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Springer 2008
De Economist (2008) 156:411432
DOI 10.1007/s10645-008-9102-5
DE ECONOMIST 156, NO. 4, 2008
THE DETERRENT EFFECT OF UK COMPETITION ENFORCEMENT
BY
FIAMMETTA GORDON, DAVID SQUIRES,
Summary
The paper briey reviews previous studies of the deterrent effect of competition enforcement. It then describes the key ndings of a recent report commissioned by the Ofce of Fair Trading on the scale of the deterrent effect of merger control and competition law enforcement in the UK. The research, which was based on in-depth interviews and phone surveys with senior competition lawyers and large UK companies also indicated which sanctions may be more effective at deterring anti-competitive behaviour and provided suggestions for improving deterrence. The paper discusses a number of policy issues raised by the researchs ndings.
Key words: competition enforcement, consumer savings, deterrent effect, merger control
JEL Code(s): K21, L4
1 INTRODUCTION
Increasingly, competition authorities interventions are being evaluated.1 In
the UK, evaluation exercises using a very wide range of different methodologies have been conducted for specic mergers, competition law decisions and market investigations.2
Broadly, these studies have two goals. First, they can be used for external accountability, to assess the scale of the benets of competition enforcement in relation to its costs to the taxpayer. Second, they can be used as an internal management tool to inform decisions as to how to allocate scarce agency resources to those activities which will deliver the greatest benets.
Corresponding author: Ofce of Fair Trading (OFT), Fleetbank House, 2-6 Salisbury Square, London EC4Y 8JX, UK, e-mail: [email protected] Deloitte, Athene Place, 66 Shoe Lane, London EC4A 3BQ, UK, e-mail: [email protected] The views expressed herein do not necessarily represent those of the OFT or Deloitte. This paper was prepared for the October 2007 workshop on Measuring the Effects of Competition Law Enforcement, organized by the Netherlands Competition Authority.
1 The diverse approaches that have been taken to evaluation in 14 OECD jurisdictions are described in a recent OECD roundtable on competition policy (OECD (2005)).2 See PwC (2005), Competition Commission (2006, 2007), OFT (2005, 2007b,c), and Davies et al. (2004).
412 FIAMMETTA GORDON AND DAVID SQUIRES
One of the most ambitious recent evaluation studies is the report published by the UKs Ofce of Fair Trading (OFT) in 2005. This estimated that the consumer...