Penalties set by Office of Fair Trading and the French Competition Authority

Who is affected

(i) All companies in UK and France whose actions could ever be subject to consideration by these competition authorities.
(ii) Customers of these companies who may be deterred from acting anticompetitively if they anticipate a tougher penalty regime.
(iii) Other competition authorities who may also be reviewing their penalties and deciding whether to follow OFT's lead

Narrative

Our advice shaped the current penalty policies and guidelines used by two major competition authorities: the Office of Fair Trading (OFT) in UK and the Autorite de la Concurrence (AdeC) in France.
As part of our ESRC project on Optimal Decision and Enforcement Structures for Competition Policy we undertook a series of user engagement meetings with both of these competition authorities. At a meeting in November 2010 we told OFT about our research on legal uncertainty and penalties, and in particular our conclusion that, contrary to the opinion most legal scholars, legal uncertainty could be a reason for having high penalties. At that point OFT was having an internal debate about revising their baseline calculation of penalties from 10% to 30% of company revenue, and were facing considerable objections on grounds of legal uncertainty. We were invited to present our results to a large meeting of OFT personnel in January 2011. Later that year OFT went out to public consultation on the proposal to raise the penalty to 30%. In a letter, the Chief Economist of OFT writes that our presentation “was helpful in clarifying our thinking about the role of legal uncertainty and ultimately helped confirm our decision to propose higher starting point penalties.” We submitted our evidence to the consultation. This included calculations based on formulae for the optimal penalty derived in our paper on Legal Uncertainty and Choice of Enforcement Procedures. These produced a range of values – some higher than 30%. In the same letter OFT’s Chief Economist also writes: “We found this helpful in terms of contributing to a balanced range of views on our proposals because many of the submissions were arguing against our proposals to raise the penalty starting point, whereas in their submission Professors Katsoulacos and Ulph put forward arguments and calculations that suggested that the optimal baseline penalty might if anything be somewhat higher than the 30% proposed in our consultation document, in particular for infringements that suffer from low detection rates.”
As a result, OFT's preferred policy remains taht of rasining penalties to 30%.
At the same time AdeC were also reviewing their penalty guidelines. These are less formulaic than OFT’s but set out the general principles. Our advice also shaped these guidelines. In a letter the Chief Economist of AdeC writes: “Discussion on the topic of fine setting was extremely interesting and timely as the Autorité was in the middle of a process to write its own sentencing guidelines (this was ultimately done in May 2011). Although our guidelines on the setting of fines for anticompetitive behaviour were primarily driven by the legal requirements of the French Code of Commerce and our past case law, all the discussions that we have had with – among other – academic economists (and therefore with Professors Katsoulacos and Ulph) have greatly influenced our discussions internally and helped thus drafting our guidelines.”

Impact status	Open
Category of impact	Public Policy Impact, Economic, Commercial Impact
Impact level	Change adopted - end stage