Innovation Defenses and Competition Laws: The Case for Market Power

364 Pages Posted: 10 Jan 2024

See all articles by Dirk Auer

Dirk Auer

International Center for Law & Economics (ICLE)

Date Written: Octover 28, 2019

Abstract

The object of this dissertation is to study the role that innovation occupies – and should occupy – in Antitrust/Competition analysis, and to put forward a coherent framework for the analysis of “innovation defenses” (defined as situations where a restriction of competition is necessary to produce a socially desirable innovation).

The dissertation is separated into two parts.

Part I adopts a positive law and economics approach, and examines how competition law an innovation might overlap. The dissertation separates this issue into three questions: What is innovation; what are the goals of competition laws on both sides of the Atlantic; and where is the enforcement of competition laws most likely to affect innovation? Having answered these questions, the dissertation examines how European Union (“EU”) competition law currently deals with innovation defenses. If this were done in a satisfactory manner, then there would be little need for a revised innovation defense framework. To this end, the dissertation surveys recent European competition cases to determine whether they incorporate economic concepts related to innovation and whether they overtly take defendants’ incentives to innovate into account. The dissertation shows that European competition law currently does not address innovation defenses in a coherent and satisfactory manner.

Part II takes a more normative stance. In order to fill the perceived policy gap, identified in Part I, it puts forward a framework for innovation defenses (“the framework”). The goal of this framework is not so much to be applied directly, but to guide policymakers through the various issues that would arise if they decided to analyze the potential chilling effects that their enforcement activities may exert on innovation.The framework centers on two key questions: is a given innovation desirable from a social welfare standpoint (i.e. do its social benefits outweigh its social costs), and is a restriction of competition necessary in order to achieve the innovation? The framework hinges on the economic concept of appropriability. Key questions include whether firms take the existence of such frameworks into account, even unwittingly, when they make their investment decisions; how the framework should be implemented; and whether it is compatible with the stated goals of competition laws and existing antitrust legislation on both sides of the Atlantic. The dissertation then applies this framework in a number of case studies and discusses its potential implications.

Suggested Citation

Auer, Dirk, Innovation Defenses and Competition Laws: The Case for Market Power (Octover 28, 2019). Available at SSRN: https://ssrn.com/abstract=4667754 or http://dx.doi.org/10.2139/ssrn.4667754

Dirk Auer (Contact Author)

International Center for Law & Economics (ICLE) ( email )

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