This presentation by Lauren Willis (Professor, LMU Loyola Law School) was made during the discussion “Integrating Consumer Behaviour Insights in Competition Enforcement” held for competition authorities’ officials on 24 June 2022. More materials on the topic can be found at oe.cd/bice. This presentation was uploaded with the author’s consent.

1. Results-Based Remedies
Professor Lauren Willis
LMU Loyola Law School, Los Angeles
Lauren.Willis@lls.edu
OECD Competition Policy Roundtable
Integrating consumer behaviour insights in competition enforcement
June 24, 2022

2. Why do consumer-facing competition remedies fail?
I. Consumers respond in unexpected and diverse ways.
II. Firms outmaneuver remedies.

3. I. Consumers respond in unexpected, diverse ways.
Remedies Intended to Remove Barriers to Switching:
 Require firms to eliminate financial, time, and effort costs.
 Require firms to reduce personal data risks.
 Also must change consumer perception of costs and risks of switching.
 Also must reduce actual and perceived difficulty of comparison
shopping so consumers can calculate the benefits of switching, if any.
 But will benefits be durable? Will consumers trust them to be
durable? Also must regulate change-in-terms clauses?

4. II. Firms outmaneuver remedies.
Remedies Intended to Remove Barriers to Shopping:
 Prohibit incumbent firm from setting default.
 Firms impose costs on consumers who decline firm-preferred position.
 Firms overwhelm consumers with options.
 Firms confuse consumers to think firm-preferred position is the default.
 Prohibit imposing costs on consumers who decline firm-preferred position.
 Firms trick consumers into believing there are costs.
 Firms impose subtle but effective annoyance costs on consumers.

5. How might regulators prevent remedy failure?
• Survey consumers and examine customer journey to understand
barriers to accurate comparison price shopping and switching.
• Involve consumer behavior experts in designing remedies.
• Test remedies in lab.
• Test remedies in field trials.
• Audit remedies post-implementation and revise as needed.

6. How might regulators prevent remedy failure?
• Survey consumers and examine customer journey to understand
barriers to accurate comparison price shopping and switching.
• Involve consumer behavior experts in designing remedies.
• Test remedies in lab.
• Test remedies in field trials.
• Audit remedies post-implementation and revise as needed.
ꭓ Consumers have limited self-awareness and regulators will not react
to consumer journey the same way consumers do.
ꭓ Even experts cannot predict what consumers will do.
ꭓ Weak external validity because real world context is so influential.
ꭓ Firms can wait until after the trial to outmaneuver remedies.
ꭓ Regulators lack capacity to audit and revise quickly.

7. Results-Based Remedies
1. Set measurable competition outcomes that
demonstrate reduction in barriers to competition;
2. Give undertaking firms responsibility and flexibility to
achieve these outcomes; and
3. Require firms to demonstrate achievement of these
outcomes.

8. 1. Set Measurable Competition Outcomes
 Actual and perceived costs of switching are low.
o Firm records show customers spend no more time to cancel than
to sign up.
o Surveys show customers believe cost, time, and difficulty of
switching are low or very low.
 Consumers understand prices and limitations on benefits sufficiently
well to accurately comparison shop.
o Surveys show customers know prices they are paying and
limitations on benefits they will receive.
o Firm records show customers select only nondominated options
from firm’s offer set.

9. 2. Give firms responsibility & flexibility to achieve outcomes.
o Reduce frictions in processes to cancel/switch.
o Make prices and limitations on benefits simpler and more
intuitive.
o Eliminate dominated offerings from firm’s offer set.
o Effectively communicate prices, limitations on benefits, how to
cancel, and ease of switching.
o Experiment, measure, and adapt recursively.

10. 3. Require firms to demonstrate achievement of
the outcomes.
Regulator or independent expert could:
 Conduct random sample customer surveys.
 Audit “customer journeys” and firm records.
Regulator must:
 Incentivize the achievement of outcomes by, e.g.,
imposing fines or altering frequency of audits.

11. Results-Based Remedies
I. Consumers respond in unexpected and diverse ways.
As compared to regulators, firms can more quickly,
effectively, and efficiently identify, target, and adapt
methods to reach outcomes.
II. Firms outmaneuver remedies.
Results-based remedies give firms incentives to help
achieve outcomes rather than hinder them.

12. Results-Based Remedies
Professor Lauren Willis
LMU Loyola Law School, Los Angeles
Lauren.Willis@lls.edu
OECD Competition Policy Roundtable
Integrating consumer behaviour insights in competition enforcement
June 24, 2022