Tuesday, February 5, 2008
Posted by D. Daniel Sokol
Bruce Lyons of the University of East Anglia explains The Paradox of the Exclusion of Exploitative Abuse.
ABSTRACT: Monopoly pricing is a textbook market failure that is taught in the first year of any economics course. The implied welfare loss (or 'exploitative abuse') justifies a whole range of competition policy towards cartels, mergers and regulated industries. Yet there is widespread hostility to prosecuting the same exploitative abuse in the textbook monopoly case (i.e. under Article 82EC)! This paper seeks to understand this paradox. I conclude that, while there are important problems with prosecuting Article 82 exploitation cases (because of problems relating to measurement, market dynamics, multi-sided markets and remedy issues), it is important to keep open the possibility of prosecution; for example, in the forthcoming Article 82 Guidelines.