Competition Policy: Some Neglected Issues in the Hilmer Report

The Hilmer Report focuses primarily on the very important issues of legislative and regulatory measures to directly reduce monopolistic structures and conduct. This article argues that competition policy also should embrace measures to reduce transaction costs. Lower transaction costs increase the substitutability of different options and help to extend the competitive market, and particularly to reduce entry barriers for new entrants and for innovations. Contrary to Hilmer, the article argues that economic theory, and particularly the marginal cost concept, can and should have a central role in the assessment of monopolistic behaviour and in the determination of access prices to ‘essential services’ provided by natural monopolies.