Thépot, F; (2015) The Effectiveness of Antitrust Enforcement Instruments: A Matter of Agency Relation. (CLES Research Paper series 1/2015). Centre for Law, Economics and Society, UCL Faculty of Laws: London, UK.

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Abstract

This paper explores how antitrust enforcement instruments modify the incentives and relations within companies, in the context of cartels. Among all relations, agency relations between shareholders and managers are the focus of this study. In the absence of individual liability, sanctions target the undertaking - or the principal of the agency relation; but not the responsible individuals - or the agent, who may engage the company in a cartel. Undertakings that face asymmetries of information and discrepancies of interests between actors may not have the ability and incentive to transfer a sanction to the responsible individuals. Thus, penalties that target the principal are deemed effective only if the company can reduce the interest gap internally and at low cost. Sanctions addressed to individuals in addition to companies, are able to impact directly the incentives of the agent of the agency relation. This paper argues that understanding the potential effects of competition law instruments on the agency relation is of utmost importance to assess their effectiveness to deter and detect cartel conduct. For competition policy purposes, it seems desirable that the agent and the principal have aligned interests towards sanctions. In contrast, leniency policy or bounty programmes that target the agent are effective if they aggravate the tension gap in the agency relation. The developments are based on the EU, and its member states, the US and other jurisdictions when relevant.

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