Abuse of Market Power: The End of ‘Make-Believe’ Analysis?

Posted by Social Science Research Network

Abuse of Market Power: The End of ‘Make-Believe’ Analysis?

Donal Curtin (Economics New Zealand)
Abstract:      This paper argues that the New Zealand legislation against abuse of market power, and subsequent jurisprudence, is ineffective to deal with the problem, in particular by relying on a counterfactual test – would a firm without market power have done the same thing, and if so, the firm with market power cannot be said to have “used” its market power (the language of the legislation). This subverts the over-riding issue, that some actions when undertaken by firms with market power have anti-competitive effects. The paper recommends that New Zealand follow Australia’s proposed solution, to move to an “effects” test, with an efficiency defence.