The application of article 82 EC in new economy market

Abstract

Rapid changes in the economy brought on by innovation and the emergence of "new economy" industries such as computers, communications and the Internet have led some to question whether EC competition law can deal with the challenges of today's dynamic markets. This is what this dissertation looks at. It seeks to analyse whether the "new economy" is so different in kind from the economies of the past as to warrant the view that practices that restrict output, create or enhance monopoly power, or raise artificial barriers to new competition are no longer the sorts of things the law should strive to prevent. The conclusion reached here, in a word, is "no". However, this does not mean that some adaptations to the approach currently taken by the Commission and the European Courts is not necessary; and in this respect, I argue for a more flexible, yet cautious, approach to competition policy in the "new economy" markets. This adaptation is necessary in view of the special characteristics of the "new economy" markets - characteristics which may not be present in more traditional markets. As a result, certain rules of thumb and standard approaches that might have worked for traditional industries may no longer be feasible and appropriate for the application of Article 82 EC to "new economy" markets. A basic understanding of what is meant by "new economy" is necessary in order to comprehend better the stance taken by the EC competition authorities in relation to the "new economy" and to fully appreciate the arguments raised in favour and against this stance. As a result, this dissertation starts in Chapter 1 by examining the special characteristics of the "new economy". This first chapter goes on to identify two different schools of thought that look at the special characteristics of the "new economy" from different angles and consequently come out with different views of how the market analysis under Article 82 EC should be carried out. The dichotomy between the two schools of thought highlighted in Chapter 1 is taken throughout this dissertation. Indeed, Chapters 2, 3 and 4 whilst dealing with the way the market analysis is currently being carried out by the EC Commission and the European Courts (and at times also by the US competition authorities), they also portray the arguments in favour and against this kind of market analysis. Thus, in line with the sequence of market analysis carried out by the Commission and the Courts under Article 82 EC, Chapter 2 starts by investigating the concept of market definition. The way the market has been in the past defined by the European authorities has been the subject of much criticism as it has sometimes been seen to be too narrowly defined and consequently to distort the whole competition law analysis which basis itself on such a definition. As it will be observed, this criticism is heightened when it comes to consider such a narrow market definition in "new economy" markets. Chapter 3 focuses then on the concept of dominance. Market shares and to a certain extent, barriers to entry, are the main factors at which the Commission and the Courts will look at in order to determine whether a firm is dominant or otherwise. However, it will be noted here that both the Commission and the Courts are obsessed with market shares as a result of which consumer welfare may be jeopardised. Chapter 4 tackles the question of abuse by looking mainly at three kinds of behaviour that firms in the new economy have recently resorted to. The conduct adopted by the firms in these cases was condemned by the Courts and the Commission as abusive. Nevertheless, I argue here that there is still room for deciding otherwise or at least to come to the same conclusion but adopt a more realistic view of "new economy" markets in full awareness of the special characteristics these industries present. Chapter 5 finally endorses the view that the current approach of the Commission and the Courts to the application of Article 82 EC in "new economy" markets needs to change to better reflect the special characteristics of this kind of economy. A way forward is therein suggested. I have taken reasonable care to state, what I believe to be the law and the view of authors as at 12th December 2007.