Richard Schmalensee, Apr 17, 2007
Our fifth issue of Competition Policy International brings diverse fare from 29 leading economists and lawyers from the European Community and the United States. We begin, as most antitrust matters do, with market definition: a controversial aspect of antitrust analysis at least since Franklin Fisher´s seminal critique based on his involvement in the IBM litigation. Real economists do not define markets, they use microeconomics to examine competitive effects. There´s much wisdom in that position. Yet many economists, including me, have found that market definition can be helpful as a screening device, particularly in merger cases.
Economists thus generally applauded William Baxter´s efforts to impart economic rigor to the market definition process. Nevertheless, it is all too easy for market definition to veer off from its useful role as a screening device. Dennis W. Carlton and Jordi Gual provide cogent commentaries on the good, the bad, and the ugly of market definition in unilateral conduct and merger cases. We then turn to antitrust issues in which intellectual property plays a critical role. The last decade has seen a surge in significant cases in this area. Significant cases some in the investigation state, others in various stages of appeal involve standard-setting organizations, treated by Damien Geradin and Anne Layne Farrar; predatory innovation, examined by Richard Gilbert; and refusal to license critical intellectual property to competitors, considered by Maurits Dolmans, Robert O´Donoghue, and Paul-John Loewenthal.
Two colloquia on the antitrust analysis of multi-sided platform businesses on either side of the Atlantic provide the fodder for our next section. One was held in May 2006 at University College London under the sponsorship of the Jevons Institute for Competition Law and Economics, while the other was held in June 2006 at the Massachusetts Institute of Technology under the sponsorship of the publisher of this journal. Recent cutting-edge economic research has shown that in many significant markets businesses create value by bringing together two or more groups of customers whose members benefit from getting together and cannot readily do so on their own.
The critical insights from this literature are that, first, businesses that range from shopping malls to videogame consoles to advertising supported media follow the same basic business model and that, second, there are some novel economic propositions that apply to these sorts of businesses that do not, for example, apply to traditional supply-chain type businesses. The two founding fathers of this literature Jean-Charles Rochet and Jean Tirole offer a number of insights about the state of this area in their introduction to the symposium, which begins with a survey paper by David S. Evans and me and a comment by Janusz A. Ordover. Renate B. Hesse, Marc Rysman, William H. Rooney, and David K. Park, and Amelia Fletcher then examine the implications of multi-sided platform businesses for antitrust analysis in areas such as predatory pricing and market definition.
Last, papers by Thomas P. Brown and Kevin L. Yingling, John Wotton, Leonard Waverman, Wilko Bolt, Duarte Brito and Pedro Pereira, and Richard A. Epstein consider antitrust issues that arise in particular industries including insurance, media, payment cards, real estate, and telecommunications. We conclude with two of our regular features. Rachel Brandenburger and Thomas Janssens examine the European Court of First Instance´s first-ever annulment of a Commission decision to clear a merger: the proposed music joint venture between Sony and Bertelsmann. Finally, Professor Massimo Motta reviews Michael Whinston´s Lectures on Antitrust Economics, which was published last year. Alas, there was not room for our third regular feature, a reprint of a classic contribution to the antitrust literature, but that will reappear next issue. On behalf of the journal´s readers and its editorial team, I am delighted to extend my thanks to all the contributors of this issue. Richard Schmalensee Professor of Economics and Management, MIT John C Head III Dean, MIT Sloan School of Management
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