Page 63 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE

there is sufficient competition in the market, such behavior (especially poten-

tially exclusionary acts) may enhance market efficiency and benefit consumers
because it is motivated by the need to compete efficiently, not to make

anticompetitive profits. Thus because potentially abusive acts and practices

can help promote competition, determining whether such practices constitute
abuse is among the most difficult tasks facing a competition agency. A

thorough economic analysis of the anticompetitive effects of alleged abusive
behavior is needed, even when a firm clearly enjoys a dominant position.

It is worth noting that in some legal systems there is a presumption that
certain practices by dominant firms are inherently unfair. This approach has

the merit of facilitating the design and enforcement of new competition laws.

With exploitative abuses it is often difficult to clearly say what is an
acceptable exercise of market power. For an enforcement agency it is almost

impossible to define the “right” price a dominant firm should charge for the

sale of products or services, since accurate and timely information on costs
and demand is generally unavailable or expensive to acquire. Therefore,

competition agencies should seek to minimize the extent to which they
regulate prices of individual firms and focus more on seeking to prevent

dominant firms from engaging in exclusionary acts that threaten competition.
Some countries specify that setting “excessive prices” can constitute an

abuse, but competition agencies are more likely to promote a healthy market

economy if they limit their involvement in direct price regulation. Moreover,
if firms expect that their prices will be regulated if they grow and capture a

sizable share of a market, their incentives for innovation and entry into new
markets will be diminished, damaging consumer welfare in the long run.

Exclusionary abuses also require careful analysis. This should take
account of the competitive environment in which the firm operates, because

a potentially abusive practice (such as exclusive dealing) may also help firms

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