Competition Policy for Small Market Economies (review)

Competition policy in small economies is becoming increasingly important, since the number of small jurisdictions that have adopted a competition policy is rapidly growing. From the theoretical and practical aspects it is established that the economic activity and market power of the firms primarily vary across the size of the firm. But whether the optimal competition policy depends on the size of an economy is a very basic question to the economists and market agents. Whether and how firms compete is very much a matter of the natural conditions of the markets in which firms operate. Although several major economic studies have focused on the special characteristics of small economies, there has been no comprehensive attempt to evaluate the implications of these characteristics on competition policy in small economies. As international trade among countries is steadily rising, the question of the relevance of jurisdictional borders to competition policy is becoming important to economic policy makers. These issues, however, were discussed in other books in case of large economies. Merger policy now a day is highly important for small economies, as mergers are one of the main driving forces behind changes in concentrated market structures.

The book by Michal Gal addressing the questions: 1) whether the size of an economy matters for competition policy and 2) how the size of the economy influences the content of its competition law. It raises many interesting and important observations about the application of competition policy in general and with respect to particular problems raised by small economies. In the introduction the author begins with definitions of market sizes and market structures to differentiate a small economy from a large one. He clearly explains how the competition for a small economy influences the economic theories and policies as a whole. A detail introduction of the topic at the beginning of each chapter provide the usefulness of the topic in particular and help understanding the aim and objective of the book in general. Considering the importance of the topic the author analyzes the merger policy in detail at the end of the book. The merger control policy is illustrated in the concluding chapter of the book. Moreover, a good conclusion of each chapter summarizes the findings and provides the author's comments correspondence to each topic.

Chapter I illustrates the key economic characteristics of small market economies. The only table in this chapter presents the relationship between concentration levels and population size of seven industrialized economies. Chapter II covers in general

the implications of small size economies for competition policy. In this chapter the author explores the basic policy choices that need to be incorporated into competition policy in small economies. He argues that a small economy can not afford to be vague in setting its goal, but rather should set clear and determine goals that focus on achieving economic efficiency. The analyses extended to the following chapters of the book by the size of firms beginning with the mere monopoly, the natural monopoly, and the oligopoly market. In chapter III the author focuses on the choice of policy instruments necessary to regulate the economic power of single-firm dominance. Other than the analysis of different approaches to regulate mere monopoly the chapter also covers a nice discussion on different aspects of market power. The summary of this chapter is enriched with useful information on regulatory measures of mere monopoly adopted by different jurisdictions related to ten industrialized economies. The analyses of the special characteristics of natural monopolies and their implications for the regulation are incorporated in chapter IV. The chapter begins with the explanation of economic characteristics of natural monopolies followed by the analyses of the general regulations, regulation of monopoly prices, drawbacks, and the legal regimes of natural monopolies. The mail policy suggestions of the natural monopoly are summarized in the conclusion of this chapter.

The second last chapter contains the regulation of oligopoly markets. The chapter is organized in two main parts. In the first part the author lays the foundation for...