Economics and the Design of Competition Law

Abstract

The courts have adopted implicitly and explicitly economic premises in developing rules towards business practices under the competition laws in the United States and the European Community. Courts in both jurisdictions hold the view that monopoly is not bad in and of itself because it can promote long-run innovation and investment. They have sought to determine, subject to relevant legislation, rules that can assess whether practices are harmful to competition generally or in particular factual circumstances. In some cases, these premises become modified over time as the result of economic learning; in other cases these premises do not have close counterparts in academic economics. This article describes the economics that seems to underlie competition law; it draws contrasts and comparisons between the US and Europe. It also explores ways in which economists, authorities, and the courts can better question, and bring evidence to bear, on these economic premises.

Keywords: antitrust rules, design of antitrust rules, economics and antitrust rules, economics and rule of reason