We present a new welfare-based framework for optimally choosing legal standards in a variety of regulatory contexts. We formalise the decision-theoretic considerations widely discussed in the existing literature by capturing the quality of the underlying analysis and information available to a regulatory authority, and we obtain a precise set of conditions for determining when a Rule of Reason approach would be able to effectively discriminate between benign and harmful actions and consequently dominate Per Se as a decision-making procedure. We then show that in a welfarebased approach the choice between legal standards must additionally take into account (i) indirect (deterrence) effects of the choice of standard on the behaviour of all firms when deciding whether or not to adopt a particular practice; and (ii) procedural effects of certain features of the administrative process in particular delays in reaching decisions; and the coverage rate of the actions taking place. We therefore derive necessary and sufficient conditions for adopting discriminating rules (such as Rule of Reason). We also examine what type of discriminating rule will be optimal under different conditions that characterise different business practices. We apply our framework to two recent landmark decisions – Microsoft vs. EU Commission (2007) and Leegin Vs. PSKS (2007) – in which a change in legal standards has been proposed, and show that it can powerfully clarify and enhance the arguments deployed in these cases.
The Mannheim Competition Policy Forum is designed to give researchers and representatives from practice an opportunity to discuss competition policy issues and points of view.
The Forum will address, for example, problems that occur in detecting and punishing cartels. Furthermore, it will examine the various possible effects of mergers, for example on companies’ product prices or their product range and innovative behaviour. It will explain the advantages and disadvantages of various simulation models which allow an assessment of competition effects prior to a merger. It also intends to discuss possibilities of preventing the abuse of dominant market positions. By providing an exchange of ideas on these and other topics, the Mannheim Competition Policy Forum will make a valuable contribution to improving transfer of scientific findings to competition policy practice.
The Mannheim Competition Policy Forum is due to take place every other Thursday during the university semester. It begins at 17:15 and is open to all interested parties. The lectures are held in English.