LA LECTURA Y LAS DISLEXIAS
3.7 LA LECTURA COMO PROCESO COGNITIVO
market economy where resources are allocated predominantly by supply and demand in free markets rather than directed by government regulation and intervention. To improve the evaluation of the impact that a lack of interoperability can have on the competitive process, the development of the economic theories underpinning competition law have been reviewed.
The rationale underpinning market economies is that they give allocative efficiency as goods are produced in the quantities valued by society. In a perfectly competitive market production is expanded to the point where market price and marginal cost330 coincide and everyone who is willing and able to purchase at the cost of production will do so. The market is in equilibrium and in a state of ‘Pareto optimal’ as no one can be better off without someone being made worse off. 331 Other optimal efficiencies are productive
330 Marginal cost includes ‘normal’ profit as all the factors of production are taken into account when computing the cost, including capital.
331 Alison Jones and Brenda Sufrin, EC Competition Law (5th edn, OUP 2010) 8
118 efficiency – downward pressure on costs which are passed on to the consumer, and
dynamic efficiencies – the delivery of innovation and technical progress.332
Perfect competition is a theoretical model, where there are a large number of buyers and sellers of homogeneous products, with no barriers to entry and all with perfect information.
Each seller is insignificant and ‘price-takers’ not ‘price-makers’. In reality ‘workable’
competition is the best that can be expected. Oligopolies, in which a few leading firms know each other’s identity and recognise they are mutually affected by output and pricing decisions are typified by markets which may have allocative and productive
inefficiencies.333 The persistent quandary is whether by intervening, the state can improve allocative and productive efficiency. An additional dimension is the extent to which the state should take back that which it has granted by way of IPRs. While IPRs are intangible, state generated property, reducing the IPR holder’s rights may also harm the incentive to innovate and hence damage dynamic efficiency. With interfaces there is yet another issue as they are generally of low innovative value but as de facto standards can give
disproportionate control over access to proprietary software and even networks.334 An influential approach to the challenge of achieving optimum control by competition law comes from the economic analysis of law, in which economic concepts are used to explain the effects of laws and to assess the economic efficiency of legal rules. Leading proponents of this field are Ronald Coase,335 Frank Easterbrook336 and Richard Posner.337 Concepts that have common currency in assessing the economic efficiency of legal rules include Pareto efficiency and game theory. The increase in importance of economics in competition law is
332 Ibid 8
333 Ibid 11
334 Ashwin van Rooijen The Software Interface between Copyright and Competition Law (Kluwer Law International 2010) 132
335 Robert H Coase, ‘The Problem of Social Cost’ (1960) 3 JJ& ECON
336 Frank H Easterbrook, ‘The Limits of Antitrust’ (1984) 63 Tex L Rev 1
337 Richard A. Posner, The Economics of Justice (Cambridge: Harvard University Press 1983)
119 marked with adoption of the effects based approach in the modernisation of Article101 and 102 as well as merger control. This new approach was seen in Microsoft, although
Microsoft failed to fully develop the efficiency argument.
Precursors to the economic analysis of law were the Progressives and American Realists.
The Progressive school of thought in the USA at the fin de siècle believed that while the rise of corporations was socially and economically beneficial to the economy, opportunities for abuse of that power clearly existed. Progressives such as Richard Ely and John Commons believed the government should regulate in areas of potential abuse. They were
particularly in favour of regulation of oligopolistic industries and antitrust enforcement more generally.338 Progressives believed in the existence of rational bases for ethical and political values and that these could be rationally justified, but believed that law and public policy were inseparable and hence justified the need for intervention. The American Legal Realists built on this case for a regulatory state, but were more sceptical about the rational foundations of legal, moral, and political values.339 The most “important common
denominator between the two political-intellectual movements was said to be their attack on legal orthodoxy, the crucial characteristic of which was an understanding of law as politically neutral.”340
According to the American Legal Realists, the free market was a system of coercive power, and the legal system and the market were interdependent. Effective policy decisions concerning resource allocation required analysis of how the legal system itself distributes coercive power. Robert Hale considered property rights not to be defensive - a means to protect oneself from unwanted interferences from others or the state, but offensive - the basis for coercing others to do something that the owner wishes.341 Taking this further it
338 Gregory S Alexander, ‘Comparing the Two Legal Realisms - American and Scandinavian’ (2002) 50 The Americal Journal of Comparative Law 154
339 Morton J. Horwitz, The Transformation of American Law,1870-1960 (OUP 1992)
340 Ibid 170 - 171
341 Robert L Hale, ‘Coercion and Distribution in a Supposedly Non-Coercive State’ [1923] Political Science Quarterly 470
120 was thought that a government which limits the right of large land-holders limits the rights of property and yet may promote real freedom. Property owners, like individuals, are members of a community and must subordinate their ambition to the larger whole of which they are a part.342 This notion that private property rights are nothing more or less than state-sanctioned coercion was echoed by the Scandinavian Realists who, though less
concerned than the American Realists with the notion of property,343 considered ownership to amount to a state guarantee to certain protection in possession, and that in the typical lawsuit over possession both sides believe they are lawfully entitled to possession.
Ultimately the legal idea of a property right is reliant only on legal machinery and has no basis in reality and therefore can only have a metaphysical basis.344 This idea is epitomised in IPRs which are intangible and legal constructs.
The Sherman Act 1890 is described as the first modern system of competition law. Its introduction was a protectionist measure in response to farmers, small businesses and those wanting to stop the transfer of wealth from consumers to big business.345 It was not until the 1950s and the emergence of the Chicago School did the theories of allocative efficiency come to dominate the economics and law of competition. Between the introduction of the Sherman Act and the Chicago School, and against the backdrop of an industrial revolution, the Depression and the New Deal, came the Harvard School’s paradigm that the structure of the market determines the firm’s conduct and market performance. Barriers to entry were thought to be widespread while economies of scale were not valued and monopoly pricing, associated with oligopolies, were thought to occur
342 Morris Cohen, ‘Property and Sovereignty’ (1927) 8 Cornell LQ
343 Gregory S Alexander, ‘Comparing the Two Legal Realisms - American and Scandinavian’ (2002) 50 The Americal Journal of Comparative Law 154
344 Axel Hagerstrom, Inquiries into the Nature of Law and Morals (Karl Olivecrona ed, C.D. Broad trans. 1953)
345 Alison Jones and Brenda Sufrin, EC Competition Law (5th edn, OUP 2010), 20
121 at relatively low levels of concentration. This resulted in an interventionist antitrust
enforcement policy in the USA.346
The Chicago School criticised the Harvard’s School’s empirical study and from the 1950s introduced its own theoretical model of economic efficiency as the exclusive goal of
antitrust. The Chicago School’s adherents thought that most markets are competitive even with a small number of sellers. They considered ‘natural’ barriers to entry more imagined than real, and economies of scale pervasive. Monopolies will tend to be self-correcting and antitrust enforcement should be tolerant of efficient behaviour and be less
interventionist.347 For the Chicago School efficiency is the sole purpose of competition law.
Policies such as distributive goals should be the subject of other laws rather than
competition law.348 The Chicago School has been criticised, among other reasons, for its belief that barriers to entry are rare, and that their market efficiency model is too simple to account for or predict business behaviour in the real world.349
Game theory has influenced the approach to oligopolies as part of the ‘new industrial economics’ or ‘post-Chicago approach’. Whereas traditional models such as Cournot’s model examine oligopolies in a static manner, game theory looks at the behaviour of the undertakings rather than concentrating on the static structure.350 It is based on infinitely or finitely repeated interactions, and models strategic interactions between firms including their cooperation and conduct. It recognises that the interdependence and the risk of mutual retaliation can encourage tacit cooperation to joint profit maximisation.351
346 Ibid 22
347 H Hovenkamp, ‘Antitrust Policy after Chicago ’ (1985) 213 Univ Mich LR 226
348 R H Bork, The Antitrust Paradox: A Policy at War with Itself (Basic Books, reprinted 1993, 1978)
349 Alison Jones and Brenda Sufrin, EC Competition Law (5th edn, OUP 2010),30
350 Heiko Haupt, ‘Collective dominance under Article 82 E.C. and E.C. merger control in the light of the Airtours judgment’ (2002) 23 ECLR 434, 435
351 Ibid
122 Meanwhile in Europe the Austrian School embraced free markets beyond the theories promoted by Schumpeter, with a belief that markets could prevent long-run exploitation of monopoly power. The Austrian School opposed intervention in the competitive process including against cartels. By contrast Ordoliberals considered that the law could create and protect the conditions of competition. As well as efficiency they had notions of fairness and considered small and medium sized enterprises to be important to consumer welfare and worth protecting against excessive market power. The Ordoliberals had some influence on the development of Article 102 TFEU but the modernisation of Article 102 with the
adoption of the effects based approach to Article 102 has moved away from the Ordoliberal stance to one that places the most importance on efficient allocation of resources and dynamic competition. The interests of the consumer are important but not the competitor, indeed the courts will examine claims put forward by dominant undertakings that their conduct is justified on efficiency grounds.