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Competition Law and High-Tech Markets : Conventional Antitrust Thinking Revisited?

By Y. Ilan


Knowledge-based industries, often labelled 'high-technology' or 'new economy' have grown in economic significance over the past few decades and have dramatically changed our living standards. These markets typically possess a range of common characteristics, most notably globalisation of businesses, innovation-intensive competition, network externalities, economies of scale and intellectual property rights as pivotal competitive assets, which whilst not in themselves new, collectively raise important implications for competition policy. The striking rise of high-technology sectors in recent years has created many new legal challenges for antitrust regulators as to whether the analytical approaches most commonly applied to assess competitive issues should be enforced upon dynamic fast moving competition. The recent decisions in the widely publicised Microsoft cases on both sides of the Atlantic have prompted attention to competition analysis in dynamic markets, inducing a lively debate in Law and Economics circles as for the interrelation between competition policy and innovation-intensive environment. Over the past years, economic methodologies have gained a substantial role in the analysis of antitrust law, which was governed for an extended period of time by legal formalism. Conformity of competition law with economic principles and the 'more economic approach' to antitrust analysis is manifested in numerous reforms recently implemented in various area of competition policy. Notwithstanding these developments, antitrust law traditionally emphasises neoclassical welfare insights, focusing upon price-based economic theory and presupposing a fixed state of technology. Consequently, the structural view of the competitive process dominates, entailing that dynamic efficiency is often discounted in favour of higher output and lower prices. Such an approach is nonetheless at odds with the realities of innovation-driven industries. In light of the conditions imposed by information technologies, this study investigates the inherent limitations of the standard economic paradigms. The first part of the book lays down the economic foundations pertinent to new economy industries, including the unique economic characteristics and their associated antitrust implications, alongside numerous dynamic theories of competition (e.g. Schumpeterian rivalry, Austrian and evolutionary approaches), which place technological process at the centre of the competitive landscape underlying the new economy. The second part applies these economic findings to a selection of competition law issues and examines the desirability of the existing legal regime. Particularly, the pitfalls associated with assessing market power in a dynamic setting, tying through product integration, predation and refusal to license IP protected information, are being closely examined. Finally, the Microsoft case is critically reviewed to demonstrate how the new economy played out in court. Whilst it is acknowledged that high-technology firms should not be excluded from the domain of competition law, uncritical application of conventional thinking carries the danger of producing incorrect results, affecting multi-national business operation as well as the formulation of competition policies

Topics: Rechtsgeleerdheid, antitrust, high-technology, dynamic theories of competition, innovation, market power, product integration, predation, refusal to license, the Microsoft case
Publisher: Utrecht University
Year: 2007
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