Unilateral Practices, Antitrust Enforcement, and Commitments

This paper analyses the impact on antitrust enforcement of commitments, a tool introduced in Europe by the Modernization reform of 2003, and intensively used since then by the European Commission and by National Competition Agencies. We consider a setting where a firm can adopt a costly practice that is either pro- or anti-competitive; the firm knows the nature of the practice and its cost whereas the enforcer has only prior beliefs about them. If the firm adopts the practice, the enforcer then decides whether to open a case. We compare a benchmark regime in which the enforcer can only run a costly investigation that may or may not bring evidence, with policy regimes in which commitments are available. We first analyze a regime reflecting the 2003 regulation, in which the firm can offer a commitment whenever a case is opened. We find that, in most cases, the introduction of commitments does not improve enforcement performance. We then study a potential reform of the regulation giving the enforcer the initiative to propose commitments. We show that this regime dominates the benchmark and current regulations whenever enforcement is desirable.