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3 - Sanctions on Legal Persons

An Economic Analysis

from Part I - General Chapters

Published online by Cambridge University Press:  29 July 2022

Tihamer Tóth
Affiliation:
Pázmány Peter Catholic University (Budapest, Hungary)
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Summary

The chapter examines four economic models, the implications of behavioural economics and the main normative implications of the sanctioning policies. Classical economic analysis of sanctions and crimes presumes that decision-makers are sanctioned directly, personally. Yet this model can only be applied in the case of competition law sanctions levied on the company, if the decision-maker of the firm is at the same time the owner of the company. If companies are sanctioned, the key issue is whether they apply internal sanctions against the decision-maker. Such sanctions can be ex-ante or ex-post, fitted perfectly of imperfectly to the goals of the decision-maker. However, not all companies apply sanctions, some because of agency problems, others because the owners of the company are not able to learn who should be sanctioned and when. There are also cases where the owners are not interested in preventing unlawful decisions even if the company is later sanctioned. The reason for that might be that they do not bear the burden of the sanctions or they make a credible commitment not to levy full (or any) sanctions on managers in order to induce them to take more risks.

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Chapter
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Publisher: Cambridge University Press
Print publication year: 2022

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