Competition Law Reading Room
Misuse of market power: Why policy objectives matter
(2014) 22(2) Competition and Consumer Law Journal 85
Dominant firm conduct is one of the most problematic areas in competition law. This article argues that the discourse concerning ‘consumer harm’ and ‘market power’ masks policy objectives that, properly considered, may inform the problem of distinguishing between dominant firm conduct which amounts to an unlawful misuse of market power and conduct which may be permitted as a normal incident of competition. The commonly accepted definition of market power as the ability to reduce output and raise prices is based on prejudicial assumptions concerning the comparison between neoclassical models of perfect competition and monopoly which are not comparable. When we examine these assumptions, and underlying policy objectives, in the light of what competitive markets can and cannot achieve, we see that market power is not something that can be possessed or taken advantage of — the power is that of the market, which is open to manipulation. We should ask under what circumstances the market can be manipulated, by not just upwards but downwards price pressure, and frame our prohibition accordingly.
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