The Role of Fair Trade Law in the Development of Knowledge-based Economy

Abstract

We try to explore, in the study, how competition policy, based principally on the Fair Trade Law, should be reinterpreted and adjusted strategically to advance overall social welfare in the presence of global development of new economy.

We first pointed out that competition policy should endeavor to nurture high-tech industries, insure market competition, and establish an effective mechanism for network operations in response to digital revolutions. Secondly, we took the computer software as representing the knowledge economy industries and explore the crucial framework for economic analysis and the probable competitive behaviors in the markets. We pinpointed such particular characteristics of these sectors as conspicuous network effects, entry barriers caused by lock-in effects, relatively low marginal costs, swift technological changes and durability of the industry products.

We proceeded to explore the proper roles of our Fair Trade Law by examining the measurement of monopoly power of industries, followed by analyses on such subjects as merger of firms, joint determination of standards, product comparability, tying and bundling, exclusive dealings and predatory pricing. We then pondered accordingly on appropriate policy adjustment viewed from such situations in our country as relatively primitive democracy, rather limited technology basis, imperfect financial systems, not well-established judicial and administrative capabilities, and the still numerous public enterprises, existing government regulations and several remnant industrial policies.

We specified the challenges and recommended resolutions respectively from the perspective of market entry, price fixing, design of competition policy authorities and intellectual properties. We suggested that we should focus on the process of competition and the condition of market entry, ostensibly prohibit contract and agreement of price fixing, ensure independence of competition policy authorities and enable them to fully participate in relevant policy-making, and lastly to raise professional and technical capabilities in government officials dealing with new economy industries.

Finally, we acknowledged the positive role of competition policies and laws in the development of knowledge-based economy. It is better to prevent the anti-competitive behavior from occurring in the first place than to curb it fterwards.