Problems of competition enforcement and redress: EU trends and new solutions Professor Dr Christopher Hodges

1. Problems of competition enforcement and redress: EU trends and new solutions Professor Dr Christopher Hodges Head of the CMS Research Programme on Civil Justice Systems Centre for Socio-Legal Studies, University of Oxford Erasmus Professor of the Fundamentals of Private Law Erasmus University, Rotterdam

2. Issues • Damages • Enforcement Policy

3. The Orthodox Approach • Competition Enforcement is about Deterrence, achieved by large fines • Penalties on individuals? • The Public Authority imposes Fines • Damages can be delegated to private actors

4. Design Choices for Enforcement Actors: public or private? Law: public or private Procedures: public or private? Time of control technique: ex ante or ex post? Enforcement policy?

5. Differing Policies on Enforcement U.S.A. Private enforcement of both public norms and private rights Deterrence Theory Damages = Fines EU Public enforcement of public law: sanctions + fines Deterrence Theory Private enforcement of private rights: damages

6. Choice of enforcement policy • Deterrence: competition • Responsive: tit-for-tat • Pyramid: escalation • Risk-based: prioritisation • Restorative Justice Hodges 2 articles 2011

7. Removal of Liberty Braithwaite Enforcement Pyramid

8. EU Public Enforcement Theory:Fines + Deterrence • A post facto control has to be very large to be effective. • How large is enough? Ineffective • Fines rise to defeat calculations re fine and leniency • DG case investigations have fallen • Recidivism? • Extent of non-compliance is unknown: important because used in fining • Assumption 10-20% cartels detected

9. Problems with Deterrence 1 • Deterrence on its own does not deter – unless the sanction, being ex post, is vast • Deterrence does not produce compliant behaviour • Should deterrence be a goal of regulatory enforcement? • Enforcement on companies is aimed at the wrong targets • Fines impose significant damage on the wrong targets (employees, shareholders, innovation)

10. Problems with Deterrence 2 • Large sanctions are contrary to constitutional/fundamental rights principles of justice, fairness and proportionality • Determination of fines is not transparent, consistent or fair • Leniency encourages perverse behaviour (infringe, then own up first, and keep illicit gain) • This policy does not rectify a balanced market

11. The effect of a cartel on the market Gain to cartelists Gain to cartelists Loss to victims Loss to victims

13. Combined effect?

14. Problems with Deterrence 3 • Damages cannot be added on after fines: they must be integrated to produce fair and proportionate outcomes • Culture: Polarisation not solidarity

15. What is the role of a competition regulator? A balanced competitive market

16. A Model for Enforcement and Restitution • The priorities are: • Restitution of victims • Restoration of a competitive market • Then consider sanctions based on: • Targeting the cause: individuals or company? • Action taken against individuals • Corporate Best Practice scheme and operation • Cooperation: Doing the Right Thing • Owning up • Paying back • Cooperation • Recidivism: past and future likelihood • Seriousness

17. Three Pillar Model Regulation ADR Private Litigation

18. A Model for Enforcement and Restitution Credible threats, enlisting self-regulation and the ‘shadow of the law’ to produce swift, cheap solutions • Public Pillar: wide enforcement powers, credible threat, targeted at the source of the problem(company, individual), wide restorative powers, so not often necessary to invoke • Responsible behaviour: company systems, responsible individuals, effective internal regulation and sanctions, supported by ADR • Private law enforcement: make unnecessary, last priority so as to avoid abuse and undermining pillars 1 and 2