The ‘does it matter’ test for competition laws

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The Competition Law and Economics Network had an interesting seminar during the week by Professor Maurice Stucke. While I will discuss the economics side below, the legal side interested me most (as a non-lawyer). It related to ‘intent’ in antitrust law. This confused me until my eyes were opened by my fellow participants. This controversial issue in US competition law is ‘mother’s milk’ in Australia. Our competition laws embrace ‘intent’ in the legislation. We call it ‘purpose’.

This highlighted the issues of (subtle) legal differences in different jurisdictions. As competition laws expand rapidly around the world, it is important to remember that simple changes in wording can change outcomes.  There is no one ‘template’ for competition laws that is ‘best’.

The key point raised by one participant was ‘does it matter’? He noted that intent (or purpose) has probably only been key to one ‘monopolization’ case in Australia – the Safeway bread case. In that matter, the Court used intent (or purpose) to draw a strong distinction between legal conduct (was the purpose to ‘bargain’, as reflected in the evidence) and illegal conduct (was the purpose to hurt smaller competitors).

The ‘does it matter?’ question lies at the heart of good competition laws. Are the laws written so that, based on the evidence, the Courts can separate out anti-competitive conduct that ‘matters’ to consumers and society. It is a good starting point for any country designing new competition laws. 

Finally, I will comment on the economics. Will someone stop behavioural economists (or their followers) using poorly designed games  as a way of supposedly showing ‘irrational’ or ‘non-utility maximizing’ decisions? The ultimatum game is a good case in point. If I choose to ‘share’ more than a minimal amount of money with the other player then that has numerous utility-maximizing justifications (I may value fairness, I may have a fear that the other player will value fairness and reject offers that he or she views as unfair, etc). All these mean that the payoffs in the ‘game’ being analysed are wrong. Analyse one game and think you are analysing a different game and of course you get the wrong results. (And as I understand it, in the ultimatum game, if players believe they are playing against a computer many of the ‘anomalies’ go away.)

Now, good behavioural economists know all this. But as an applied-micro-theorist I get sick of having to defend what microeconomics actually says from people who argue it is wrong because they use behavioural results to make incorrect statements about what they think microeconomics says! (For a very brief refresher – see the bottom of this post).

2 Responses to "The ‘does it matter’ test for competition laws"
  1. Strongly agree with your comments on behavioural economics… the “how long is a string” branch of economics that can, in the wrong hands, be used to justify about any position.

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