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Law Notes Competition Law Notes

Introduction To Competition Law Notes

Updated Introduction To Competition Law Notes

Competition Law Notes

Competition Law

Approximately 389 pages

Competition Law notes fully updated for recent exams at Oxford and Cambridge. These notes cover all the LLB and BCL competition law cases and so are perfect for anyone doing an LLB in the UK or a great supplement for those doing LLBs abroad, whether that be in Ireland, Canada, Hong Kong or Malaysia (University of London).

These were the best Competition Law notes the director of Oxbridge Notes (an Oxford law graduate) could find after combing through forty-eight LLB samples from outstanding la...

The following is a more accessible plain text extract of the PDF sample above, taken from our Competition Law Notes. Due to the challenges of extracting text from PDFs, it will have odd formatting:

Introduction to Competition Law

Competition Law LLM

[Author]

Table of Contents

The Market System (neo-classical economics perspective) 3

1. The Concept of “Efficiency” 3

Static Efficiency 3

Dynamic Efficiency 3

2. Perfect Competition 3

3. Monopoly 4

Is monopoly always a bad thing? 4

4. Oligopoly 4

5. Challenges to the Neo-Classical Model 5

The Structure and Aims of the Competition Laws 5

1. US Law: Sherman Act of 1890 5

2. The Objectives of the Sherman Act 6

Harvard School 6

Chicago School 6

Post-Chicago 6

Convergence Neo-Harvard and Neo-Chicago 6

3. EU Competition Law: History and Objectives 7

The Role of Ordoliberalism 7

The role of efficiency 8

Competition Policy

The Market System (neo-classical economics perspective)

Competition law is about regulating markets, so we need to know about markets. The production and distribution of goods and services to consumers constitutes the market. We assume firms are profit maximising, so they will take actions accordingly. Prices are constituted by supply and demand within the market. Supply and Demand are both usually somewhat ‘elastic’, which means that they vary with price. In a well-function competitive market, we’ll reach a competitive equilibrium, where supply and demand interact. Everything is sold, and no one wants to buy anything more at the market price – this is efficient – the best allocation of society’s resources, according to Adam Smith’s Wealth of Nations. However, there are some assumptions – that firms act selfishly to maximise their individual utility, for example, and some structural factor assumptions, such as a lack of externalities. For our purposes, we also assume competition – we require competition and competitive markets.

The Concept of “Efficiency”

Efficiency is an economic concept, which has come into the realm of competition law, so is now a competition law concept too. It has normative force too.

Static Efficiency

This is the element that is focussed on most – about the distribution of resources in a market – this is a measure of consumer surplus (the difference between the consumer’s value and the price paid that accrues to the consumer, and society) and producer surplus (profit = price – cost). Static efficiency seeks to maximise these surpluses, though they conflict. Efficiency is unconcerned with distribution, see the debate between Posner and Dworkin for the jurisprudential aspect of efficiency – is efficiency a normative value?

Allocative efficiency involves matching production to consumer demand and productive efficiency measures avoidance of wastage of resources.

Dynamic Efficiency

Most Law and Economics focuses on static efficiency, but dynamic efficiency is increasingly important. It is concerned with progress and development – it is quite an elusive concept as it is so abstract. R+D is used as a proxy for Dynamic Efficiency, along with numbers of patents etc. Schumpeter’s creative destruction shows the idea of dynamic efficiency – cycle of monopoly market new monopoly with development.

Perfect Competition

We know that one of the assumptions of the working of the market system is that markets are competitive. Competition means that no firm can raise prices above the equilibrium price – no-one has market power. The invisible hand works within the market, leading to a competitive equilibrium. We need a large number of buyers and sellers (atomised buyers and sellers), perfect information about the numbers of buyers and sellers, and about price, no barriers to entry, and a homogenous product. Further, the quantity of goods or services trade by a single buyer or seller is so small compared to the total that changes in these quantities leave market prices unaffected. This means all actors are price-takers. This will be Pareto-efficient. At a technical level, the competitive price is equal to “marginal cost,” meaning the cost that the firm incurs to produce a single additional unit of the product (in practice, including a reasonable rate of return on capital).

Monopoly

Monopoly describes a market where a single seller has sufficient market power to alter unilaterally the market price, either by increasing output to drive down prices, or by reducing output to create scarcity and drive up prices. Either way, the firm will work at its profit-maximising point, regardless of whether that is better for the market or the consumer. When compared with competition, the primary effects of monopoly are reduced output, higher prices and a transfer of income from consumers to producers (while producer welfare tends to be maximised, there may be allocative inefficiency). Although this situation could still efficient if total wealth is maximised, in monopoly markets there is typically also a deadweight loss, whereby some of the benefits that would have accrued to consumers in a competitive market fail to transfer to the monopolist and are lost to society. Part of the consumer surplus transfers to the monopolist, but some of it vanishes – this is the social cost of a monopoly. Other disadvantages include a lack of progress, as monopolists have ‘a quiet life’ with no competition. Moreover, the struggle by producers to achieve a monopoly, in anticipation of the supra-competitive returns that follow if and then the position is achieved, may generate “rents” that are also a cost of monopoly (expenditure by firms in an effort to acquire greater economic opportunities)—e.g. Kreuger (1974). If these resources are spent on R+D, that’s okay, but there may be other expenditure, which will be lost to society (e.g. doing down competitors).

Is monopoly always a bad thing?

No, it can be beneficial – there is a slightly ambiguous relationship between dynamic efficiency and market concentration. 2 views: Schumpeter argues that monopolies will encourage innovation. Kenneth Arrow argues that monopolists have diminished incentives to innovate, and prefer to rest on their laurels. The problem with the Arrow viewpoint is that producers are...

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