Competition L aw

1. Competition Law Introduction & Economic Analysis of Competition Law

2. Competition law • Competition law is a set of rules, and judicial decisions maintained bygovernments relating either to • agreements between firms that restrict competition, or (RKHK 4054 m.4) • abuse of market power on the part of private firms, or (RKHK 4054 m.6) • -theconcentration (RKHK 4054 m.7)

3. Competition creates efficiencies in the market place. • Productive efficiency: ensuring that any time a good orservice is produced, it is done by using the smallest number of resources. Thus, ifa man uses a tree to make 4 cricket bats, and another man uses a tree to make 5cricket bats, then the latter’s productive efficiency is better than the former’s.

4. Allocative efficiency: ensuring that the available resources areused in a satisfactory manner. That is, we want to produce those things mostdesired by the community first

5. Dynamic efficiency: In the modern world it is important that firms are able torespond quickly to changing economic circumstances. To be dynamicallyefficient means that firms are aware of the changing circumstances, and they areable to adapt to meet those new needs, such as searching for and adopting newtechnologies and ways of doing things better.

6. competition is not an end in itself, but rather is the means by which society can attain those efficiencies. • competition is good and thusought to be protected, does not mean that in a free market economy every sector is left tounbridled competition. Areas such as health services or the provision of basic utilities may,for example, be subject to governmental intervention or government controls. 118 18

7. In the EU, for example, agriculture is controlled by thecommon agricultural policy, which employs subsidies, grants, and interventionbuying to manipulate the market and is the absolute antithesis to a competitive system. • In  the  European  Union  (EU), single  market  integration  is  a major  goal  of  competition  law,  often  overriding  the  goal  of  market  efficiency. 

8. Political Economy • An economist’s restricted vision : • the habit of viewing "everything in relation to the economy and in terms of material productivity, making material and economic interests the center of things by deducing everything from them and subordinating everything to them as mere means to an end. • It would not be productive if economists largely ignored the complexity of the world in which economic choices and policies operate

9. Economism invariably led economists into the trap, the tendency to regard market mechanisms as value-neutral methods applicable to any economic or social order. • - economists should seek to avoid segmenting economic inquiry from the complex character of human nature. • -The ordinary man is not such a homo ceconomicus .... The motives which drive people toward economic success are as varied as the human soul itself.

10. ADAM SMITH, AN INQUIRY INTO THE NATURE AND CAUSES OF THE WEALTH OF NATIONS (1776). • a larger intended work on "the cultural history of mankind" in which "economics was viewed as an organic part of the larger whole of the intellectual, moral, and historical life of society.

11. Smith's political economy also involves the study of the interrelationship between economic theory and the political ideas and movements of a given time. • Wealth of Nations began not as a book on economics but as an essay in conjectural history, "the systematic study of the effects of legal, institutional and general environmental conditions upon human progress.”

12. In late nineteenth century, the term "political economy" was generally replaced by the term economics, used by those seeking to place the study of economy upon mathematical and axiomatic bases, rather than the structural relationships of production and consumption • The language of aggregates and mathematics also reflected his worry that economics would gradually become unintelligible to non- economists and of decreased usefulness to policymakers.

13. A radically empirical, positive approach to economics is inadequate because it simply leaves out too much. A London street directory will not show us the distance between Buenos Aires and London. • Smith, also preferred market-oriented economies to previous economic arrangements on the basis not only of their greater efficiency, but also of the greater liberty provided by market economies to ever-widening numbers of people.

14. Smith, also preferred market-oriented economies to previous economic arrangements on the basis not only of their greater efficiency, but also of the greater liberty provided by market economies to ever-widening numbers of people. Emma Rothschild reminded us that Smith saw economic liberty as something to be supported partly becapeople from many forms of subjugation.

15. Law & Economics Perspective The University of Chicago is the epicenter of the first modern (twentieth century) movement in law and economics. Efficiency • However, the goal of the law cannot solely be "efficiency" without any social aim. While waste must be combated and resources marshaled, there is no reason to believe that because efficiency is a desirable effect ofgood lawmaking that it should be the paramount goal of lawmaking generally.

16. Subsidy in Law and Economics Subsidy in Law and Economics Bank Bailouts and Nouveau-Interventionism

17. Competition law and consumer protection law • These are different concepts, though quite related since they seek to ensure that markets can function forthe maximum benefit of consumers. • The  common  goal  of  both  competition  law  and  consumer  protection  is  to  provide  consumers  with  access  to  an  array  of  competitively  priced  goods  and  services  in  the market place.  The distinctions are as follows: 

18. while  the  role  of  competition  law  is  to  ensure  that  the  marketplace  remains  competit ive,  so  that  a  meaningful  range  of  options  is  made  available  to  consumers,,  the  role  of  consumer  protection  law  is  to  protect  consumers’  ability  to  choose  freely  and  effectively  among  the  options.

19. while  competition  law  requires  that  consumers  find  a  reasonable  range  of  options  in  the  market place, undiminished by artificial constraints  like price­fixing or anti­competitive  mergers, consumer protection law  requires  that  consumers  are  able  to  make  a  reasonably  free  and  rational  selection  from  among  those  options,  unimpeded  by  artificial  constraints  like  deception  or the withholding of material information. Consumer protection analysis  focuses on  the  question  of  whether actual purchasers have been  misled. 

20. It  must  also  be  noted  that  though  both  competition  law  and  consumer  protection  law  are  aimed  at  improving  the  position  of  the  consumer,  there  are  some  business  practices  which  may  be  beneficial  to  consumers,  at  least  for  as  long  as they  last,  but  which  may  be  deemed  to  be  offensive  of  the  competition  laws.    An  example  here  is  the  concept  of  predatory  pricing.  As  long  as  the  price  is  brought  low  by  the  predatory­pricer,  consumers  enjoy  a  windfall  since  they  have  the  product  very  cheap.    One  could  say,  therefore,  from  t he  point  of  view  of  consumer  protection  that  this  is  a  good  and  welcome  phenomenon.    However,  such  a  phenomenon  is  usually  disapproved  of  by  competition  law,   

21. Competition law  and anti­dumping law • While  competit ion  law  is  concerned  with  ensuring  t hat  the  activit ies  of  business  undertakings  do  not  damage  the  competitive  process,  ant idumping  laws  target  allegedly  ‘unfair’  trading  practices  of  foreign  companies  accused  of  exporting  (or  ‘dumping’)  products  into  ot her  countries  at  prices  below  the  cost  of  production,  or  below  the  price  charged  in  domestic  or  third  markets. 

22. Despite  these  underlying  differences  between  compet ition  and  antidumping  laws,  ther e  are  types  of  dumping  which  if  they  occur,  could  definitely  be  dealt  with  under the competition laws because they have the characteristics  of anti­competitive behaviour like: predatory  dumping 

23. It should also be noted here that sometimes, antidumping measures could actually though unintendedly, be employed in a way that they would go contrary to the rules of competition.