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 trade liberalisation. The 1970 and 1980’s Chicago revolution changed the US model of antitrust beyond recognition, transforming it into an instrument to promote economic efficiency and making heavy use of the toolkit of neoclassical economics in interpreting the law. This model of antitrust became an important feature of the international consensus throughout the 1980s, 1990s and early 2000s, as competition laws were adopted around the world.

This consensus has been under attack in recent times. Economic inequality is now thought to be related to the rise of economic concentration and market power, and there are now various ‘official’ voices arguing in favour of integrating fairness and equality concerns into the operational concepts and tools of competition law. This is particularly apparent in the EU, where the ‘special responsibility’ of dominant companies, focus on protecting the competitive process and enforcement against exploitative practices illustrate the ascendancy of the social dimension of EU competition law. Even in the US, there have been calls for more active antitrust enforcement in order to protect consumers and address market concentration.

Part II addresses the main objections to attempts to enrich competition law with equity concerns. The author identifies mainly three such objections, which I will address in turn because they comprise the core of his argument:

  •  Consumer Welfare – This objection is that competition law should focus on consumer welfare, and not on matters of fairness or equality.

To refute it, the author reviews the origins and evolution of concepts of ‘welfare’ in detail. He concludes that recent developments have led to an objectivisation and uniformisation of concepts of welfare, ‘without any consideration of the broader social context to which the agent’s action is embedded’. In other words, ‘one-pound worth of commodities is expected to have the same impact on the welfare of a millionaire and the welfare of a poor individual’.  This is not inherent to concepts of welfare, which originally included a subjective dimension. Some authors have long criticised this ‘objective’ approach, and suggest that welfare measurement should reflect a preference for equality and fairness.

In short, this overview shows that ignoring inequality in the context of welfare could be subject to criticism from both a conceptual and economic perspective. The various approaches followed in mainstream welfare economics make implicit choices as to the distribution of resources, which affect how welfare is identified and measured. It is thus a mirage to try separate matters of inequality from matters of efficiency.

  • Institutional Choice – It is commonly argued that there are other, more effective, institutions than competition law to deal with inequality.

The author begins to address this objection by remarking that distributional concerns are inherent in competition law enforcement. Traditional competition analysis focuses on economic efficiency and does not explicitly deal with distributional issues. However, it is possible to build a broader narrative for intervention, based on wider conceptions of “consumer welfare”. Furthermore, it seems that competition intervention to control market power has the incidental effect of benefitting consumers (which may have fewer resources) to the detriment of companies (which are usually owned by people with more resources).

Even if inequality can be addressed more effectively through other mechanisms, such as progressive taxation or subsidies, competition law can still play a role – particularly in order to prevent structural inequality in the economy, which can then be leveraged into political power. Likewise, it may happen that regulation is not optimal and that competition law will provide the best institutional answer to a ‘regulatory’ problem at hand, or to address the relevant fairness concerns.

  • Equality and efficiency are contradictory goals – It is implicit in most arguments on the topic that there is a trade-off between equality and efficiency, i.e. focusing on equality may harm competition’s focus on economic efficiency. To refute this argument, the author reviews the economic literature on the relationship between equality and efficiency, and shows that a variety of approaches can be deployed that ensure their convergence, both from a static and from a dynamic perspective.

The last section develops the author’s view of fairness-driven competition law.

Building on Walzer’s ‘spheres of justice’ theory, the purpose of a fairness-driven competition law will be to equalise the structural position of the individual (or collective) agents in the various overlapping social spheres where they are active, so that economic power is not easily converted into cultural or political power. This is an approach based on a moral conception of equality of value, which cannot be achieved if inequalities in wealth, income, social status, and well-being are large or if they are pervasive. Hence, the author focuses on lessening inequalities of all kinds and aims for “complex equality” in which competition law can play a role.

The underlying concern here is that economic power has a tendency to become political power, and then supress market freedoms in order to shore up its position. Complex equality-driven competition law thus takes a wider perspective on economic power than merely focusing on ‘market power’: it will also be concerned with the political implications of such power. Such implications may be that most of the consumers (or people) affected by anticompetitive conduct will belong to lower income strata; or that monopolistic positions may lead to the emergence of economic dominance, which can then be converted and extended more easily into other social spheres.

Comment:

This is a (very) long paper, as is usual with the author. While I do not share the author’s approach, the paper covers all the topics in detail and it is bound to become a relevant source in any future discussion of the interaction between competition and distributional concerns. I am particularly fond of how the paper deals with some of the main objections to the inclusion of concerns with inequality into competition law made by orthodox authors such as Hovenkamp.

Yet, and quite apart from disagreeing with it, I have some issues with the piece. Ultimately, the author is arguing for distribution concerns being included into competition law, but it is unclear to me how this is supposed to be done. This is compounded by the absence of an argument of why equality is a valuable goal in itself, which is a serious matter in what is ultimately a normative suggestion to make competition more equality-sensitive. Lastly, a normative concept of fairness is developed in the end, but it seems to play no role – except, perhaps, implicitly – in the reasoning that precedes it.

This is a working paper still, though, so I expect to see a more succinct and more fully argued version of the argument soon.

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

  1. antitrustdigest says:

    As per the addendum above, below you can find the author’s clarification on the content and intent of this working paper:

    I do not think this review understood the paper and its context. This forms part of a long work I am undertaking and as I explain in the introduction of the paper, it forms part of a book I am writing with separate chapters covering the legal hermeneutics discussion on the basis of the EU law, the way the various fairness norms can be operationalised in different tools and methods etc.

    What this paper simply aims to do is to “deconstruct” the dominant economic efficiency or consumer welfare narrative, on the basis of welfare thinking, showing how simplistic it has been and the reasons it has not engaged with the quite rich debate in welfare economics. Actually, the point I wanted to make is that we have been looking only to a very narrow dimension of welfare and this for the wrong (institutional capability related) pseudo-reasons. But of course, we both know that this is a political choice, rather than really motivated by institutional reasons. To a certain extent, the paper implicitly aims to show that the welfare criterion which is promoted as the holy grail that would ensure consistency and avoid arbitrary decision-making is as wide and “fuzzy” (to use a term employed by some) as the criterion of fairness and that, from this perspective, it does not have a comparative advantage over the fairness criterion.

    My paper was not about promoting a specific goal – unless you consider social stability being one (maintaining the status quo). This is a very conservative goal actually, which is something I recognise in one of the last footnotes. Again, I did this on purpose as I wanted to challenge the conservative efficiency group – and its emphasis on equilibrium on their terms. My aim was to show that if you want to keep the status quo then you have to consider both efficiency and fairness and that the arguments of those that oppose fairness on the basis of institutional concerns (as I do not know many people that would openly claim that it is better to promote unequal societies) are risible as welfare has the same indeterminacy problems than fairness. But I also engage with those saying there is a trade-off between efficiency and fairness and I show that this is also wrong.

    The “values” of efficiency and fairness form part of the way mainstream economists analyse the social contract, with the idea of social stability at its centre, stability that does not depend on the existence of a coercive state (basically stability referring to the glue keeping cooperative and non-cooperative interactions possible without the society to fall apart). This is the starting point of the paper. This is also why I rely a lot on Ken Binmore’s analysis of the social contract – the link he makes on social stability and myself later on systemic resilience and how this depends on BOTH efficiency and fairness, rather than take a more philosophical perspective that would have started by what is the RIGHT concept of fairness.

    At the same time, I am not a big fan of the discussion about the goals of competition law, which I criticised in a paper of mine 6 years ago on institutional grounds: see https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2235875 (the last parts of the paper are relevant). I also do not take in this paper a philosophical perspective on the “right” fairness approach.

    I think these normative discussions are nice but not my cup of tea and certainly should not be dissociated from the legal and political context in each jurisdiction. It is less important to think about the normative debate about which values we should promote as a society for competition law etc, your opinion or that of a philosopher might be different than mine – and this debate will be the result of dialectics by essence inconclusive or with a temporary conclusion that could be revised. These discussions need also to be done in the context of a specific community according to the preferences of that community for a certain idea of fairness – actually fairness is a way to select between various multiple efficient equilibria and the choice will most often be dependent on the need to ensure social stability (some societies are more ready to accept inequality than others, a multi-ethnic society like the US might be an example of that).

    I take your comments on my approach not providing any clear path, but the aim of this paper was not to re-construct competition law along ONE fairness narrative but to make the fairness narrative more acceptable and then to open the discussion about what type of fairness narrative we want. I suggest one linked to Walzer’s work that I think may be a good starting point for a discussion, that needs to be done within each competition law system and society, but of course I am open to other options.

    The legal hermeneutics work for the EU legal system is done in a different paper that will form part of the book and will hopefully appear later this year.

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