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 Law
Erasmus University, Rotterdam
Issues
1.
2.
Damages
Enforcement Policy
The Orthodox Approach
 Competition Enforcement is about Deterrence,
achieved by large fines
 Penalties on individuals?
 The Public Authority imposes Fines
 Damages 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.
EU
Private enforcement of both
public norms and private
rights
Public enforcement of
public law:
sanctions + fines
Deterrence Theory
Deterrence Theory
Damages = Fines
Private enforcement of
private rights: damages
Choice of enforcement policy
 Deterrence: competition
 Responsive: tit-for-tat
 Pyramid: escalation
 Risk-based: prioritisation
 Restorative Justice
Hodges 2 articles 2011
Braithwaite Enforcement Pyramid
Removal
of Liberty
EU Public Enforcement Theory:
Fines + Deterrence
 A post facto control has to be very large to be effective.
 How large is enough?
Ineffective
 Fines rise to defeat calculations re fine and leniency
 DG case investigations have fallen
 Recidivism?
 Extent of non-compliance is unknown: important
because used in fining
 Assumption 10-20% cartels detected
Problems with Deterrence 1
1.
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 2
5.
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
Gain to
cartelists
Loss to
victims
Loss to
victims
Problems with Deterrence 3
9.
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 Restitution
 The priorities are:
 Restitution of victims
 Restoration of a competitive market
 Then consider sanctions based on:




Targeting the cause: individuals or company?
Action taken against individuals
Corporate Best Practice scheme and operation
Cooperation: Doing the Right Thing



Owning up
Paying back
Cooperation
 Recidivism: past and future likelihood
 Seriousness
Three Pillar Model
ADR
Regulation
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