Felipe Irarrázabal ‘Competition and the plague’ (‘La libre competencia y la peste)

This piece is available here, but only in Spanish. The summary below reflects my own translation of the piece. Emergencies – such as wars and natural disasters – undermine the assumptions underpinning competition law and policy. Competition enforcement against cartels builds on the premise that fierce competition is highly beneficial for society, whereas firm cooperation will only create benefits in much more restricted situations. Competition enforcement also relies on legal procedures, which are by nature slow and lend themselves to sophisticated disputes. Covid-19 has forced authorities to enact exceptional regimes and pressured them to take urgent and even drastic measures. The coming economic recession will likely require similar measures. The main competition agencies in the world have started to react to this negative scenario. Several of them have declared that they will be alert to any possible violation of competition law. Others have specified that they will not accept excessive prices as a result of the crisis (although this legal…

OECD work on Crisis Cartels (2009)

The OECD background paper on this topic was written by Professor Simon J. Evenett in 2011, and can be found here. The purpose of this paper is to consider whether changes in policies towards cartel formation are merited during economic crises and associated recoveries. The paper is structured as follows: Sections two defines crisis cartels. The term crisis cartel is used to refer to a cartel that was formed during a severe sectoral, national, or global economic downturn. Such cartels can occur without state permission or legal sanction, which may trigger enforcement; or they may be permitted, even fostered, by a government, which may trigger advocacy. The impact of a crisis on the incentive of firms to cartelise will depend on the nature of the crisis, be it sectoral, national, or international. In thinking through the impact of each type of crisis on the behaviour of cartel members, one must identify the ways in which the crisis affects the business…

OECD work on Competition and the Financial Crisis (2009)

This paper can be found here. Systemic crises reopen the question of what is the role of competition policy in such scenarios. The main issues are whether competition is desirable at all in times of systemic crises, and how to limit potential negative effects of state intervention on competition in the medium and long term. The paper investigates these questions, and is particularly interesting because it was written while the aftershocks of the crisis were still being felt. It notes that while the crisis started in the financial sector, it had an important impact on the real economy. Nonetheless, the paper focused mostly on interventions in the financial sphere, which are – at least at present – of limited interest to us. As such, I will focus on the sections of the paper that are likely to prove more relevant to us going forward. Section II provides an overview of the relationship between the financial sector and competition law. Most of…

Carl Shapiro ‘Antitrust in Times of Populism’

This paper – which can be found here – has been surrounded by a lot of publicity, and is a potentially important piece. It begins with an observation that goes to the heart of the debate:  ‘politicians are calling on antitrust to solve an array of problems associated with the excessive power of large corporations’. The author believes that ‘concerns about corporate power, and today’s renewed interest in antitrust, represent an opportunity to strengthen competition policy.’ At the same time, he alerts that the role of antitrust in promoting competition could well be undermined if antitrust is called upon or expected to address problems not directly relating to competition, such as the political power of corporations or income inequality. The ‘central purpose of this article is to assess the relevant economic evidence regarding competition (…) and then, based on that evidence and on antitrust learning and experience, identify ways to improve and strengthen antitrust.’ The paper is structured as follows:…

Simcha Barkai ‘Declining Labor and Capital Shares’

In this paper,  the author argues that the decline in the labour share of the economy has not been offset by an increase in the capital share in the US. Over the last 30 years we have witnessed a large decline in the labour share of gross value added. There have been many explanations advanced for this – such as technological change, mechanization, capital accumulation, changes in the relative price of capital, trade-offs between labour and capital – in which  the decline in the labour share is offset by an increase in the capital share. The author disputes this view, and argues that instead there has been a large increase in the profit share in the U.S. non-financial corporate sector over the last 30 years. The paper begins with a review of the literature on the decline of the labour share, and describes how that literature tends to explain that this decline has been off-set by an increase in the capital…

Jan De Loeckery and Jan Eeckhout ‘The Rise of Market Power and the Macroeconomic Implications’ (2017) NBER Working Paper No. 23687

In this paper – which can be found here – the authors look at a number of issues that have become a staple of the macro-economic literature of late (i.e. the economy is experiencing a fundamental long term change which manifests itself in a number of trends such as declining labour shares, declining wages, declining labour force participation, slowdown in labour market dynamism, decreased job mobility, lower migration rates, and lower growth). They  argue that while many explanations have been proposed for each of these secular trends, all these developments are consistent with one common cause that hitherto has remained undocumented:  the rise in market power since 1980. After the introduction – where the argument is very clearly outlined – the paper is structured as follows: In Section 2, they explain why mark-ups are an important measure to identify market power in this context. They also identify the data sources and develop an empirical framework to identify industry mark-ups. The…

David Autor, David Dorn, Lawrence F. Katz, Christina Patterson, and John Van Reene “The fall of labour share and the rise of superstar firms” NBER Working Paper No. 23396

This paper – which can be found here – focuses on the “fall of labor’s share of GDP in the United States and many other countries in recent decades”. Why does this matter for competition law and policy? Because this phenomenon seems to be associated with the rise of “super-star” firms and increased market concentration – something that we kind of take for granted in the digital sector, but not necessarily elsewhere. The paper starts by noticing that, while there is a consensus that the labour share has been declining over the past few decades, there is a lively debate on what are the causes of this recent decline. The two main likely culprits are: (i) the fall in the cost of capital relative to labour; (ii) trade and international outsourcing – i.e. labour shares have declined the most in industries that were strongly affected by increasing imports (e.g., from China). However, the authors argue that none of these explanations…

Jan De Loeckery and Jan Eeckhout ‘The Rise of Market Power and the NBER Working Paper No. 23687

The authors of this paper – which can be found here – look at a number of issues that have become a staple of the macro-economic literature of late (i.e. the economy is experiencing a fundamental long term change which manifests itself in a number of trends such as declining labour shares, declining wages, declining labour force participation, slowdown in labour market dynamism, decreased job mobility, lower migration rates, and lower growth) and argue that, while many explanations have been proposed for each of these secular trends, all these developments are consistent with one common cause that hitherto has remained undocumented:  the rise in market power since 1980. After the introduction – where the argument is very clearly outlined – the paper is structured as follows: In Section 2, they explain why mark-ups are an important measure to identify market power in this context. They also identify the data sources and develop an empirical framework to identify industry mark-ups. The…