I. Background
Competition policy does not apply in a vacuum. To the contrary, competition policy is a product of economics, ideology, philosophy, history, and politics. Modern studies on competition theory and policy focus on western developed market economies, especially the United States. Therefore, it is worth discussion whether the competition policy or standards designed for economic powers and developed countries shall be applied to other countries equally. This study examines the following issues based on literature review and case study: 1. the concept of a small economy, 2. How the scale of economy affects its competition policy, and 3. Special competition law issues in a small economy. Lastly, the study proposes a regulatory scheme of competition law targeting characteristics of Taiwan's economy.
II. Methodology and Analysis
The study applies the literature analysis. First of all, we collect reports, books, journal articles, and written reports published by international competition organization for systematic review and summary. Second, we study the literature and systems in different countries to explore characteristics of small economies. The results will be applied to review our economic features and competition law enforcement. Lastly, we conclude with specific suggestions to our competition policy. The literature we survey includes relevant books, journal articles, theses, dissertations, government publications, and statistics. So far, there is no uniform definition of small economies, and it is inconclusive whether the economy scale affects the implementation of competition policy. Hence, only a few studies are particularly designed for the topic. We will focus on articles written by Michal S. Gal, who specialized in the study of competition policy for small economies. In addition, we review reports issued by international competition organizations. In most countries, the competition policies for cartels are similar, even in small economies. However, monopoly and merger regulations have different elements due to different market structures. Therefore, we examine the impacts of economy scale on competition policy, especially monopoly and merger regulations, from academic and practical perspectives.
III. Major Suggestions
For small economies, regulatory schemes and standards for law enforcement shall reflect their market structure. However, it is an international consensus that competition policies for large or small economies are similar in nature, and the difference is just an issue of magnitude. Hence, suggestions on monopoly regulation and merger control are proposed based on the reference to law implementation in large economies, mostly countries with advanced competition laws, and the current development of Taiwan's economy:
(1) Monopoly regulation
- A small economy shall include imports that are substitutions, currently or potentially, to domestic products in its relevant market, in order to avoid overestimation or underestimation of monopoly power.
- The market share is not an absolute index for monopoly power.
- Compared to larger economies, monopoly policies in small economies shall emphasize more on behavioral aspects, especially for exclusive behaviors abusing the monopoly power.
- In a small economy, the study as to how a monopoly affects market competition shall be based on a solid economy analysis to avoid unnecessary costs of law enforcement resulting from misjudgment.
(2) Merger control
- Merger policies in small economies shall assume that merger is a means realizing potential efficiency in an oligopoly market.
- Merger policies in small economies shall adopt measures that is capable of evaluating the anti-competition effect, efficiency and social policy objectives of the merger.
- Non-structural dynamic factors are important for merger policies.
- The current and potential increase in market power caused by mergers shall be considered.
Strict assumptions and burden of proof may reduce efficiency and lead the discussion wrongly founded on a narrow theoretical basis.