Competition Law in the New Economy Industries-Is the Current European Competition Analysis Adequate to Protect Consumers in the New Economy Industries

UoM administered thesis: Phd

  • Authors:
  • Kwangkug Kim

Abstract

This abstract is written by Kwangkug Kim for the thesis of MPhil in Law at The University of Manchester, on 18 April 2012. The thesis title is: 'Competition Law in the New Economy Industries: Is the Current Competition Analysis Adequate to Protect Consumers in the New Economy Industries.'This thesis researches current European competition principles in the New Economy industries. New Economy industries have distinct characteristics from traditional ones. One of these characteristics is network effects. This characteristic plays a significant role in determining the type of competition. In such marketplaces, the competition is 'for the market', not 'within the market', and the market is likely to end up highly concentrated or monopolised. The network effects lead to a tendency for markets to tip towards a single dominant network or technology. Whilst the network effects encourage new undertakings to enter a market, at the same time these allow a dominant firm to leverage its dominance from a primary market to secondary/downstream markets. In particular if a dominant network or technology becomes a de facto standard, its owner has similar characteristics to a natural monopolist because its technology is protected by intellectual property rights (IPRs) and its exclusive exercise is guaranteed by intellectual property law. In such a case, the dominant firm can easily leverage its market power from one market to another; especially, when markets are vertically or horizontally related, the risk of leveraging dominance is dramatically increased. For example, in the computer software market, operating systems are a basic platform in order to develop almost all software. Thus, if a firm has dominance in the operating systems market, it can easily enter into and acquire a market power in applications markets using its protected IPRs and various business strategies such as tying/technological integration. In Microsoft, a milestone case in IT markets, competition authorities had opportunities to deal with undertakings' two strategies in the New Economy markets. One was technological integration and the other was refusal to license. Whilst technological integration provides increased access to new features or technologies to consumers, IP holders can legally restrict access to its technology or network, due to exclusivity allowed by IP law, through refusal to license. Dominant firms may evict competitors from secondary or complementary markets using these practices. Thus, these practices may make effective competition impossible in the short term and cause harm to consumers in the long term. In IT markets, once an effective competition is restricted, it is difficult or impossible to restore it because of IT characteristics, such as network effects, relatively high switching costs, economies of scale/large installed base, and lock-in. As a result, in such a case, immediate intervention may be needed to maintain effective competition, but at the same time to protect incentives to innovate. Intervention made by European competition authorities into IT markets have so far recognised their unique characteristics and this led to competition rules being applied more flexibly to technological tying and interoperability cases. In other words, more lenient standards have applied to IT markets due to its durable monopoly caused by network effects.

Details

Original languageEnglish
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Award date1 Aug 2013