In this section we deal with general issues overarching the different provisions in competition law regulation.
Goals of competition law
In the intricate and dynamic world of modern economies, competition law emerges as an indispensable regulatory mechanism. It underpins the belief in the power of open, fair, and efficient markets, and operates at the intersection of economics, law, and policy. The primary goals of competition law, or antitrust law as it's often known in the United States, include promoting economic efficiency, ensuring consumer welfare, and maintaining market fairness. However, the interpretation and priority of these objectives can vary significantly across jurisdictions, reflecting distinct legal traditions, economic philosophies, and socio-political contexts. This chapter delves into these core goals, offering a comprehensive exploration of their theoretical underpinnings, practical implementations, and the balancing act often required to navigate conflicts that arise between them.
Choice of standards and goals
Competition policy regulators find themselves at the crux of a delicate balancing act, tasked with selecting and prioritizing specific goals to maintain a competitive, fair, and efficient market landscape. The choice of these goals is pivotal, as it not only sets the tone for competition policy but also impacts decision-making, regulatory enforcement, and legislative drafting. The "why" behind choosing a goal is often informed by a country's economic objectives, social equity considerations, and political climate. For instance, a regulator in a developing economy might prioritize market integration and economic growth, while one in a more mature economy might emphasize consumer welfare and market efficiency. Furthermore, the chosen goals must be capable of pragmatic enforcement, which requires a clear understanding of the market dynamics and the resources at the regulator's disposal. Therefore, the process of choosing a goal for competition policy is a complex, multifaceted task, demanding a blend of economic insight, legal acumen, and astute policy-making.
Antitrust economic schools
There are several economic schools of thought that have influenced antitrust policy and its implementation. Here are a few of the most prominent ones:
Classical Political Economy: The classical school, represented by thinkers like Adam Smith, emphasized the importance of competition in promoting consumer welfare and believed in the self-regulating nature of the market. Antitrust policy under this school might be less active, as market forces were believed to naturally prevent monopolies and stimulate competition.
Chicago School: This school emerged in the 1970s and had a profound impact on antitrust law. Proponents argue that markets are generally efficient and that monopolies are often temporary. They suggest that antitrust policy should focus only on consumer welfare, often defined in terms of prices. The Chicago School tends to be skeptical of antitrust enforcement, arguing that it often does more harm than good.
Harvard School: Also known as the structure-conduct-performance paradigm, this school focuses on market structure as a determining factor for competition. The belief is that concentrated markets (with few firms) are more likely to lead to anti-competitive behavior and hence less efficiency. The Harvard School often argues for more active antitrust enforcement than the Chicago School.
Post-Chicago School: This school arose in response to the Chicago School's perceived overly simplistic view of competition and the efficiency of markets. Post-Chicago scholars use game theory and other advanced economic models to show that firms can use anti-competitive practices in subtle ways, even in conditions that Chicago School adherents would argue are competitive.
New Brandeis School: Named after Supreme Court Justice Louis Brandeis, this school has emerged in the 21st century in response to growing market concentration. The New Brandeis School, also known as the anti-monopoly or hipster antitrust movement, argues for broader antitrust enforcement, not only based on consumer welfare but also considering other factors like market power, fairness, labor rights, and more.
- Freiburg School (Ordo-Liberalism): Originating in Germany, the Freiburg School emerged after World War II and had a significant influence on the development of competition policy in Europe. The central tenet of this school is the concept of "economic constitution", the idea that markets need a legal framework to function effectively and that the state should create an order that fosters competition. It emphasizes the danger of economic power concentration and advocates for active government policies to prevent abuses of market power and promote competition. Ordo-liberalism played a crucial role in the development of the social market economy in Germany and influenced the design of competition laws in the European Union.
These schools of thought provide frameworks for thinking about competition and the role of antitrust law. However, it's important to note that real-world antitrust policy and enforcement often involve a mix of these theories, and interpretations can vary widely.
„For Harvard, as well as Chicago, market competition was fundamentally beneficial, and allocative efficiency its socially desirable outcome. Government should create a legal framework that would promote well-functioning markets, and not use its regulatory power to try to achieve potentially conflicting social and political goals. While Harvard and Chicago I/O economists might disagree on what sort of government rules would produce such efficient markets, they agreed that this goal was the appropriate one for policymakers to center, and that economics provided useful tools for thinking about how to reach it.” Thinking Like an Economist : How Efficiency Replaced Equality in U.s. Public Policy (9780691226606). Berman, Elizabeth Popp p. 82.