Post-Chicago Developments in Antitrust Law (New Horizons in Law and Economics Series)

350 Pages·2003·1.13 MB·English

by  Antonio Cucinotta

Post-Chicago Developments in Antitrust Law
NEWHORIZONS IN LAWAND ECONOMICS
Series editors: Gerrit De Geest, University of Ghent and University of
Antwerp, Belgium and University of Utrecht, The Netherlands; Roger Van den
Bergh, University of Rotterdam and University of Utrecht, The Netherlands;
and Paul Fenn, University of Nottingham, UK.
The application of economic ideas and theories to the law and the explanation
of markets and public economics from a legal point of view is recognized as
one of the most exciting developments in both economics and the law. This
important series is designed to make a significant contribution to the develop-
ment of law and economics.
The main emphasis is on the development and application of new ideas.
The series provides a forum for original research in areas such as criminal law,
civil law, labour law, corporate law, family law, regulation and privatization,
tax, risk and insurance and competition law. International in its approach it
includes some of the best theoretical and empirical work from both well-estab-
lished researchers and the new generation of scholars.
Titles in the series include:
Inflation and the Enforcement of Contracts
Shirley Renner
Law and Economics and the Labour Market
Edited by Gerrit De Geest, Jacques Siegers and Roger Van den Bergh
Economic Efficiency in Law and Economics
Richard O. Zerbe Jr.
The Economics of Harmonizing European Law
Edited by Alain Marciano and Jean-Michel Josselin
Post-Chicago Developments in Antitrust Law
Edited by Antonio Cucinotta, Robert Pardolesi and Roger Van den Bergh
Post-Chicago
Developments in
Antitrust Law
Edited by
Antonio Cucinotta
Universita di Messina, Italy
Roberto Pardolesi
LUISS Guido Carli, Rome, Italy
Roger Van den Bergh
University of Utrecht and University of Rotterdam,
The Netherlands
NEWHORIZONS IN LAWAND ECONOMICS
Edward Elgar
Cheltenham, UK • Northampton, MA, USA
©Antonio Cucinotta, Roberto Pardolesi, Roger Van den Bergh 2002
Chapter 6 ©Rudolph J.R. Peritz
All rights reserved. No part of this publication may be reproduced, stored in
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permission of the publisher.
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Acatalogue record for this book
is available from the British Library
Library of Congress Cataloguing in Publication Data
Post-Chicago developments in antitrust law/edited by Antonio Cucinotta, Roberto
Pardolesi, Roger Van den Bergh.
p. cm. – (New horizons in law and economics)
Includes index.
1. Antitrust law–Economic aspects. 2. Restraint of trade–Economic aspects.
3. Competition. I. Cucinotta, Antonio, 1962–II. Pardolesi, Roberto.
III. Bergh, Roger Van den. IV. Series.
K3850 .P67 2002
343′.0721–dc21 2002021257
ISBN 1 84376 001 0
Typeset by Cambrian Typesetters, Frimley, Surrey
Printed and bound in Great Britain by MPGBooks Ltd, Bodmin, Cornwall
Contents
List of figures and tables vii
Preface viii
List of contributors x
1 The reckoning of post-Chicago antitrust 1
Herbert Hovenkamp
2 The difficult reception of economic analysis in European
competition law 34
Roger Van den Bergh
3 Apreface to post-Chicago antitrust 60
Jonathan B. Baker
4 Post-Chicago, post-Seattle and the dilemma of globalization 76
Eleanor M. Fox
5 The bounds approach to antitrust 87
Patrick Van Cayseele
6 Dynamic efficiency and US antitrust policy 108
Rudolph J.R. Peritz
7 ‘Obvious’consumer harm in antitrust policy: the Chicago
School, the post-Chicago school and the courts 129
John E. Lopatka and William H. Page
8 Second order oligopoly problems with international dimensions:
sequential mergers, maverick firms and buyer power 161
Michael S. Jacobs
9 Rule fixing: an overlooked but general category of collusion 183
Robert H. Lande and Howard P. Marvel
10 Raising consumers’costs as an antitrust problem: a sketch of the
argument from Kodakto Microsoft(the European proceedings) 197
Francesco Denozza
11 How safe is the king’s throne? Network externalities on trial 213
Roberto Pardolesi and Andrea Renda
12 The vertical price fixing controversy 251
Antonio Cucinotta
13 The competitive dynamics of distribution restraints: efficiency
versus rent seeking 280
Peter C. Carstensen
v
vi Contents
14 Cooperation, competition and collusion among firms at
successive stages 296
Robert L. Steiner
Index 317
Figures and tables
FIGURES
5.1 AP(N) function and its bounds 89
5.2 An alternative to antitrust action 91
5.3 The P(N) function parameterized on g 97
5.4 The Nash equilibrium (p*, r*) of the pricing game with L> M 99
11.1 The effect of diffusion of good Ain a network 216
11.2 Learning effects, let alone, merely change the slope of the
demand curve, increasing the size of consumer surplus 222
11.3 The combined effect of learning effects and network effects 222
11.4 Welfare dynamic analysis of network and learning effects
in markets for information goods 228
TABLES
5.1 Some key elements of the methodology 96
5.2 Acomparison of price–cost margin estimates in European
and US manufacturing: a sample of industries 102
vii
Preface
Competition law has formed an important area of European law since the
establishment of the Community. The EEC Treaty of 1957 introduced prohi-
bitions of cartel agreements and abuse of a dominant position, which since
1962 onwards have been directly binding on firms. Since 1989 the Merger
Control Regulation subjects all large concentrations to antitrust scrutiny, in
order to prevent effective competition in the internal market being impeded. In
recent years economics has assumed greater prominence in EC competititon
law analysis. On many occasions, the EC Commission has stated that an
economics-based approach is to be preferred to strictly legalistic methods of
decision making. Clear examples are the Notice on the definition of the rele-
vant market and the Guidelines on vertical restraints. In addition, recent
merger decisions show an increasing degree of economic sophistication,
including econometric techniques to establish dominance.
In spite of this recent change of perspective, it is fair to say that up to now
economic considerations have played a more important role in the United
States than in Europe. From the 1970s onwards, the Chicago School had a
profound impact on American antitrust law. Chicagoans argue that economic
efficiency is to be considered as the sole goal of competition law. Obviously,
confining antitrust to efficiency goals permits regulators and courts to employ
the teachings of economic analysis to a much broader extent than would be
possible if the opposite view, that non-economic goals are equally important,
is accepted. In Europe, the political goal of market integration has impeded a
full reception of the relevant economic insights. Clear examples are the ban on
absolute territorial protection for dealers and the prohibition of third-degree
price discrimination by dominant firms.
Confronting different views on controversial issues of competition law is
always a challenging invitation for academics on both sides of the Atlantic
Ocean. The University of Messina offered a great opportunity for such an
intellectually stimulating meeting by organizing a conference in Taormina in
October 2000. The timing of the conference was excellent. More than 20 years
had passed since the initial successes of the Chicago School in the United
States, hence, the time seemed ripe for a critical evaluation of the Chicago
approach to antitrust. Recent judgments of the US Supreme Court (such as
Kodak) and the debate surrounding the Microsoftcase have led to the view that
antitrust has entered the post-Chicago era, in which previous immoderations
viii
Preface ix
are tempered and more refined and accurate analyses take precedence. This
claim is made exactly at the time when European competition policy opens the
door for an economics-based approach. The conference in Taormina created
optimal scope for a discussion of the economic foundations of competition
policy and the different ways in which both American and European competi-
tion law do – or do not – take account of these economic insights.
Most of the papers presented at Taormina have been collected in this book,
which obviously gives no final answer to the host of questions arising from the
complexities of antitrust, but does offer a definite contribution to a better
understanding of the many ‘interfaces’between economic thinking and sound
legal policy.
Antonio Cucinotta, Roberto Pardolesi and Roger Van den Bergh