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.
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.