The Law of Unintended Consequences
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.