Innovation and Competition in the Digital Network Economy: A Legal and Economic Assessment on Multy-Tying Practices and Network Effects

Through an in-depth analysis of the Korea Fair Trade Commission (KFTC) caseand#8212;which led to a December 2005 decision, currently under appeal at the Seoul High Court, condemning three fundamental tying practices embedded in Microsoftand#8217;s global business strategyand#8212;the author clearly establishes the precise nature of Microsoftand#8217;s anticompetitive practices, complete with clear technical descriptions of the underlying applications and digital media systems. The discussion develops valuable guidelines on such core issues as the following:

and#8226; network effect, tipping effect, and lock-in effect

and#8226; separability of Microsoftand#8217;s tied and tying products

and#8226; forced purchase by consumers of multiple tied products

and#8226; Microsoftand#8217;s reinforcement of market entry barriers

and#8226; Microsoftand#8217;s and#8220;normal business practiceand#8221; defense

and#8226; cumulative damage to consumersand#8217; interests

The bookand#8217;s ultimate legal and economic assessment clarifies ways in which government competition authorities can select from globally available options on a case-by-case basis, enforce re-pricing measures, avoid belated remedies, and continuously monitor new types of anticompetitive conduct.