A Study on Article 45 of Fair Trade Act from the prospective of Economic Analysis of Law

The purpose of this thesis is to review the Article 45 of Fair Trade Act. Besides of being examined the hypothesis, there are two different standpoints in the content of the article itself and the reasonable principle adopted practically. For that, it leads to different academic views, which in fact are just the adjustments between the two standpoints, however, makes the problem between patent and antitrust confusing.
This regulation is involved to the reconciling between Patent Act and Fair Trade Act. Patent is acted to declare the intangible property right and to internalize the profits of intangible property right created, in order to protect the owner’s techniques from being plagiarized and copied gratuitously, so as the tragedy of commons. Therefore, the patent right can be regarded as a general property right, and is not qualified to be limited by the Fair Trade Act.
There are some limits on property rights, such as the property rule and liability rule applied in United States, should be adopted as the limits. With the discretion, the courts could decide to counterbalance interests of both parties or the society as a whole in some conditions, to restrict the scope of patent, or apply the liability rule with flexibility. It is not necessary to intervene by the authority of the Fair Trade Act to avoid the misuse of patent right.
What so called the maintenance of competition in the Fair Trade Act means the definition of the state of perfect competition in economics. However, from the view of Neo-Institutional Economics and Chicago School, competition is a dynamic process, it needs to take the promotion of consumer’s welfare into consideration, and efficiency is the only standard.
As rational player, the monopolized firm do not overprice under the conditions of the market. The Neo-Institutional Economics explains that any vertical or horizontal integration has its necessity with the concept of transaction costs. A rational firm do not expand its scale without any limits, and cause higher management. On the other hand, the Chicago School takes the price theory as the grounds to elaborate that most of the acts of Anti-competition have the justifications, unless the purpose of firm is very obvious to form a cartel in the market or to create monopoly. In sum of the ideals of the Neo-Institutional Economics and Chicago School, the market will be counterbalanced with the market mechanism by itself. In addition, administration regulations have some inefficient problems in Economics. So the Fair Trade Act is adopted with reasonable principle according to the experience of antitrust development.
The article 45 of the Fair Trade Act is confusing. If the Fair Trade Act has the legitimacy, the dealing wouldn’t be different in the case with the patent or not. However, it should take each effective defense into consideration as justifiable causes, and endow enterprise into free market operation. The interests of innovation are an efficiency defense as justifiable cause in the new economic field particularly. The Fair Trade Act will be more flexible in thinking over these ideas while applying the reasonable principle.