European Antitrust Policy

EUROPEAN ANTITRUST POLICY:

An Empirical Analysis of Commission Decisions and their Appeals Histories, 1964 - 20011

Preliminary version for EARIE 2004, Berlin

Maarten Pieter Schinkel Martin Carree and Andrea Günster2

Abstract

Competition policy is both an active and much debated area of government intervention in market processes. This paper surveys European antitrust policy since the grounds for its implementation were laid in 1962. To that end, it presents a number of summary statistics on European antitrust policy based on data collected from official records on all published antitrust decisions by the European Commission's Directorate-General Competition, the first being from 1964. These statistics include key figures such as the total number of cases per year and their duration over time, the nature of infringements, the level of imposed fines, and the commissioner responsible for the decision. Subsequently, those decisions of DG Competition to which an appeal was lodged with the Court of First Instance / Court of Justice of the European Communities are studied in more detail. Considered are issues such as the grounds for appeal, revisions, and probabilities of success depending on characteristics such as the type of infringement originally found, the duration and length of the appeals proceedings and the president of the appeals court. Findings include some remarkable significant effects on the probability of revision, as well as some comforting neutrality results.

Keywords: Antitrust, European Commission, Directorate-General Competition, appeals procedures, Court of First Instance, European Court of Justice.

JEL Classification: L40, K21, D40

1 We are indebted to Ida Wendt for her overall legal guidance in the collection of our data, and her extensive comments to earlier drafts of this paper. For her kind provision of insight into the documentation management of the DG Competition, we thank Corinne Dussart-Lefret of the European Commission. Financial support from METEOR in initiating the collecting of the data is gratefully acknowledged.

2 Maarten Pieter Schinkel is at Department of Economics and ACLE, Universiteit van Amsterdam, The Netherlands. Martin Carree is at the Department of Organization and Strategy and METEOR, Universiteit Maastricht, The Netherlands and Andrea Günster is master student at Universiteit Maastricht. Schinkel is corresponding author at: Roetersstraat 11, 1018WB Amsterdam, or by e-mail: [email protected].

1 1. Introduction

Europe's competition policy is a very visible and much debated part of European Union policy. In the drafting of the Treaty of Rome of 1957, competition policy was assigned a key role in the unification of Europe for its potential to reduce barriers of trade between the member states. Gradually, it was recognized that much good for welfare can be expected from competition policy in a unified Europe as well, and today the Directorate-General Competition responsible for implementing European Competition law guards, in close cooperation with national antitrust authorities in the member states, over the rules set to protect the European competitive processes from anticompetitive conduct to the benefit of consumer welfare at large. In 2002, the DG decided in 363 antitrust cases – including ten prohibition decisions, imposing fines totaling more than EUR 1 billion – 268 merger cases and 652 state aid cases, opened a total of 1019 new cases. It issued more than a thousand press releases, and evaluated and reorganized itself with numerous guideline drafts, control rules and by establishing a new position of Chief Economist.3 The Commission's investigations and opinions have far reaching implications. They are daily news in international media and followed by consumers at large, as well as numerous firm representatives, competition lawyers, economic consultants and academics. It is fair to say that European competition policy is big business. Despite the fact that the enforcement of European competition law has such weight, surprisingly little statistical survey studies on its history of more than forty years have been done. In its more recent annual reports, the DG itself produces some concise summary statistics on trends in the number of decisions and notification a yearly basis, going back about five years. Yet, a consistent empirical analysis covering a longer period of time is, to the best of our knowledge, currently not available. Such a study could, however, potentially be very interesting. The history of competition policy enforcement in the United States, for example, has been a very rich source of empirical analysis and learning. With the publication of Richard Posner's seminal paper on federal antitrust enforcement in 1970 started a fruitful research branch from which papers sprang, such as Gallo, Craycraft, et. al. (1985, 1986), Corwin (1992), Gallo, Dau-Schmidt, Craycraft and Parker (1994, 2000), Lin et al. (2000), and Ghosal and Gallo (2001). As a result, the more than one hundred years of federal US antitrust policy since the Sherman Act of 1890 is well documented, as Posner concludes in his review of the empirical literature in Chapter 2 of the new 2001 edition of his Antitrust Law. A few isolated empirical analyses have been performed, though, on the enforcement of competition laws in EU member States. Davies, Driffield and Clarke (1999) determine the probability of receiving an adverse finding against firms investigated by the UK Monopolies and Mergers Commission (MMC), on the basis of data from 1973 to 1995 collected from MMC reports. They find divergent probabilities for different types of alleged anticompetitive behavior. Inspired by this analysis, Lauk (2002) did a similar study into the decisions of the German Bundeskartellamt (BKartA) on abusive practices and cartels. Lauk explores the explanatory value of a number of characteristics on the probability of an adverse finding on data collected on decisions taken between 1985 and 2000. Finally, there is a recent working paper by Duso, Neven and Röller (2003) that uses stock market data to evaluate whether the EU merger control decisions to allow or block mergers between 1990 and 2002 were correct in hindsight. This paper surveys the enforcement history of the European Directorate-General Competition, from its earliest case decision dating from 1964 up until 2002. It presents

3 Cf. European Commission, Directorate-General for Competition (2003).

2 summary statistics on the original decisions of DG Competition, and traces the appeals histories of those cases to which an appeal was lodged, either with the Court of First Instance (CFI) or the European Court of Justice (ECJ), or both. The survey is based on a substantive data set, put together from the officially published decisions of the DG Competition, the CFI, and the ECJ. In total, this set contains 587 separate DG Competition decisions, to which a total of 159 appeals cases were brought. On each of these EU antitrust cases, a number of variables were collected and analyzed, such as the number of months that passed between opening and closing of the case, the names of the parties to which the allegations were brought, the nature of the alleged and/or found offence, the level of fines imposed, and the name of the Commissioner that signed the decision. The appeals data include any revision of the fine, the break-down of litigation costs over the various parties, including the Commission, and the name of the President of the Court, for example. The review analysis aspires to be complete on published European antitrust cases up to 2001 (and up to 1998 for the complete appeals histories). It does not consider merger control decisions, nor state aid cases. Also, the analysis here does not relate the enforcement efforts of DG Competition to over-all magnitudes such as the level of economic activity in the Union, or the political climate in Europe. Instead, the focus is solely on summary statistics and simple probit analyses of appeals decisions. The balance sheet of European competition policy thus drawn up may, at the dawn of the implementation of modernized EU competition law, serve as a benchmark for future evaluations thereof. The paper is organized as follows. In the next section, some key figures of European Antitrust enforcement are presented. Where possible, trends and breaks are related to historical developments and policy changes within the DG or the Commission at large. Section 3 surveys the 159 existing appeals decisions, their histories and consequences. Some revisions on appeal have been based mainly on legal grounds. Others have been the result of applied economic insights that led the court to a different assessment of the alleged anticompetitive effects of the defendants’ behavior. Some of these cases have become landmark cases, in that they had ramifications for DG Competition’s enforcement policy. Recently, several revisions on appeal of merger decisions by the Commission, most flagrantly in GE/Honeywell, have been visible in this respect. Yet, a gradual process of ‘economizing’ EU competition policy by implementation of increasingly more sophisticated economic argument into the handling of antitrust cases can be observed as well. In part, this development is based on feedback from the appeals courts. The section identifies several of these landmark cases, which are set out in somewhat more detail. In Section 4, a probit analysis of a number of possible causes for reversals of Commission decisions on appeal is presented. Section 5 draws up the main conclusions. Finally, the appendices provide a brief description of the data and their sources.

2. European Antitrust Enforcement in Some Key Figures

This section reviews the enforcement of Europe’s competition laws concerning antitrust from 1964 to 2001 on the basis of some straightforward summary statistics. In Section 2.1 some time trends on the total number decisions, their nature and how the investigations on the basis of which they were made were initiated. Section 2.2 captures the productivity of the DG Competition where it concerns antitrust, by analyzing the duration of investigations and the complexity of decisions, relative to the number of A-grade staff employed by the directorate- general. Section 2.3 focuses on the various types of infringements found by DG Competition. Section 2.3.1 relates the decision of DG Competition to the original allegations at the start of the investigation, which provides some insight in the likelihood of each type of adverse

3 finding. Section 2.3.2 studies how findings are distributed over sectors, following the OECD sector classification. The section concludes with a trend analysis of remedies, in Section 2.4.

2.1 The Commission’s Official Decisions over Time

After the grounds for implementing European competition policy were established with the definitive version of Article 81 and Article 82 of the European Commission Treaty in 1962, the first antitrust decision made by the new Directorate-General Competition was on a notification of a vertical agreement between two companies, Grossfillex and Fillistorf, that had already been filed in 1959. The arrangement was given negative clearance under responsibility of Walter Hallstein, in March 1964. Figure 1 plots the number of cases over time between 1964 and 2001. The average number of formal decisions has been 15 over this period. Yet, the picture reveals some fluctuations as well. There is a remarkable decrease in the total number of decisions in the mid 1990s. One explanation for this apparent reduction in the total number of cases is that the DG Competition, when it was inclined to allow certain notified arrangements, substituted away from official decisions, toward comfort letters, which are not official decisions and therefore are not included in the total number of decisions. From 1998 on the number of decisions again increased, presumably partly as the result of the special anti-cartel unit created within DG Competition in that year.

1. EC; Total Cases per Year 30

0 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00

Total Cases per Year

Figure 1: Total number of officially published decisions by DG Competition, 1964-2001

In the early stages of EU competition law enforcement, the Commission decided for negative clearances and exemptions in the majority of cases. The first infringement found was in September 1964 in the Commission’s fourth decision in Grundig-Consten. After twenty months of investigation upon notification, the agreement between the two firms was decided a breach of Article 81 EC Treaty and ordered to be discontinued. That first adverse finding was appealed with the ECJ, involving, apart from the two companies, the governments of Italy and the Federal German Republic. The Court of Justice quashed the decision of the Commission on economic grounds, after almost two years, as the first appeals ruling in antitrust, in June 1966.

4 Only in June 1969 did the Commission find an infringement again, in the so-called Quinine case. A breach of Article 81 was found, in the form of horizontal market sharing, quota arrangements and price fixing, after the Commission had started its first investigation on its own initiative, 12 months earlier. Prior to that the Bundeskartelamt had found against the firms involved in the arrangement as well. The Quinine cartel was the first decision in which, apart from the order to stop the practice, fines were levied, totaling EURO 500.000. This second adverse finding was with some success appealed in three different appeals cases lodged with the ECJ by ACF Chemiefarma NV, Buchler and company, and Boehringer Mannheim GmbH respectively. The decision was quashed on economic grounds in all three appeals. Yet, each appealer’s fine was reduced only by EURO 10.000, and the plaintiffs were each to pay their own legal costs, as well as the costs made by the Commission in its defense. More steadfast was Commissioner Jean Rey’s second infringement decision, in Matieres Colorantes, Dyestuffs in June 1967 after 26 months of investigation on the Commission’s own initiative. The horizontal price fixing was to be discontinued and fined EURO 490.000. When nine separate appeals were lodged in May 1969 with the ECJ, after 61 months of deliberation, it upheld the decision of the Commission in all but one, gazienda Colori Nazonali - Acna SPA, a minor party to the conspiracy, that saw its fine reduced from EURO 4000 to EURO 1000 – but had to pay its own, as well as the Commission’s costs – when the decision was quashed on economic grounds. Having been quite lenient in its decisions in the first ten years of enforcement, from the early 1970’s onwards, when the total number of decision increases, the amount of infringements found increases substantially, relative to exemptions and negative clearances. Consequently, so did the number of appeals, which are the subject of Section 3 below. Figure 2 displays how the total number of decisions breaks down in these three types of official decisions in a frequency distribution.

2. EC; Official Decisons

0 65 70 75 80 85 90 95 00

Exemption Infringement Negative Clearance

Figure 2: Total number of decisions by DG Competition split up in exemptions, infringements and negative clearances

As said, this frequency distribution provides some insight into the apparently significant reduction in the total number of decisions in the 1990s. Of the two possibilities the Commission has to accept the notified potentially anticompetitive agreement when it believes that it is not an infringement, Figure 2 reveals that, although the Commission seemed to favor negative clearances in the first enforcement decade, steadily the number of exemptions granted exceeded the number of negative clearances in the 1970’s. Around the 1980’s both types of formal decision were relatively little made, and the relative number of negative clearances rose again towards 1990. Now, both negative clearance and exemption offer the notifying party the possibility to continue with the notified arrangement. There is an important difference, however, between the rulings, which lies in their duration. Negative clearance is granting permanent protection from future investigations into the notified arrangement, whereas exemption is only given for a limited amount of time.4 The Commission, therefore, seems to have gradually substituted to a weaker form of clearance. This is in line with the Commission’s continued effort to use its means of regulation more extensively, motivated by an urge to reduce administrative burden and produce quicker clearance for notifications awaiting a decision. Substituting the writing of comfort letters for formal negative clearance decisions seems to have been policy since about 1990. In general, the comfort letter is a weak form of negative clearance that postpones further investigations with the promise that any future ramifications, should the notified arrangement later be found an infringement, would be lenient for the intermediate period. Yet, since comfort letters are not official decisions, and therefore not published, this practice of handling cases by comfort letter seemingly reduces the industry of the Commission. The ratio of the number of cases dealt with using an informal procedure compared to the number of formal antitrust decisions in the period 1997-2002 ranged from 324 : 54 in 2001 to 490 : 27 in 1997. Obviously, the number of effective decisions by the DG Competition has been substantially higher than the number of formal decisions displayed in Figure 2. Yet, those notifications dealt with by comfort letter most likely have been the relatively insignificant cases. Another trend in the Commission’s enforcement strategy, particularly of recent years, when the modernization of European competition policy was announcing the abolishment of the notification requirement, has been a gradual shift towards a greater own initiative of the Commission in investigating cases. Figure 3 provides a frequency distribution of the report route along which a case arrives at the DG Competition.

4 See Ritter et.al. ***.

6 4. EC; Report Route 30

0 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00

Commission own initiative Complaint Notification

Figure 3: Report route of DG Competition

Figure 3 clearly shows that the investigations on the Commission’s own initiative, whilst lower in the 1990’s than in the 1970’s and 1980’s, has increased significantly since 1999. The number of notifications has been remarkably lower in the 1990’s than it was before. Official decisions on case brought to the Commission by complaints have, since the mid 70’s been a fairly constant share of all decisions. The early development of complaints suggests that parties needed some time to become aware of the possibility to file complaints against alleged anticompetitive behavior of rivals or suppliers. It has been suggested in the literature that the possibility for parties to complain about their competitors has made antitrust policy itself an instrument of anticompetitive behavior. By instigating unjustified investigations against rivals, firms would abuse the authorities in an attempt to weaken competitors.5 In Table 1 we display the Commission’s official decisions are set against the way in which the case came to the Commission. In total 71 cases of complaint have led to an infringement decision.

Infringement Exemption Negative Clearance All Cases Notification 56 113 66 235 Complaint 71 0 1 72 Commission own initiative 100 3 1 104 Table 1 Official decisions specified to original report route.

Table 1 also reveals that the Commission’s own initiative leads to the highest number of infringement cases, that is, according to the DG Competition: for appeals see Section 3. Finally, note that almost 60 percent of investigations leading to a formal decision is initiated by a notification. Although a number of perverse incentive effects may be behind some of the numbers – particularly the relatively low number of infringements found amongst notified cases certainly may be due to a selection effect leading only those firms with good intentions

5 Cf. Baumol and Ordover (1988).

7 to notify their arrangements – the efficiency costs from discontinuing the notification requirement seem modest.

2.2 The Commission’s Industry in Enforcement

As a measure of the DG Competitions diligence in its decision making, it is of interest to plot the duration of investigations over time, as done in Figure 4. The amount of months required to close the formal decision from the start of the investigation is set against the year in which the formal decision was made. Clearly, once enforcement got underway from 1968 onwards, there is a slight downwards trend in the average number of investigation months from around sixty in the 1970s to an average of about thirty months per formal decision in the 1990s.

5. EC; Duration in Month 100

0 65 70 75 80 85 90 95 00

Average Duration in Month

Figure 4: The average number of months required to reach a formal decision, 1964-2001.

Whereas the number of months required to reach a decision has decreased, the complexity of cases has increased. One measure for this is the number of paragraphs in the official publication of the formal decision. The so-called ‘points’ are numbered in the documents of DG Competition. Over time, the number of points develops as displayed in Figure 5. From fairly brief decisions in the 1970’s, the number of points has grown exponentially up to around ten times the number used in the early decisions. One possible explanation for the exploding growth in the length of decisions in the early 1990’s may be the reassignment of the EC in 1992. This increased the need for extensive justification by the “new” Commission. Overall, the growth seems to reflect an increase in complexity of cases, both in terms of economic content, and from a legal prospective.

6. EC; Length of Decision 250

200

150

100

0 65 70 75 80 85 90 95 00

Average Points Figure 5: The number of points in the official publication of the formal decisions, 1964-2001.

Finally, we consider whether it is possible to identify certain periods of increasingly active enforcement related to the Commissioner in charge. In total 15 Commissioners have been responsible for signing DG Competition’s decisions. Some, however, have been in office only very briefly. Commissioners that have been responsible for DG Competition’s decisions for a period of time that can reasonably be expected to have made an influence on the direction of enforcement possible with a substantial amount of decisions are listed in Table 2 below, with the total number of decisions to their name. The final column of Table 2 is planned to have a measure for the Commissioner’s impact on enforcement.

Commissioner Period in Office Formal Decisions Industry measure6 Jean Rey 21 Franco M. Malfatti 26 Francois-Xavier Ortoli 28 Raymond Vouel 56 Frans Andriessen 64 Peter Sutherland 77 Leon Brittan 68 Karel van Miert 74 Mario Monti 36 Table 2 Industry under Commissioner in charge.

2.3 Infringements

Where the Commission finds an infringement, five main categories can be identified: horizontal restraints, abuse of a dominant position, exclusive practices, vertical restraints and joint ventures. Horizontal constraints include behavior such as market sharing, concerted practices, collusion and cartels. These cases fall under Article 81 EC Treaty. Abuse of dominant position, an example of which is price discrimination in the context of a monopoly

6 Measured as the number of formal decisions per month in office.

9 position, are Article 82 EC Treaty cases. Exclusive practices, such as the exercise of patent rights, but also certain forms of price discrimination and discount scheme’s, as well as vertical restraints, can be infringements of both Article 81 and 82. Joint ventures also were part of the antitrust law. However, since 1997 joint ventures may also be dealt with through merger control. In Figure 7, the total number of decisions over the years 1964 until 2001 is divided into these five main categories.7

7. EC; Nature of the Offence 40

0 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00

Dominance Vertical Joint Venture Horizontal Exclusive

Figure 6: Decisions by their nature, 1964-2001

Clearly, of all infringements, the number of cases of abuse of dominance, exclusive practices and joint ventures are minor relative to the cases of horizontal and vertical restraints. The finding of an abuse of dominance follows a positive trend. Up to the late 1990s, infringements of Article 82 are rarely found. After that, the number of infringements increases strongly. One reason for this may be that the Commission’s goal of market harmonization, which led to the privatization of many former state-owned enterprises with natural monopoly characteristics, has seen an increased need to police the abuse of dominance. Yet, the increase may also be due to a swift in emphasis in enforcement. A similar pattern can be observed for joint ventures, namely. Up until 1970s, the joint ventures were not a jurisdiction of the European Commission. After it became within reach of EC regulations and a fairly steep positive trend is displayed. The category of horizontal and vertical restraints and exclusive practices shows a fairly constant development over time.

2.3.1 The Likelihood of Adverse Findings

7 One category of formal decisions, typically regulation 1/2003 – the former Regulation 17 – cases, which concern procedural violations such as the refusal to supply information, lack of cooperation or supply of false information, have been excluded from the analysis of infringements in this figure and below. In total, of the *** infringement decisions, *** are Regulation 1/2003 decisions.

By relating the type of alleged infringement of competition law to the eventual decisions by the Commission, an impression of the likelihood of an adverse finding is obtained. Of all investigations by the DG Competition, Table 3 lists for each category of infringement the number of decisions for each category of formal decisions.

Infringement Exemption Negative Clearance All Cases Horizontal constraints 89 32 28 149 Abuse of Dominance 27 1 1 29 Exclusive Practices 24 19 8 51 Vertical Restraints 57 26 21 104 Joint Ventures 3 33 6 42 Table 3 Official decisions specified to type of alleged infringement.

Several things meet the eye from this table. Investigations of abuse of dominance are found infringements of Article 82 EC Treaty in all but two out of 29 cases, which is 93%. Conversely, investigations of joint ventures have led in the vast majority of cases (39 of 42, that is almost 93% as well) to the conclusion that they could be allowed within Europe’s competition laws. Exclusive practices present themselves as less clear-cut. The ratio of infringements found compared to exemptions and negative clearances combined is approximately half. These averages seem to reflect a tough approach to anticompetitive behavior, yet with an open eye for efficiency enhancing cooperations.

2.3.2 OECD Sector Specification

Applying the OECD sector specification, it is possible to study the overall numbers of official decisions per sector. Table 4 lists this break down. A first thing that is revealed is that the sectors Manufacturing and Wholesalers, Retailers and Hotels represent the largest number of official decisions by far. Both in Manufacturing, where 159 out of 261 decisions were infringements, and in Wholesale, with 88 out of 149 cases, around 60% of all decisions are infringements.

Infringement Exemption Negative Clearance All Cases Agriculture 13 2 14 29 Mining 8 1 0 9 Manufacturing 159 66 36 261 Electricity & Gas 0 4 0 4 Constructing 7 2 6 15 Wholesalers, Retailers 88 41 20 149 and Hotels Transport 24 12 3 39 Finance, Real Estate, 13 16 5 34 Business and Insurance Communication 9 9 5 23 Public Service 5 3 0 8 Table 4 Official decisions specified by sector, according to the OECD sector classification.

11 In some sectors, such as Electricity & Gas with no infringements on 4 investigations, and Finance, Real Estate, Business and Insurance with 13 infringements on 34 decisions in total, infringements are rare. Investigations in Mining display extensive law breaching (89%) although the sample is quite small with nine cases.

2.4 Sanctions

When an infringement of Article 81 or 82 of the EC Treaty is found, the Commission can sanction it. Typically, the parties found to have behaved anti-competitively are ordered to stop the particular behavior. Apart from remedying the found infringement by ordering it to be discontinued, the Commission has the ability to impose sanctions in the form of fines. The use that has been made of this possibility over the history of European competition law enforcement varies. In the early years, fines were absent or very low. In the 1990s this changed. Average fines rose strongly, and the distance between the lowest and the highest fine imposed on parties in infringements closed. Figure 7 plots the level of the average maximum fine imposed on the parties found to have infringed on the Articles 81 and 82 of the EC Treaty between 1964 and 2001. In the early years of enforcement, up until 1989, maximum fines were very low, compared to later levels.

8. EC; Fine 30000000

25000000

20000000

15000000

10000000

5000000

0 65 70 75 80 85 90 95 00

Average Maximum Fine Average Minimum Fine

Figure 7: Total amount of fines imposed by the Commission for competition infringements per year, 1964-2001.

In Table 5, the fines imposed in total over the years for the various types of infringements are displayed. In terms of the percentage of infringements that find themselves fined, there is a very explicit order: abuse of dominance is fined in about 70% of cases, concerted practices in little more than 60%, vertical restraints in around 50% and exclusive practices in slightly over 40% of found infringements. Of these, perhaps the high percentage of fines imposed on concerted practices is most striking. After all, this type of alleged anticompetitive behavior is hard to substantiate. Nevertheless, when the Commission believes it has found one, she is willing to impose a fine in the majority of cases.

Infringement Infringed and Fine out Total Amount of Fines Average Fine with Fine of all Infringed (%) Concerted Practices 56 62.92 Vertical Restraints 30 52.63 Abuse of Dominance 19 70.37 Exclusive Practices 10 41.67

Table 5 Fines for various types of infringements, 1964 – 2001.

3. Appeals Proceeding with ECJ and CFI

From the very first decision by the DG Competition on behalf of the Commission, parties found in breach of the European competition laws have appealed to Court for revision. Up until 1989, the European Court of Justice (ECJ) in Luxembourg dealt with these appeals to Commission decisions. Since, cases are referred first to the Court of First Instance (CFI). In this section, rulings by these two courts on appeals against decisions by the Commission between 1964 and 1998 are considered. For the later years appeals to decisions made by the Commission later than 1998, do not have a full history yet. A large number of those rulings are still pending, that is. In section 3.1 the trend in appeals is studied over time, and in relation to the original decision of the Commission. Section 3.2 presents some statistics on the industry of the Courts, including the average amount of months that was necessary to reach a decision, and the length of the ruling. Section 3.3 analyses the nature of the rulings, in particular those that led to a (partial) revision of the Commission’s formal decision and sanctions.

3.1 Appeals Lodged

A first observation overseeing the history of appeals is that the vast majority of appeals has been lodged against infringement decisions by the Commission. There have been some appeals against Exemption decisions, by the original complainants. In the early seventies, some appeals against exemptions granted are seen and again in the early 1990’s the number of appeals against exemption briefly increased, which were, however, only a small percentage of the total number of appeals cases brought in those years respectively. Only in 1991 has there been an appeal against a negative clearance decision. Figure 8 below plots the number of rulings by the two appeals courts between 1964 and 1998, according to their starting date. They are therefore comparable to the total number of decisions – as said, particularly infringements – per year, as appeals are to lodged within a period of some weeks of the Commission decision. The number of appeals has somewhat grown over the years, but there is a lot of variation.

13 9. Appeal Proceedings 25

0 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00

Appeals Proceedings

Figure 8: Total number of appeals rulings by ECJ and CFI per year, 1964-1998

3.2 Industry of the Appeals Courts

An upward trend in keeping with that of the Commission decisions is found in the average number of points in appeals rulings, displayed in Figure 9.

11. Length of Decision 350

300

250

200

150

100

0 65 70 75 80 85 90 95 00

Average Points

Figure 9: The number of points in the official publication of ECJ/CFI rulings, 1964-98.

3.3 Appeals Rulings

The eventual rulings of the Courts, upholding the decision of the Commission, or rather modifying it, are the subject of this section. When the Courts rule partially or fully in favor of the complaining parties – typically undertakings found to have infringed on European competition law – it can quash or annul the Commission’s decision, or reveal some sympathy

14 for the appealers by partially reducing the fines, or sharing the costs for the appeals procedures between the appealers and the Commission. The latter, revisions of sanctions, are considered in Section 3.3.2. In Section 3.3.1, the nature of the appeals rulings is set against the original decisions.

3.3.1 Nature of the Findings

Figure 10 displays the total number of rulings on appeal, to their nature.

5. Nature of Offence

0 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00

Joint Venture Horizontal Licensing Excluded Vertical

Figure 10: Rulings on appeal by year of ruling, 1964-98.

When taking the overall numbers of rulings on appeal and considering the amount of times the Courts found in favor of the party that lodged the appeal, some idea of the “success” with which an appeals can be brought is obtained. Table 6 provides these numbers for the three official Commission decisions – leaving a small category of other appeals.

All Found for Applicant “Success ratio” Infringement 131 69 0.53 Exemption 10 5 0.5 Negative Clearance 1 0 0 Other 12 3 0.25 Table 6 Reversed rulings on appeal, 1964 – 1998.

Indeed interpreting these numbers as such, there is little difference in success with bringing an appeal against an adverse finding by the parties found in breach of competition law and complaints against exemptions given. Table 7 considers the reversed rulings on appeal per

15 category of infringement originally found by the Commission. Again, a fairly stable picture emerges. Although vertical arrangements are less successfully appealed against, and exclusive practices have indeed a 20% higher success ratio, horizontal and agreements and dominance decisions are reversed on average in around half of cases.

All Found for Applicant “Success Ratio” Horizontal 95 48 0.51 Dominance 15 7 0.47 Exclusive Practices 16 9 0.56 Vertical 32 12 0.38 Excluded Categories 3 0 0 Table 7 Reversed rulings on appeal by type of infringement, 1964 – 1998.

A somewhat peculiar, and with an eye to recent developments in international antitrust enforcement interesting development is that when cases that involved only European parties are compared with appeals decisions in cases that involved non-European parties as well, the former turn out to have slightly less than 50% success rate – which is around the average overall, whereas non-European cases are much more likely to be successful on appeal, namely in 83% of cases.

3.3.2 Revision of Sanctions

Figure 11 gives an indication of the ratio of the revised versus the original fines over the years. It can be seen that this ratio varies a lot over the years, probably largely due to the small numbers of cases per year.

4. Ratio Revised to Original Fine

1.0

0.8

0.6

0.4

0.2

0.0 65 70 75 80 85 90 95 00

Revised Fine Ratio

Figure 11: Ratio of the revised versus the original fine over the years.

Even when the Court keeps up the larger part of the logic and decision of the Commission, it still may feel that the applicant’s case has some merit. One indicator for this being the case is

16 the distribution of the costs of the appeals litigation over the parties. Regularly, the Court ordains the Commission to pay a considerable share of these costs, even when its decision and sanction has basically been upheld. In Table 8 below,

Liable/Cost incurred Commission Company Both Total

Commission 52 22 21 74 Company 97 133 95 230

Table 8 Distribution of the Court’s costs over the parties, 1964 – 1998.

4. Some Reasons for Success – Probit analyses

There are various issues concerning antitrust law that can be examined using statistical analysis. One may consider the probability of infringement for the notified cases, the amount of fines when there has been an infringement, the probability of appeal, the probability of a decision being quashed / annulled by ECJ, the fine revision by ECJ and the way in which ECJ decides the legal costs have to be shared. These analyses contribute to our understanding of the grand picture of European antitrust policy. In the Appendix C the regression and probit results are given. We will shortly discuss these preliminary results below.

The determinants of the probability of infringement

The probability of infringement after correcting for the route taken (notification, complaint, Commission’s own initiative) has not shown a statistically significant upward or downward trend. Commissioners Vouel and Brittan showed the highest probabilities of infringement. Infringement cases show a significant higher number of points.

The determinants of total fine when infringed

Total fines were relatively low for dominance cases. There is no significant effect of the Commissioners.

The determinants of the probability of appeal when infringed

Appeals were slightly more common for the Van Miert period. There is a negative trend of the number of appeals and appeals are more likely in case the number of points are higher. Surprisingly, there is no effect of the size of total fine. Article 82 cases are appealed to more often than Article 81 cases.

The determinants of the probability of the decision being quashed / annulled

After appeal some 26 out of 147 cases were quashed / annulled. The number of points had a negative effect on the probability of being quashed / annulled. In case of economic rationales there was a higher likelihood of being quashed / annulled. There was some difference between the Commissioners, with for example the Van Miert cases being more likely to be

17 quashed / annulled than the Brittan, Andriessen or Vouel cases. Also there have been some statistical differences across sectors. More complainants leads to a higher probability of quashing / annulling.

The determinants of the rate of fine revision

Fine revision (in percentage terms) was quite low in the Brittan era. The number of defendants had a negative impact on fine revision. Procedural grounds led to a substantially higher fine revision (in percentage terms). There has been more fine revision in the CFI period than before.

The determinants of the extent of cost sharing

Cost sharing is a variable in between –2 and +2, where the latter means that costs are solely paid by the applicant. Here the Commissioners seem to have matter to some extent with Sutherland, Brittan and Van Miert eras different from the others. Procedural grounds also impacted the cost sharing rate significantly. Also the CFI period had different cost sharing rules than the period before.

5. Conclusions

This paper shows some preliminary study into European antitrust policy. We have shown some summary statistics and simple statistical analyses to uncover some trends and determinants of decisions. The current paper will be extended to provide a well-worked out statistical analysis with policy implications. To our knowledge there has not yet been an analysis of the complete trajectory from EC decision till appeal outcomes. This paper seeks to fill this gap.

References

Corwin, E.D. (1992), Trends in Enforcement of the Antimonopoly Laws, in: Antitrust and Regulation, Elgar, London, 110-118; European Commission, Directorate-General for Competition (2003), European Union, Competition Policy, XXXIInd Report on competition policy 2002, Office for Official Publications of the European Communities, Luxembourg. Gallo, Joseph C., Joseph L. Craycraft, and Steven C. Bush (1985), Guess Who Came to Dinner: A Statistical Study of Federal Antitrust Enforcement for the Period 1963-1984, Review of Industrial Organization 2, 106-130; Gallo, Joseph C., Joseph L. Craycraft, and Shantanu Dutta (1986), Incarceration and Fines: An Empirical Study of Antitrust Sanctions, Review of Industrial Organization 3, 38-66; Gallo, Joseph C., Kenneth G. Dau-Schmidt, Joseph L. Craycraft, and Charles J. Parker (1994), Criminal Penalties under The Sherman Act: A Study of Law and Economics, Research in Law and Economics 16, 1-73; Gallo, J.C., K. Dau-Schmidt, J.L. Craycraft and C.J. Parker (2000), Department of Justice Antitrust Enforcement, 1955-1997: An Empirical Study, Review of Industrial Organization, 17, 75-133; Ghosal, V. and Gallo, J. (2001), The Cyclical Behavior of the Department of Justice Antitrust Enforcement Activity, International Journal of Industrial Organization 19, 27-54;

18 Katsoulacos, Y. and D. Ulph (1998), Endogenous spillovers and the performance of research joint ventures, Journal of Industrial Economics 46, 333-357. Lauk, M. (2002), Econometric Analysis of the Decisions of the German Cartel Office, working paper, TU Darmstadt. Lin, P., R. Baldev, M. Sandfort, D. Slottje (2000), The US Antitrust System and Recent Trends in Antitrust Enforcement, Journal of Economic Surveys 14, 255-306. Posner, Richard A. (1970), "A Statistical Study of Antitrust Enforcement," Journal of Law and Economics 13, 365-419. Posner, Richard A. (2001), Antitrust Law, second edition, The University of Chicago Press, Chicago.

19 Appendix A Description of the Data: Commission Decisions

The analyses of Commission decisions reported on in this paper were performed on an extensive data base that includes information on all antitrust decisions taken on behalf of the European Commission (EC) by Directorate General Competition (DGCOMP). The information was collected from official European Union (EU) records. These stretch from 1964 to the beginning of 2003.

The case documents of Directorate General Competition (DGCOMP) were initially consulted on the web pages:

European Commission:

http://europa.eu.int/comm/competition/antitrust/cases/ which was last accessed on the world web on the 28th of July 2003. These web pages do not have the status of an official publication. To guarantee completeness of the data, the set was then checked against the official publications of the Commission, collected in:

European Commission, Reports of the Commission Decisions relating to competition, for the years: 1964-73 1973-80 1981-85 1986-88 1989-90 1990-92 1993-94 1994-98, Office for Official Publications of the European Communities, Luxembourg

Only minor deviations between the information on the web pages and the official publications were found.

The unofficial information provided on the web pages of the Commission is complete up to 2001. The official publications are complete up to 1998 – so that minor discrepancies may exist between the web and official records between 1998 and 2001. A number of cases dated after 2001 has been included, but not necessarily all. All decisions officially published are included in the sheets. All relevant public information published in these documents has been included. Some information was censored by the Commission for reasons of confidentiality.

20 Appendix B Description of the Data: Appeals with ECJ and CFI

The analyses of appeals histories to the Commission decisions reported on in this paper are based on a data set that includes information on rulings on appeals to decisions taken on behalf of the European Commission (EC) by Directorate General Competition (DGCOMP) in antitrust cases brought to the authorities of appeal, the Court of First Instance (CFI) and the European Court of Justice (ECJ), respectively. The information was taken from the official ECJ and CFI records. These stretch from 1964 to 1998 and are ordered chronologically after the date of the original decision by the DGCOMP.

The case documents were accessed through the official web page of the Court of First Instance and the European Court of Justice:

-Court of First Instance:

http://curia.eu.int/en/content/juris/index.htm

-European Court of Justice:

http://curia.eu.int/en/content/juris/index.htm

Both websites were lasted consulted on the 28th of July 2003.

All decisions published on these websites are included in the sheet. Some of the information contained in those documents was censored for reasons of confidentiality.

21 Appendix C Regression and Probit analyses

1. Probit Infringement on full EC sample (n = 450)

Dependent Variable: INFRINGEMENT Method: ML - Binary Probit

Sample(adjusted): 1 587 Included observations: 450 Excluded observations: 137 after adjusting endpoints Convergence achieved after 6 iterations Covariance matrix computed using second derivatives Variable Coefficien Std. Error z-Statistic Prob. t C -0.042187 1.011641 -0.041702 0.9667 HALLSTEIN -0.312196 0.972922 -0.320885 0.7483 REY -0.108863 0.789582 -0.137874 0.8903 MALFATTI -0.003901 0.737967 -0.005286 0.9958 MANSHOLT 1.633654 0.908143 1.798895 0.0720 ORTOLI 1.274910 0.689286 1.849610 0.0644 VOUEL 2.101221 0.668103 3.145058 0.0017 ANDRIESSEN 1.419011 0.722857 1.963061 0.0496 SUTHERLAND 1.283470 0.868719 1.477429 0.1396 BRITTAN 1.856237 1.096275 1.693222 0.0904 VAN_MIERT 1.296824 1.457648 0.889669 0.3736 MONTI 1.833494 1.852612 0.989680 0.3223 EIGHTYONE -0.418729 0.473240 -0.884814 0.3763 EIGHTYTWO 1.110244 0.571432 1.942917 0.0520 COMMISSION 2.240994 0.293231 7.642411 0.0000 COMPLAINT 2.712025 0.366235 7.405143 0.0000 DURATION -0.001008 0.001965 -0.512709 0.6082 POINTS 0.015276 0.003347 4.564270 0.0000 DOMINANCE -1.834161 0.572066 -3.206205 0.0013 HORIZONTAL -0.385658 0.354295 -1.088521 0.2764 JOINT_VENTURE -1.473851 0.472818 -3.117161 0.0018 LICENSING -0.812742 0.393829 -2.063692 0.0390 VERTICAL -0.418519 0.354890 -1.179290 0.2383 EUROPEAN -0.378354 0.589069 -0.642291 0.5207 MIXED -1.226570 0.663394 -1.848931 0.0645 TREND -0.005098 0.003850 -1.323939 0.1855 SECTOR1 -0.130076 0.419648 -0.309965 0.7566 SECTOR2 1.218039 0.803785 1.515379 0.1297 SECTOR3 -0.124737 0.262665 -0.474890 0.6349 SECTOR4 -0.193166 0.629047 -0.307078 0.7588 SECTOR5 0.232022 0.403207 0.575441 0.5650 SECTOR6 -0.046583 0.171978 -0.270864 0.7865 SECTOR7 -0.915268 0.473488 -1.933031 0.0532 SECTOR8 -0.734497 0.394740 -1.860712 0.0628

22 SECTOR9 0.532298 0.470715 1.130829 0.2581 Mean dependent var 0.513333 S.D. dependent var 0.500378 S.E. of regression 0.308742 Akaike info criterion 0.738407 Sum squared resid 39.55856 Schwarz criterion 1.058015 Log likelihood -131.1416 Hannan-Quinn criter. 0.864377 Restr. log likelihood -311.7562 Avg. log likelihood - 0.291426 LR statistic (34 df) 361.2291 McFadden R-squared 0.579346 Probability(LR stat) 0.000000 Obs with Dep=0 219 Total obs 450 Obs with Dep=1 231

2. Total fine on Infringement sample ( n = 231)

Dependent Variable: TOTAL_FINE Method: Least Squares

Sample(adjusted): 4 587 IF INFRINGEMENT=1 Included observations: 231 Excluded observations: 7 after adjusting endpoints Variable Coefficien Std. Error t-Statistic Prob. t C -1.75E+09 4.38E+09 -0.398403 0.6908 HALLSTEIN 4.16E+08 7.10E+09 0.058673 0.9533 REY -2.02E+09 4.86E+09 -0.416638 0.6774 MALFATTI -1.90E+09 4.24E+09 -0.447278 0.6552 MANSHOLT -2.59E+09 3.88E+09 -0.667046 0.5055 ORTOLI -2.70E+09 3.62E+09 -0.745141 0.4571 VOUEL 7.43E+08 3.19E+09 0.233008 0.8160 ANDRIESSEN 1.14E+09 3.51E+09 0.323463 0.7467 SUTHERLAND 1.17E+09 4.24E+09 0.275603 0.7831 BRITTAN 4.33E+09 5.28E+09 0.820175 0.4131 VAN_MIERT 2.12E+09 6.84E+09 0.309934 0.7569 MONTI 3.47E+09 8.64E+09 0.402145 0.6880 EIGHTYONE 9.02E+09 1.85E+09 4.875011 0.0000 EIGHTYTWO 8.42E+09 1.79E+09 4.705239 0.0000 COMMISSION 2.15E+09 1.25E+09 1.717954 0.0874 COMPLAINT -7.47E+08 1.33E+09 -0.560694 0.5756 DURATION 2522937. 10285547 0.245290 0.8065 POINTS -7989262. 5392800. -1.481468 0.1401 DOMINANCE -5.37E+09 2.10E+09 -2.562624 0.0111 HORIZONTAL -8.20E+09 1.66E+09 -4.939568 0.0000 JOINT_VENTURE -6.86E+09 4.30E+09 -1.596702 0.1119 LICENSING -6.02E+09 2.08E+09 -2.901600 0.0041 VERTICAL -6.55E+09 1.72E+09 -3.798032 0.0002 EUROPEAN 1.57E+09 3.05E+09 0.514751 0.6073

23 MIXED 6.34E+09 3.40E+09 1.866561 0.0635 TREND -9409209. 17282664 -0.544430 0.5868 SECTOR1 -1.19E+09 1.82E+09 -0.653064 0.5145 SECTOR2 6.30E+08 2.92E+09 0.215454 0.8296 SECTOR3 -2.01E+09 1.29E+09 -1.560025 0.1204 SECTOR4 -1.57E+09 3.59E+09 -0.438880 0.6612 SECTOR5 9.37E+08 2.18E+09 0.429003 0.6684 SECTOR6 -4.73E+08 7.74E+08 -0.610600 0.5422 SECTOR7 3.20E+09 1.99E+09 1.606879 0.1097 SECTOR8 -6.27E+08 2.13E+09 -0.293658 0.7693 SECTOR9 -1.62E+09 2.48E+09 -0.652272 0.5150 R-squared 0.275817 Mean dependent var 4.50E+0 8 Adjusted R-squared 0.150194 S.D. dependent var 6.65E+0 9 S.E. of regression 6.13E+09 Akaike info criterion 48.04835 Sum squared resid 7.36E+21 Schwarz criterion 48.56993 Log likelihood -5514.584 F-statistic 2.195587 Durbin-Watson stat 2.007427 Prob(F-statistic) 0.000448

3. Probit Appeal on Infringement sample (n = 231)

Dependent Variable: APPEAL Method: ML - Binary Probit

Sample(adjusted): 4 587 IF INFRINGEMENT=1 Included observations: 231 Excluded observations: 7 after adjusting endpoints Convergence achieved after 1 iterations Covariance matrix computed using second derivatives Variable Coefficien Std. Error z-Statistic Prob. t HALLSTEIN -1.506312 1.947620 -0.773412 0.4393 REY 0.213674 1.147329 0.186236 0.8523 MALFATTI -1.666327 1.090107 -1.528590 0.1264 MANSHOLT -1.100129 0.948972 -1.159285 0.2463 ORTOLI -0.465353 0.876913 -0.530672 0.5956 VOUEL -0.398835 0.748703 -0.532701 0.5942 ANDRIESSEN 0.406159 0.808022 0.502658 0.6152 SUTHERLAND 1.246909 0.988617 1.261265 0.2072 BRITTAN 1.756274 1.233347 1.423990 0.1544 VAN_MIERT 2.906071 1.604839 1.810817 0.0702 MONTI 2.373973 2.044584 1.161103 0.2456 COMMISSION 0.488818 0.305443 1.600355 0.1095 COMPLAINT 0.300913 0.322094 0.934242 0.3502 DOMINANCE 0.002079 0.531770 0.003910 0.9969 VERTICAL 0.507343 0.462466 1.097040 0.2726 JOINT_VENTURE 0.807606 1.188174 0.679703 0.4967

24 LICENSING 0.146631 0.556863 0.263316 0.7923 HORIZONTAL 0.843075 0.463331 1.819595 0.0688 TOTAL_FINE -8.17E-12 1.96E-11 -0.416952 0.6767 INFRINGEMENT -0.174575 1.020098 -0.171136 0.8641 EUROPEAN -0.275637 0.719060 -0.383330 0.7015 MIXED -0.560772 0.812715 -0.689998 0.4902 SECTOR1 0.005193 0.438753 0.011837 0.9906 SECTOR2 -0.765983 0.799505 -0.958071 0.3380 SECTOR3 0.327827 0.326465 1.004170 0.3153 SECTOR4 0.621866 0.824312 0.754406 0.4506 SECTOR5 0.639276 0.568222 1.125045 0.2606 SECTOR6 0.060849 0.195755 0.310841 0.7559 SECTOR7 -0.341226 0.496881 -0.686736 0.4922 SECTOR8 -0.182072 0.549648 -0.331252 0.7405 SECTOR9 0.209279 0.666665 0.313919 0.7536 TREND -0.008350 0.004110 -2.031520 0.0422 DURATION 0.001204 0.002665 0.451632 0.6515 POINTS 0.002558 0.001328 1.926619 0.0540 EIGHTYONE -0.257242 0.495109 -0.519567 0.6034 EIGHTYTWO 0.853488 0.435904 1.957972 0.0502 Mean dependent var 0.246753 S.D. dependent var 0.432058 S.E. of regression 0.369653 Akaike info criterion 1.076859 Sum squared resid 26.64540 Schwarz criterion 1.613339 Log likelihood -88.37717 Hannan-Quinn criter. 1.293240 Avg. log likelihood -0.382585 Obs with Dep=0 174 Total obs 231 Obs with Dep=1 57

4. Probit on Annulled & Quashed on full sample (n = 147)

Dependent Variable: QUASHED_ANNULLED Method: ML – Binary Probit

Sample(adjusted): 2 158 Included observations: 147 Excluded observations: 10 after adjusting endpoints Convergence achieved after 24 iterations Covariance matrix computed using second derivatives Variable Coefficien Std. Error z-Statistic Prob. t CFI -0.054034 1.527524 -0.035374 0.9718 DURATION -0.034716 0.030108 -1.153053 0.2489 POINTS -0.020656 0.007759 -2.662170 0.0078 PROCEDURAL 23.75253 15496635 1.53E-06 1.0000 ECONOMIC 8.187931 2.973542 2.753595 0.0059 NO_COMPLAINA 0.161301 0.080795 1.996423 0.0459 NT

25 NO_DEFENDANT -0.144259 0.146898 -0.982032 0.3261 EC_EXEMPTION 5.644280 2.471040 2.284172 0.0224 EC_NEGCLEARA 2.543250 30881410 8.24E-08 1.0000 NCE REY 5.252190 4.022564 1.305682 0.1917 VOUEL -2.844066 1.588113 -1.790846 0.0733 ANDRIESSEN -2.909067 1.208229 -2.407711 0.0161 SUTHERLAND -8.385890 4602367. -1.82E-06 1.0000 BRITTAN -3.867198 2.264462 -1.707778 0.0877 VAN_MIERT 1.438849 1.983647 0.725355 0.4682 EC_HORIZONTA -1.052883 1.056847 -0.996249 0.3191 L EC_VERTICAL 1.929494 1.713693 1.125927 0.2602 EC_DOMINANCE 0.436729 1.361337 0.320809 0.7484 SECTOR2 -1.625477 1.335764 -1.216890 0.2236 SECTOR3 -4.325560 1.739887 -2.486116 0.0129 SECTOR5 -5.366878 2.449487 -2.191022 0.0285 SECTOR6 -1.639648 1.243031 -1.319073 0.1871 SECTOR7 -5.371963 49.45599 -0.108621 0.9135 SECTOR9 -4.342537 1.991946 -2.180048 0.0293 Mean dependent var 0.176871 S.D. dependent var 0.382864 S.E. of regression 0.211260 Akaike info criterion 0.553949 Sum squared resid 5.489584 Schwarz criterion 1.042183 Log likelihood -16.71528 Hannan-Quinn criter. 0.752324 Avg. log likelihood -0.113709 Obs with Dep=0 121 Total obs 147 Obs with Dep=1 26

5. Regression on fine reduction on all cases with fine implementation

Dependent Variable: FINE_REVISION Method: Least Squares

Sample(adjusted): 2 158 Included observations: 147 Excluded observations: 10 after adjusting endpoints Variable Coefficien Std. Error t-Statistic Prob. t CFI 1877563. 921324.0 2.037896 0.0437 DURATION 15581.69 15394.46 1.012162 0.3134 POINTS -153.2717 1961.477 -0.078141 0.9378 PROCEDURAL 5026480. 1093706. 4.595824 0.0000 ECONOMIC 1187330. 463400.7 2.562210 0.0116 NO_COMPLAINA -39155.61 49583.58 -0.789689 0.4312 NT NO_DEFENDANT -229889.1 122747.3 -1.872865 0.0635 EC_EXEMPTION 60578.39 871713.5 0.069493 0.9447

26 EC_NEGCLEARA 252916.5 2579939. 0.098032 0.9221 NCE REY -978316.7 1131421. -0.864680 0.3889 VOUEL 159442.4 1112378. 0.143335 0.8863 ANDRIESSEN -582160.3 890516.4 -0.653733 0.5145 SUTHERLAND -1817607. 1021427. -1.779479 0.0776 BRITTAN -2923224. 1105389. -2.644520 0.0092 VAN_MIERT -1099184. 1137401. -0.966400 0.3357 EC_HORIZONTA -321030.1 799312.2 -0.401633 0.6887 L EC_VERTICAL 363376.4 915717.7 0.396821 0.6922 EC_DOMINANCE -357458.8 760261.5 -0.470179 0.6391 SECTOR2 -1059397. 1579334. -0.670787 0.5036 SECTOR3 352483.5 650108.9 0.542191 0.5887 SECTOR5 36587.89 1071420. 0.034149 0.9728 SECTOR6 162680.3 559214.2 0.290909 0.7716 SECTOR7 -1328587. 1359794. -0.977050 0.3305 SECTOR9 -569245.2 1010961. -0.563073 0.5744 R-squared 0.327534 Mean dependent var 828918.6 Adjusted R-squared 0.201789 S.D. dependent var 2776367. S.E. of regression 2480480. Akaike info criterion 32.43409 Sum squared resid 7.57E+14 Schwarz criterion 32.92232 Log likelihood -2359.905 Durbin-Watson stat 1.548383

6. Regression on cost sharing on full sample (n = 158) Dependent Variable: COST_INCURRED Method: Least Squares

Sample(adjusted): 2 158 Included observations: 147 Excluded observations: 10 after adjusting endpoints Variable Coefficien Std. Error t-Statistic Prob. t C 1.227847 0.531909 2.308377 0.0227 CFI -1.189567 0.480783 -2.474227 0.0147 DURATION -0.001805 0.006487 -0.278238 0.7813 POINTS 0.000762 0.000826 0.923215 0.3577 PROCEDURAL -2.203084 0.462397 -4.764490 0.0000 ECONOMIC -1.683047 0.202698 -8.303235 0.0000 NO_COMPLAINA 0.008565 0.020929 0.409230 0.6831 NT NO_DEFENDANT 0.092727 0.054938 1.687846 0.0940 EC_EXEMPTION -0.571859 0.372842 -1.533783 0.1277 EC_NEGCLEARA -0.163694 1.086087 -0.150719 0.8804 NCE REY 0.693662 0.514798 1.347446 0.1803 VOUEL -0.565124 0.491500 -1.149794 0.2525 ANDRIESSEN 0.251006 0.412412 0.608630 0.5439

27 SUTHERLAND 1.179495 0.440433 2.678032 0.0084 BRITTAN 1.322831 0.479529 2.758604 0.0067 VAN_MIERT 1.556247 0.491938 3.163500 0.0020 EC_HORIZONTA -0.030874 0.382727 -0.080669 0.9358 L EC_VERTICAL -0.165183 0.405158 -0.407701 0.6842 EC_DOMINANCE 0.107172 0.370211 0.289489 0.7727 SECTOR2 -0.588907 0.674583 -0.872994 0.3844 SECTOR3 0.509949 0.306012 1.666432 0.0982 SECTOR5 0.199366 0.487878 0.408639 0.6835 SECTOR6 0.283962 0.241063 1.177959 0.2411 SECTOR7 -0.153853 0.595002 -0.258576 0.7964 SECTOR9 0.173474 0.443623 0.391039 0.6965 R-squared 0.546737 Mean dependent var 1.018481 Adjusted R-squared 0.457571 S.D. dependent var 1.417209 S.E. of regression 1.043772 Akaike info criterion 3.077283 Sum squared resid 132.9140 Schwarz criterion 3.585860 Log likelihood -201.1803 F-statistic 6.131648 Durbin-Watson stat 2.004951 Prob(F-statistic) 0.000000