Improving Accuracy in Effects-Based Analysis: An Incentive-Oriented Approach

Abstract

This article examines the beneficial effects of altering the legal standard in effects-based analysis under Art 81 EC. We show why the use of an expansive notion of restrictiveness, and the exercise of discretion allows the European Commission to make excessive savings on the accuracy of its assessments. By reference to the economic literature on tort law, this is shown to result in over-compliance. To remedy this problem, we examine the possibility of improving the level of accuracy in effects-based analysis. In doing so, a point is made that reaches beyond the boundaries of antitrust law. It is shown that the standard theory on improving accuracy is critically dependent on the assumption that under-deterrence is the problem to be solved. Where over-compliance prevails, a reduction in the level of enforcement, due to higher costs of investigation, need not have a negative impact on deterrence. This is because the cases that would not be launched any longer are likely to be primarily the ones that should not be challenged in the first place. We conclude that the prospects for improving accuracy in European effects-based analysis are good therefore.

Keywords: competition law, antitrust, uncertainty, legal standard, accuracy in adjudication, enforcement

JEL Classification: K21, K41, K42