Resource allocation by a competition authority

Stephen Martin

And when we deal with questions relating to principles of law and their applications, we do not suddenly rise into a stratosphere of icy certainty.

(Charles Evans Hughes)


The workings of the law are uncertain. This is true in general and it is true for antitrust or competition law.

If firms are found to have violated competition policy, they open themselves up to the possibility of fines 1 - if the offending conduct is detected, if the enforcement agency decides to levy a fine or challenge the conduct in court, if a trial court sustains the enforcement agency, and, if all of these things come to pass, if the trial court is not overturned in the event of appeal to higher courts.

In some cases it is clear that a certain course of action violates competition policy. If a manufacturer has distributors in several EU member states, and forbids those distributors to sell across national boundaries, the manufacturer knows it is violating EU competition policy. Uncertainty is then limited to whether or not the conduct will be detected and the sizes of legal expenses and the eventual fine.

In other cases, whether a course of action violates competition law is far from clear in advance. For example, behavior that is found to constitute illegal collusion in one instance is often difficult to distinguish from behavior that is found to be legal conscious parallelism in another. 2

Conscious parallelism decisions in both the European Union and the United States suggest that independent decisions independently arrived at will not be found to violate competition policy, even if those independent decisions lead to outcomes that generate economic profits over the long run. Some kinds of conduct will shift behavior from the legal category of ‘independent’ to the legal category of ‘collusive’, but exactly what kinds of conduct will have this effect sometimes seems idiosyncratic. 3,4

In like manner, it seems fair to say that at this writing (September 1998), it is not clear whether the marketing practices that have been used by Microsoft Corporation for its operating systems and network browsers violate US antitrust law.


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Competition Policy Analysis


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