ASCOLA Competition Law series
Edited by Paul Nihoul and Tadeusz Skoczny
Chapter 1: Substance and process in competition law and enforcement. Why we should care if it’s not fair
The hallmark of an effective law is that it is obeyed by those subject to it. A law that prohibits certain types of conduct is not effective if it does not influence behaviour to conform with it. Moreover, law enforcement authorities are limited in their capacity and resources and rely on most of those who are subject to the law to comply voluntarily with it most of the time. Given this, it is essential to understand the factors that influence compliance with the law. A long-standing theory on compliance is that behaviour is most effectively influenced by increasing the likelihood of detection and punishment of wrongdoing and threatening the application of severe sanctions for transgressions. This is the well-known rational choice or classical deterrence paradigm that permeates much public policy thinking, particularly in the criminal justice realm, but also in the realm of business regulation, including competition and consumer regulation. In the latter context, it is a paradigm that has spawned a substantial body of economic literature concerned with methods for calculating the ‘optimally deterrent’ monetary penalty. An alternative view challenges the assumption that it is the objective certainty and/or severity of punishment that is the most effective or sustainable approach to influencing compliance with the law. The challenge derives from an impressive body of theoretical and empirical research that exposes the weaknesses in the classical deterrence paradigm.