A PYMNTS Company

Optimal Enforcement of Competition Policy: The Commitments Procedure Under Uncertainty

By  |  October 19, 2014

Posted by Social Science Research Network

Optimal Enforcement of Competition Policy: The Commitments Procedure Under Uncertainty – Axel Gautier (University of Liege – Research Center on Public and Population Economics ; Catholic University of Louvain (UCL) – Center for Operations Research and Econometrics) and Nicolas Petit (University of Liege – School of Law)

ABSTRACT: Since the introduction of a formal commitments procedure in EU antitrust policy (Article 9 of Council Regulation 1/2003), the European Commission has extensively settled cases of alleged anticompetitive practices. In this paper, we use a formal model of law enforcement (Bebchuk, 1984; Shavell, 1988) to identify the optimal procedure to resolve cases in a context of uncertainty related to the law (L-uncertainty) and to the facts (F-uncertainty). We show that commitments are suboptimal when there L-uncertainty is important. Furthermore, the generalized use of commitments creates an additional risk of under-enforcement when F-uncertainty is significant.