines + DeterrenceA post facto control has to be very large to be

effective.How large is enough?

IneffectiveFines rise to defeat calculations re fine and

leniencyDG case investigations have fallenRecidivism?Extent of non-compliance is unknown: important

because used in finingAssumption 10-20% cartels detected

Problems with Deterrence 11. Deterrence on its own does not deter – unless the

sanction, being ex post, is vast

2. Deterrence does not produce compliant behaviour

3. Should deterrence be a goal of regulatory enforcement?

4. Enforcement on companies is aimed at the wrong targets

5. Fines impose significant damage on the wrong targets (employees, shareholders, innovation)

Problems with Deterrence 25. Large sanctions are contrary to

constitutional/fundamental rights principles of justice, fairness and proportionality

6. Determination of fines is not transparent, consistent or fair

7. Leniency encourages perverse behaviour (infringe, then own up first, and keep illicit gain)

8. This policy does not rectify a balanced market

Gain to cartelists

Loss to victims

Gain to cartelists

Loss to victims

Problems with Deterrence 39. Damages cannot be added on after fines: they

must be integrated to produce fair and proportionate outcomes

10. Culture: Polarisation not solidarity

A balanced competitive market

A Model for Enforcement and RestitutionThe priorities are:

Restitution of victimsRestoration of a competitive market

Then consider sanctions based on:Targeting the cause: individuals or company?Action taken against individualsCorporate Best Practice scheme and operationCooperation: Doing the Right Thing

Owning up Paying back Cooperation

Recidivism: past and future likelihoodSeriousness

Three Pillar Model

RegulationADR Private Litigation

A Model for Enforcement and Restitution

Credible threats, enlisting self-regulation and the ‘shadow of the law’ to produce swift, cheap solutions

Public Pillar: wide enforcement powers, credible threat, targeted at the source of the problem(company, individual), wide restorative powers, so not often necessary to invoke

Responsible behaviour: company systems, responsible individuals, effective internal regulation and sanctions, supported by ADR

Private law enforcement: make unnecessary, last priority so as to avoid abuse and undermining pillars 1 and 2