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Contract and Tort Law

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Competition Policy: Introduction
What is Competition Policy
Brief history of competition laws
Objectives of competition policy
Relationship with other public policy objectives

1

What is competition policy?
Definition: Competition Policy aims at ensuring that competition in the marketplace is not restricted in a way that is detrimental to society
Why do we need a competition policy?
Market failure also in markets without natural monopoly features. Even if entry is possible, dominant positions might persist, due to:
• sunk costs industries
• lock-in effects and switching costs
• network effects
2

What is competition policy, II
We need competition policy also because:
Un-monitored, firms may resort to actions that increase their profits, but harm society, such as:





Collusion
Mergers which lessen competition
Predatory behaviour
Exclusionary behaviour
3

Competition policy vs. regulation
Both justified by market failures, but they differ by:
Procedures and control rights
• Regulation: more extensive powers (price, investments, products…), intervenes on market structure

Timing of oversight
• C.P.: ex-post; regulation: ex-ante
• C.P.: usually more time
• Occasional vs. continuous intervention

Information intensiveness
• Industry-specific for regulation
4

Demarcation lines become fuzzier
Despite these differences, the distinction between competition and regulation is less clearcut:
Merger control: preventive authorization system
Merger remedies (Structural vs. behavioral remedies)
Exploitative abuses (EU: article 82; not US)
Also: overlapping competence in several areas

5

History of competition laws: the US
End of XIX Century in the US:
• Revolution in transportation and communication, which lead to a single US market
• Technological innovations, stock market, new managerial methods

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