Note: This is an internal event for Monash University staff and students.

What is the economic rationale for competition law? What is the economic harm that competition law is designed to address?

These questions are of fundamental importance for competition agencies or courts who seek to apply the law, and for public policy professionals seeking to reform the law. The conventional economic approach to public policy suggests that competition law should seek to promote total economic welfare (defined as the sum of producers’ surplus and consumers’ surplus), but competition laws are not written or enforced in a manner that is consistent with this hypothesis.

It has been common (particularly in the US) to assert that competition law seeks to promote a concept of consumer welfare, but on closer inspection we find that competition laws are not consistent with promoting the welfare of consumers either. Some commentators argue that competition law should protect the competitive process, but this approach lacks a foundation in welfare economics and therefore lacks the ability to make basic trade‐offs between desirable goals.

In this talk, Dr Biggar will propose an alternative hypothesis as the economic foundation for competition law. This alternative focuses on the sunk, relationship-specific investments made by market participants. This approach asserts that an important, and overlooked, role of competition law is to protect trading partners from the threat of hold-up, where it is unreasonable for the parties to use conventional mechanisms to protect those sunk investments themselves. This approach can help to explain features of competition law and law enforcement that cannot be explained by the traditional consumer welfare or total welfare frameworks. This approach offers promise by providing a consistent, comprehensive, economic foundation for competition law.

Note: This session will take place on Zoom.

CLARS-Economics Session with Dr Darryl Biggar, ACCC