By Dr Abdullah Ahmed Alkayat

In the 19th century, a few businesses known as “trusts,” controlled the supply and pricing of major economic sectors around the world — railroads, oil, steel, and sugar. Without competition in these industries, smaller businesses and consumers had limited choices; the artificially high prices and low-quality products from these trusts threatened economic prosperity and the US Congress passed an innovative antitrust law — the Sherman Act — to break up many trusts into smaller companies, protecting consumers by promoting competition in the marketplace.

When market players impede competition by fixing prices, rigging bids, or allocating (dividing up) customers, consumers lose the benefits of fair competition. These anti-competitive behaviors often inflate prices higher than actual costs, distorting the allocation of societal resources, and harming both consumers and the economy. Antitrust provisions and laws seek to ensure competition between market players is free and open, benefiting consumers and businesses. Competition often ensures lower prices and better products or services for consumers. A freely competitive market also encourages businesses to find innovative and efficient production methods, attracting consumers with low prices and improved quality.

Similar antitrust legal provisions are found in most jurisdictions. For example, sections one and two of the Sherman Act, Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU), and Articles L420-1 and L420-2 of the French Commercial Code, all prohibit certain types of agreements between undertakings and the abuse of dominant position. Despite these similarities, the antitrust legal systems of the United States, the EU, and France function differently due to their distinct enforcement rules governing antitrust laws.

Legal rights are typically enforced through judicial decisions or legislative intervention, but methods beyond litigation and legislation can also help enforce legal rights. Use of physical force is perhaps the most direct method but strategic power — the power to grant or withhold the reward of future cooperation — may also be used to enforce legal rights. However, its application depends on various factors and the nature of the relationship between the parties, including the extent of a potential benefit or potential loss without cooperation.

Moral condemnation may also be an enforcement mechanism as a violation of certain rules can lead to moral condemnation from consumers and moral regret from the violator. This could even apply to the image of the business itself, such as recent moral condemnation for businesses infringing environmental law or social networking sites violating users’ privacy. Businesses must not underestimate the power of moral sanctions for the enforcement of the legal rules.

Legal enforcement mechanisms involve compensation, restitution, punishment, and prevention. Competition law aims to restore competition in the market and can involve ending infringement of competition rules, compensating victims, and minimizing future anticompetitive behavior. Many legal systems use a combination of public and private enforcement for antitrust matters. Public enforcement typically involves the government, a competition agency, or a public prosecutor identifying and sanctioning violators of competition laws. Public authorities may impose criminal or monetary sanctions to compensate the general public for the distortion of the competitive process in the market, but this enforcement is intended to deter violations and protect competition, not compensate injured parties.

Private enforcement mainly fulfils a compensatory function for direct victims of anti-competition behavior and often involves litigation initiated by an individual, a legal entity, an organization, or a public entity seeking a court-established antitrust violation and order for compensation and even injunctive relief. Private enforcement, in combination with public enforcement, can enhance the deterrent impact of public antitrust enforcement on market players.

The coexistence of stand-alone actions and public enforcement actions help detect more anticompetition behaviors in the market, while follow-on actions after public enforcement decisions can increase the amount of monetary sanctions. The relationship between public and private enforcement in follow-on actions is complementary. Under some antitrust enforcement systems, additional discouragement is beneficial and can lead to an optimal level of deterrence. However, over-deterrence can negatively affect competition processes in the market and lead to suboptimal results for social welfare.

Furthermore, private enforcement complements public enforcement because competition authorities — particularly in larger markets — often have limited resources and must concentrate on cases with the greatest impact on competition and the economy. In the absence of public enforcement action, private enforcement helps individuals protect their legitimate rights and receive relief when no public enforcement action has occurred.

Accordingly, the optimal antitrust law enforcement system may involve public enforcement for clarification and development of the law as well as deterrence and punishment, with private enforcement used to compensate victims of anticompetition behaviors. A good antitrust enforcement policy considers the interaction of public and private enforcement and integrates the separate tasks approach, under which public and private antitrust enforcement are each assigned the tasks for which they are best suited. Despite the benefit of a dual antitrust enforcement system, however, it remains limited in its actual application.

The Competition Protection Agency oversees antirust issues and assesses violations in Kuwait and, although Kuwait has implemented two different antitrust laws — the annulled No 10 of 2007 and the current Law 72 of 2020 — public enforcement remains the norm. Private enforcement mechanisms, like the dual enforcement opportunities in the United States, are unavailable in Kuwait. In fact, most countries still primarily apply public enforcement; however, more jurisdictions are trending toward additional private enforcement tools, including the European Union, which has leaned into private enforcement in the last decade. In Kuwait, with its smaller market — particularly when compared to the United States — public enforcement remains the most efficient mechanism. At least, until the need for private enforcement emerges.

NOTE: Dr Abdullah Ahmed Alkayat is a Commercial and Capital Markets Law Professor at Kuwait University School of Law.