The case for a European Competition Disqualification Order

Abstract

Disqualification of directors for breaches of competition law is not yet on the European agenda. The UK introduced a Competition Disqualification Order (CDO) in 2002. By way of a CDO, a director can be disqualified if his company is in breach of competition law and he is deemed to be unfit to act as director because of his role in the breach. Despite there having been only one reported case in the UK, CDOs have been proved to be an efficient tool in contributing to various policy goals. Empirical data shows that the business community perceives CDOs as an efficient sanction. Input-output data suggests that CDOs have a positive cost/benefit balance. Economic analysis shows that CDOs will reduce overall agency costs in companies. By contrast, adverse effects (over-deterrence) on risk taking represent a potential disadvantage to CDOs. The core design problems of a future CDO will be the binding effect of the cartel investigation on the enterprise, and the connection between corporate governance and competition law. Since neither legislative competence nor human rights issues are hindrances or impediments to a European CDO, the paper suggests that it will be a major step toward the optimal enforcement of competition law.