Intervention of an Administrative Agency

'Administrative enforcement' shall be defined as being performed by an agency that can carry out monitoring and has some investigative powers.[1] It can decide by itself, refer cases to a court, or even defend them in a court. Actions can be triggered by low-cost reporting or carried out on its own motion. Appeal along the lines of the administrative law branch is possible.[2] Those authorities can grant various remedies but usually not compensation.

The efficient handling of both scenarios might be found in public law enforcement: this means any action taking place by and before a public authority, and triggered in various ways, whether by an own motion, by an individual or by a representative. It is ultimately the agency that decides when to act. Hence, the role of the lawsuit initiator is diminished. A public agency has the advantage of providing for high investigative powers (including digital investigations). In other words, after a 'low-cost' report or on an own motion, the public entity acts and thereby remedies for instance an individual's 'rational apathy' and free-riding problems as in the cases at hand.

If societal harm is extensive, with harm being less serious to the individual but widespread, it must be guaranteed that the authority obtains this information to take enforcement action. If private information - in the hands of individual consumers or competitors - needs to be transmitted, incentives have to be provided in order for this to be guaranteed.[3] Remedies can play a crucial role in this regard. Not being able to obtain compensation may be a disincentive for consumers. Having suffered only minor harm, the consumer may not be inclined to take any further action at all. Reporting strategies can be envisaged: for instance, cooperation with consumer advice centres and so on, where consumers have complained. Taking over the costs from the individual might be justified in this setting, because each individual has experienced only a minor damage for which she would not be willing to finance an entire procedure.

The entity's available investigative powers can come in handy, particularly for Case Scenario 2.[4] This factor, however, has to be set in relation to the societal harm. Monitoring and own investigations can lead to the agency becoming aware of infringements, which puts them in the position to take action on an own motion. The speed of a reaction will be another factor in the efficiency. Hence, monitoring or ex ante clearing might be an effective tool, particularly to protect bona fide traders and to single out mala fide traders; however, it is very costly in terms of administrative costs and leads to a danger of societal losses due to censorship. A public agency has deterrent sanctions at its availability, like fines, that can outweigh low probabilities of detection and conviction. Compared to criminal law the procedure is said to be less accurate which leads to a higher susceptibility to error costs.[5] Public authorities are privileged compared with pure private litigation when it comes to investigating facts about a case (e.g., powers to access business premises).

The distinction between individual and group cases becomes blurred in relation to a public authority, since it will ultimately decide whether a case is to be taken regardless of who triggers it. When purely assessing group litigation - for instance, a representative bringing a case to the authority - the individual is relieved of the reporting activity but may have to show her affiliation with the group litigation. In terms of the agency acting as a representative, certain findings as to a public agency coming before a civil court, for instance, have already been discussed in Subsection 3.2. If representative actions are brought to a public authority, advantages in risk-sharing that are given to the individual are present also for the representative. The interaction here is that monitoring or investigation could be carried out either by the representative or by the agency (the adjudicating body). The fact that the public body can generate a great deal of information is a new aspect compared with the private law branch, and it might be decisive for the cost-benefit analysis of the body carrying out a lawsuit. From the perspective of the association, it could be advantageous that there are enhanced investigative powers in comparison to a civil court (and certainly a CADR). This can be a decisive issue when assessing risks of a proceeding, and may induce the representative body to favour a public body. In this sense, the procedure is superior in terms of generating more information if it includes a public authority, which is necessary for scenarios like Case Scenario 2. The main drawback might be the lack of compensation as a remedy.

Capture is possible of the agency bringing the case or deciding a case, and within associations. The more powers that are in the hands of the same entity, the greater the danger: for example, bringing a case, and then investigating and adjudicating it, which is the situation if everything is being handled by the same body. A separation of these powers can be considered, or rules that public bodies can bring actions, for instance, only to the civil court, to a CADR body, or to specialized courts. Other reasons underlying this are the costs of spreading error cost across all members of the group, or the occurrence of frivolous lawsuits.

Likewise, these are arguments in favour of introducing a court element into the procedure - as it is given in criminal law.

Administrative costs depend on the remedy involved, the amount of investigative powers used, and on whether it concerns individual or group litigation. The number of administrative bodies to be set up to reduce the risk of capture is also decisive. Lower administrative costs would depend on whether information raised could be transferred without doubling.

In total, and in particular for Case Scenario 2, the investigative powers are crucial. For Case Scenario 1, they might not be necessary. Issues of capture, frivolous lawsuits and error costs speak in favour of involving a court element in the procedure.

Competitors can have high damages at stake and therefore incentives to sue in the civil court. Due to them being from within the market, it is less likely that they need additional investigative powers.[6] It is certainly beneficial to motivate representatives to seek remedies like injunctions, where individuals would not take this step but where societal harm is extensive.

  • [1] Note that in practice, investigative powers given to public authorities vary between countries and between legal fields within these countries. Therefore, a potential in investigative powers generally is given.
  • [2] Similarly characterised in F Cafaggi and H-W Micklitz, 'Administrative and Judicial Enforcement in Consumer Protection: The Way Forward' (2008) 29 EUI Working Papers LAW 4.
  • [3] See WH van Boom and MBM Loos, 'Effective Enforcement of Consumer Law in Europe: Synchronizing Private, Public, and Collective Mechanisms', in Working Paper Series (2008) 16; In competition law: leniency programmes are for instance regarded as providing private information within public law enforcement structures, see Keske (2010) 20; Shavell (1993) 259, 267. See on self-reporting: L Kaplow and S Shavell, 'Optimal Law Enforcement with Self-Reporting of Behavior' (1994) 102(3) Journal of Political Economy 583-606.
  • [4] It is not excluded that future technological developments will render it indeed worthwhile to equip individuals or their lawyers with wider investigative powers. Low administrative (and other societal) costs might justify this at some point. For the time being, societal costs are assumed not to outweigh the benefits of equipping every individual with wide investigative powers.
  • [5] See Garoupa (2000) 5. The reason is the difference in sophistication that stands behind these sanctioning mechanisms - see also AI Ogus, MG Faure, and NJ Philipsen, 'Best Practices for Consumer Policy: Report on the Effectiveness of Enforcement Regimes' ,Report prepared for the UK Department of Trade and Industry and OECD (2006) 47 and MG Faure, AI Ogus, and NJ Philipsen (2009) 176.
  • [6] Here few or no information asymmetries are present as they know the market segment, see Mahe (2009) 174.
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