The impact of competition interventions on compliance and deterrence

Practice area: Behavioural Economics | Competition | Competition & Antitrust | Competition Economics | Remedies and enforcement
Client: Office of Fair Trading
Published: December, 2011
Keywords: qualitative analysis quantitative analysis stakeholder surveys and consultations

The research, which consisted of a survey of more than 500 large companies and 300 SMEs, as well as a small survey of specialist competition advisers in legal firms, estimates that for each abuse of dominance case, 12 potential infringements are deterred; for each cartel case, 28 potential infringements are deterred and for each commercial agreements case, 40 potential infringements are deterred. The study finds that businesses view the reputational damage and criminal sanctions arising from competition enforcement as the most important drivers of compliance with the law, followed closely by the associated financial penalties. By contrast, competition advisers in legal firms place the greatest emphasis on financial penalties, followed by criminal sanctions and leniency policy. Businesses report a lack of knowledge of competition law to be the most important driver of non-compliance. Around half of large businesses said that they were fairly or very knowledgeable about various basic aspects of competition law, although SMEs were less likely to report that they were knowledgeable. The study involves also an experiment with officials responsible for compliance with competition law. The results of the experiment show that anti-competitive behaviour responds to financial incentives. Experiment participants were less likely to choose a risky alternative (the cartel option) if there was a high probability of detection, a high sanction or a low gain from a risky option. However, the experiment also shows that the choice of whether or not to participate in a cartel depends not only on financial incentives but also on the degree of risk aversion and social preferences to minimise costs to other people in the economy.