between the incumbent pharmaceutical and the generic entrant, if the entrant has come in while the incumbent believes it still has patent protection.

Settlements of these cases often involve large payments to the generic entrant. That is not a typographical error. Settlements of these lawsuits often involve large payments to the injuring party from the injured party. The settlements also determine the conditions under which the entrant may enter, that is, the settlements are a contract between competitors which determine how much one may compete. Competition policy should view such settlements with great suspicion. $ ^{4} $

#### 4. a.3) Firms Enlisting Governments to Limit Competition

One of the permanent duties of the competition policy authorities in the US is consultation with the rest of the government to prevent anticompetitive government action. The motivation for this duty is simple. It is easy for government action in any of a wide number of domains to reduce competition. A government agency may be captured, in the sense that it implements rules intending to block competition, or it simply may not be aware of competition concerns.

Traditional examples come from regulatory contexts. For example, a safety regulator might enact product-design rules to protect consumers from injury. If the domestic industry contributes to the writing of those rules, certain of their details may limit competition. For example, technicalities in the rules may make it very difficult for importers to comply while domestic firms can easily comply. Alternatively, if the industry’s most successful firm helps the government write the rules, technicalities may make it very difficult for any other competitor to comply. Such rules protect the industry from competition whether or not they protect consumers from injury.

Another traditional example comes from close relationships between government agencies and specific firms. In the US, many of the examples arise in the defense sector. Departments of Defense have a strong bent to planning, and when they come into contact with the economy, that sometimes turns into a strong bent toward central planning. The problem, however, is perfectly general. The government (or near-government, such as banks in some countries) entity which works closely with an industry may not have perfect cost-minimizing incentives and thus may not necessarily seek an industry structured in a competitive manner.

The most important examples of firms enlisting governments to protect them from competition come from international economic policy. Outside of a few sectors, international treaties limit explicit protectionism through tariffs. This means that a wide variety of different government actions will be sought to limit international competition. These can be financial policies, regulatory policies, land-use policies, any of a wide variety of policies which might help established domestic industry at the expense of blocking international competition for domestic consumers' business.

When competition policy officials consult with the rest of the government in the hopes of enhancing competition, they should have high hopes but realistic expectations. Sometimes, the political pressure in favor of anticompetitive regulation is very strong, and little can be done to prevent reductions in competition through government action. At other times, however, the problem arises because the regulatory or procurement