Competition Policy

Throughout the book, we have described a number of situations where firms might restrict competition in their attempt to increase their market power at the expense of their competitors and/or of consumers: collusive agreements in Chapter 14, welfare-reducing horizontal mergers in Chapter 15, predatory behaviour in Chapter 16 and exclusionary practices in Chapter 17. To assess whether such conducts are detrimental or not, we measured their effects on economic welfare. That allowed us to show that not all restrictions to competition are detrimental (think of the vertical restraints that we discussed in Chapter 17). But in the case they are, we were forced to recognize that market forces are not always sufficient to curb market power and reduce prices, implying that public intervention, namely competition policy , may be desirable. Competition policy (or antitrust policy, as it is called in the US) can be broadly defined (following Motta, 2004, p. 30) as ‘the set of policies and laws which ensure that competition in the marketplace is not restricted in a such a way as to reduce economic welfare’. In this appendix, our aim is to complement our previous analyses by giving a broad description of competition policy. We start by offering a brief historical perspective to understand where competition policy comes from (Section B.1). Then, focusing on the European Union and the United States, we describe the relevant laws and link economics issues (exclusion, collusion, merger etc.) to the particular laws (Section B.2).