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Imperfect competition law enforcement

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  • Schinkel, Maarten Pieter
  • Tuinstra, Jan

Abstract

Competition policy is a subject of often heated debate. Competition authorities, seeking to battle anticompetitive acts in complex cases to the best of their abilities, regularly find themselves advised by rival economic theories and disputed empirical analyses. As a consequence, there is a real possibility that they may occasionally err, missing true violations of competition law or finding firms liable that have actually done nothing but good competition. In this paper, possible consequences of such imperfect competition law enforcement on firm strategies are considered. In a simple cartel setting, it is found that the incidence of anti-competitive behavior increases in both types of enforcement errors: Type II errors decrease expected fines, while Type I errors encourage industries to collude precautionary when they face the risk of false allegations. Hence, fallible antitrust enforcement may stifle genuine competition. Moreover, when enforcement error are non-negligible, competition authorities run the risk of being over-zealous, in the sense that welfare is best served by an authority that is selective in its targeting of alleged anticompetitive acts.
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  • Schinkel, Maarten Pieter & Tuinstra, Jan, 2006. "Imperfect competition law enforcement," International Journal of Industrial Organization, Elsevier, vol. 24(6), pages 1267-1297, November.
    • Handle: RePEc:eee:indorg:v:24:y:2006:i:6:p:1267-1297
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    1. Katsoulacos, Yannis & Ulph, David, 2014. "Decision Errors, Legal Uncertainty and Welfare: a General Treatment," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 2015-09, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Katsoulacos, Yannis & Ulph, David, 2014. "Legal Uncertainty, Competition Law Enforcement Procedures and Optimal Penalties," SIRE Discussion Papers 2015-12, Scottish Institute for Research in Economics (SIRE).
    3. Paolo Buccirossi & Lorenzo Ciari & Tomaso Duso & Giancarlo Spagnolo & Cristiana Vitale, 2011. "Measuring The Deterrence Properties Of Competition Policy: The Competition Policy Indexes," Journal of Competition Law and Economics, Oxford University Press, vol. 7(1), pages 165-204.
    4. Maarten Pieter Schinkel, 2008. "Forensic Economics In Competition Law Enforcement," Journal of Competition Law and Economics, Oxford University Press, vol. 4(1), pages 1-30.
    5. Grajzl, Peter & Baniak, Andrzej, 2018. "Private enforcement, corruption, and antitrust design," Journal of Comparative Economics, Elsevier, vol. 46(1), pages 284-307.
    6. Michiel Bijlsma & Roel van Elk, 2008. "Opportunistic competition law enforcement," CPB Discussion Paper 110.rdf, CPB Netherlands Bureau for Economic Policy Analysis.
    7. Michiel Bijlsma & Roel van Elk, 2008. "Opportunistic competition law enforcement," CPB Discussion Paper 110, CPB Netherlands Bureau for Economic Policy Analysis.
    8. Hüschelrath, Kai, 2009. "Methodologische Grundlagen einer Evaluation von Wettbewerbspolitik," ZEW Discussion Papers 09-084, ZEW - Leibniz Centre for European Economic Research.
    9. Claudio Calcagno, 2012. "Stand-alone private antitrust damages: (how) should competition authorities react?," European Journal of Law and Economics, Springer, vol. 34(2), pages 365-389, October.
    10. Lars Sørgard, 2009. "Optimal Merger Policy: Enforcement Vs. Deterrence," Journal of Industrial Economics, Wiley Blackwell, vol. 57(3), pages 438-456, September.
    11. Lang, Matthias, 2017. "Legal uncertainty as a welfare enhancing screen," European Economic Review, Elsevier, vol. 91(C), pages 274-289.
    12. Katsoulacos, Yannis & Ulph, David, 2014. "Legal Uncertainty, Competition Law Enforcement Procedures and Optimal Penalties," SIRE Discussion Papers 2015-12, Scottish Institute for Research in Economics (SIRE).
    13. Bernardo Guimaraes & Bruno Meyerhof Salama, 2023. "Permitting Prohibitions," The Journal of Legal Studies, University of Chicago Press, vol. 52(1), pages 241-271.
    14. Guimarães, Bernardo de Vasconcellos & Salama, Bruno Meyerhof, 2017. "Contingent judicial deference: theory and application to usury laws," Textos para discussão 440, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).
    15. Damien Neven & Hans Zenger, 2008. "Ex Post Evaluation of Enforcement: A Principal-Agent Perspective," De Economist, Springer, vol. 156(4), pages 477-490, December.
    16. Ghebrihiwet, N. & Motchenkova, E.I., 2010. "Leniency programs in the presence of judicial errors," Serie Research Memoranda 0008, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    17. Katsoulacos, Yannis & Ulph, David, 2017. "Regulatory decision errors, Legal Uncertainty and welfare: A general treatment," International Journal of Industrial Organization, Elsevier, vol. 53(C), pages 326-352.
    18. Will, Birgit E. & Schmidtchen, Dieter, 2008. "Fighting cartels: some economics of council regulation (EC) 1/2003," CSLE Discussion Paper Series 2008-02, Saarland University, CSLE - Center for the Study of Law and Economics.
    19. Katsoulacos, Yannis & Ulph, David, 2014. "Legal Uncertainty, Competition Law Enforcement Procedures and Optimal Penalties," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 2015-12, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    20. 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 2012-04, Department of Economics, University of Konstanz.
    21. Katsoulacos, Yannis & Ulph, David, 2014. "Decision Errors, Legal Uncertainty and Welfare: a General Treatment," SIRE Discussion Papers 2015-09, Scottish Institute for Research in Economics (SIRE).
    22. Panayiotis Agisilaou, 2013. "Collusion in Industrial Economics and Optimally Designed Leniency Programmes - A Survey," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2013-03, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    23. Guimaraesy, Bernardo & Meyerhof Salama, Bruno, 2017. "Contingent judicial deference: theory and application to usury laws," LSE Research Online Documents on Economics 86146, London School of Economics and Political Science, LSE Library.
    24. Katsoulacos, Yannis & Ulph, David, 2014. "Decision Errors, Legal Uncertainty and Welfare: a General Treatment," SIRE Discussion Papers 2015-09, Scottish Institute for Research in Economics (SIRE).

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