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Speeches 2008 -

Stimulating or chilling competition - John Fingleton, OFT Chief Executive

25 September 2008

John Fingleton, OFT chief executive, spoke at the Fordham Annual Conference on International Antitrust Law and Policy in New York on the potential chilling effects of competition law enforcement.

Executive summary of the paper written by John Fingleton and Ali Nikpay for the conference
Competition enforcement can bring substantial benefits for consumers and businesses alike, in terms of lower prices, higher quality, greater innovation and increased productivity.

However, competition enforcement also has the potential to increase costs for businesses and risks deterring pro-competitive conduct through inappropriate intervention into market conduct or insufficient intervention to deter harmful conduct. In the debate regarding the likelihood that competition enforcement will deter (or 'chill'), rather than stimulate, competition, it is often argued that the risks of deterring pro-competitive conduct are greater as a result of over-intervention than under-intervention. However, economic research suggests that under-intervention should not be considered to be less serious or harmful to welfare than over-intervention.

In the absence of perfect information to guide interventions and unlimited resources with which to carry them out, competition authorities must strive to operate a regime in which the benefits of their interventions are maximised and outweigh the costs.

This paper examines the elements necessary for an optimal competition enforcement regime, and suggest that these are (i) an appropriate analytical framework for enforcement; (ii) the institutional ability to carry out effective interventions through effective resourcing that does not unduly stretch the capabilities of the authority; (iii) adequate incentives to consistently product high-quality enforcement actions; and (iv) independence. We consider that an economically-sound, effects-based framework that focuses on consumer welfare is the most appropriate and effective framework to stimulate competition and minimise the risk of chilling genuinely pro-competitive behaviour.

Having considered the building blocks of an optimal competition enforcement regime, this paper then reviews the OFT's regime in light of those criteria and considers some key issues arising out of competition enforcement in an international context.

Download the full paper (pdf 192 kb).

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