Innovation Markets and Competition Analysis

Innovation Markets and Competition Analysis

EU Competition Law and US Antitrust Law

New Horizons in Competition Law and Economics series

Marcus Glader

This book examines the legal standards – and their underlying economic rationale – for the protection of competition in the innovation process, in both European competition law and American antitrust law.

Chapter 2: Economics, innovation and competition

Marcus Glader

Subjects: economics and finance, competition policy, law - academic, competition and antitrust law

Extract

2.1 BACKGROUND Innovation is a major factor behind economic growth and is increasingly shaping market conditions and affecting market participants’ behaviour. Competition policy continues to play an important role in regulating markets and promoting welfare, but changing market characteristics increasingly affect the correct assessment of various practices. Recent antitrust cases have provoked diverse opinions regarding the scope of antitrust law and its execution by the antitrust authorities. When decision making is based on analysis of both current structures and future developments in dynamic environments, there is concern about the limits of authorities’ ability correctly to apprehend, assess and regulate market behaviour. On the other hand, when decision making refrains from such an analysis, or makes too limited an analysis, the policy may be seriously criticized for not factoring in important aspects of the market process. Whether an antitrust authority will allow a certain transaction or behaviour could depend on whether economic welfare, on balance, is likely to be enhanced or diminished. In both US and EU competition policy, this goal is not indifferent as to whose welfare is enhanced. In both jurisdictions, consumers are favoured. This means that a fair share of the resulting benefits from a scrutinized operation must end up with consumers. In most cases, this consumer criterion will not differ from a pure efficiency criterion. A passing on of resulting benefits to consumers is generally accomplished as long as effective competition remains on the market. More importantly, economic welfare cannot be restricted to pure price concerns. In...

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