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The Concepts of Industrial Policy and Competition Law Distinguished

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The Interface of Competition Law, Industrial Policy and Development Concerns

Part of the book series: Munich Studies on Innovation and Competition ((MSIC,volume 8))

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Abstract

The notion of industrial policy is evasive. There is no precise definition of what exactly it refers to. Hence, one must approach the concept from the various descriptions and thus find out about its common features. This section delineates the substance of industrial policy, both in its traditional (Sect. 2.1.1.1) and more modern appearance (Sect. 2.1.1.2). The main focus will thereby lie on developing and emerging economies. Additionally, the section contains the main justifications for applying industrial policy (Sect. 2.1.1.3).

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Notes

  1. 1.

    This process of catching-up is described as the ‘flying geese pattern’, where countries advance from one comparative advantage to the next and sector specialisations move from more developed countries to its less developed neighbours. Early developers facilitate change in second- and third-tier countries, as was the case for example with Japan and its successors such as Thailand and Singapore. See M Hiley in J Hossein, M Tribe and J Weiss (eds), Industrial Development and Policy in Africa – Issues of De-Industrialisation and Development Strategy (2000) 58, 58. See also Y Akyüz in M Cimoli, G Dosi and JE Stiglitz (eds), Industrial Policy and Development (2009) 144, 155. Others use the metaphor of a forest, where trees stand for products and monkeys for firms. Product innovation depends on how easily the monkeys can jump to trees that are yet unoccupied. This depends on how far the next tree is away. Once countries manage to establish themselves in a denser part of the forest, it is supposed to get easier to develop more diverse products. See R Hausmann and B Klinger, ‘Structural Transformation and Patterns of Comparative Advantage in the Product Space’, Center for International Development (CID) Working Paper No 128 (2006) 2ff. Further elaborating on this, see R Hausmann and D Rodrik, ‘Doomed to Choose – Industrial Policy as Predicament’ (2006), talk given at First Blue Sky Seminar by Center for International Development, Harvard, Harvard University, 9 September 2006, 13ff.

  2. 2.

    CN Pitelis in P Bianchi and S Labory (eds), International Handbook on Industrial Policy (2006) 435, 435.

  3. 3.

    K Bjorvatn and ND Coniglio, ‘On the Importance of Openness for Industrial Policy Design in Developing Countries’, NHH Department of Economics Discussion Paper No 3/2007 (2007) 1.

  4. 4.

    M Di Maio in M Cimoli, G Dosi and JE Stiglitz (eds), Industrial Policy and Development (2009) 107, 107.

  5. 5.

    P Bianchi and S Labory in P Bianchi and S Labory (eds), International Handbook on Industrial Policy (2006) 3, 3.

  6. 6.

    See D Rodrik, ‘Industrial Policy for the Twenty-First Century’, Harvard Kennedy School (HKS) Working Paper No RWP04-047 (2004) 2; A Singh, ‘Competition and Competition Policy in Emerging Markets: International and Developmental Dimensions’, UNCTAD G-24 Discussion Paper Series No 18 (2002) 1, 18.

  7. 7.

    H Pack and K Saggi, (2006) 21 (2) World Bank Res. Obs. 267, 267–268.

  8. 8.

    T Altenburg, ‘Industrial Policy in Developing Countries’, Deutsches Institut für Entwicklungspolitik Discussion Paper 4/2011 (2011) 1, 12.

  9. 9.

    M Pangestu in B Hoekman, A Mattoo and P English (eds), Development, Trade, and the WTO: A Handbook (2002) 149, 150.

  10. 10.

    See also at Sect. 4.2.5 on South Africa as a developmental state. That these countries were successful only due to intervention is by no means uncontested. As counterfactuals do not exist – nobody can be certain about how they would have fared absent policy intervention – it is argued that East Asia cannot serve as a proper role model. See for instance H Pack and K Saggi, (2006) 21 (2) World Bank Res. Obs. 267, 283–284. See also D Rodrik, ‘Normalizing Industrial Policy’, Commission on Growth and Development Working Paper No 3 (2007) 1, 9. See further T Hatta, ‘Competition Policy vs. Industrial Policy as a Growth Strategy’, ERIA Discussion Paper Series (2017).

  11. 11.

    See I ul Haque, ‘Rethinking Industrial Policy’, UNCTAD Discussion Paper No 183 April 2007 (2007) 3. The author opines that the focus on market failures is too narrow, for it depicts government activity as residual and modest in nature. He identifies three problems – market failures are difficult to locate, focus on them limits government action to supply-side policies, and it disregards ‘private sector failure’ – and therefore commends a broader, East-Asian-style policy approach. See also M Pangestu in B Hoekman, A Mattoo and P English (eds), Development, Trade, and the WTO: A Handbook (2002) 149, 149.

  12. 12.

    I ul Haque, ‘Rethinking Industrial Policy’, UNCTAD Discussion Paper No 183 April 2007 (2007) 3.

  13. 13.

    See H Shapiro, ‘Industrial Policy and Growth’, UN Department of Economic and Social Affairs Working Paper No 53 (2007) 1. See also T Altenburg, ‘Industrial Policy in Developing Countries’, Deutsches Institut für Entwicklungspolitik Discussion Paper 4/2011 (2011) 1, 13.

  14. 14.

    D Rodrik, ‘Industrial Policy for the Twenty-First Century’, Harvard Kennedy School (HKS) Working Paper No RWP04-047 (2004) 12.

  15. 15.

    Changed trade patterns under globalisation challenge this argument. Whereas previously there was little chance for domestic investment if unlikely to pay off, today most intermediate products are traded freely, meaning that international firms, which are less likely to suffer from coordination failures, can now replace such investment. See H Pack and K Saggi, (2006) 21 (2) World Bank Res. Obs. 267, 276.

  16. 16.

    D Rodrik, ‘Industrial Policy for the Twenty-First Century’, Harvard Kennedy School (HKS) Working Paper No RWP04-047 (2004) 9. For a discussion see H Pack and K Saggi, (2006) 21 (2) World Bank Res. Obs. 267, 276ff.

  17. 17.

    D Rodrik, ‘Industrial Policy for the Twenty-First Century’, Harvard Kennedy School (HKS) Working Paper No RWP04-047 (2004) 11.

  18. 18.

    T Altenburg, ‘Industrial Policy in Developing Countries’, Deutsches Institut für Entwicklungspolitik Discussion Paper 4/2011 (2011) 1, 13.

  19. 19.

    Ibid 14.

  20. 20.

    On Europe see J Pelkmans in P Bianchi and S Labory (eds), International Handbook on Industrial Policy (2006) 45, 62 and 69.

  21. 21.

    It is difficult to draw a line between old and new style policies. Instruments that were used in the second half of the last century, such as trade protection and selective financial support, are still commonplace today. What has changed though is the way they are applied. Governments have become more attentive to if they have the key determinants in place, if some sort of comparative advantage is present and if support to one sector can generate spillover effects and benefits for others. Two developments matter: Firstly, the application of undifferentiated and inflexible support schemes has often proved to not yield satisfactory results and, secondly, in many instances international trade obligations have lessened the manoeuvring space to apply policy measures. On the latter, see M Di Maio in M Cimoli, G Dosi and JE Stiglitz (eds), Industrial Policy and Development (2009) 107, 127. See further I ul Haque, ‘Rethinking Industrial Policy’, UNCTAD Discussion Paper No 183 April 2007 (2007) 4–5.

  22. 22.

    For a comparison of performance, see H Shapiro, ‘Industrial Policy and Growth’, UN Department of Economic and Social Affairs Working Paper No 53 (2007) 8.

  23. 23.

    D Rodrik, ‘Normalizing Industrial Policy’, Commission on Growth and Development Working Paper No 3 (2007) 1, 24ff.

  24. 24.

    M Di Maio in M Cimoli, G Dosi and JE Stiglitz (eds), Industrial Policy and Development (2009) 107, 117–118 and 125.

  25. 25.

    D Rodrik, ‘Industrial Policy for the Twenty-First Century’, Harvard Kennedy School (HKS) Working Paper No RWP04-047 (2004) 3.

  26. 26.

    Ibid. See also T Altenburg, ‘Industrial Policy in Developing Countries’, Deutsches Institut für Entwicklungspolitik Discussion Paper 4/2011 (2011) 1, 31. The author suggests ‘a systematic and professionally moderated collaborative process’, which comprises businesses, market analysts and government representatives. Collaboration between private firms is said to be necessary, too. This is especially the case with regard to innovation firms. On the implications for competition policy, see J Lorentzen and P Møllgaard in P Bianchi and S Labory (eds), International Handbook of Industrial Policy (2006) 115, 122ff.

  27. 27.

    This does not mean that governments pour out money randomly. But the approach accepts the inherent difficulty to anticipate what industries may flourish and should be promoted from an early stage. It does not in the view of proponents of industrial policy substitute for an elaborate policy agenda.

  28. 28.

    D Rodrik, ‘Industrial Policy for the Twenty-First Century’, Harvard Kennedy School (HKS) Working Paper No RWP04-047 (2004) 12. That governments are incapable of rightly selecting promising industries is a key criticism of those sceptical towards industrial policy: It is, so opponents argue, not possible for policymakers to assess the actual extent and repercussions of various market failures and accurately address issues such as which industries bear the potential for long-time comparative advantage and what industries and firms can create knowledge spillovers, which then is why countries should abstain from grand-scale intervention in the first place. See H Pack and K Saggi, (2006) 21 (2) World Bank Res. Obs. 267, 281–282. A further argument against the application of industrial policy is that it provokes corruption and rent-seeking, because once government grants support to firms, it becomes prone to being lobbied. See D Rodrik, ‘Normalizing Industrial Policy’, Commission on Growth and Development Working Paper No 3 (2007) 1, 11.

  29. 29.

    State measures can be grouped in two categories: Legal rules, which constitute the institutional framework and include competition law, intellectual property rights and general business and employment laws, and capacities, which are measures aimed at increasing the availability of tangible assets, such as finance and infrastructure, and intangible assets, such as knowledge and training. See P Bianchi and S Labory in P Bianchi and S Labory (eds), International Handbook on Industrial Policy (2006) 3, 20–21.

  30. 30.

    Ibid 20.

  31. 31.

    See J Lorentzen and P Møllgaard in P Bianchi and S Labory (eds), International Handbook of Industrial Policy (2006) 115, 120. On Europe see J Pelkmans in P Bianchi and S Labory (eds), International Handbook on Industrial Policy (2006) 45, 73.

  32. 32.

    D Rodrik, ‘Industrial Policy for the Twenty-First Century’, Harvard Kennedy School (HKS) Working Paper No RWP04-047 (2004) 11.

  33. 33.

    I ul Haque, ‘Rethinking Industrial Policy’, UNCTAD Discussion Paper No 183 April 2007 (2007) 8.

  34. 34.

    P Bianchi and S Labory in P Bianchi and S Labory (eds), International Handbook on Industrial Policy (2006) 3, 20.

  35. 35.

    Compare ML Possas and H Borges in M Cimoli, G Dosi and JE Stiglitz (eds), Industrial Policy and Development (2009) 447, 450. See further CN Pitelis in P Bianchi and S Labory (eds), International Handbook on Industrial Policy (2006) 435, 442–443.

  36. 36.

    See M Sakakibara and ME Porter, (2001) 83 (2) Rev. Econ. Stat. 310, 319. The authors argue that Japanese competitiveness is associated not with cartels, collusion and intervention but with local competition. They find a positive relationship between domestic rivalry and trade performance. See also M Pangestu in B Hoekman, A Mattoo and P English (eds), Development, Trade, and the WTO: A Handbook (2002) 149, 152.

  37. 37.

    Again on Japan, see ME Porter and M Sakakibara, (2004) 18 (1) J. Econ. Perspect. 27, 35.

  38. 38.

    M Di Maio in M Cimoli, G Dosi and JE Stiglitz (eds), Industrial Policy and Development (2009) 107, 124.

  39. 39.

    Compare T Altenburg, ‘Industrial Policy in Developing Countries’, Deutsches Institut für Entwicklungspolitik Discussion Paper 4/2011 (2011) 1, 29.

  40. 40.

    Infant industry was defined as ‘any newly established type of activity for which the economy’s existing endowment of skills and human capital does not provide immediate technology mastery.’ See M Tribe in J Hossein, M Tribe and J Weiss (eds), Industrial Development and Policy in Africa – Issues of De-Industrialisation and Development Strategy (2000) 30, 34.

  41. 41.

    Friedrich List was the first to approach the concept of protecting nascent industries comprehensively. In the midst of the 19th century he pointed to the various stages of development and held that development through free trade presupposes equal starting positions for all trading partners. Since this was not the case, he advocated temporal protection, which should be selective and limited in time. See on this M Shafaeddin, ‘What Did Frederick List Actually Say? Some Clarifications on the Infant Industry Argument’ (2000).

  42. 42.

    M Tribe in J Hossein, M Tribe and J Weiss (eds), Industrial Development and Policy in Africa – Issues of De-Industrialisation and Development Strategy (2000) 30, 31.

  43. 43.

    See on concept HJ Bruton, (1998) 36 J. Econ. Lit. 903; J Waterbury, (1999) 27 (2) World Dev. 323.

  44. 44.

    See W Lachmann, ‘The Development Dimension of Competition Law and Policy’, UNCTAD Series on Issues in Competition Law and Policy (1999) 8. Although infant industry protection is more far-reaching than just protection from trade, that is, import substitution, both terms are used interchangeably, for it is the trade element which makes the debate on support for new industries particularly controversial. See M Tribe in J Hossein, M Tribe and J Weiss (eds), Industrial Development and Policy in Africa – Issues of De-Industrialisation and Development Strategy (2000) 30, 38.

  45. 45.

    See M Tribe in J Hossein, M Tribe and J Weiss (eds), Industrial Development and Policy in Africa – Issues of De-Industrialisation and Development Strategy (2000) 30, 31. See also H Pack and K Saggi, (2006) 21 (2) World Bank Res. Obs. 267, 269.

  46. 46.

    See M Di Maio in M Cimoli, G Dosi and JE Stiglitz (eds), Industrial Policy and Development (2009) 107, 117.

  47. 47.

    Y Akyüz in M Cimoli, G Dosi and JE Stiglitz (eds), Industrial Policy and Development (2009) 144, 156.

  48. 48.

    M Tribe in J Hossein, M Tribe and J Weiss (eds), Industrial Development and Policy in Africa – Issues of De-Industrialisation and Development Strategy (2000) 30, 40 and 41.

  49. 49.

    Importantly though, not every country may be sufficiently large in order to allow for scale economies to be realised. Ibid 43. Compare next section on national champions.

  50. 50.

    Ibid 37–38.

  51. 51.

    When a new activity is entered into, maximum tariffs apply. When the industry has matured, tariffs are gradually reduced. See Y Akyüz in M Cimoli, G Dosi and JE Stiglitz (eds), Industrial Policy and Development (2009) 144, 156.

  52. 52.

    Export policies and external or internal competition are said to be necessary elements for import substitution to work. M Di Maio in M Cimoli, G Dosi and JE Stiglitz (eds), Industrial Policy and Development (2009) 107, 117–119.

  53. 53.

    Ibid 117, 118. See also W Lachmann, ‘The Development Dimension of Competition Law and Policy’, UNCTAD Series on Issues in Competition Law and Policy (1999) 11–12.

  54. 54.

    H Pack and K Saggi, (2006) 21 (2) World Bank Res. Obs. 267, 269.

  55. 55.

    Ibid 270. A few objections come to mind: First, private investors are more risk avers in a developing country context. Second, capital market imperfections, such as insufficient information on contracting partners, may limit borrowing opportunities. Third, contrary to producers, investors may not have sufficient information on the relevant industries. Fourth, private investments and public policy are different in what they attempt: The first is subject to the probability to realise profit. Government however takes a long-term stance; it does not expect to make a gain out of every investment. Rather, it supports numerous activities in order to succeed with a few. See M Tribe in J Hossein, M Tribe and J Weiss (eds), Industrial Development and Policy in Africa – Issues of De-Industrialisation and Development Strategy (2000) 30, 48.

  56. 56.

    H Pack and K Saggi, (2006) 21 (2) World Bank Res. Obs. 267, 272.

  57. 57.

    See M Di Maio in M Cimoli, G Dosi and JE Stiglitz (eds), Industrial Policy and Development (2009) 107, 117.

  58. 58.

    Y Akyüz in M Cimoli, G Dosi and JE Stiglitz (eds), Industrial Policy and Development (2009) 144, 147–149. More than others, the US was protectionist across a whole range of industries. Reportedly, evidence proves a positive relationship between protection and its economic growth. Compared to this historical evidence, today’s trade policy in developing countries is said to be excessively liberal. See also M Shafaeddin, ‘What Did Frederick List Actually Say? Some Clarifications on the Infant Industry Argument’ (2000) 4; M Tribe in J Hossein, M Tribe and J Weiss (eds), Industrial Development and Policy in Africa – Issues of De-Industrialisation and Development Strategy (2000) 30, 49.

  59. 59.

    There was the danger otherwise of developing countries having to entirely exit from skill- and technology-intensive, high value-added sectors. See Y Akyüz in M Cimoli, G Dosi and JE Stiglitz (eds), Industrial Policy and Development (2009) 144, 166 and 168.

  60. 60.

    Ibid 160.

  61. 61.

    W Barfuß in M Monti and others (eds), Economic Law and Justice in Times of Globalisation (2007) 267, 269.

  62. 62.

    J Galloway, (2007) 28 (3) ECLR 172, 172. This second part is important, for often it is takeover attempts by foreign firms that alarm politicians and trigger counter-measures, of which sufficiently strengthening the local firm constitutes a medium to long-term response. For a European perspective on national champions and merger control, see D Geradin and I Girgenson, ‘Industrial Policy and European Merger Control – A Reassessment’ (2011) 22ff. Exploding the myth that EU merger control is often used for political reasons, in particular against US firms, see A Bradford, RJ Jackson and J Zytnick, (2018) 15 (1) J. Empir. Leg. Stud. 165, 188.

  63. 63.

    See UNCTAD, ‘The Relationship Between Competition and Industrial Policies in Promoting Economic Growth’ (2009) 1, 5.

  64. 64.

    See also Monopolkommission, Hauptgutachten 2002/2003: Wettbewerbspolitik im Schatten ‘Nationaler Champions’ (2005) 77.

  65. 65.

    See P Geroski, ‘Competition Policy and National Champions’ (2005), talk given at Austrian Institute of Economic Research (WIFO), Vienna, 8 February 2005.

  66. 66.

    See M Hellwig in panel discussion on ‘Wettbewerbspolitik und Industriepolitik im Lichte des “More Economic Approach”’, printed in Monopolkommission (ed), Zukunftsperspektiven der Wettbewerbspolitik (2005) 89, 105.

  67. 67.

    See Monopolkommission, Hauptgutachten 2002/2003: Wettbewerbspolitik im Schatten ‘Nationaler Champions’ (2005) 80. See also C Aubert, O Falck and S Heblich in O Falck, C Gollier and L Woessmann (eds), Industrial Policy for National Champions (2011) 63, 84. See also comments by C von Weizsäcker in panel discussion on ‘Wettbewerbspolitik und Industriepolitik im Lichte des “More Economic Approach”‘, printed in Monopolkommission (ed), Zukunftsperspektiven der Wettbewerbspolitik (2005) 89, 94.

  68. 68.

    See P Geroski, ‘Competition Policy and National Champions’ (2005), talk given at Austrian Institute of Economic Research (WIFO), Vienna, 8 February 2005.

  69. 69.

    This happens through a reduction of fixed costs (after the merger machines and managerial structures may become redundant), a concentration of funds for R&D, a restructuring towards more efficient plants, a combination of know-how, etcetera. See OECD, ‘Competition Policy, Industrial Policy and National Champions’, Background Note (2009) 1, 28.

  70. 70.

    See P Geroski, ‘Competition Policy and National Champions’ (2005), talk given at Austrian Institute of Economic Research (WIFO), Vienna, 8 February 2005.

  71. 71.

    Ibid 37–38.

  72. 72.

    See OECD, ‘Competition Policy, Industrial Policy and National Champions’, Background Note (2009) 1, 31.

  73. 73.

    See for instance J Drexl in Monopolkommission (ed), Zukunftsperspektiven der Wettbewerbspolitik (2005) 49, 63. A general argument – the same argument is put forward against industrial policy in general – goes that governments face information problems, for they lack knowledge on what champions are worthy to support.

  74. 74.

    See Monopolkommission, Hauptgutachten 2002/2003: Wettbewerbspolitik im Schatten ‘Nationaler Champions’ (2005) 76.

  75. 75.

    Ibid 78.

  76. 76.

    OECD, ‘Competition Policy, Industrial Policy and National Champions’, Background Note (2009) 1, 28.

  77. 77.

    See L Sørgard, (2007) 3 (1) ECJ 49, 54. See also M Neumann, (1990) 34 (2–3) EER 562, 565.

  78. 78.

    See OECD, ‘Competition Policy, Industrial Policy and National Champions’, Background Note (2009) 1, 28–30.

  79. 79.

    What adds to this general argument is the consideration that in case a foreign firm is present in the local market a merger between two domestic firms may allow the foreign firm to free-ride on the merged firms reduced output and increased price, which leads to a shift of profit from the local firms to the foreign one (price umbrella effect). See L Sørgard, (2007) 3 (1) ECJ 49, 53.

  80. 80.

    On such a cooperation, see J Lorentzen and P Møllgaard in P Bianchi and S Labory (eds), International Handbook of Industrial Policy 115, 116ff; CN Pitelis in P Bianchi and S Labory (eds), International Handbook on Industrial Policy (2006) 435, 442.

  81. 81.

    Compare SJ Evenett in DH Brooks and SJ Evenett (eds), Competition Policy and Development in Asia (2005) 47, 59. The author takes South Korea as an example that national champion policies must be accompanied by enforcement of competition law. As will be seen, the South African case confirms this proposition.

  82. 82.

    See Monopolkommission, Hauptgutachten 2002/2003: Wettbewerbspolitik im Schatten ‘Nationaler Champions’ (2005) 80. From a total welfare perspective this negative effect may decrease however if the country is a net exporter, because the increase in profits from sales to foreign customers may outweigh the loss in domestic consumption. See L Sørgard, (2007) 3 (1) ECJ 49, 56. Obviously though this calculation does not benefit consumers. It conflicts with the consumer surplus standard adopted by most competition authorities. See also C Aubert, O Falck and S Heblich in O Falck, C Gollier and L Woessmann (eds), Industrial Policy for National Champions (2011) 63, 82. On welfare standards, see at Sect. 2.2.2 below.

  83. 83.

    Compare P Geroski, ‘Competition Policy and National Champions’ (2005), talk given at Austrian Institute of Economic Research (WIFO), Vienna, 8 February 2005. Noting that competition at home is the best prescription for healthy firm development, the author dismisses the argument that competition policy stands in the way of meaningful policy intervention.

  84. 84.

    Ibid 4.

  85. 85.

    See on this for example JD Kienstra, (2012) 32 (3) Nw. J. Int’l L. & Bus. 569.

  86. 86.

    See P Geroski, ‘Competition Policy and National Champions’ (2005), talk given at Austrian Institute of Economic Research (WIFO), Vienna, 8 February 2005.

  87. 87.

    See OECD, ‘Competition Policy, Industrial Policy and National Champions’, Background Note (2009) 1, 44.

  88. 88.

    See C Aubert, O Falck and S Heblich in O Falck, C Gollier and L Woessmann (eds), Industrial Policy for National Champions (2011) 63, 83. The authors name the Concorde and Airbus as highly visible policy projects.

  89. 89.

    See OECD, ‘State Owned Enterprises and the Principle of Competitive Neutrality’, Background Note (2009) 1, 30.

  90. 90.

    A Goldstein in P Bianchi and S Labory (eds), International Handbook on Industrial Policy (2006) 198, 198.

  91. 91.

    OECD, ‘State Owned Enterprises and the Principle of Competitive Neutrality’, Background Note (2009) 1, 31. OECD, Corporate Governance of State-Owned Enterprises – A Survey of OECD Countries (2005) 22.

  92. 92.

    OECD, Corporate Governance of State-Owned Enterprises – A Survey of OECD Countries (2005) 23.

  93. 93.

    The SOEs among the 2000 largest firms worldwide are said to contribute almost 6 per cent to world GDP in sales. See P Kowalski and others, ‘State-Owned Enterprises – Trade Effects and Policy Implications’, OECD Trade Policy Paper No 147 (2013) 1, 20. In Africa SOEs were reported to produce 15 per cent of the GDP. See World Bank, ‘Held by the Visible Hand – The Challenge of SOE Corporate Governance for Emerging Markets’ (2006) 1, 1. See also OECD, ‘State Owned Enterprises and the Principle of Competitive Neutrality’, Background Note (2009) 1, 31.

  94. 94.

    World Bank, ‘Bureaucrats in Business – The Economics and Politics of Government Ownership’ (1995) 1, 4; OECD, ‘State Owned Enterprises and the Principle of Competitive Neutrality’, Background Note (2009) 1, 26; D Shapiro and S Globerman, ‘The International Activities and Impacts of State-Owned Enterprises’ (2009) 4.

  95. 95.

    See OECD, Corporate Governance of State-Owned Enterprises – A Survey of OECD Countries (2005) 43, 46 and 49.

  96. 96.

    D Shapiro and S Globerman, ‘The International Activities and Impacts of State-Owned Enterprises’ (2009) 7.

  97. 97.

    See P Kowalski and others, ‘State-Owned Enterprises – Trade Effects and Policy Implications’, OECD Trade Policy Paper No 147 (2013) 1, 11–12; D Shapiro and S Globerman, ‘The International Activities and Impacts of State-Owned Enterprises’ (2009) 11. See also G Robb and P Mondliwa, ‘SOEs and Competition: Reflections on South Africa’s Experiences in Telecommunications and Energy ‘ (2017), talk given at Eleventh Annual Conference on Competition Law, Economics & Policy, Johannesburg, University of Johannesburg, 30 August–1 September 2017, 3–4.

  98. 98.

    OECD, Corporate Governance of State-Owned Enterprises – A Survey of OECD Countries (2005) 20–21; M MacCarthaigh, (2011) 32 (3) Policy Studies 215, 216.

  99. 99.

    D Shapiro and S Globerman, ‘The International Activities and Impacts of State-Owned Enterprises’ (2009) 11.

  100. 100.

    A Capobianco and H Christiansen, ‘Competitive Neutrality and State-Owned Enterprises: Challenges and Policy Options’, OECD Corporate Governance Working Papers No 1 (2011) 8. Here cross-subsidisation by funds from areas where the firm makes excessive profit may be helpful.

  101. 101.

    Ibid.

  102. 102.

    OECD, ‘State Owned Enterprises and the Principle of Competitive Neutrality’, Background Note (2009) 1, 28.

  103. 103.

    A Capobianco and H Christiansen, ‘Competitive Neutrality and State-Owned Enterprises: Challenges and Policy Options’, OECD Corporate Governance Working Papers No 1 (2011) 8–9.

  104. 104.

    P Kowalski and others, ‘State-Owned Enterprises – Trade Effects and Policy Implications’, OECD Trade Policy Paper No 147 (2013) 1, 12.

  105. 105.

    OECD, ‘State Owned Enterprises and the Principle of Competitive Neutrality’, Background Note (2009) 1, 27.

  106. 106.

    See A Goldstein in P Bianchi and S Labory (eds), International Handbook on Industrial Policy (2006) 198, 200.

  107. 107.

    Compare on this G Robb and P Mondliwa, ‘SOEs and Competition: Reflections on South Africa’s Experiences in Telecommunications and Energy ‘ (2017), talk given at Eleventh Annual Conference on Competition Law, Economics & Policy, Johannesburg, University of Johannesburg, 30 August–1 September 2017, 12–18.

  108. 108.

    A Goldstein in P Bianchi and S Labory (eds), International Handbook on Industrial Policy (2006) 198, 203; D Shapiro and S Globerman, ‘The International Activities and Impacts of State-Owned Enterprises’ (2009) 14; M Shirley and P Walsh, ‘Public Versus Private Ownership – The Current State of Debate’, World Bank Policy Research Working Paper No 2420 (2000) 38. Note though that privatisation does not per se benefit the larger public. For this to happen, a regulatory framework has to be in place that forces regulators and competition authorities to avoid distorting effects. See A Goldstein in P Bianchi and S Labory (eds), International Handbook on Industrial Policy (2006) 198, 204ff.

  109. 109.

    See A Capobianco and H Christiansen, ‘Competitive Neutrality and State-Owned Enterprises: Challenges and Policy Options’, OECD Corporate Governance Working Papers No 1 (2011) 5–6.

  110. 110.

    Air Italia, for instance, was only privatised when in financial straits. The French government strove to protect the national carrier Air France from competitive pressures when the EU’s transport market was liberalised. Swissair had been state-owned until its demise, which also large government loans could not prevent.

  111. 111.

    A Capobianco and H Christiansen, ‘Competitive Neutrality and State-Owned Enterprises: Challenges and Policy Options’, OECD Corporate Governance Working Papers No 1 (2011) 6–7.

  112. 112.

    Ibid 7.

  113. 113.

    See D Shapiro and S Globerman, ‘The International Activities and Impacts of State-Owned Enterprises’ (2009) 13.

  114. 114.

    OECD, ‘State Owned Enterprises and the Principle of Competitive Neutrality’, Background Note (2009) 1, 29.

  115. 115.

    See A Goldstein in P Bianchi and S Labory (eds), International Handbook on Industrial Policy (2006) 198, 200.

  116. 116.

    OECD, ‘State Owned Enterprises and the Principle of Competitive Neutrality’, Background Note (2009) 1, 29.

  117. 117.

    See A Capobianco and H Christiansen, ‘Competitive Neutrality and State-Owned Enterprises: Challenges and Policy Options’, OECD Corporate Governance Working Papers No 1 (2011) 9.

  118. 118.

    See L Parret, ‘Do We (Still) Know What We are Protecting?’, TILEC Discussion Paper No 010 (2009) 3.

  119. 119.

    A Jones and B Sufrin, EU Competition Law (6th edn, 2016) 7.

  120. 120.

    Ibid 7–8. EM Fox in R Pitofsky (ed), How the Chicago School Overshot the Mark: The Effect of Conservative Economic Analysis on U.S. Antitrust (2008) 77, 78.

  121. 121.

    Compare W Kerber in J Drexl, L Idot and J Monéger (eds), Economic Theory and Competition Law (2009) 93, 98.

  122. 122.

    Note that due to its static nature the model of perfect competition cannot integrate dynamic competition. There are even trade-offs involved in so far as perfect competition does not provide sufficient incentives for innovation. See ibid 100; R Whish and D Bailey, Competition Law (8th edn, 2015) 4–5.

  123. 123.

    W Kerber in J Drexl, L Idot and J Monéger (eds), Economic Theory and Competition Law (2009) 93, 96.

  124. 124.

    R Whish and D Bailey, Competition Law (8th edn, 2015) 8–9.

  125. 125.

    L Parret, ‘Do We (Still) Know What We are Protecting?’, TILEC Discussion Paper No 010 (2009) 22.

  126. 126.

    Drexl notes that ‘consumer welfare’ is closely linked to neoclassical price theory and only refers to allocative efficiency and static price competition. To arrive at a more apt differentiation, the author therefore differentiates between total welfare on the hand and consumer surplus on the other hand. See J Drexl in MS Gal and others (eds), The Economic Characteristics of Developing Jurisdictions – Their Implications for Competition Law (2015) 265, 268–269.

  127. 127.

    H Hovenkamp, ‘Distributive Justice and Consumer Welfare in Antitrust’ (2011) 6.

  128. 128.

    Ibid.

  129. 129.

    Note the critique though of the notion of consumer welfare, see J Drexl in J Drexl, W Kerber and R Podszun (eds), Competition Policy and the Economic Approach (2011) 312, 316ff. As one of its shortcomings he identifies the one-dimensionality of the concept: ‘By simply being used for measuring efficiency, the consumer welfare approach does not address the concern arising from the failure of the neoclassical analysis to take into account arguments of distributive justice.’ See also H Hovenkamp, (1985) 84 (2) Mich. Law Rev. 213, 234.

  130. 130.

    RD Blair and DD Sokol, (2012) 78 (2) Antitrust Law J. 471, 473. See also W Kerber in J Drexl, L Idot and J Monéger (eds), Economic Theory and Competition Law (2009) 93, 102.

  131. 131.

    L Kaplow in D Zimmer (ed), The Goals of Competition Law (2012) 3, 10. For a criticism, see W Kerber in J Drexl, L Idot and J Monéger (eds), Economic Theory and Competition Law (2009) 93, 103–104. Concerning the US, the fact that the Supreme Court does not draw a clear line between both concepts is said to render the debate somewhat academic. See H Hovenkamp, ‘Distributive Justice and Consumer Welfare in Antitrust’ (2011) 9. Compare also RD Blair and DD Sokol, (2012) 78 (2) Antitrust Law J. 471, 477. Since most other countries tend to stick to a consumer welfare approach, the debate is anyhow limited to the US context.

  132. 132.

    See International Competition Network, ‘Competition Enforcement and Consumer Welfare Setting the Agenda’ (2011) 1, 60 and 75.

  133. 133.

    On EU law, see R Whish and D Bailey, Competition Law (8th edn, 2015) 21 and 205.

  134. 134.

    For a contrast of the two approaches, see O Andriychuk in D Zimmer (ed), The Goals of Competition Law (2012) 95, 107ff and 110ff.

  135. 135.

    J Drexl in MS Gal and others (eds), The Economic Characteristics of Developing Jurisdictions – Their Implications for Competition Law (2015) 265, 282.

  136. 136.

    See also L Parret, ‘Do We (Still) Know What We are Protecting?’, TILEC Discussion Paper No 010 (2009) 14.

  137. 137.

    See ibid 15. On abuse of dominance, see J Vickers, (2005) 115 (504) Econ. J. (London) 244, 246.

  138. 138.

    W Kerber in J Drexl, L Idot and J Monéger (eds), Economic Theory and Competition Law (2009) 93, 107.

  139. 139.

    G Amato, Antitrust and the Bands of Power: The Dilemma of Liberal Democracy in the History of the Market (1997) 2.

  140. 140.

    Ibid 2–3.

  141. 141.

    For an elaborate discussion on the differences between the welfare perspective, which is critical towards secondary goals, and the non-welfare view, which favours a multiplicity of goals, in the European context, see I Lianos, ‘Some Reflections on the Question of the Goals of EU Competition Law’, Centre for Law, Economics and Society (CLES) Working Paper Series No 3/2013 (2013) 3ff.

  142. 142.

    OECD, ‘The Objectives of Competition Law and Policy’, Global Competition Forum 2003 – Session 1 (2003) 1, 9.

  143. 143.

    On the EU, see I Lianos, ‘Some Reflections on the Question of the Goals of EU Competition Law’, Centre for Law, Economics and Society (CLES) Working Paper Series No 3/2013 (2013) 13.

  144. 144.

    See OECD, ‘The Objectives of Competition Law and Policy’, Global Competition Forum 2003 – Session 1 (2003) 1, 2 and 3–4. Compare also the economic function of competition law according to W Fikentscher in W Fikentscher (ed), Die Freiheit und ihr Paradox: Über Irrtümer unserer Zeit (1997) 1, 68.

  145. 145.

    OECD, ‘The Objectives of Competition Law and Policy’, Global Competition Forum 2003 – Session 1 (2003) 1, 3.

  146. 146.

    See UNCTAD, ‘The Relationship Between Competition and Industrial Policies in Promoting Economic Growth’ (2009) 1, 4.

  147. 147.

    A Jones and B Sufrin, EU Competition Law (6th edn, 2016) 28.

  148. 148.

    OECD, ‘The Objectives of Competition Law and Policy’, Global Competition Forum 2003 – Session 1 (2003) 1, 3.

  149. 149.

    See at Sect. 3.3 on interface.

  150. 150.

    Compare DM Davis in BE Hawk (ed), International Antitrust Law & Policy: Fordham Competition Law 2010 (2011) 325, 326.

  151. 151.

    Not surprisingly, it is especially developing and transition countries that rely on such reasoning. See OECD, ‘The Objectives of Competition Law and Policy’, Global Competition Forum 2003 – Session 1 (2003) 1, 9.

  152. 152.

    Quite the opposite, competition policy is said to be ‘an expression of the current values and aims of society and is as susceptible to change as political thinking generally.’ R Whish and D Bailey, Competition Law (8th edn, 2015) 20.

  153. 153.

    See UNCTAD, ‘The Relationship Between Competition and Industrial Policies in Promoting Economic Growth’ (2009) 1, 4. The same argument of course is made against the inclusion of additional concerns, because balancing various interests makes enforcement more complex.

  154. 154.

    D Lewis in V Dhall (ed), Competition Law Today – Concepts, Issues, and the Law in Practice (2007) 340, 360.

  155. 155.

    Compare V Zoghbi in PS Mehta and SJ Evenett (eds), Politics Triumphs Economics: Political Economy and the Implementation of Competition Law and Economic Regulation in Developing Countries (2009) 89, 115–116.

  156. 156.

    The Sherman Act was enacted in 1890, one year after Canada had given itself a similar statute. The Clayton Act, the second statutory instrument of US antitrust enforcement, was adopted in 1914. See on US developments WE Kovacic and C Shapiro, (2000) 14 (1) J. Econ. Perspect. 43.

  157. 157.

    Compare DJ Gerber, Global Competition – Law, Markets and Globalization (2010) 151.

  158. 158.

    Only recently the discussion has taken up a third dimension, including less developed countries. See in the Introduction and the following.

  159. 159.

    J Vickers, (2007) 3 (1) ECJ 1, 3. Art. 101(1) TFEU outlaws certain types of behaviour, including the fixing of purchase or selling prices (lit a) and the limitation or control of production (lit b). According to Art. 101(3) this behaviour may in principle be justified by efficiency gains if beneficial to consumers. Regarding wilful restrictions of competition however, such justification will hardly be possible.

  160. 160.

    See European Council, ‘Council Regulation (EC) on the Control of Concentrations Between Undertakings’, No 139/2004.

  161. 161.

    J Vickers, (2007) 3 (1) ECJ 1, 4–5.

  162. 162.

    Ibid 6.

  163. 163.

    EM Fox, (2003) 26 (2) World Compet. 149, 151.

  164. 164.

    Two important advocates were Robert H Bork and Richard A Posner. See RH Bork, The Antitrust Paradox: A Policy at War With Itself (1978); RA Posner, (1979) 127 (4) Univ. Penn. Law Rev. 925. For a discussion of Bork’s impact, see WE Kovacic, (1990) 36 Wayne L. Rev. 1413.

  165. 165.

    EM Fox, (2003) 26 (2) World Compet. 149, 152.

  166. 166.

    The Chicago School is said to have three major characteristics: first, a rigorous application of price theory; second, the centrality of empiricism; and third, an emphasis on the social cost of legal errors in the design of antitrust rules. See JD Wright, (2012) 78 (1) Antitrust Law J. 301, 305. For an earlier characterisation, see H Hovenkamp, (1985) 84 (2) Mich. Law Rev. 213, 226–229.

  167. 167.

    EM Fox, (2003) 26 (2) World Compet. 149, 152.

  168. 168.

    WE Kovacic, (1990) 36 Wayne L. Rev. 1413, 1419.

  169. 169.

    WE Kovacic and C Shapiro, (2000) 14 (1) J. Econ. Perspect. 43, 52.

  170. 170.

    See BH Kobayashi and TJ Muris, ‘Chicago, Post-Chicago and Beyond: Time to Let Go of the 20th Century’, George Mason University Law and Economics Research Paper Series No 12–31 (2012) 6–8. On Muris’s earlier advocacy for a minimal antitrust mandate, see EM Fox, (2002) 70 (2) Antitrust Law J. 371, 380–384.

  171. 171.

    Resale price maintenance had been illegal per se for almost 100 years. This doctrine was overturned in Leegin Creative Leather Products Inc v PSKS Inc 551 U.S. 877 (2007). For a criticism, see WS Grimes in R Zäch, A Heinemann and A Kellerhals (eds), The Development of Competition Law (2010) 29, 46–52. The Chicago School’s economic theory considerably impacted on US jurisprudence. In a couple of landmark decisions the applicability of antitrust law was markedly trimmed back. See Brooke Group Ltd v Brown & Williamson Tobacco Corp 509 U.S. 209 (1993). Here the Court had held that predatory pricing was an unlikely phenomenon, for it did not make business sense. In order to prove it, the plaintiff would not only have to present evidence on below-cost pricing but also show that a recoupment of the losses through monopoly pricing was likely. In a later case the Supreme Court found that the by-laws of a dentists’ association that restricted certain forms of advertisement, was not anticompetitive because it did not restrict output, that is, dental services, see California Dental Ass’n v FTC 526 U.S. 756 (1999). Concerning the issue of an essential facility, the Court accepted the owner’s rejection to grant unimpeded access to its local loop as a rightful refusal to deal, since otherwise property law would be infringed and innovation chilled. Verizon Communications Inc v Law Offices of Curtis V Trinko, LLP 540 U.S. 398 (2004). See also WE Kovacic and C Shapiro, (2000) 14 (1) J. Econ. Perspect. 43, 53.

  172. 172.

    This had been a concern before. Compare EM Fox, (2002) 70 (2) Antitrust Law J. 371, 376–377.

  173. 173.

    The fact that hardly any plaintiff ever wins a case before the Supreme Court exemplifies this changed attitude towards enforcement of antitrust. See WS Grimes in R Zäch, A Heinemann and A Kellerhals (eds), The Development of Competition Law (2010) 29, 58.

  174. 174.

    For a critique of such a narrow efficiency concept, see EM Fox in R Pitofsky (ed), How the Chicago School Overshot the Mark: The Effect of Conservative Economic Analysis on U.S. Antitrust (2008) 77, 88. The author calls an ‘efficiency paradox’ that ‘in the name of efficiency, economically conservative US antitrust law protects inefficient conduct by dominant and leading firms and thus protects inefficiency.’

  175. 175.

    This, as will instantly be shown, reflects the European approach.

  176. 176.

    See remarks in Verizon Communications Inc v Law Offices of Curtis V Trinko, LLP 540 U.S. 398 (2004), 407. On the notion of ‘Post-Chicago’, see BH Kobayashi and TJ Muris, ‘Chicago, Post-Chicago and Beyond: Time to Let Go of the 20th Century’, George Mason University Law and Economics Research Paper Series No 12-31 (2012) 15ff. On Post-Chicago and other offshoots, see JD Wright, (2012) 78 (1) Antitrust Law J. 301, 309ff. Schumpeter introduced his idea of competition as a process of ‘creative destruction’, in which monopoly rents attract competitors, that way ‘destroying’ the erstwhile monopolist and spurring innovation. See on this below at Sect. 3.4.2.2 on dynamic efficiencies.

  177. 177.

    J Drexl in J Drexl, W Kerber and R Podszun (eds), Competition Policy and the Economic Approach (2011) 312, 329–330.

  178. 178.

    Different from the US, under European abuse of dominance law there is no need for a causal link between the dominant position and the conduct in question. In the EU, abuse does not presuppose a wilful maintenance or strengthening of market power. See J Vickers, (2005) 115 (504) Econ. J. (London) 244, 246–247.

  179. 179.

    6/72 Europemballage and Continental Can v Commission [1973] ECR 215; C-8/08 T-Mobile Netherlands and Others [2009] ECR I-4529; C-501/06 P GlaxoSmithKline v Commission [2009] ECR I-9291. See also T-201/04 Microsoft v Commission [2007] ECR II-3601.

  180. 180.

    EM Fox, (2002) 70 (2) Antitrust Law J. 371, 392.

  181. 181.

    R Whish and D Bailey, Competition Law (8th edn, 2015) 191.

  182. 182.

    The different approaches became important in the GE/Honeywell case. The US authorities cleared the merger, whilst the EU blocked it. The Commission, partly confirmed by the CFI, had feared that the merged entity would use its combined market to oust competitors. Compared to the US, it took a long-term view. See Honeywell International Inc v Commission of the European Communities [2005] ECR II-5527. See also X Vives and G Staffiero, ‘The GE-Honeywell Merger in the EU’, Instituto de Estudios Superiores de la Empresa (IESE) Occasional Paper No 160 (2008) 32.

  183. 183.

    Art 102 of the TFEU in lit (a) and (c) prohibits excessive prices and price discrimination, respectively.

  184. 184.

    As mentioned, more reticent enforcement in order to not stifle efficiency was one of the key concerns of the Chicago School of thought. Note that, vice versa, cautious enforcement increases the likelihood of false negatives, that is, occasions where conduct is judged to not be anticompetitive whilst in reality it is.

  185. 185.

    R Whish and D Bailey, Competition Law (8th edn, 2015) 203.

  186. 186.

    Compare EM Fox, (2003) 26 (2) World Compet. 149, 149. The author defends the approach against such allegations.

  187. 187.

    R Whish and D Bailey, Competition Law (8th edn, 2015) 206–207. The authors point to Commission statements and Court notes making clear that the law is not about helping inefficient firms. See for instance European Commission, ‘Guidance on the Commission’s Enforcement Priorities in Applying Article 82 of the EC Treaty to Abusive Exclusionary Conduct by Dominant Undertakings’ OJ [2009] C 45/7 para 6.

  188. 188.

    Compare EM Fox, (2002) 70 (2) Antitrust Law J. 371, 410. Despite being a critic of the Chicago School, the author points to the risk of slipping towards enforcement that protects competitors.

  189. 189.

    Compare J Drexl in MS Gal and others (eds), The Economic Characteristics of Developing Jurisdictions – Their Implications for Competition Law (2015) 265, 270–271.

  190. 190.

    A Jones and B Sufrin, EU Competition Law (6th edn, 2016) 276–278.

  191. 191.

    European Commission, ‘Guidance on the Commission’s Enforcement Priorities in Applying Article 82 of the EC Treaty to Abusive Exclusionary Conduct by Dominant Undertakings’ (2009) OJ [2009] C 45/7 paras 5, 6 and 19.

  192. 192.

    This was expressed by the lack of an effects-based analysis in the 2007 judgement concerning travel agents’ rebates granted by British Airways, British Airways v Commission [2007] ECR I-2373. Compare against this the South African rebates case, involving SAA, which was decided based on a great volume of effects-based evidence; see on this at 2.C.I.5. See also the Court’s refusal to introduce a recoupment requirement for predatory pricing, a condition necessary under US law. France Télécom v Commission [2009] ECR I-2369. Compare A Alemanno and M Ramondino, (2009) (6) ELR 202.

  193. 193.

    See CFI in T-201/04 Microsoft v Commission [2007] ECR II-3601, para 664. In C-501/06 P GlaxoSmithKline v Commission [2009] ECR I-9291, para 63, the ECJ rejected the requirement of consumer harm to prove a violation.

  194. 194.

    See MS Gal and EM Fox in MS Gal and others (eds), The Economic Characteristics of Developing Jurisdictions – Their Implications for Competition Law (2015) 296, 303–304. They differentiate between a US ‘pro-freedom-for-business’ approach, an EU ‘pro-open-market’ approach and a ‘pro-poor and pro-development’ approach, for which they cite South Africa as an example.

  195. 195.

    Such an approach is anathema to conservative competition law purists. See for instance GL Priest in DD Sokol, TK Cheng and I Lianos (eds), Competition Law and Development (2013) 79.

  196. 196.

    D Lewis, ‘Competition and Poverty Reduction’, Global Forum on Competition 2013 – Session 1 (2013) 3.

  197. 197.

    On the need to focus on development, see also E Fox, ‘Competition Policy: The Comparative Advantage of Developing Countries’, NYU Law and Economics Research Paper No 17-04 (2017) 74.

  198. 198.

    RD Anderson and AC Müller, ‘Competition Policy and Poverty Reduction: A Holistic Approach’, WTO Staff Working Paper ERSD-2013-02 (2013) 7.

  199. 199.

    See on this M Bakhoum in MS Gal and others (eds), The Economic Characteristics of Developing Jurisdictions – Their Implications for Competition Law (2015) 177.

  200. 200.

    J Drexl in MS Gal and others (eds), The Economic Characteristics of Developing Jurisdictions – Their Implications for Competition Law (2015) 265, 289.

  201. 201.

    Ibid 287.

  202. 202.

    See MS Gal and EM Fox in MS Gal and others (eds), The Economic Characteristics of Developing Jurisdictions – Their Implications for Competition Law (2015) 296, 324. The authors speak of the ‘goal of making markets work’. See also O Budzinski and MH Beigi in MS Gal and others (eds), The Economic Characteristics of Developing Jurisdictions – Their Implications for Competition Law (2015) 223, 224. The authors stress the need to generate competition instead of just preserving it.

  203. 203.

    RD Anderson and AC Müller, ‘Competition Policy and Poverty Reduction: A Holistic Approach’, WTO Staff Working Paper ERSD-2013-02 (2013) 5.

  204. 204.

    See EM Fox, ‘Imagine: Pro-Poor(er) Competition Law’, Global Forum on Competition 2013 – Session 1 (2013) 5.

  205. 205.

    M Bakhoum in MS Gal and others (eds), The Economic Characteristics of Developing Jurisdictions – Their Implications for Competition Law (2015) 177, 188ff.

  206. 206.

    See D Lewis, ‘Competition and Poverty Reduction’, Global Forum on Competition 2013 – Session 1 (2013) 4.

  207. 207.

    See EM Fox, ‘Imagine: Pro-Poor(er) Competition Law’, Global Forum on Competition 2013 – Session 1 (2013) 10; MS Gal and EM Fox in MS Gal and others (eds), The Economic Characteristics of Developing Jurisdictions – Their Implications for Competition Law (2015) 296, 337.

  208. 208.

    For a number of concrete suggestions, EM Fox, ‘Imagine: Pro-Poor(er) Competition Law’, Global Forum on Competition 2013 – Session 1 (2013) 9ff.

  209. 209.

    See D Lewis, ‘Competition and Poverty Reduction’, Global Forum on Competition 2013 – Session 1 (2013) 7.

  210. 210.

    For a detailed compilation of evidence of anticompetitive behaviour in developing country markets, see F Jenny, (2006) 29 (1) World Compet. 109, 113–132. See further the cross-country study, covering Zambia, Kenya, Ghana, Vietnam and Bangladesh, on the product markets of sugar, cement, beer and mobiles. K Ellis and R Singh, ‘Assessing the Economic Impact of Competition’, Overseas Development Institute (ODI) (2010) 90–91. Most of these markets, all strongly relevant to the less well-endowed, were found to be uncompetitive and plagued by high concentration. Increased competition was therefore held to yield lower prices and better productivity, resulting in growth, jobs, and better access to services.

  211. 211.

    See RD Anderson and AC Müller, ‘Competition Policy and Poverty Reduction: A Holistic Approach’, WTO Staff Working Paper ERSD-2013-02 (2013) 8–9.

  212. 212.

    Ibid 13. For a list of detrimental conduct, see ibid 15.

  213. 213.

    See D Lewis, ‘Competition and Poverty Reduction’, Global Forum on Competition 2013 – Session 1 (2013) 5.

  214. 214.

    See M Hantke-Domas, (2003) 15 Europ. J. Law Econ. 165, 169.

  215. 215.

    Compare ME Levine and JL Forrence, (1990) 6 (Special Issue: Papers from the Organization of Political Institutions Conference, April 1990) J. Law Econ. Organ. 167, 175. The authors distinguish between self and other-regarding preferences; only the latter form public interest. Unlike self-regarding or private interests, they depend on a social context.

  216. 216.

    Ibid 181.

  217. 217.

    Ibid.

  218. 218.

    See JG Christensen, ‘Public Interest Regulation Reconsidered: From Capture to Credible Commitment’ (2010), talk given at 3rd Biennial Conference of ECPR Regulatory Governance Standing Group on ‘Regulation at the Age of Crisis’, Dublin, University College Dublin 17–19 June 2010, 5.

  219. 219.

    Complex rules and procedures and subjects difficult to understand without proper education or background make information costs high. ME Levine and JL Forrence, (1990) 6 (Special Issue: Papers from the Organization of Political Institutions Conference, April 1990) J. Law Econ. Organ. 167, 185.

  220. 220.

    M Hantke-Domas, (2003) 15 Europ. J. Law Econ. 165, 167, 172 and 186.

  221. 221.

    ME Levine and JL Forrence, (1990) 6 (Special Issue: Papers from the Organization of Political Institutions Conference, April 1990) J. Law Econ. Organ. 167, 168.

  222. 222.

    Ibid.

  223. 223.

    JG Christensen, ‘Public Interest Regulation Reconsidered: From Capture to Credible Commitment’ (2010), talk given at 3rd Biennial Conference of ECPR Regulatory Governance Standing Group on ‘Regulation at the Age of Crisis’, Dublin, University College Dublin 17–19 June 2010, 12.

  224. 224.

    Ibid 18 and 27.

  225. 225.

    RA Posner, (1974) 5 (2) Bell J. Econ. Manage. Sci. 335, 340. See also J den Hertog, ‘Review of Economic Theories of Regulation’, Tjalling C. Koopmans Research Institute Discussion Paper Series No 10-18 (2010) 21.

  226. 226.

    See GJ Stigler, (1971) 2 (1) Bell J. Econ. Manage. Sci. 3, 4. See further RA Posner, (1974) 5 (2) Bell J. Econ. Manage. Sci. 335, 336–336 and 343.

  227. 227.

    RA Posner, (1974) 5 (2) Bell J. Econ. Manage. Sci. 335, 356.

  228. 228.

    See J den Hertog, ‘Review of Economic Theories of Regulation’, Tjalling C. Koopmans Research Institute Discussion Paper Series No 10-18 (2010) 2.

  229. 229.

    Ibid 18–21.

  230. 230.

    See JG Christensen, ‘Public Interest Regulation Reconsidered: From Capture to Credible Commitment’ (2010), talk given at 3rd Biennial Conference of ECPR Regulatory Governance Standing Group on ‘Regulation at the Age of Crisis’, Dublin, University College Dublin 17–19 June 2010, 6.

  231. 231.

    Ibid 29.

  232. 232.

    See CR Leslie, (2012) 2 (3) UC Irvine L. Rev. 885.

  233. 233.

    Allnutt v Inglis 12 East 530 (1810).

  234. 234.

    M Hantke-Domas, (2003) 15 Europ. J. Law Econ. 165, 167 and 170.

  235. 235.

    Ibid 173–175.

  236. 236.

    To be sure, this is not to argue against monopolies as such but anticompetitive behaviour they engage in.

  237. 237.

    See on this argument for instance report on Kenya by M Briggs, ‘The Public Interest Test in Africa: Purpose or Folly?’, Global Competition Review (2016).

  238. 238.

    See MS Gal and EM Fox in MS Gal and others (eds), The Economic Characteristics of Developing Jurisdictions – Their Implications for Competition Law (2015) 296, 334.

  239. 239.

    As a consequence, US case law constitutes much less of a precedent to developing countries than European jurisprudence, a fact pointedly confirmed by Davis, the President of the South African Competition Appeal Court, when remarking that US jurisprudence was in fact useless for South Africa. See panel discussion on ‘Competition Policy, Abuse of Dominance and Economic Development in Developing Countries’, printed in BE Hawk (ed), International Antitrust Law & Policy: Fordham Competition Law 2010 (2011) 355, 376. See also, DM Davis in BE Hawk (ed), International Antitrust Law & Policy: Fordham Competition Law 2010 (2011) 325, 331.

  240. 240.

    Fear that developing and transition countries might overenforce abuse of dominance, using it ‘as a Trojan Horse for the smuggling in of price controls and other dubious government harassment of successful enterprises’, was indeed the primary reason to not recommend it. R Pittman, (2004) 27 (2) World Compet. 245, 246. See also M Coppola Tineo and R Pittman, ‘Abuse of Dominance Enforcement Under Latin American Competition Laws’, US Department of Justice Antitrust Division Economic Analysis Group Discussion Paper 06-6 (2006) 7. Citing contributions on Eastern Europe by Godek and Willig, see also RD Anderson and A Heimler in V Dhall (ed), Competition Law Today – Concepts, Issues, and the Law in Practice (2007) 59, 6. Finally, see D Fruitman, ‘Abuse of Dominance in Developing Economies: A Focus on the Issues in Cambodia, Laos and Vietnam’, CUTS (2006) 6.

  241. 241.

    MM Dabbah in BE Hawk (ed), International Antitrust Law & Policy: Fordham Competition Law 2010 (2011) 301, 309–310.

  242. 242.

    Ibid 312.

  243. 243.

    This does not amount to a concept that is cast in stone and does not cater for the necessary flexibilities to assess on a case-by-case basis (formalist versus rule of reason approach). Yet in countries where authorities have little experience there may be merit in the argument that the legislator sets out in detail the requirements for finding an abuse.

  244. 244.

    MM Dabbah in BE Hawk (ed), International Antitrust Law & Policy: Fordham Competition Law 2010 (2011) 301, 315.

  245. 245.

    See M Motta in panel discussion on ‘Competition Policy, Abuse of Dominance and Economic Development in Developing Countries’, printed in BE Hawk (ed), International Antitrust Law & Policy: Fordham Competition Law 2010 (2011) 355, 360–361. The author points to economic, historical and political reasons.

  246. 246.

    See JL Clarke, SJ Evenett and K Lucenti, (2005) 28 (7) The World Econ. 1029; F Jenny, (2006) 29 (1) World Compet. 109. These studies gathered evidence from newspaper articles in Latin America and Africa. In both cases reports about monopolistic practices constituted a none-negligible fraction.

  247. 247.

    MM Dabbah in BE Hawk (ed), International Antitrust Law & Policy: Fordham Competition Law 2010 (2011) 301, 305–306.

  248. 248.

    S Roberts in O Edigheji (ed), Constructing a Democratic Developmental State in South Africa – Potentials and Challenges (2010) 222, 227.

  249. 249.

    See MS Gal, (2000–2001) 74 SCLR 1437, 1445ff; International Competition Network, ‘Unilateral Conduct Workbook Chapter 3: Assessment of Dominance’ (2011) 27–28.

  250. 250.

    D Lewis, ‘Natural Monopolies – The Role of Competition Authorities’ (2004), talk given at Seoul Competition Forum, Seoul, 20 April 2004.

  251. 251.

    S Roberts, (2012) 35 (2) World Compet. 273.

  252. 252.

    P Brusick and SJ Evenett, (2008) (2) Wis. Law Rev. 269, 280.

  253. 253.

    Leverage power can be used to also enter non-dominated markets. Compare D Lewis, ‘Natural Monopolies – The Role of Competition Authorities’ (2004), talk given at Seoul Competition Forum, Seoul, 20 April 2004. See also P Brusick and SJ Evenett, (2008) (2) Wis. Law Rev. 269, 282 and 292.

  254. 254.

    P Brusick and SJ Evenett, (2008) (2) Wis. Law Rev. 269, 274–275. See also Davis in panel discussion on ‘Competition Policy, Abuse of Dominance and Economic Development in Developing Countries’, printed in BE Hawk (ed), International Antitrust Law & Policy: Fordham Competition Law 2010 (2011) 355, 366–367.

  255. 255.

    S Roberts, (2012) 35 (2) World Compet. 273, 276.

  256. 256.

    P Brusick and SJ Evenett, (2008) (2) Wis. Law Rev. 269, 276.

  257. 257.

    Kovacic refers to three pre-conditions necessary to challenge incumbent firms: relatively free access to the market in terms of access to capital, the ability to enter without gatekeepers, and the possibility to easily raise funds. See comments in panel discussion on ‘Competition Policy, Abuse of Dominance and Economic Development in Developing Countries’, printed in BE Hawk (ed), International Antitrust Law & Policy: Fordham Competition Law 2010 (2011) 355, 369.

  258. 258.

    P Brusick and SJ Evenett, (2008) (2) Wis. Law Rev. 269, 276–277.

  259. 259.

    The latter refers to Fox’ argument for a model that ‘takes account of the opacity, blockage and political capture of [the] markets and includes some measure of helping to empower people economically to help themselves’. EM Fox, (2007) 13 Sw. J.L. & Trade Americas 101, 103.

  260. 260.

    For details compare, for instance, P Sutherland and K Kemp, Competition Law of South Africa (2013) 7–18. Normally, one assumes a price increase of 5 per cent for a period of one year.

  261. 261.

    Ibid 7–22.

  262. 262.

    M Botta, Merger Control Regimes in Emerging Economies: A Case Study on Brazil and Argentina (2011) 336.

  263. 263.

    RD Anderson and A Heimler in V Dhall (ed), Competition Law Today – Concepts, Issues, and the Law in Practice (2007) 59, 63. D Fruitman, ‘Abuse of Dominance in Developing Economies: A Focus on the Issues in Cambodia, Laos and Vietnam’, CUTS (2006) 9.

  264. 264.

    Compare the CJEU’s definition, which describes dominance as the position of economic strength by an undertaking that enables it to prevent effective competition being maintained on the relevant market by giving it the power to behave to an appreciable extent independently of its competitors, customers and ultimately its consumers, United Brands Company and United Brands Continentaal BV v Commission [1978] ECR 207, para 65. See also the definition of the OECD, which similarly holds that a firm has substantial market power when competitive constraints imposed by other firms are relatively ineffective on the dominant firm. OECD, ‘Substantial Market Power and Competition’, Policy Brief September 2008 (2008) 2.

  265. 265.

    D Fruitman, ‘Abuse of Dominance in Developing Economies: A Focus on the Issues in Cambodia, Laos and Vietnam’, CUTS (2006) 10.

  266. 266.

    See International Competition Network, ‘Unilateral Conduct Workbook Chapter 3: Assessment of Dominance’ (2011) 18.

  267. 267.

    RD Anderson and A Heimler in V Dhall (ed), Competition Law Today – Concepts, Issues, and the Law in Practice (2007) 59, 64.

  268. 268.

    On European law, see R Whish and D Bailey, Competition Law (8th edn, 2015) 191.

  269. 269.

    International Competition Network, ‘Unilateral Conduct Workbook Chapter 3: Assessment of Dominance’ (2011) 33.

  270. 270.

    Ibid 25.

  271. 271.

    RD Anderson and A Heimler in V Dhall (ed), Competition Law Today – Concepts, Issues, and the Law in Practice (2007) 59, 65.

  272. 272.

    OECD, ‘Substantial Market Power and Competition’, Policy Brief September 2008 (2008) 5–6.

  273. 273.

    See RD Anderson and A Heimler in V Dhall (ed), Competition Law Today – Concepts, Issues, and the Law in Practice (2007) 59, 64; MM Dabbah in BE Hawk (ed), International Antitrust Law & Policy: Fordham Competition Law 2010 (2011) 301, 314; D Fruitman, ‘Abuse of Dominance in Developing Economies: A Focus on the Issues in Cambodia, Laos and Vietnam’, CUTS (2006) 10.

  274. 274.

    International Competition Network, ‘Unilateral Conduct Workbook Chapter 3: Assessment of Dominance’ (2011) 5. With presumptions in place correct market definition is even more crucial because it also determines on dominance. On the risk of lopsided analysis confirming legal presumptions, see OECD, ‘Substantial Market Power and Competition’, Policy Brief September 2008 (2008) 4.

  275. 275.

    See International Competition Network, ‘Unilateral Conduct Workbook Chapter 3: Assessment of Dominance’ (2011) 22. Compare also the European Court of Justice, which treats a market share of 45 to 50 per cent as sufficiently indicative of dominance so as to shift the burden of evidence towards the relevant firm. R Whish and D Bailey, Competition Law (8th edn, 2015) 192–193.

  276. 276.

    On the argument that an ‘as-efficient’ competitor test is perhaps not adequate for developing countries, compare EM Fox, ‘Imagine: Pro-Poor(er) Competition Law’, Global Forum on Competition 2013 – Session 1 (2013) 10. On the test, see J Vickers, (2005) 115 (504) Econ. J. (London) 244, 256–258.

  277. 277.

    Whilst it is contended that the nature of abuse of dominance in developing countries does not differ from abuse elsewhere and that also the rules are conceptually similar, it is a different question if the law is more expansive in what conduct it captures. See respective comments by T Lipsky and M Motta in panel discussion on ‘Competition Policy, Abuse of Dominance and Economic Development in Developing Countries’, printed in BE Hawk (ed), International Antitrust Law & Policy: Fordham Competition Law 2010 (2011) 355, 370 and 378.

  278. 278.

    Compare RD Anderson and A Heimler in V Dhall (ed), Competition Law Today – Concepts, Issues, and the Law in Practice (2007) 59, 67–71.

  279. 279.

    For the experience in the US where ‘recoupment presents an impossible-to-satisfy element in some courtrooms’, see CR Leslie, (2013) 113 (7) Colum. L. Rev. 1695.

  280. 280.

    According to Davis, this dimension is said to be crucial in order to obtain credibility. See his comment in panel discussion on ‘Competition Policy, Abuse of Dominance and Economic Development in Developing Countries’, printed in BE Hawk (ed), International Antitrust Law & Policy: Fordham Competition Law 2010 (2011) 355, 376.

  281. 281.

    M Motta and A de Streel in Konkurrensverket (ed), The Pros and Cons of High Prices (2007) 14, 18. See also P Hubert and M-L Combet, (2011) 1 Revue Concurrences 44, 45. This contribution contains an overview of the more recent use of the concept under EU law.

  282. 282.

    This implies acceptance of an excessive pricing rule less objective and less efficient than what is ordinarily considered to be tolerable. See DS Evans and AJ Padilla, ‘Excessive Prices: Using Economics to Define Administrable Legal Rules’, Centre for Economic Policy Research (CEPR) Working Paper No 4626 (2004) 18–22. On the relevance of regulation of excessive pricing in developing countries, see P Brusick and SJ Evenett, (2008) (2) Wis. Law Rev. 269, 285.

  283. 283.

    For deliberations in this regard, see MM Dabbah in BE Hawk (ed), International Antitrust Law & Policy: Fordham Competition Law 2010 (2011) 301, 322. Interfering with prices is fraught with danger though. Any decision on an appropriate price ordinarily hinges on a detailed cost analysis of the production of the relevant product, an analysis which is difficult to make. See M Motta and A de Streel in Konkurrensverket (ed), The Pros and Cons of High Prices (2007) 14, 33–35. Two further problems are involved: price caps curtail the inducement for innovation and distort the inducement function of profits to potential entrants. On the latter see RD Anderson and A Heimler in V Dhall (ed), Competition Law Today – Concepts, Issues, and the Law in Practice (2007) 59, 81.

  284. 284.

    See EM Fox, ‘Imagine: Pro-Poor(er) Competition Law’, Global Forum on Competition 2013 – Session 1 (2013) 10. The author refers to the South African Mittal case, which is described below. See at Sect. 6.1.2.

  285. 285.

    OECD, ‘Abuse of Dominance in Regulated Sectors’, Case Submitted by Senegal to Global Competition Forum 2005 – Session 3 (2005) 1.

  286. 286.

    See A Bhattacharjea in DD Sokol, TK Cheng and I Lianos (eds), Competition Law and Development (2013) 52, 61. With regard to abuse, the author suggests a predatory pricing control with clear standards for costs and an assessment of entry conditions. See further MS Gal and EM Fox in MS Gal and others (eds), The Economic Characteristics of Developing Jurisdictions – Their Implications for Competition Law (2015) 296, 337. However, note that pigeon-holing of conduct may also involve the risk of unduly limiting the provision’s scope, resulting in anti-competitive behaviour not sufficiently being captured. See S Roberts, ‘Assessing the Record on Competition Enforcement Against Anti-Competitive Practices and Implications for Inclusive Growth’, REDI3x3 Working Paper No 27 (2017) 35.

  287. 287.

    See remarks by Davis in panel discussion on ‘Competition Policy, Abuse of Dominance and Economic Development in Developing Countries’, printed in BE Hawk (ed), International Antitrust Law & Policy: Fordham Competition Law 2010 (2011) 355, 376 and 400.

  288. 288.

    Pleading against the obligation to prove output effects across the whole market, see also EM Fox, (2007) 13 Sw. J.L. & Trade Americas 101, 231.

  289. 289.

    DM Davis in BE Hawk (ed), International Antitrust Law & Policy: Fordham Competition Law 2010 (2011) 325, 333. In a similar vein S Roberts, ‘Assessing the Record on Competition Enforcement Against Anti-Competitive Practices and Implications for Inclusive Growth’, REDI3x3 Working Paper No 27 (2017) 31. Discussing South Africa’s abuse of dominance regime, he remarks critically that effects tests tend to favour resourceful incumbents and make it difficult for small companies to argue their case.

  290. 290.

    MS Gal and EM Fox in MS Gal and others (eds), The Economic Characteristics of Developing Jurisdictions – Their Implications for Competition Law (2015) 296, 334.

  291. 291.

    This would respond to worries that by too simple an approach the law regarding abuse of dominance might be hindered in its natural development. See Dabbah in panel discussion on ‘Competition Policy, Abuse of Dominance and Economic Development in Developing Countries’, printed in BE Hawk (ed), International Antitrust Law & Policy: Fordham Competition Law 2010 (2011) 355, 403.

  292. 292.

    Candidate markets were proposed with regard to excessive pricing. See M Motta and A de Streel in Konkurrensverket (ed), The Pros and Cons of High Prices (2007) 14, 17 and 20. See also DS Evans and AJ Padilla, ‘Excessive Prices: Using Economics to Define Administrable Legal Rules’, Centre for Economic Policy Research (CEPR) Working Paper No 4626 (2004) 29.

  293. 293.

    This of course presupposes a long-term commitment to competition policy by the government.

  294. 294.

    MS Gal and EM Fox in MS Gal and others (eds), The Economic Characteristics of Developing Jurisdictions – Their Implications for Competition Law (2015) 296, 335.

  295. 295.

    Ibid 336.

  296. 296.

    See on this argument J Drexl in MS Gal and others (eds), The Economic Characteristics of Developing Jurisdictions – Their Implications for Competition Law (2015) 265, 288–290.

  297. 297.

    D Fruitman, ‘Abuse of Dominance in Developing Economies: A Focus on the Issues in Cambodia, Laos and Vietnam’, CUTS (2006) 16. See Lipsky’s comment in panel discussion on ‘Competition Policy, Abuse of Dominance and Economic Development in Developing Countries’, printed in BE Hawk (ed), International Antitrust Law & Policy: Fordham Competition Law 2010 (2011) 355, 373. On the exclusion of state actions from US antitrust, see T Lipsky in BE Hawk (ed), International Antitrust Law & Policy: Fordham Competition Law 2010 (2011) 339, 351.

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Strunz, B. (2018). The Concepts of Industrial Policy and Competition Law Distinguished. In: The Interface of Competition Law, Industrial Policy and Development Concerns. Munich Studies on Innovation and Competition, vol 8. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-57627-4_2

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