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  • Print publication year: 2018
  • Online publication date: January 2018

Introduction

Summary

Exclusionary practices are contracts, pricing strategies and more generally actions taken by dominant firms to deter new competitors from entering an industry, to oblige rivals to exit, to confine them to market niches, or to prevent them fromexpanding, and which ultimately cause consumer harm. This is certainly the most controversial area in competition policy, and one in which economics has arguably not yet been able to guide policymakers in the design of sensible rules and enforcement practices.

Whether due to the influence of the Chicago School (in whose teaching there is little room for the possibility that dominant firms exclude rivals in a welfare-detrimental way) or due to other reasons (such as the expectation that entry will take place, hence reducing any existing market power), it is rare for US courts to find that a firm has infringed antitrust laws on the basis of monopolisation or attempted monopolisation. In general, therefore, even firms with very significant market power are free to engage in unilateral business practices such as tying, exclusive dealing contracts, fidelity discounts and aggressive price policies (obviously, this lenient stance does not extend to coordinated behaviour such as cartels, which is punished very severely).

At the other extreme, dominant firms in the European Union (‘EU’) are under close scrutiny, and it is very unlikely that cases involving practices such as exclusive dealing, fidelity rebates and price discrimination are decided in favour of a dominant firm.

Most economists have denounced this state of affairs as unsatisfactory for quite some time and have emphasised that these practices may be anti-competitive or efficiency-enhancing depending on the circumstances. As a consequence, they should be neither under a (de jure or de facto) per se illegality nor under a laissez-faire regime, but should be assessed on the basis of the effects exerted on the market. Admittedly though, the guidance that economic theory has so far been able to provide to competition law enforcement in this area is not fully adequate. Some so-called post-Chicago models have offered what economists call ‘possibility results’ (namely, the development of models showing that a given practice may have an anti-competitive effect under certain conditions), but few ‘general identification’ results, which could assist the analyst in uncovering all the potential effects (positive and negative) of an exclusionary practice, as well as their significance in practice.