5

Implementation of second-best solutions

The judge or the bureaucrat?

A lawyer’s perspective

Anders Chr. S. Ryssdal


Introduction

Perfectly competitive markets are like unicorns - perfect beauties and never seen. Businessmen and competitions officials alike have to muddle through in a world of market imperfections, respectively trying to make money and repair market failures. Both groups try to make sense of confusing market forces, and, fortunately, they both need lawyers to apply the rules of the game.

This means that lawyers - who should alternatively be assumed away or denounced as deadweight costs in any honest economic model - in the real world have an important role to play especially on the enforcement level of competition policy, and this fact provides the subject of my topic here today. If there is more than one way to procedurally impose corrective remedies on the conduct of business - what is often referred to as ‘second-best solutions’ by competition officials - the issue to be discussed is what method provides the better alternative.

To simplify my presentation, I shall distinguish in the main between two forms of enforcement: on the one hand, administrative enforcement where decisions are made by an administrative agency and only later subjected to (limited) judicial review, and on the other hand, judicial enforcement, where the competition agency shall have to initially present its case to a court to obtain corrective action.

While administrative enforcement has been the typical European model, enforcement by the Department of Justice through the courts is more customary in the US. In the real world, a number of hybrids exist, and to my knowledge no system operates in pure form. We have expert administrative tribunals that look like courts, and we have activist specialist judges who act like competition officials. The US Federal Trade Commission is a typical example. However, the important distinguishing factor is what degree of independence from political authority the final decision maker can exercise. While administrative enforcement is typically subordinated to some political authority as regards policy instructions and review, the actions of a court can only be corrected through the more cumbersome procedure of changing the substance of the law. That the real world consists of decision-makers whose dependence and independence are only partial, does not detract from the usefulness of applying this distinction at the outset.

-65-

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Competition Policy Analysis
Table of contents

Table of contents

  • Title Page iii
  • Contents v
  • Figures ix
  • Tables x
  • List of Contributors xi
  • Preface xiii
  • Introduction 1
  • Notes 5
  • 1 - Towards a Competitive Society? 6
  • 2 - Competition Law and Policy 20
  • 3 - Competition Policy and Market Dynamics 35
  • 4 - Who Should Be Responsible for Competition Policy in Regulated Industries? 43
  • 5 - Implementation of Second-Best Solutions 65
  • 6 - Competition Policy with a Coasian Prior? 78
  • 7 - The Australian Competition Policy Reforms 87
  • 8 - Competition Policy in the Information Economy 109
  • Notes 130
  • 9 - Regulating Manufacturers and Their Exclusive Retailers 133
  • References 148
  • 10 - Deregulating Norwegian Airlines 150
  • 11 - Resource Allocation by a Competition Authority 165
  • 12 - European State Aid Policy 200
  • Index 239
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