Chillin'Competition

Relaxing whilst doing Competition Law is not an Oxymoron

The Law of Unintended Consequences

with 3 comments

With rising fines for antitrust violations, there’s been a lot of fuzz about the adequacy of the current EU penalty system.

The EU fines system is generally lambasted on two counts. First, it would be inefficient because the average level of fines currently slapped by competition authorities would still be far below the optimal deterrence level. Second, it would be unfair because it targets companies as a whole, rather than the individuals which have secretly engaged into unlawful conduct. In so doing, administrative fines would thus harm a range of third parties (shareholders, workforce, etc.) which have nothing to do with the infringement. Interestingly, increasing fines to satisfy the efficiency concern would further exacerbate the unfairness concern.

The upshot of this has been a renewed interest for alternative penalties (director disqualification, individual fines, etc.). In a recent paper published in ECLR, our esteemed colleague Prof. Alan Ryley (City University London) puts forward a creative, and somewhat radical proposal:

Thirdly, the expulsion of aliens from EU territory: Most international business executives need to be able to travel into the European Union, the world’s largest single market. Prohibition from entering EU territory for a term of years would make it difficult for them to act as senior level executives, as well as significantly damaging their reputations.

Now a question: beyond preventing business executives from making Xmas shopping in Paris and London – which I do not view as a particularly strong deterrent – I fail to see how this could really dissuade guilty alien executives to operate cartels within the EU. Paradoxically, those executives will be increasingly incentivized to negotiate cartels targeted at the EU outside of the European territory, with the unintended side-effect that the Commission’s will face mounting difficulties to gather evidence of unlawful conduct.

The full reference of Prof. Riley’s excellent paper is “The modernisation of EU anti-cartel enforcement: will the Commission grasp the opportunity?”, E.C.L.R. 2010, 31(5), 191-207, 2010.

Thanks to my assistant N. Neyrinck and my student B. Boggaerts for the pointer.

The picture above is taken from one of the worst French movies ever.

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Written by Nicolas Petit

15 February 2011 at 9:46 pm

3 Responses

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  1. Good point in reviewing EU penalty system. I would also point out the issue of calculating the amount of fine as far as cartels are concerned. I wonder if setting a fine counted on a revenue obtained in a year preceding the year of fine imposition still lies within the frames of legal certainty and fine adequacy. E.g. what if the EC protracts the proceedings so as to reach a year of higher revenue of an undertaking (–> higher fine)? Perhaps we should turn back to fines strictly stipulated?

    Ben

    15 February 2011 at 10:46 pm

    • It is interesting to read Ben’s comment and in particular his last point since several similar issues related to legal certainty are currently pending before the Supreme administrative court in Athens (for ex. in a case where, in short, the parties seem to have raised arguments against the allegedly too vast discretion of the NCA in this context, and in particular with regard to the fact that in Greece in the SO sent to the parties there is no proposed amount for the fine – contrary to what used to be the case in the past).

      George Pedakakis

      20 February 2011 at 11:37 pm

  2. If the EU penalty system should be reviewed, it shouldn’t cause any alteration of the economy. Disqualification order may be a better solution. However, from my point of view, “ preventing business executives from making Xmas shopping in Paris and London” could undoubtedly dissuade executives to take part to a cartel within the EU…

    J.Wieczorek

    21 February 2011 at 8:06 pm


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