Compensation Function and Deterrence Effects of Private Actions for Damages : The Case of Antitrust Damage Suits

In this work we take the case of damages actions brought by victims of antitrust violation, and refer to the current discussion originated by the EC Commission's projected reform (the 2005 Green Paper), to show some of the many failures of damages actions in performing a deterrence function, and their dependence on the specific features of each case. These problems are analysed in a conceptual framework in which three sets of choices are identified, namely those related to: (a) the definition of the illegal conducts; (b) the management of the risk; (c) the management of the consequences. We illustrate how the three groups are relatively independent of each other, and use such independence to address the (supposed) conflict between deterrence and compensation. Three possible goals of a deterrence policy are considered: discouraging all illegal conducts, discouraging only those illegal conducts which are socially inefficient, avoid deterring legal conducts which are similar to illegal ones. For each of them, the possible disparities between optimal levels of deterrence and the effects of antitrust damages actions are shown, to conclude that some consequences of the proposed boost in damages actions (especially those in terms of over-deterrence) seem overlooked in the current discussions. Moreover, we maintain that the design of the reform should not be influenced by a given preference to deterrence or to compensation as the goal to be accorded priority, since they lie theoretically on autonomous grounds. Rather, attention should be paid to the empirical interferences, that may require corrective devices as may be the case with a continuous adjustment of Public Enforcement to restore appropriate levels of deterrence once the deterrence effects of the (reformed) private damages actions are observed