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Private antitrust enforcement in the presence of pre-trial bargaining

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  • Bourjade, Sylvain
  • Rey, Patrick
  • seabright, paul

Abstract

We study the effect of encouraging private actions for breaches of competition law. We develop a model in which a plaintiff, who may have private information about whether a breach of law has been committed, decides whether to open a case against a defendant. If opened, the case may be settled out of court or may proceed to full trial. The authorities can facilitate private actions by lowering the costs of opening a case or of proceeding to a full trial, or by raising the damages to be expected in the event of success. We show that facilitating private action increases the number of cases opened and sometimes but not always makes plaintiffs more aggressive in pre-trial bargaining. The latter, if it occurs, tends to make defendants who have committed anti-trust violations more likely to settle than innocent defendants. We also show that for screening to work requires the Court to be committed to rely only on submitted evidence in the case, and not on other possibly relevant background material. We finally study how to design the rules so as to enhance the role of private litigation on antitrust enforcement and prove that it is better to increase damages that to reduce costs of initiating a suit. In particular we find large benefits from introducing a system of compensation for Defendants found non-liable, paid by unsuccessful plaintiffs.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 34840.

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Date of creation: 2009
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Publication status: Published in The Journal of Industrial Economics 3.LVII(2009): pp. 372-409
Handle: RePEc:pra:mprapa:34840

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Keywords: litigation; private actions; out-of-court settlement; enforcement;

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References

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Cited by:
  1. Ronald W. Cotterill, 2009. "Antitrust Economic Analysis in Food Marketing Channels," Issue Papers, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy 57, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
  2. Claudio Calcagno, 2012. "Stand-alone private antitrust damages: (how) should competition authorities react?," European Journal of Law and Economics, Springer, Springer, vol. 34(2), pages 365-389, October.
  3. Bourjade, Sylvain, 2009. "The role of private litigation in antitrust enforcement," MPRA Paper 34818, University Library of Munich, Germany.
  4. Schwartz, Warren F. & Wickelgren, Abraham L., 2011. "Optimal antitrust enforcement: Competitor suits, entry, and post-entry competition," Journal of Public Economics, Elsevier, Elsevier, vol. 95(7), pages 967-972.
  5. Cotterill, Ronald W., 2009. "Antitrust Economic Analysis in Food Marketing Channels," 2009 Conference, August 16-22, 2009, Beijing, China, International Association of Agricultural Economists 53201, International Association of Agricultural Economists.
  6. Tim Reuter, 2012. "Private antitrust enforcement revisited: The role of private incentives to report evidence to the antitrust authority," Working Paper Series of the Department of Economics, University of Konstanz, Department of Economics, University of Konstanz 2012-04, Department of Economics, University of Konstanz.

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