Public and Private Enforcement of Competition Law – A Differentiated Approach

Most competition law enforcement systems are based on two enforcement pillars: public enforcement and private enforcement. While private enforcement is often treated as something new or at least marginally important in Europe, it has been the driving force of US antitrust enforcement since the middle of the 20th century. In order to create more incentives to seek compensation before European courts, the European Commission has published a Green Paper in 2005 and a White Paper in 2008 to incentivise private damages actions and remove perceived obstacles for victims of anticompetitive conduct.

Strengthening the enforcement of private rights inevitably raises the question of how public and private enforcement can ideally be aggregated to achieve a welfare optimal outcome. Both public and private enforcement are costly, but each mode also has got its particular benefits. As a consequence, any integrated enforcement scheme ought to find a way to optimally combine the benefits and costs of running the two systems. In a situation – as in Europe – in which private enforcement activities are added to an existing public enforcement system, an assessment of the incremental costs and benefits of such a step becomes crucial for the design of an optimal competition law enforcement system.

Against this background, we investigate the relationship between public and private enforcers introducing a more differentiated approach. In contrast to the existing literature, we take into account that the costs and benefits of detection and prosecution and, thus, the usefulness of each enforcement mode may change with a variation of the type of anticompetitive conduct. We define a set of parameters that determine the costs and benefits of both types to enforce the antitrust laws and discuss implications for European competition law and policy.

Hüschelrath, Kai and Sebastian Peyer (2013), Public and Private Enforcement of Competition Law – A Differentiated Approach, ZEW Discussion Paper No. 13-029, Mannheim.