EX POST EVALUATION OF ANTITRUST AND UNFAIR COMPETITION FINES ON FIRMS: EMPIRICAL EVIDENCE FROM TAIWAN

Abstract

Ex post evaluations have been adopted by regulatory authorities to evaluate the impact of antitrust decisions. Relevant studies commonly focus on single types of unlawful activity, and use data on specific products. Moreover, relatively little evidence has been provided in Asian jurisdictions. This study examines the impact of antitrust decisions and unfair competition fines, imposed by the Taiwan Fair Trade Commission (TFTC), on the profit margins and operation costs of firms in Taiwan. All of the administrative fines on cartels, violations of merger notifications, vertical restraints, and unfair competition are considered herein. The Difference-in-Difference model and the Quantile Regression technique were employed on a unique population-based dataset of 2,238,022 firms drawn from a census survey in Taiwan. The results point to a negative (positive) effect of the TFTC's administrative fines on firms’ profit margins (operating costs). The negative effect of fines on firms’ profit margins is more pronounced for the fines linked to cartel conduct. To respond to reductions in profit margins, firms are more likely to engage in research and development (R&D) activities and to use computers in business sales, on average. Moreover, small firms are more likely to increase the use of computers in business sales, whereas medium and large firms are more likely to invest in R&D to compensate for their losses stemming from their cessation of illegal activities.