The perfomance of the antitrust prosecutor's office:

is really public enforcement superior to private enforcement?

Abstract

This paper evaluates the performance on antitrust cases of the Chilean public enforcer (FNE by its acronym in Spanish). It presents an approach that frames its differences with private plaintiffs in terms of the effort that each of these mechanisms of enforcement should deliver during the trial. In a particular case, the presence of the FNE is used to draw the line between public and private enforcement, while the number of hearings is considered as a proxy of the joint effort delivered by the parties. The results show that the FNE outperforms private plaintiffs in a large number of cases where the effort of the parties is relatively low. However, within a small number of cases where the parties deliver a relatively high effort, the private plaintiffs are the ones who perform better. The paper argues that these trends are related with the structure of agency costs. Whereas private plaintiffs face a variable cost, depending on the number of victims whose coordination is required, the FNE works as a bureaucratic organization that has rather constant costs. The FNE has thus a comparative advantage in prosecuting offenses that involve a large number of victims, such as collusion. In contrast, private plaintiffs have the edge in cases involving a limited number of victims, such as dominance or predatory pricing. Diverging from recent studies, the paper concludes that the superiority of the FNE is only partial, and thus the policy should aim at bringing together both mechanisms of enforcement. Private and public enforcement does not behave as structural substitutes but as strategic complements. Hence, strengthening one at the expense of the other is plainly a bad idea.