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Fighting cartels: some economics of council regulation (EC) 1/2003

Birgit E. Will and Dieter Schmidtchen

No 2008-02, CSLE Discussion Paper Series from Saarland University, CSLE - Center for the Study of Law and Economics

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.

Keywords: competition law; cartel law enforcement; legal exception; imperfect (search for similar items in EconPapers)
JEL-codes: K21 K42 L40 (search for similar items in EconPapers)
Date: 2008
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