Determinants of the (Slow) Development of Effect-Based Competition Enforcement: Testing the Impact of Judicial Review on the Choice of Legal Standards by Competition Authorities

Abstract

The moderate extent to which many competition authorities (CAs) worldwide apply concepts, tools, and techniques developed by modern economic theory remains a puzzle for both academics and authorities themselves. In the model of reputation-maximizing CA developed by Katsoulacos (Eur J Law Econ 48(4): 125–165, 2019), in which decisions are subject to judicial review, the choice of the legal standard (LS) in a particular case is explained by the cost of litigation and anticipation of the LS adopted by the appeal courts. In this article, we empirically test, using a dataset of decisions reached by the Russian CA, the relation between the LS adopted and the annulment rate of appealed decisions and show that this is consistent with the assumptions of reputation-maximization choice. The implications of the analysis allow us to conclude that, first, the model of rational reputation-maximizing authority can explain the extent of economics utilized by CAs; second, the role that courts play in the administrative (in contrast to prosecutorial) model of competition enforcement is higher than is widely believed.