Private Enforcement of European Competition Law and the Persisting Collective Action Problem

Several economic criteria may help policy-makers in choosing between public and private enforcement of competition law. The welfare losses caused by infringements of the cartel prohibition may be better internalized by imposing fines rather than by bringing damages actions. Public agencies may possess information advantages and they may also be able to remedy the difference between the private and social motive to sue. Private enforcement may complement public enforcement by increasing deterrence and guaranteeing compensation. Both direct and indirect buyers should be given standing to bring damages actions. Given the reluctance to introduce US-style class actions, European policy-makers favour collective opt-in actions and representative actions brought by consumer associations. However, the participation rate of opt-in collective actions may remain too low and actions by consumer associations are also vulnerable to principal-agent problems. Moreover, private enforcement of competition law by consumer associations will remain suboptimal if the funding problem is not solved. This paper argues in favour of an optimal mix of public and private enforcement of competition law and suggests some remedies to overcome the above mentioned problems.