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European Competition Policy Modernization: From Notification to Legal Exception

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  • Law


eerrev060116.dvi European Competition Policy Modernization: From Notifications to Legal Exception∗ Frédéric Loss† Estelle Malavolti-Grimal‡ Thibaud Vergé§ Fabian Bergès-Sennou¶ January 2006 Abstract Council Regulation (EC) 1/2003 came into force on the 1st of May 2004 replacing the mandatory notification of agreements between firms by a regime of ex post monitoring. This paper provides a theoretical justification for this shift based on the competition authority’s accuracy of judgement. We show that ex post monitoring dominates when the competition authority’s probability of error if low enough. We also investigate the two other existing legal systems, i.e. block exemptions and black list, and show that they should be preferred when the competition authority’s beliefs about the welfare impact of the agreements are very optimistic or very pessimistic. Keywords: competition policy, imperfect audit. JEL classification: L4, D8. ∗We would like to thank David Alary, Eric Avenel, Pedro Pita Barros, Bruno Jullien, Denis Gromb, Jean Marie Lozachmeur, Massimo Motta, Patrick Rey, Karl Schlag, Jean Tirole, the editor and two anonymous referees for helpful comments. Frédéric Loss, Estelle Malavolti-Grimal, and Thibaud Vergé gratefully acknowledge financial support from the European Commission (TMR while at FMG-LSE), the European University Institute and the Leverhulme Trust (while at CMPO, Bristol) respectively. †CNAM - Laboratoire d’économétrie. ‡LEEA-ENAC (Toulouse). §Laboratoire d’Economie Industrielle, CREST-INSEE. ¶University of Toulouse (INRA-ESR). 1 1 Introduction In January 2003, the European Commission (henceforth EC) published a new regulation modifying the procedure for the detection of anti-competitive practices and abuses of dominant position.1 The main effects of this reform are to replace the current notification system of ex ante monitoring in favor of an ex post offence repression regime and to decentralize the enforcement of compe

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