Evaluation of direct impact and deterrent effect of CA98 cases: A report for the CMA

DotEcon was commissioned by the Competition and Markets Authority (CMA) to conduct an evaluation of five recent CA98 decisions taken by the CMA (or the Office of Fair Trading – OFT – the CMA’s predecessor) with regard to both direct and indirect effects of the competition authority’s intervention.

The primary focus of the evaluation was on assessing the indirect effects from firms becoming more aware of the requirements of competition law and changing their assessment of the likelihood of anticompetitive behaviour being detected or being subject to enforcement action, which in turn may lead to changes in firms’ behaviour.

Based on the results of a survey of businesses, DotEcon assessed awareness of both the specific cases and competition law more generally and sought to quantify the indirect, deterrent effect on firms not subject to the original enforcement action.

The findings demonstrate a clear link between CMA/OFT intervention and greater levels of awareness and understanding of competition law, specifically in relation to the illegality of specific infringing behaviour in the selected CA98 cases. Furthermore, there is evidence to support the view that awareness of cases pursued by the CMA/OFT changes in the perception of being caught and prosecuted, ultimately deterring infringing behaviour by other firms.

We presenting estimates of the indirect impact, calculated as the detriment avoided from firms being deterred from engaging in infringing behaviour. We  find that the indirect deterrence effect is plausibly a multiple of the direct effect. Although the effect per firm is small, there is a significant benefit due to the large number of businesses being deterred from engaging in anti-competitive behaviour.

The report can be found here and is also available from the CMA website.

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