Ariel Ezrachi on ‘EU Competition Law Goals and The Digital Economy’ (2018) Report for BEUC – The European Consumer Organisation

This paper  can be found here. I have already reviewed it in an earlier post. At the time, I focused on the article’s overview of the goals of EU competition law. However, the article also contained a detailed discussion of the impact that the digital economy may have on these goals. I was unable to review this discussion then, so I propose to do it here. Competition policy is one of several instruments used to advance the goals of the European Treaties. According to the European Commission, competition on the market is protected as a means of enhancing consumer welfare and of ensuring an efficient allocation of resources. This notwithstanding, EU competition law has also consistently been held to protect ‘not only the interests of competitors or of consumers, but also the structure of the market and, in so doing, competition as such.’ Moreover, a genuinely indigenous objective is worthy of note, namely that of promoting European market integration. In addition…

Philippe Aghion, Stefan Bechtold, Lea Cassar and Holger Herz ‘The Causal Effects of Competition on Innovation: Experimental Evidence’ (2018) The Journal of Law, Economics, and Organization 34(2) 162

This paper, which can be found here, adds to the literature on the relationship between competition and innovation, which has been the subject of longstanding attention by economists. However, existing empirical studies on competition and innovation suffer from a number of limitations. The authors seek to address these limitations as regards a specific type of innovation models – so called ‘Step-by-Step Innovation Models’. Their study shows that, as long as key assumptions of the step-by-step innovation model are met, theoretical predictions of this model are confirmed by laboratory empirical data. Section 2 looks at ‘Step-by-Step Innovation Models’. The main characteristic of step-by-step innovation models when compared with previous Schumpeterian models (where competition is for the market) is that innovation incentives do not depend on post-innovation rents only, but rather on the difference between post-innovation and pre-innovation rents of incumbent firms. In the basic model setup, an industry consists of two firms which produce the same good and compete over selling the…

Ariel Ezrachi on ‘EU Competition Law Goals and The Digital Economy’ (2018) Report for BEUC – The European Consumer Organisation

This paper – which can be found here – remarks that questions regarding whether certain conducts pose competition problems have become increasingly common in the face of new business strategies, new forms of interaction with consumers, the accumulation of data and the use of big analytics. It argues that answers can only be provided by taking into account the goals and legal framework of specific competition regimes. The author focuses on the EU. The paper thus outlines the goals and values of European Competition law, and looks at how they apply to digital markets. The report is structured as follows: The paper begins with an introduction to the constitutional foundations of European Competition law. Competition policy is one of several instruments used to advance the goals of the European Treaties. In this context, competition rules must be interpreted in the light of the wider normative values of the EU. These are not limited to economic goals such as promoting consumer welfare, but…

Maurice Stucke and Marshall Steinbaum ‘The Effective Competition Standard – A New Standard for Antitrust’ (2018) Report for the Roosevelt Institute

This is a report published for the Roosevelt Institute, and can be found here. It builds on the Neo-Brandeisian canon and tries to develop an applicable antitrust standard out of it. According to the authors, the consumer welfare standard is to blame for the role that competition has played in a number of social ills, including increased market concentration. To redress this, the authors advance an alternative standard: the effective competition standard. This framework would restore the primary aim of antitrust, namely to protect competition wherever it has been compromised. This new standard would: 1) protect individuals, purchasers, consumers, and producers; 2) preserve opportunities for competitors; 3) promote individual autonomy and well-being; and 4) disperse and de-concentrate private power. In particular, the effective competition standard would allow enforcement against vertical integration and the adoption of bright-line indicators for anticompetitive behaviour. The paper is structured as follows: It begins with an introduction that describes a number of economic trends, and explains that…

Ioannis Liannos ‘The Poverty of Antitrust’ CLES Research Paper Series 2/2018 [UPDATED]

This working paper, which can be found here, starts from the author’s (openly acknowledged) view that competition law should have a role in tackling economic inequality and poverty, and seeks to provide a coherent theoretical framework for competition law’s role in this regard. [ADDENDUM] Since this was a working paper, I sent the author some comments which were more detailed than the overview below. Following this, the author and I had a conversation about the paper. We concluded that I had misunderstood the paper, and he was kind enough to prepare a clarification. I would like to thank him for this. You can find the clarification below in the comments. [End of addendum] The paper is structured as follows: Part I explores the various roles of competition law and its evolution over time. In the US, antitrust was originally a tool of social regulation, which sought to ensure that smaller firms had a fair chance to participate in the economic expansion generated by…

Makam Delrahim (Assistant Attorney General, Antitrust Division, U.S. DoJ) ‘Antitrust Enforcement in the Digital Era’

In these remarks, hich can be found here, AAG Delrahim defends the ‘broad antitrust consensus that still reigns today’ and considers how it might apply to the digital sphere. He begins by outlining the two key components of the current antitrust consensus. The first is the consumer welfare standard, which requires that some business practices should be condemned as unlawful only where they harm competition in such a way that consumers suffer. The second component is “evidence-based enforcement”. Outside the realm of naked horizontal restraints such as price fixing, bid rigging, and market allocation, antitrust demands evidence of harm or likely harm to competition, often weighed against efficiencies or procompetitive justifications. Evidence-based enforcement also requires a readiness to adapt our existing antitrust framework and tools to new or emerging threats to competition. One such threat comes from digital platforms and the increased market concentration they give rise to. AGG Delrahim considers that the antitrust consensus approach is flexible to new business…

Tim Wu ‘After Consumer Welfare, now what? The ‘Protection of Competition’ Standard in Practice (2018) CPI Antitrust Chronicle April

The goal of this short piece, which can be found here, is to address arguments that abandoning the ‘consumer welfare’ standard would make antitrust law too unworkable and indeterminate. The paper argues that there is an alternative standard ‘protection of competition’ that is practicable and at least as predictable as the consumer welfare standard. This standard has the additional advantage of being much truer to the legislative intent underlying US antitrust laws than the consumer welfare standard. The piece is structured as follows The first section provides an overview of the two main criticisms of current antitrust practice. Critics of current antitrust practice are committed to antitrust revival, and broadly opposed to the extremes of the Chicago. However, they then divide as regards their approach to the “consumer welfare” standard. The first group – comprising mainly economist and lawyers – believes that the standard has been abused and misused, but nonetheless retains its utility as the anchor of antitrust law and policy….

Douglas Melamed and Nicolas Petit ‘After Consumer Welfare’ — A Response To Professor Wu’ (2018) Competition Policy International Column (July)

According to Wu’s piece above, the “fundamental and important difference between” the consumer welfare paradigm and the “protection of competition” standard is that the former “seeks to maximize some value” while the latter “is designed to protect a process.” Melamed and Petit argue that this distinction is not correct in this piece which can be found here. There is, to be sure, abundant rhetoric in antitrust literature about maximizing consumer welfare, but that is not how antitrust law and the consumer welfare paradigm actually work. Instead, antitrust law prohibits the creation or increase of market power by conduct that is not competition on the merits. There are two elements to an antitrust violation: bad conduct, and more market power than there would be absent that conduct.  Bad conduct is, to oversimplify, conduct that does not reduce costs or price or increase output or product quality (including innovation).  Such conduct can create or increase market power only by either coordinating the…

Jonathan B. Baker, Jonathan Sallet & Fiona Scott Morton ‘Introduction: Unlocking Antitrust Enforcement’ (2018) Yale Law Journal 127(7) 1916

This piece is the introduction to a special issue by the Yale Law Journal on ‘Antitrust Enforcement’. I shall review a number of these articles in forthcoming posts. In the introduction, the authors begin by describing the context in which this special issue of the Yale Law Journal was published. This context is not dissimilar to that which led to the adoption of antitrust rules in the first place:  there is a market power problem which may contribute to slow economic growth and to widening economic inequality. This issue of the Journal tries to lay the foundation for an overarching enforcement agenda ‘in the long, but receding, shadow of the Chicago School, which brought economic analysis to the forefront of antitrust but failed to fully capture the realities of competition and the private actions that can curb it”. This small piece also explains the basic underpinnings of this new enforcement agenda. In particular, they consider that: “Economic analysis lies at…

Sandeep Vaheesan ‘The Twilight of the Technocrats’ Monopoly on Antitrust?’ (2018) Yale L.J. Forum 127 980

This issue of the Yale Law Journal above has  provoked a reaction, which can be found here.  The article argues, even as they present worthy policy recommendations, the contributions in this issue of the Yale Law Journal are disappointingly modest in scope, particularly in their acceptance of the consumer welfare standard. Rather than contribute to and engage with the growing debate on the suitability of the consumer welfare standard, the contributing scholars write as though consumer welfare antitrust is cast in stone. This is so even though current antitrust doctrine has aided and abetted the concentration of numerous markets. Powerful businesses have used their might to hurt people in myriad ways, and consumer welfare captures at most only a subset of these public harms. Not questioning the goals of antitrust—hardly even acknowledging that these goals, and particularly the consumer welfare standard, are contested—reveals a fixation on the technical trees at the expense of the philosophical forest. At heart, his argument…