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Eleanor M. Fox Professor, New York University School of Law

Exclusionary strategies of dominant firms: do small and developing economies need a view of their own?. Eleanor M. Fox Professor, New York University School of Law Fifth Annual Lecture, Fair Trading Commission of Barbados Feb. 13, 2009. Outline. 1 Introduction 2 Barbados and the world

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Eleanor M. Fox Professor, New York University School of Law

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  1. Exclusionary strategies of dominant firms: do small and developing economies need a view of their own? Eleanor M. Fox Professor, New York University School of Law Fifth Annual Lecture, Fair Trading Commission of Barbados Feb. 13, 2009

  2. Outline • 1 Introduction • 2 Barbados and the world • 3 Globalization and its ideologies • 4 Economic law –US, EU competition • Why an abuse of dominance law? What should it do? • 5 Full and fair competition for Barbados • 6 Conclusion

  3. I. Introduction • What is a dominant firm? • What are exclusionary strategies? • Why should we worry? Or not worry? • Should the whole world do the same thing? • Efficiency and justice: for whom • IS IT TRUE - What is good for the MNEs is good for Barbados

  4. II. Barbados, the world, and competition • A. Barbados • Your beautiful island • Building competitive markets in Barbados • keeping markets safe from abuse • B. Competition and the world • 1989 fall of Berlin Wall • 1994 Conclusion of the Uruguay Round, WTO • Forces of competitive freedom • But also unleashing world cartels and global dominance

  5. C. Competition LAW and the world • US – from 1890 • A law against power • EU – from 1957 • A law to establish a common market • Integration, level playing field • South Africa – from 1998 • Efficiency and justice • Barbados – from 2003 • Fair competition for consumers and enterprises

  6. III. How globalization changed the stakes and unleashed ideologies • 1980s-90s • Heyday of the “Washington Consensus” • The market is good, the government is bad • There is one right path for the world-the market • Market power is fleeting • Government intervention is protectionist • “Globalization + liberalization lifts all boats” • From roots up to top down (but with no top) • Truths and errors

  7. US economic law adopts the Washington consensus • This is a cautionary tale • To explain how market ideologies can shrink the competition law so that it provides very little protection against abuse of dominance • And to show the room for another path • Stories from the US • The law of abuse of dominance • US law shrinks, and shrinks, and shrinks

  8. US point of view: Presidents Reagan through Bush II • “Competition law protects competition and consumers, not competitors” • Should it also empower David against Goliath? (No; Goliath is efficient)

  9. Should the law protect business from aggressive dominant firms? (No)Do you see a shark? This is not a shark. Only inefficient competitors see a shark.

  10. OR should the law just focus on consumers? (and efficiency) - YES

  11. Consumers yes, BUT • But • The law should not protect against prices that are too high • The market will drive prices down • Price capping by an agency is too regulatory, and regulators will get it wrong

  12. We have seen the goal; what are the presumptions? • Consumer welfare and efficiency: this means aggregate wealth • Markets are robust and work • Antitrust cases against dominant firms usually make things worse • US law is tolerant of exclusionary practices • Enforcement might handicap efficient firms, chill innovation

  13. US Supreme Court:The last 2 cases on dominance • Verizon v. Trinko 2004 • Dominant telecom with sole access to local loop degrades service when supplying rivals • No violation; even dominant firms should not have duties to share facilities except in most extreme cases lest their incentives to invent be chilled • “Monopoly power .. is an important element of the free-market system …[It] is what attracts business acumen.” “False condemnations are especially costly …”

  14. Supreme Court case - 2 • Weyerhaeuser 2007 • Dominant buyer of logs overbuys and drives up price to deprive rival saw mills of enough logs, squeezing them out • No violation because a predatory buying scheme is likely to fail and a failed predatory buying scheme, like predatory pricing, may benefit consumers

  15. More US cases • Rambus • Rambus makes computer technology chips • The industry is setting a standard for interoperability • Rambus deceives: • Supports a standard that will incorporate its new patents and hides the fact that it will require licensing of its patents • no violation; the effect may have been to exclude other technologies or just to raise prices • And just raising prices is not a violation

  16. Other jurisdictions • European Union • Has a adopted a more economic approach • Prohibits exploitative pricing • Prohibits exclusionary practices • More willing than US to weigh the costs of excluding rivals • Entry and access matter • South Africa • Aggressive against dominant firm • Including monopoly firms using strategies to keep up prices • Mittal/Harmony Steel case

  17. C. Back to America -Economic fundamentalism explodes: the financial crisis –“We are all socialists now” • Economic fundamentalism and Alan Greenspan’s shock • “There must have been a flaw in my model” • The financial crisis has shattered the ideological free market beliefs • These are the beliefs on which US monopoly law is poised; what future for the shrunken US antitrust? • A need to rethink assumptions • Back to roots

  18. V. Barbados and its law • The fair competition act is an act • To promote, maintain, encourage competition • To prohibit prevention, restriction, distortion of competition and the abuse of dominant positions • To “ensure that all enterprises, irrespective of size, have the opportunity to participate equitably in the market place” …

  19. Barbados Act, Sec. 16 • A firm abuses a dominant position if it • Restricts entry • Deters an enterprise from competing • Eliminates any enterprise • Imposes unfair prices • Limits production • Engages in tying or exclusive dealing • Uses any other measure unfairly allowing it to maintain dominance

  20. Would/should Barbados condemn .. • Verizon? • Weyerhaeuser? • linkLine? • Rambus? • By what principle? • What if efficient dominant firm threatens to eliminate domestic business by sustainable low prices – and in times of financial crisis?

  21. Barbados protects consumers

  22. Should it also empower David against Goliath?

  23. Should it also protect business from aggressive dominant firms?

  24. CONCLUSION:A VIEW OF ONE’S OWN • A COMPETITION LAW • For empowering David • Against predatory sharks • FOR THE CONSUMER AGAINST EXPLOITATIVE FIRMS • Rethinking globalization and liberalization • Time for roots-up competition law • with proper regard for the world

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