Birgit Will and Dieter Schmidtchen:
Fighting Cartels: Some Economics of Council
Regulation (EC) 1/2003
Discussion Paper No. 2008-02

Keywords: competition law, cartel law enforcement, legal exception, imperfect
decision making, type I error, type II error
JEL Classification: K21, K42, L40
 

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Abstract

This paper investigates the effectiveness of the new Council Regulation (EC) 1/2003 which replaces the mandatory notification and authorization system by a legal exception system. Effectiveness is operationalized via the two subcriteria compliance to Art. 81 EC Treaty and the probabilities of type I and type II errors committed by the European Commission.

We identify four different types of Perfect Bayesian Nash Equilibria: fullcompliance, zero-compliance, positive-compliance and full-deterrence. We show that the Commission can, in principle, hit the full-compliance equilibrium, where the cartelizing firms fully obey the requirements of Art 81(3) EC Treaty and both error probabilities are zero.