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Preventing Innovative Cooperations: The Legal Exemptions Unintended Side Effect

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  • Growitsch, Christian
  • Nulsch, Nicole
  • Rammerstorfer, Margarethe

Abstract

In 2004, European competition law had been faced with considerable changes due to the introduction of the new Council Regulation No. 1/2003. One of the major renewals was the replacement of the centralized notification system for inter-company cooperations in favor of a so-called legal exemption system. We analyze the implications of this reform on the agreements firms implement. In contrast to previous research we focus on the reform's impact on especially welfare enhancing, namely innovative agreements. We show that the law's intention to reduce the incentive to establish illegal cartels will be reached. However, by the same mechanism, also highly innovative cooperations might be prevented. To avoid this unintended effect, we conclude that only fines but not the monitoring activities should be increased in order to deter illegal but not innovative agreements.

Suggested Citation

  • Growitsch, Christian & Nulsch, Nicole & Rammerstorfer, Margarethe, 2008. "Preventing Innovative Cooperations: The Legal Exemptions Unintended Side Effect," IWH Discussion Papers 6/2008, Halle Institute for Economic Research (IWH).
    • Handle: RePEc:zbw:iwhdps:iwh-6-08
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    Cited by:

    1. Moritz Birgit & Becker Martin & Schmidtchen Dieter, 2018. "Measuring the Deterrent Effect of European Cartel Law Enforcement," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 18(3), pages 1-27, July.

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    More about this item

    Keywords

    Competition policy; competition law enforcement; legal exemption system;
    All these keywords.

    JEL classification:

    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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