Harmonisation and the EU Internal Market : a Law and Economics Approach

Abstract

During the last years, the European Union has faced the questions of its legitimacy, its role and its future more fiercely than ever since the European project was initiated. One of the key questions is when it is desirable and necessary to introduce new European rules. This thesis offers an answer to this question from a Law and Economics perspective in the area of EU private law, focusing on consumer contract law and antitrust damages actions.

The thesis relies on the framework provided by the economic theory of federalism, which postulates that centralising a policy needs to be justified by a particular benefit, to compensate for the lower correspondence to local preferences and lost possibilities for regulatory experimentation. Against this theoretic background, the thesis advocates that the subsidiarity principle, which governs the exercise of competences by the EU institutions, ought to be an efficiency principle that weighs the various economic arguments in favour and against harmonisation.

The thesis extends the framework of the economics of federalism in several ways. First, the thesis explores the link between the economics of federalism and the economics of integration. It is found that there are hardly any limits to the possibilities to harmonise rules for completing the internal market if one follows the logic of the economic concept of market integration, which also underlies the internal market's legislative competence of the EU. Almost any variation in Member States' legal rules could be considered as an obstacle to the internal market. An overarching economic theory of harmonisation needs to take account not only of reductions in transaction costs and other trade barriers, but also of broader welfare effects. By incorporating heterogeneous preferences into a trade model, the thesis illustrates that harmonising rules involves a trade-off between enhancing competition by reducing transaction costs, and ensuring that policies correspond to citizens' preferences.

Further extensions of the economics of federalism framework are identified in the scope and enforcement of EU legislation. The limited scope of the Antitrust Damages Directive in terms of its rules on limitation periods may limit the extent to which the Directive can achieve its goal of providing a level playing field' for antitrust damages claims throughout the EU. The second goal of this Directive, to balance public and private antitrust enforcement, may require an adjustment to some of the substantive rules on liability, in order to prevent that damages claims undermine the success of the leniency program.

Building upon the insights from the economics of federalism, the thesis aims to show that the effects of harmonisation lie not only in a reduction of transaction costs, but also in the substantial rules included in the EU policy, their scope of application, and their enforcement. The implication for policy making is that the justification for further harmonisation should go beyond the limited focus on the beneficial effects on the internal market, to include a wider range of welfare considerations.