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Timothy J. Brennan, Oct 01, 2008
Most competition law falls into one of three categories. The first, cartel behavior, is relatively uncontroversial. The basics of the second, horizontal mergers, are generally accepted, but how best to implement it—efficiency defenses, welfare standards, the need for market definition, or the value of customer testimony—can be hotly contested. The most controversial category is single-firm conduct, called monopolization in the United States and abuse of dominance in much of the rest of the world.
This controversy has three roots. First, acquiring a monopoly can entail doing something better than one’s rivals, such as charging lower prices or offering better products. Prosecuting these practices risks frustrating what competition is supposed to promote. Second, even if a firm has a market power, conduct that forecloses entry or rivalry elsewhere in its vertical supply chain would not be in that dominant firm’s interest. It thus presumably cuts costs or boosts demand, increasing overall economic benefit. Third, interventions may have the stated goal of protecting competition, but do so only indirectly by preserving the viability of rivals. Consequently, debate about single-firm conduct has been polarized between those who see these protections as protecting competitors and those who see them as a means to protect consumers.
