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Tuesday, September 6, 2011

Inter-Generational Impacts in Competition Analysis: Remembering Those Not Yet Born

Posted by D. Daniel Sokol

Christopher Townley, King's College London has written on Inter-Generational Impacts in Competition Analysis: Remembering Those Not Yet Born.

ABSTRACT:Imagine an agreement between two engineering companies, which produce vehicle components. They set up a joint venture to combine their R&D efforts to improve the production and performance of an existing component. The companies pool their existing technology licensing businesses in the area. The R&D is paid for out of current profits and will, in part, be funded by an agreed price increase; so current consumers pay for it. If the R&D is successful, only future consumers will benefit.

The OFT Discussion Paper asks whether ‘consumers’, in Article 101(3)’s second condition, only refers to current consumers (that is, those currently purchasing the product) or does it extend to future consumers (who do not purchase the product now, perhaps because they are not yet alive, but will do so in the future). In other words, the OFT Discussion Paper notes that over a longer time period: “…benefits can be inter-generational. Here the consumers who effectively paid for the benefits do not receive them. Instead, future generations of consumers benefit. Currently, this appears to be the threshold above which we infer that the Commission no longer considers them relevant benefits…” This was one of three themes discussed at a breakfast roundtable that the OFT organised in May 2010. The focus of the debate was a recent OFT paper: OFT, Article 101(3) - A Discussion of Narrow versus Broad Definition of Benefits (OFT Discussion Paper). 23 experts attended, some from other UK competition authorities (the Competition Commission and Ofcom), DG COMP, some UK government departments (Department for the Environment Food and Rural Affairs and the Department for Business Innovation and Skills), academia, businesses and law firms. The OFT compiled a synopsis of the roundtable’s discussion (Synopsis).

Section 2 presents some preliminary observations; then Section 3 examines some legal, moral and economic issues. Next, the paper discusses the advantages and disadvantages of aggregating costs to current consumers with benefits to future consumers in the same market (Aggregating Across Generations), Sections 4 and 5, respectively. Section 6 concludes, in favor of Aggregating Across Generations.

http://lawprofessors.typepad.com/antitrustprof_blog/2011/09/inter-generational-impacts-in-competition-analysis-remembering-those-not-yet-born.html

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