An Economic Approach to Abuse of Dominance

The European debate on abuse of dominance issues in antitrust has been recently characterized by an emphasis on purely economic aspects, and by an emerging consensus on the merits of taking an “effects-based approach” aimed at the maximization of consumer welfare and the protection of competition. The European Commission has recently issued a Guidance Paper on exclusionary abuses which purports to move EU enforcement on abuse of dominance in this direction. In spite of these developments, we are still far from reaching any consensus on the best way to apply competition policy to specific issues such as predatory pricing, bundling, vertical restraints, exclusive dealing and so on. We analyze the genesis of the European approach to antitrust and discuss the leading economic theories on competition policy and abuse of dominance, as developed by the Chicago School, the post-Chicago approach and the endogenous market structures approach. Finally, we use these economic foundations to analyze the EU approach to abuse of dominance, we examine the Guidance Paper, we provide a comparison with the American approach, and we discuss the implications of some recent important cases.