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The role of economics in legal practices: "market power abuses"

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  1. Protecting the consumer against abuse of market power: an economic as well as a social goal (TPA, section 46)
    1. The concept of misuse of market power in section 46 of the Trade Practices Act
    2. Parallels and differences with the rest of the world
  2. Economics as a tool to identify market power: interests and limits
    1. Using economics to demonstrate the existence of market power
    2. Limits to economic approaches: assessing the relevant market
  3. Demonstrating the misuse of market power and assessing penalties: the role of the judge
    1. The economic signals of misuse of market power
    2. Putting economic assumptions into perspective: the role of the judge

On May 18th, 1998, the US Justice Department of Justice alleged Microsoft Corporation had abused monopoly power by bundling together its web browser (Internet explorer) with the Windows operating system. According to the Department of Justice, Microsoft used its market power in the operating system to hinder competition for the web browsers. Many economic experts intervened and the case was settled in favour of the prosecutors: Microsoft was forced to share its application programming interfaces (Wikipedia). This case asks the question of the role of economics in legal practices. Why does competition law require economic expertise and analysis and to what extent is this reasoning useful to both the lawmaker and the judge? What are the concepts used and why? What are the limitations of economic analysis when it comes to assessing the competition issues? We will first analyze the goals of section 46 of the Australian Trade Practices act and study the parallelism and differences between the regulations on abuse of market power in Australia and in the European Union. We will see that economics is a useful instrument for the legislator, and that economic concepts are used to serve social and political purposes (I). We will then observe the way economic reasoning is used by the judge to determine whether a firm detains market power (II) and whether it abuses its market power (III). In both parts, we will try to identify the limits of economics and to rethink the role of the judge and that of the legal reasoning as a necessary complement of the economic approach.

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