The Role of Economic Efficiency in Competition Law

The main focus of the paper is the function of economics in the current application of competition law. While advocating further economization of the law, it is seen as necessary to widen the extent to which aspects of economic efficiency encompassing static and dynamic efficiency are taken into consideration in an antitrust analysis. Much attention is devoted to these issues, while clarifying what is meant by them, how they are to be understood and implemented in the practice of antitrust authorities, as well as discussing their importance for the promotion of innovation. It is noted that accounting for the economic efficiency aspects differently in the light of competition law allows for the assessment of the market behavior of dominant companies, which traditionally has been seen as anticompetitive. This main issue of the paper is analyzed extensively and explained using the case of Microsoft, a company accused by the US and EU antitrust authorities of abusing its dominant position on the market of operating systems in that it integrated the sale of its base product Windows OS exclusively with other applications (Media Player and Internet Explorer). The differences presented in the research part of the paper as to the way Microsoft was treated by these authorities originated in their different methodology of analysis and assessment of the effects of the sales model launched by Microsoft for products offered to the PC manufacturers and their users, in spite of the US and EU antitrust authorities adopting the same evaluation standard – consumer welfare. Aspects of dynamic efficiency adequate in the assessment of the behavior of innovative firms holding a dominant position proved to be deciding. On the other side of the Atlantic, taking into account the aspects of dynamic efficiency was crucial in coming up with a lighter assessment of Microsoft’s tying compared to the European authorities’ assessment which was based largely on the structural analysis, where the benefits arising from dynamic efficiency are not visible. It is clear from the decisions made by the Commission that it favours regulation over effects generated by competition forces at a later time.