Working Paper: CEPR ID: DP17140
Authors: Michele Polo; Patrick Rey
Abstract: This paper analyses the impact of commitments on antitrust enforcement. These tools, introduced in Europe by the Modernization reform of 2003, are now used intensively by the European Commission and by National Competition Agencies. We consider a setting where a firm can adopt a practice that is either pro- or anti-competitive; the firm knows the nature of the practice whereas the enforcer has only prior beliefs about it. If the firm adopts the practice, the enforcer then decides whether to open a case. When commitments are available, the firm can offer a commitment whenever a case is opened; the enforcer then decides whether to accept it or run a costly investigation that may or may not bring supporting evidence. We show that introducing commitments weakens enforcement when the practice is likely to be anti-competitive. The impact of commitments is however more nuanced when the practice is less likely to be anti-competitive.
Keywords: antitrust enforcement; commitment; remedies; deterrence
JEL Codes: L40; K21; K42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| commitments (L14) | enforcement (K40) |
| anticompetitive practices (L41) | commitments (L14) |
| commitments (L14) | investigations (C99) |
| enforcer's welfare criterion (D63) | investigations (C99) |
| commitments (L14) | deterrent effect (K40) |
| commitments (L14) | enforcement effectiveness (K40) |
| commitments (L14) | expected welfare (D69) |