Deterrence in Competition Law

This chapter provides a comprehensive discussion of the deterrence properties of a competition policy regime. On the basis of the economic theory of law enforcement, we identify several factors that are likely to affect its degree of deterrence: (1) sanctions and damages; (2) financial and human resources; (3) powers during the investigation; (4) quality of the law; (5) independence; and (6) separation of powers. We then discuss how to measure deterrence. We review the literature that uses surveys to solicit direct information on changes in the behavior of firms due to the threats posed by the enforcement of antitrust rules, and the literature based on the analysis of hard data. Finally, we argue that the most challenging task both theoretically and empirically is how to distinguish between “good” and “bad” deterrence.