Economics
Competition Policy
Competition policy refers to government measures aimed at promoting fair competition and preventing anti-competitive practices in markets. It encompasses regulations and laws designed to ensure that businesses operate in a competitive environment, fostering innovation, efficiency, and consumer welfare. The key objectives include preventing monopolies, regulating mergers and acquisitions, and addressing anti-competitive behavior.
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10 Key excerpts on "Competition Policy"
eBook - PDF- Owen E. Hughes, Deirdre O'Neill(Authors)
- 2008(Publication Date)
- Red Globe Press(Publisher)
Chapter 5 Competition Policy Introduction Competition Policy is an important, if contested, area of govern-ment–business interaction. At its broadest, it is the use of govern-ment laws or regulations to force or encourage competition to occur in the private marketplace. Competition Policy can be defined as ‘those policies and actions of the state intended to prevent certain restraints of trade by private firms’ (Doern, 1995, p. xi). Without Competition Policy, its advocates argue, firms would collude; behave in a predatory manner or merge with com-petitors, all with the aim of reducing competition and keeping prices and profits high. Competition Policy operates at the very border between government and business, with government action being intimately concerned with the operations of the market. Its role can become controversial, with businesses not always particu-larly happy with the way competition authorities go about their work. Not surprisingly, businesses and business groups often object to the results of particular cases and to restrictions on their freedom of action. The contest over Competition Policy is given extra spark by there being no consensus within economics as to the desirable scope of government actions to force private businesses to compete. It is noteworthy that competition laws have extended their applicability in recent decades at the same time as there have been attempts to generally reduce economic regulation due to theoretical change and the problems of over-regulation. This is somewhat paradoxical. How is it possible to justify, on the one hand, deregulation and, on the other, an increase in regulation? If we have a free-market system, what is wrong with letting it work? It is usually assumed that competition is the driving force leading to greater efficiency in market systems and, therefore, policies that enhance competition should be good for the consumer and the economy. At the same time, many economists argue that the 88
eBook - PDF- Rhona C. Free(Author)
- 2010(Publication Date)
- SAGE Publications, Inc(Publisher)
In the United States (the primary focus in this chapter), there are two primary methods that government has adopted to impact business behavior and market out-comes. The first is referred to as Competition Policy, or antitrust policy. Competition Policy tries to promote eco-nomic efficiency through rules, or codes of conduct, for firm behavior that are designed to restore the market to a competitive, or near competitive, outcome. It is not so much that monopolies are deemed illegal under competi-tion policy, but rather it is more the attempt by a firm or group of firms to monopolize an otherwise competitive market that tends to trigger a government response. In many respects, Competition Policy tends to be reactive, in that it is prompted by legal challenges to a firm's observed behavior designed to garner market power when competi-tion would otherwise exist. Competition Policy is a vast field in economics and is beyond the scope of this chapter. This chapter focuses primarily on direct regulation. Direct regulation is more preemptive in nature. Rules for market outcomes are established by the government. Prices are set, capital investments are subject to oversight, market entry is limited, and often certain types of produc-tion processes are mandated. Such regulation tends to override market outcomes that would have arisen without any such rules. From the perspective of most economists, who would generally prefer that the market allocate resources, the fact that regulation substitutes for market outcomes can be justified only if the market is indeed sub-ject to failure. After a brief review of the regulatory history of the United States, the economic reasons for regulation as well as common types of regulation are reviewed. However, because the economic prescriptions for market failures have not been followed closely in practice, a more formal review of the incentives of regulators to regulate is consid-ered.
eBook - PDFCompetition Policy
Theory and Practice
- Massimo Motta(Author)
- 2004(Publication Date)
- Cambridge University Press(Publisher)
Finally, it may not join with non-members to restrict competition and price. If the association violates these prohibitions, the FTC refers the matter to the DOJ for prosecution. 76 On anti-dumping, see Chapter 7. On the possibility that Competition Policy instruments are used as a protectionist device, see Motta and Onida (1997). 77 See Gual (1995) on the conflicts among competition, trade and industrial policies in the EU. 78 See Chapter 2 on the role of competition to promote productive efficiency. 30 Competition Policy: History, Objectives, and the Law marketplace and has detrimental effects, since it might allow inefficient firms to survive at the expense of more efficient ones. Although in the EU it is the Compe- tition Directorate that is in charge of state aids, and such aids do have an effect on competition, I take the view that they pertain more to the domain of trade policy than of that of Competition Policy. Accordingly, I do not deal with subsidies in this book. 1.3.3 Competition Policy: A Definition To define Competition Policy (or anti-trustpolicy as it is more often called in the US) is not an easy task. A possible definition might be as follows: «the set of policies and laws which ensure that competition in the marketplace is not restricted in a way that is detrimental to society". This definition admits the possibility that some restrictions might not necessarily be detrimental. For instance, some agreements between a manufacturer and a retailer, which limit competition by other retailers often improve economic welfare (see Chapter 5). But the definition is also empty unless one specifies what «detrimental to society" means. In turn, this calls for a specification of the objectives of Competition Policy. In Section 1.3 I have argued that economic welfare is the objective competition authorities and courts should pursue.
eBook - ePub- Peter Willis(Author)
- 2013(Publication Date)
- Informa Law from Routledge(Publisher)
In reality, markets do not conform to these theoretical constructs and this may provide a justification for governments to intervene. The breadth and nature of such state intervention when markets “fail” is the subject of extensive political debate and will not be canvassed here; suffice to say that competition law is part of this intervention. It is predicated on protecting an ideal of market interaction and is concerned that, when unconstrained by rivalry, businesses would seek to behave in ways that are considered socially undesirable.The four main elements of competition law and policy can be described in this way:— Prohibition of anti-competitive agreements: in the simplest form of such agreements, firms in a rivalrous position seek to dampen that rivalry by agreement on prices and/or output.— Prohibition of abuse of dominance: once a firm is sufficiently large that it is not hampered by rivalry from its competitors or from the behaviour of its customers, its self-interest will dictate that it behaves in a way that no longer benefits consumers, ie by seeking to exclude competitors or exploit customers.— Merger control: as an extension of concerns about agreements, the result of one company buying another firm may be the dampening of rivalry. To prevent market structures arising where firms do not compete effectively, Competition Policy can prohibit certain mergers and acquisitions.— Market investigations: these focus on the behaviour arising from the informal interaction of market participants, whereby structures or practices that hinder rivalry may have evolved without any specific abuse of dominance necessarily taking place.In this chapter we explore how economics is at the heart of these statutes. The rationale for their existence is the protection of means of delivering economic efficiency. The key aspect of analysis is the economic concept of rivalry; the main tools for conducting this scrutiny arise from economics.The chapter is structured as follows. Section 2.2
eBook - PDF- Christopher Townley(Author)
- 2009(Publication Date)
- Hart Publishing(Publisher)
3 Other jurisdictions have adopted a similar stance. In most jurisdictions with a competition law today, the legislation’s objective is to increase economic efficiency. 4 That said, in some jurisdictions, Competition Policy also pursues ‘non-efficiency’ objectives. 5 Canada’s competition law, for example, as explained by section 1.1 of its Competition Act 1985, was promulgated: [T]o maintain and encourage competition in Canada in order to promote the efficiency and adaptability of the Canadian economy, in order to expand opportunities for Canadian participa-tion in world markets while at the same time recognising the role of foreign competition in Canada, in order to ensure that the small and medium-sized enterprises have an equitable opportunity to participate in the Canadian economy and in order to provide consumers with competitive prices and product choices. The theoretical debate about antitrust’s goals largely mirrors this divergence in the competition rules. Many economists believe that economic efficiency (welfare) should be the exclusive focus of Competition Policy. 6 A leading textbook notes that economists generally view antitrust as a set of laws designed to promote competition and, therefore, economic efficiency. 7 Other scholars believe that Competition Policy should also advance non-efficiency objectives. 8 In the face of this disagreement, Chapter 1 poses two core questions why might Competition Policy incorporate public policy objectives, Section 2; and, given that I believe that this is sometimes appropriate, when might Competition Policy incorporate public policy objectives, Section 3? Both questions are discussed in a legal vacuum. This is not to say that legal context is unimportant; rather, I want to explore a theoretical ‘ideal’ and then, in the later chapters, to examine this ‘ideal’ in the specific legal context of the European Union.
- N. Gardner(Author)
- 2016(Publication Date)
- Palgrave Macmillan(Publisher)
Part I The Framework of Competition Policy 1 Ideas and Their Implementation A Introduction The legislative framework of Competition Policy provides no more than a broad indication of the intentions of the policymakers who devised it. It delegates to the authorities which it appoints, a wide range of discre- tion in their performance of the task of giving practical effect to those intentions. That discretion is not exercised in a vacuum, however: those responsible are influenced by the intellectual and political climate and by the social and constitutional environment within which they oper- ate. This chapter is concerned with the nature of those influences. The principal intellectual influence upon legislators, as well as upon those appointed to implement their policies, has of course been eco- nomic theory. It would be difficult indeed to find another branch of public policy so thoroughly dominated by a set of abstract theoretical propositions. The original basis for Competition Policy was a set of pro- positions concerning competition which were first put forward by nineteenth-century economists; and those propositions continue to constitute what might be termed the `mainstream view' of its rationale. They are founded, however, on a highly simplified model of the eco- nomy, and of the workings of firms within it; and even within that model, they are subject to important qualifications which are often overlooked. In recent years, moreover, the use of that model as the rationale for Competition Policy has come under attack, and fresh the- oretical developments have begun to have their influence. Section B, below, is a non-technical re Âsume  of the relevant propositions of main- stream competition theory and of its assumptions and limitations. Competition Policy need not, however, be exclusively concerned with the promotion of competition. Other objectives are also sought in the 3
- Albert Sánchez Graells(Author)
- 2015(Publication Date)
- Hart Publishing(Publisher)
85 In the end, it would be equivalent to other forms of economic planning, and competition law should not be used with regulatory purposes. While competition law is concerned with preventing illegal interference with the market, regulation implies the power to alter an existing, legal, situ-ation. Competition law may not be used to make an existing market more competitive, unless some element of the market is illegal. 86 Consequently, proper competition law enforcement should not be replaced by regulatory intervention. Indeed, semi-economic objectives (with clear political colours and more properly understood as industrial policy) such as limiting the size that companies or the level of concentration that markets can attain have already been abandoned as desirable antitrust goals. It is submitted that Competition Policy should not be aimed at planning the economy or at conducting industrial policy, in the sense that competition authorities are in the best position to know which market structure would yield theoretically optimal results—that is particularly true in the case of platform or multi-sided markets, in markets where innova-tion is the key driver to growth and development, 87 and even in more traditional markets where consumer preferences might largely determine the structure of the offer. Economic regulation through Competition Policy has to escape any economic planning temptations 82 Along the same lines, see Amato (n 45) 109–13. 83 For a strong criticism of the ability of current competition theory and enforcement to advance its stated goals, see RW Crandall and C Winston, ‘Does Antitrust Policy Improve Consumer Welfare? Assessing the Evidence’ (2003) 17 Journal of Economic Perspectives 3.
eBook - PDFThe Concept of Abuse in EU Competition Law
Law and Economic Approaches
- Pinar Akman(Author)
- 2012(Publication Date)
- Hart Publishing(Publisher)
Thus, the following section examines the potential objectives of competition law and policy, including consumer welfare and total welfare. 96 DJ Neven, ‘Working Paper’ in CD Ehlermann and LL Laudati (eds), European Competition Law Annual 1997: Objectives of Competition Policy (Oxford, Hart Publishing, 1998) 114; Scherer (n 87) 999. Harberger’s study in 1954 seeking to measure the overall deadweight loss attributable to monopolies found the relevant value to be around one-tenth of one per cent of gross national product or two dol-lars per capita at 1953 income and price levels; A Harberger, ‘Monopoly and Resource Allocation’ (1954) 44 American Economic Review 77, 84. Cf Posner (n 91) 17 criticising Harberger’s and similar studies for being incapable of properly measuring the costs of monopoly by ignoring the monopoly profits invested in attempts to monopolise, ie, for rent-seeking purposes. 97 Brodley (n 94) 1028. 98 ibid 1028. 99 ibid 1030. 100 ibid 1032. 101 ibid. See also FM Scherer, ‘Efficiency, Fairness and the Early Contributions of Economists to the Antitrust Debate’ (1990) 29 Washburn Law Journal 243, 254. OBJECTIVES OF COMPETITION LAW AND POLICY 25 III OBJECTIVES OF COMPETITION LAW AND POLICY A In General A quick survey of suggested goals of competition law and policy reveals a wide variety of alternatives: the maximisation of consumer welfare, economic effi-ciency, the dispersion of economic and political power, the unclogging of mar-kets, the protection of easy entry into business and the protection of small businesses’ welfare are just a few examples. 102 The general discussion of what the goals of competition law and policy are and should be has mostly taken place in the United States. Thus, the propositions and arguments regarding the objectives stemming from the US may not always serve the needs of Europe due to political, economical and cultural differences.
eBook - PDFEurolegalism
The Transformation of Law and Regulation in the European Union
- R. Daniel Kelemen(Author)
- 2011(Publication Date)
- Harvard University Press(Publisher)
152 • Competition Policy law, which was based on a strict prohibition regime and extensive pri-vate enforcement. These early developments will appear all the more striking when we observe what has happened in the last decade. West European governments resisted the Americanization of their competi-tion policies in the 1950s, when the United States dominated much of the Continent. Yet today the EU is succeeding where the United States failed and promoting the spread of American-style Competition Policy, with an emphasis on rigorous microeconomic analysis, strict judicial control, and widespread private enforcement. The Development of EU Competition Policy In the years after World War II, just as competition policies were being introduced at the national level, a parallel set of developments was oc-curring at the European Union level. Since the very launch of the Eu-ropean Communities, Competition Policy has always enjoyed a special status (McGowan and Wilks 1995). The founders of European integra-tion recognized that a robust, supranational Competition Policy was necessary to break down barriers between national economies. With-out a supranational Competition Policy, dominant players in national markets might abuse their market power to quash would-be competi-tors from neighboring states, and cartels could carve up the European market. EU-level Competition Policy—first in the European Coal and Steel Community (ECSC) and later in the European Economic Community (EEC)—initially combined aspects German ordoliberalism and the general European model of competition with elements of the Ameri-can model (Quack and Djelic 2005; Büthe and Swank 2007). While the imprint of European traditions clearly remains to this day, over the years the economic and institutional environment of EU Competition Policy has led EU policy makers to shift their approach closer to Amer-ican practice.
eBook - PDF- Eleanor Fox, Daniel Sokol, Eleanor Fox, Daniel Sokol(Authors)
- 2009(Publication Date)
- Hart Publishing(Publisher)
Through a series of general indications, the law prohibits certain forms of private commercial conduct and establishes a wide framework to promote economic objectives, thus helping to create an efficient allocation of resources in the economy. One crucial aspect of Mexican Competition Policy is the application of the law of competition. In the United States, for example, competition authorities (such as the Department of Justice and the Federal Trade Commission) evaluate the pos-sible anticompetitive aspects of mergers and other practices and take their cases to the judicial power (the courts), which is the ultimate decision maker. However, in Mexico, the courts lack experience in the implementation of Competition Policy. In general, Mexican judges do not have basic economic training, much less spe-cialization, in areas such as competition and economic regulation. Additionally, the Mexican judicial system has gained a negative reputation for its inefficiency. The creation of courts specializing in economic areas, including competition and anti-dumping, has been proposed, but political 2 and financial obstacles exist. A. Regulation of Monopolistic Practices The FLEC divides anticompetitive practices into two types of conduct: absolute (hori-zontal) monopolistic practices, and relative (vertical) monopolistic practices. Absolute practices are subject to ‘per se’ treatment. Relative monopolistic practices violate the FLEC only if the firms (in Spanish called ‘economic agents’ or agentes económicos ) have substantial power in a relevant market defined through a rule of reason approach. Article 10 of the FLEC identifies some practices that may be considered an abuse of dominance (exclusive agreements, boycotts), as does Article 7 (preda-tion, distribution exclusivity, price discrimination or sale conditions, crossed subsidies, and growing costs). 3 It has not been easy for the CFC to execute Article 10 with the criteria in Article 7.
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