Friday, December 3, 2004

John Kay on competition

John Kay, a  British economist and contributor to the Financial Times, published an interesting commentary on competition policy, particularly relevant to the Microsoft case.  He writes:

"Predatory action is prohibited in Europe, the US and most other countries. So company B sues. Before the judge dons his robes, company A agrees to make a substantial payment to company B, which then withdraws from the case and the market. Company A's comfortable and profitable monopoly is restored.

"Everyone is happy - except, of course, consumers, whose interests the law exists to defend. If company A were simply to pay company B not to compete, that would be illegal, as it should be. But if the same effect is achieved through the settlement of an antitrust action, no rules are breached if the agreement is appropriately drafted, as it certainly will be. Could this happen? Does this happen? Yes."

For a complete version of the essay, follow this link to Dr. Kay's website.

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