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Preventing innovative cooperations: the legal exemptions unintended side effect

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  • Christian Growitsch

    ()

  • Nicole Nulsch

    ()

  • Margarethe Rammerstorfer

    ()

Abstract

In 2004, European competition law had been faced with considerable changes due to the introduction of the new Council Regulation No. 1/2003. One of the major renewals was the replacement of the centralized notification system for inter-company cooperations in favor of a so-called legal exemption system. We analyze the implications of this reform on the agreements firms implement. In contrast to previous research we focus on the reform’s impact on especially welfare enhancing, namely innovative agreements. We show that the law’s intention to reduce the incentive to establish illegal cartels will be reached. However, by the same mechanism, also highly innovative cooperations might be prevented. To avoid this unintended effect, we conclude that only fines but not the monitoring activities should be increased in order to deter illegal but not innovative agreements.

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File URL: http://hdl.handle.net/10.1007/s10657-010-9184-9
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Bibliographic Info

Article provided by Springer in its journal European Journal of Law and Economics.

Volume (Year): 33 (2012)
Issue (Month): 1 (February)
Pages: 1-22

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Handle: RePEc:kap:ejlwec:v:33:y:2012:i:1:p:1-22

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Web page: http://www.springerlink.com/link.asp?id=100264

Related research

Keywords: Competition policy; Competition law enforcement; Legal exemption system; K42; L40;

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  1. A. Mitchell Polinsky, 2004. "Optimal Fines and Auditing When Wealth is Costly to Observe," NBER Working Papers 10760, National Bureau of Economic Research, Inc.
  2. Ulrich Blum & Nicole Steinat & Michael Veltins, 2008. "On the rationale of leniency programs: a game-theoretical analysis," European Journal of Law and Economics, Springer, vol. 25(3), pages 209-229, June.
  3. Garoupa, Nuno, 1997. " The Theory of Optimal Law Enforcement," Journal of Economic Surveys, Wiley Blackwell, vol. 11(3), pages 267-95, September.
  4. Barros, Pedro Pita, 2003. "Looking behind the curtain--effects from modernization of European Union competition policy," European Economic Review, Elsevier, vol. 47(4), pages 613-624, August.
  5. Shavell, Steven, 1993. "The Optimal Structure of Law Enforcement," Journal of Law and Economics, University of Chicago Press, vol. 36(1), pages 255-87, April.
  6. Gary S. Becker, 1968. "Crime and Punishment: An Economic Approach," Journal of Political Economy, University of Chicago Press, vol. 76, pages 169.
  7. A. Mitchell Polinsky & Steven Shavell, 1999. "The Economic Theory of Public Enforcement of Law," NBER Working Papers 6993, National Bureau of Economic Research, Inc.
  8. Frederic Loss & Estelle Malavolti-Grimal & Thibaud Vergé & Fabian Berges, 2008. "European competition policy modernization: from notification to legal exception," Working Papers 22644, Institut National de la Recherche Agronomique, France.
  9. Polinsky, Mitchell & Shavell, Steven, 1979. "The Optimal Tradeoff between the Probability and Magnitude of Fines," American Economic Review, American Economic Association, vol. 69(5), pages 880-91, December.
  10. Buccirossi, Paolo & Spagnolo, Giancarlo, 2006. "Optimal Fines in the Era of Whistleblowers," CEPR Discussion Papers 5465, C.E.P.R. Discussion Papers.
  11. Neven, Damien J. & Roller, Lars-Hendrik, 1991. "European integration and trade flows," European Economic Review, Elsevier, vol. 35(6), pages 1295-1309, August.
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