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This chapter examines potential objectives of competition law. It discusses the non-welfare objectives that have been assigned to competition law in the literature and the law and argues that none of them is capable of being an objective of competition law by itself. From this analysis, the need for a welfare objective emerges. The various concepts of efficiency are relative to the achievement of a given measure of welfare and, while relevant, cannot be objectives of competition law in themselves. Social or consumer welfare is then discussed and the superiority of long-term social welfare over consumer welfare is demonstrated. The relevance of consumer welfare is that consumer harm can, in certain circumstances, be a test for anti-competitive behaviour which achieves the objective of maximizing long-term social welfare. The concepts of economic freedom and fairness can also be properly understood only in the light of this objective.

This chapter examines the social welfare consequences of coordinated oligopolistic price elevation. From the outset, it is notable that none of the pertinent theory directly distinguishes between successful coordination due merely to recognized interdependence and that resulting from classic cartel behavior, or various cases in between. The harm from price coordination in terms of allocative inefficiency or loss in consumer welfare depends most directly on the extent and duration of supracompetitive pricing. From a dynamic perspective, price elevation may also cause production inefficiency on account of excessive entry. The expectation of above-marginal-cost prices also induces a number of other kinds of investments, many (but not all) of which are efficient.

This chapter explains the complications of total versus consumer welfare standards; the differences between monopolization and abuse of dominance; the varying meanings of market power and monopoly power; and differing judicial review procedures. These topics underpin the exploration, in separate chapters, of mergers; exclusive dealing; price discrimination; predatory pricing; loyalty and bundled discounts; intellectual property and dynamic competition. In these diverse areas, the rationales underlying their differing treatment under U.S. and EU law are interconnected. For example, the rationales supporting EU treatment of loyalty discounts are related to the rationales supporting the treatment of price discrimination, of exclusive supply contracts and of predatory pricing. This treatment differs sharply from that accorded the same issues in the U.S. The rest of this book explores such connections.

This chapter explains why the dynamic of World Trade Organization (WTO) negotiations tends to lead to the progressive liberalization of market-access barriers promoting consumer welfare. As all agreements tend to be ‘incomplete’, it is a legitimate task of WTO judges to clarify progressively the WTO requirements of nondiscriminatory treatment of like goods and of like services. The additional requirements, in the WTO Agreements on Technical Barriers to Trade and on Sanitary and Phytosanitary Standards, to base restrictive measures on the ‘necessity principle’ and on ‘scientific evidence’, offer useful ‘double checks’ for judicial identification of protectionist measures. While the WTO rules on non-discriminatory market access offer weak safeguards for consumer welfare, the WTO's contingent protection instruments protect import-competing producers from ‘injurious competition’ without regard to consumer welfare. Finally, this chapter concludes that ‘the WTO rules are producer-oriented’ and need to be changed by governments committed to promotion of consumer welfare.

This chapter briefly summarizes the conclusions of this study and presents a set of emerging principles of international competition law. The emerging principles seek to align the components of the international competition law system that builds a consensus among states that the long-term interests of all states would be advanced if international competition law had the overall objective of maximizing global consumer welfare. The emerging principles include (1) subsidiarity; (2) no common competition law; (3) a multifaceted international institutional agreement; (4) non-discrimination and consistency; (5) procedural fairness; (6) transparency; (7) ensuring effective enforcement; (8) competitive effects jurisdiction; (9) international enforcement cooperation and judicial assistance; (10) from technical assistance to enforcement cooperation; and (11) dispute settlement.

This book examines some of the defects and needs for reform in the current world trading system, which focuses on the World Trade Organization (WTO). The subtitle of this book — Legitimacy, Efficiency, and Democratic Governance — is very descriptive of the intent of the book's author and director, Professor Petersmann, and his view of the endeavour. This book is the result of three international conferences on Preparing the Doha Development Round. In each of these conferences, leading academics presented papers on the various subjects of the Doha Development Round of the WTO entailing stimulating discussions among WTO ambassadors, other practitioners from developed and less-developed WTO member countries, economists, political scientists, and legal academics. This volume examines some important institutional questions, such as the ‘political legitimacy’ of the WTO system. It looks particularly at the degree to which the system protects consumer welfare, and how that goal of the system could be evaluated.

A brief historical overview of advertising documents that advertising traditionally performed two different functions: to inform and to persuade. Over time, the law has adopted the view that all advertising is information and, based on this view, has come to preserve the uniqueness, reputation, prestige, and exclusivity that today’s goods and services conjure in consumers’ minds. This chapter discusses three recurrent themes that underlie the function and operation of the current economic system and explores, in particular, how the workings of the present experience economy are justified in legal and economic theory. It is through the operation of these principles (revealed preferences, maximization of consumer welfare, external incentives) that consumer choices are supposed to allocate resources efficiently. It explains the contradictory tensions within those principles and provides the basis for the claim that a twenty-first-century reconceptualization of the consumer may enrich our understanding of what constitutes progress.

This chapter explores the origins and effects of the Pure Food and Drugs Act of 1906 in the U.S. It explains that the Act provided regulators unprecedented authority over interstate trade in food and drug products. This chapter investigates the timing and nature of support for the Act and evaluates the early enforcement of this law and its effects on consumer welfare. Both the narrative and statistical evidence suggest that a nuanced combination of the three main views of Progressive Era reform explains the adoption of the law.

It is essential to the wider public legitimacy of the shareholder value maximization approach to corporate governance that share values can be maximized only by meeting consumers’ preferences and by using resources as efficiently as possible; and that therefore shareholders’ interests represent the general interest. The claim rests on the assumption that firms are operating in more or less pure markets. Since few markets are pure, theorists have moved from the idea of consumer sovereignty to that of consumer welfare, but this represents a sleight of hand. Further, not all human needs can be served by trading in markets. That leads us to the search for alternatives. There must be a variety of these, as one lesson of the failure of neo-liberal market theory to realize its ambitions is that there is no one best way. Neo-liberal dogmatism must be replaced by a genuinely liberal pursuit of diversity.

The analytic structure developed in the first six chapters is applied to quality-differentiated production, quality-differentiated pricing, and consumer welfare analysis. The quality-differentiated production problem is developed as a special case of the multiple-output problem for both nonstochastic and stochastic pricing regimes. The "household production" model of Gorman (1956) and Lancaster (1966) is developed in a conjugate dual framework whose solution for rational individuals obeys the zero-maximum (zero minimum) principle. The nominal concepts of compensating variation and equivalent variation are shown to have real-valued (dual) parallels in the compensating benefit and the equivalent benefit. Real, as opposed to nominal, valuation for traded and nontraded goods is treated in the benefit framework. Directional derivatives of distance functions are used to rationalize the frequently observed empirical discrepancy between willingness-to-pay and willingness-to-accept.

This chapter provides an “absolutist” view: that, after a century of study and application of competition law, there is widespread agreement that there is a set of competition law principles that if appropriately implemented will maximally improve consumer welfare, enhance economic growth, and aid those with low income in any society. If this view can be supported, there is little value in debating how different economic conditions in different countries compel differences in competition law. The competition laws of all nations should in principle be identical. This chapter is purposely provocative and conflicts with the central theses of other chapters in the book. I believe that there is value to the provocation. Of course, economic conditions and institutional conditions differ across countries. These differences will affect the implementation of any competition law and cannot be discounted.

All competition laws have goals, and these goals direct decisions about what the law is and how it should be enforced. Some goals are set out in statutes; others are set by competition law institutions and courts (these are usually consistent with the formal statutory goals, but not always) formal government goals. In order to understand a specific competition law regime, it is necessary to identify the goals that shape them. Some goals are economic. These include efficiency, consumer welfare, and economic development. Other goals include fairness, privacy, and economic freedom. This chapter identifies each of these goals, probes the reasons for them, traces relationships among them, and follows some of their consequences. A key question here is: What factors determine how much influence stated goals will have on the decisions of institutions? Some institutions and individuals pursue goals that are not stated, but rather serve their own interests (e.g., corruption). The chapter refers to these goals, their origins, and their influence.

Chapters 5, 6, and 7 examine the targets of competition law. Key questions: Why is the conduct considered harmful? How is it pursued—for example, which remedies are used? What are the incentives and obstacles in pursuing the conduct? Where is enforcement likely—global patterns? Chapter 5 answers these questions for the two types of anticompetitive agreements. The first type includes horizontal agreements—that is, agreements between competitors. These are the most commonly pursued and heavily penalized violations in the world. Where such an agreement influences a market, it necessarily restrains competition, reducing efficiency, harming consumer welfare, impinging on economic freedom, and interfering with economic development. All competition laws target them, but they also allow justifications such as the need for cooperation in research, and competition laws vary significantly in the extent to which they allow such justifications. Vertical restraints—for example, between a manufacturer and a distributor—have a very different profile. They include, for example, agreements to fix consumer prices and to divide markets. Economists call for case-based analysis to determine their effects, and often such effects are difficult to prove, so competition laws in which economic analysis is central typically face limited enforcement against them. Many other competition laws contain specific rules condemning them.

Global developments in merger control have shown varied approaches across jurisdictions regarding public interest issues in cross-border mergers. In developed countries, the domestic impact of cross-border mergers are subjected to foreign investment laws administered by the state and competition laws administered by competition regulators. Recent decisions on cross-border mergers have highlighted the tension between public interest and competition considerations in merger control, in that a merger would be approved by the competition authorities, but overturned by the state. In contrast, in some developing countries, competition authorities only review cross-border mergers, with the state having no decision-making role in the process. The question remains as to which approach achieves optimal outcomes that foster competition and is also in the public interest in the domestic economies affected by cross-border mergers. This chapter undertakes a comparative analysis of cross-border mergers in selected countries to assess the approaches to evaluating public interest considerations.