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From the Editor: Spring 2008

 |  April 24, 2008

David Evans, Apr 24, 2008

A colloquy of articles on the European Court of First Instance (CFI) judgment in Microsoft Corporation v. European Commission (EC Microsoft) begins the Spring 2008 issue of Competition Policy International. The CFI´s September 2007 judgment capped an almost decade-long tussle between two powerful entities and is a significant statement by this influential court on the state of Article 82 EC jurisprudence. The first three papers in this series focus on the refusal-to-supply side of the case. We begin with John Vickers who compares aspects of the Microsoft matter to the Commission´s investigation and ultimate undertaking with IBM in the early 1980s. Eleanor Fox comments on Vickers article and is followed by Daniel Beard. Articles by Hew Pate and Kelyn Bacon address the tying abuse side of the case. Maurits Dolmans, who played a significant role for RealNetworks and other interveners that sided with the Commission, will publish a comment on Pate´s article in a forthcoming release of Global Competition Policy, our online magazine.

A symposium on consumer protection and antitrust follows the colloquy on the EC Microsoft case. The field of competition law and economics has shown increased interest in consumer protection partly as a result of recent work by economists on behavioral economics. This relatively new discipline studies how people actually make decisions and examines the implications, rather than, as is customary in economics, examining the implications under the assumption that people make rational decisions. Behavioral economics has stimulated thinking on consumer protection by providing insights into possible governmental remedies for business practices that take advantage of apparent oddities in how people make decisions. Paul Pautler provides an introduction to the articles by Mark Armstrong, Howard Beales, Paul Rubin, and Claudio Tesauro and Francesco Russo.

These articles provide an introduction to the economics of consumers protection and its connection to competition policy. Turning to the issue´s case notes, we chose to highlight merger policy and the Whole Foods case. The U.S. Federal Trade Commission (FTC) asked a federal district court to block Whole Foods acquisition of Wild Oats on the grounds that the merger would raise prices in the market for natural and organic supermarkets. The district court judge ruled against the FTC in a lengthy decision that was upheld by the U.S. Court of Appeals for the DC Circuit. The FTC has appealed that decision to the full appeals court. Deborah Feinstein and Michael Bernstein provide their thoughts on the case and its implications. Antitrust Stories, a new collection edited by Daniel Crane and Eleanor Fox, is the subject of the book review by William Kovacic. Each chapter of the book provides a historical rendering of important U.S. antitrust cases beginning with Standard Oil in 1911 and ending with Empagran in 2004, as told by an accomplished group of antitrust economists and lawyers.

Kovacic provides a summary of the chapters in the book and evaluates the authors methods and research conventions, noting that authors were encouraged by the editors to examine the human dimension of the case. Kovacic, also well-acquainted with the human aspects of many of the cases, complements and critiques the authors recounts and the personal context of the cases. Our classic for this issue consists of reprinting portions (Chapters VII and IX) of a 170 year-old book that has had a profound influence on our understanding of vertical relationships: Augustin Cournot´s Recherches sur les principes mathmatiques de la thorie des richesses. These chapters introduce the concept now widely known as double marginalization which shows, among other things, that two vertically related firms with market power can make more money and lower prices for consumers by merging or otherwise coordinating their pricing decisions. As Michael Salinger shows in his introductory essay to the relevant chapters in Cournot, this finding has proven important to our understanding of vertical practices and vertical mergers.

It is, of course, only one of the many contributions that Cournot made in his masterful microeconomics text on which antirust increasingly relies. The Spring 2008 issue marks the start of CPI´s fourth year and seventh issue. We would like to thank John Temple Lang and Jorge Padilla for serving as our European co-editors for our first three years. Both are joining our editorial board. Joining us as co-editors are Professor Antonio Bavasso from the Faculty of Laws at University College London and a partner at Allen & Overy, and Professor Mark Armstrong from the Department of Economics at the University College London and an advisor to the U.K. Office of Fair Trading. In addition, as part of an increased focus on Asia, we also welcome new co-editors Professor Mark Williams, an expert in Asian competition law from Hong Kong Polytechnic University, and Professor Xinzhu Zhang, an advisor to China´s State Council and the Antimonopoly Law, Director of the Research Center for Regulation and Competition at the Chinese Academy of Social Sciences, and Professor of Economics at the School of International Business Administration, Shanghai University of Finance and Economics. Finally, Richad Schmalensee and I have traded places as he is chairing our editorial board and I am taking on the role of editor. On behalf of our editorial team, I am delighted to extend my thanks to all of the contributors to this issue. David S. Evans University College London and University of Chicago

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