ASCOLA Competition Law series
Edited by Josef Drexl and Fabiana Di Porto
Chapter 10: The regulatory approach in competition law enforcement for innovation-intensive industries: the case of broadband access regulation in Japan
This chapter examines how different a viewpoint the competition agencies need to adopt in dealing with innovation-intensive industries than with other industries. For this purpose, the chapter looks specifically at the broadband sector, which includes not only broadband networks but also products and services. New communications technologies and services, particularly the mobile ones, have considerably invigorated competition in telecommunications not only in downstream services but also in upstream networks. Therefore, companies operating in the broadband networks and services should no longer be subjected to ex ante telecommunications regulations. The international comparative analysis conducted in this chapter reveals several policy implications regarding competition law enforcement in innovation-intensive industries. First, competition agencies are advised to use the requirement to identify market power as a safeguard against over-regulations of unilateral (and exclusionary) conduct. Correct examination of market power necessitates correct definition of a relevant market, which should include not only ‘locked-in’ customers but also possible new customers. Moreover, a current market share should not be treated as the exclusive indicator of market power; a competition agency needs to grasp innovation trends in order to make a forward-looking assessment of market power. Second, a competition agency needs to base its examination of a refusal to deal (or a price squeeze) regarding access to a broadband network on a standard that balances innovation incentives against chances of new entries. The refined essential-facility doctrine properly reflects this balancing consideration. Still, a competition agency needs not only to identify essentiality of a facility but also to engage in a balancing evaluation between anticompetitive effects and efficiency effects. Third, a competition agency may let a telecommunications agency do the task of setting up behavioural remedies against companies that have engaged in competition law violations. This arrangement leads to administrative efficiency, but presupposes that the two agencies share the same regulatory standard. When this is not the case, the competition agency needs to set up a specific behavioural order against the violating company.
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