Competition Law as a Form of Social Regulation

Date01 March 2020
DOI10.1177/0003603X19898626
Published date01 March 2020
AuthorIoannis Lianos
Article
Competition Law as a Form of
Social Regulation
Ioannis Lianos*
Abstract
For a long time considered a fringe topic, of interest for developing and emergent economies, the
question of inequality and poverty has recently taken center stage in mainstream competition law
scholarship in the developed countries. Some of this literature deplores the current state of
competition law, which has largely ignored this issue, and argues for a different paradigm that would
actively engage with economic inequality and its causes. Taking a social contract perspective, and
noting the hybrid nature of competition law, which is a tool of economic order, but also a form of
social regulation, this study explores the main difficulty in enriching competition law with equity
concerns: the economic foundations of mainstream competition law in welfare economics and the
crucial separation of the economic efficiency dimension from that of distributive justice. It then
examines alternative traditions in economic thought, which are more compatible with an egalitarian
perspective. It then turns to the institutional question, exploring the various instruments that
governments dispose in order to equalize, and the respective role of more conventional tools
against inequality, such as taxation, concluding that the institutional argument against equity con-
cerns in competition law does not stand serious scrutiny. It also critically engages with the argument
that there is a trade-off between equality and efficiency, and again concludes that this argument does
not stand serious scrutiny. The final part revisits the thorny question of what is to be equalized.
Drawing on the idea of “complex equality,” it presents the contours of a fairness-driven
competition law.
Keywords
fairness, inequality, efficiency, competition law, antitrust, consumer welfare, equality of opportunity,
complex equality, dominant firms, growth, innovation
*President, Hellenic Competition Commission; Faculty of Laws, University College London, London, United Kingdom of Great
Britain and Northern Ireland
Corresponding Author:
Ioannis Lianos, Facult y of Laws, University Co llege London, London WC 1H 0EG, United Kingdom o f Great Britain and
Northern Ireland.
Email: i.lianos@ucl.ac.uk
The Antitrust Bulletin
2020, Vol. 65(1) 3-86
ªThe Author(s) 2020
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DOI: 10.1177/0003603X19898626
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I. Introduction: The Twilight of the Efficiency Approach in Competition
Law
For a long timeconsidered a fringe topic,of interest for developingand emergent economies,
1
the question
of inequalityand poverty has recentlytaken center stage inmainstream competitionlaw scholarship.
2
The
confidence crisis that hit financial capitalism at the aftermaths of the financial crisis of 2007–2008,
3
the
realization thatthe ongoing fourth industrial revolution may lead to risinglevels of economic concentra-
tion and drasticchanges in labor markets andincome distribution,
4
and the rise ofpopulism in the United
States andin Europe
5
have disruptedthe mainstream model of competition law the last fourdecades. This
has been mainly driven by the technocratic quest for economic efficiency.
6
The debate ha s expan ded
beyond academia, with a number of political leaders calling for a more active role for competition
law in the fight for fairness and against inequality.
7
This is a complex issue, as competition law
1. See,inter alia, E. Fox, Economic Development, Poverty, and Antitrust: The Other Path,13SW.J.L.TRADE AM. 211 (2007).
2. See, inter alia, M. E. Stucke, Occupy Wall Street and Antitrust,85S
OUTHERN CAL.L.REV. 33 (2012); T. ATKINSON,
INEQUALITY:WHAT CAN BE DONE? 126-132 (Harvard University Press, 2015); J. B. Baker & S. C. Salop, Antitrust,
Competition Policy, and Inequality, 104 GEO. L.J. 1 (2015); D. Crane, Antitrust and Wealth Inequality, 101 CORNELL L.
REV. 1171 (2016); L. Khan & S . Vaheesan, Market Pow er and Inequality: The An titrust Counterrev olution and Its
Discontents,11H
ARV.L.POLYREV. 235 (2017); Special issue, Antitrust Inequality Conundrum (Oct. 2017) 1
Competition Policy International (with eight papers on the topic of inequality and fairness); J. Stiglitz, Towards a
Broader View of Competition Policy,in COMPETITION POLICY FOR THE NEW ERA—INSIGHTS FROM THE BRICS COUNTRIES 4
(T. Bonakele et al., eds., OUP 2017); H. Hovenkamp, Antitrust Policy and Inequality of Wealth,FAC.SCHOLAR. 1769 (2017),
http://scholarship.law.upenn.edu/faculty_scholarship/1769; S. Roberts, Assessing the Record on Competition Enforcement
Against Anti-Competitive Practices and Implications for Inclusive Growth (REDI3x3 Working Paper No. 27, Feb. 2017); S.
L. Hsu, Antitrust and Inequality—The Problem of Super-Firms,63A
NTITRUST BULL. 104 (2018); M. S. Gal, The Social
Contract at the Basis of Competition Law,inC
OMPETITION POLICY:BETWEEN EQUITY AND EFFICIENCY 88-109 (I. Lianos & D.
Gerard eds., Cambridge University Press, 2018); C. Shapiro, Antitrust in a Time of Populism (Oct. 24, 2017), https://faculty.
haas.berkeley.edu/shapiro/antitrustpopulism.pdf.
3. Anumber of recent surveys in developed (and emergent) economies indicate that people’s faith in markets and the capitalist
system has suffered substantially the last nine years. See The Economist, Market Troubles (Apr. 6, 2011), https://www.
economist.com/blogs/dailychart/2011/04/public_opinion_capitalism (noting a drop from 80%to 59%in favor of markets
from 2002 to 2011 in the United States); Wall Street Journal, Has the World Lost Faith in Capitalism? (Nov. 6, 2015)
(commenting on a seven-nations survey conducted by YouGov on public opinion vis-`a-vis capitalism); Shorthand Social,
What the World Thinks of Capitalism (Nov. 3, 2015, 05:23 PM) https://social.shorthand.com/montie/3C6iES9yjf/what-the-
world-thinks-of-capitalism (summarizing the results of the YouGov international survey). The survey however notes that
still more people trust free enterprise than government at lifting people out of poverty.
4. United Nations, Depart ment of Economic and Social Affairs, The Impact of the Technological Revolution on Labour
Markets and Income Distribution (July 31, 2017), https://www.un.org/development/desa/dpad/wp-content/uploads/sites/
45/publication/2017_Aug_Frontier-Issues-1.pdf.
5. See,inter alia,B.M
OFFITT,THE GLOBAL RISE OF POPULIS M:PERFORMANCE,POLITICAL STYLE,AND REPRESENTATION 43-45
(Stanford Univ. Press 2016) (conceptualizing populism as a “new political style”).
6. This approach is linked to the rise of the dominance of economics as the primary source of wisdom in competition law,
although various economic doctrines may offe r different perspectives: R. T. ATKINSON &D.B.AUDRETCH,ECONOM IC
DOCTRINES AND APPROACHES TO ANTITRUST 1-33 (ITIF, Jan. 2011). In particular of Chicago antitrust economics school has
emphasized the importance of economic efficiency and “consumer welfare” (this ambiguous concept being interpreted as
referring to consumer surplus). See,inter alia, Y. Brozen, Competition, Efficiency and Antitrust,3J.W
ORLD TRADE L. 65
(1969); R. H. BORK,THE ANTITRUST PARADOX:APOLICYAT WAR WITH ITSELF (Basic Books 1978); R. A. Posner, The Chicago
School of Antitrust Analysis, 127 UNIV.PA.L.REV. 924 (1979). Although there is some literature putting forward the need
for competition law to focus on wealth transfers from consumers to suppliers [see,inter alia, R. H. Lande, Wealth Transfers
as the Original and Primary Concern of Antitrust: The Efficiency Interpretation Challenged,34H
ASTINGS L.J. 65 (1982)],
thus taking a distributive justice perspective, it is still unclear how this may be operationalized in practice, in view of the
acceptance that there should be a trade-off between allocative inefficiencies and productive or dynamic efficiencies. I will
explore these trade-offs in part V.
7. See, Senator Elizabeth Warren, Reigniting Competition in the American Economy (June 29, 2016), https://www.warren.
senate.gov/files/documents/2016-6-29_Warren_Antitrust_Speech.pdf; M. Vestager, EU Competition Commissioner,
4The Antitrust Bulletin 65(1)
starts from the premise that free markets are beneficial to society and has, so far, confined its
intervention in cases where markets may not work as expected (externalities and in particular
market power), because of business or government anticompetitive practices.
Some of the authors calling for a more active policy against inequalities challenge the role of
markets, as it is accepted that some degree of inequality may result from their operation.
8
The current
level of inequality (and poverty) and the fact that this is rising (at least in developed countries) is
judged alarming, and is conside red to impose a “price” to society, in ter ms of lower efficiency,
productivity, and social stability.
9
Denying the opposition between markets and government, and
drawing on rent-seeking theory and the influence of institutional and political factors shaping labor
markets and patterns of remuneration, these authors claim that monopolies and powerful corporations
dominating markets influence the government and the broader institutions of our societies (the rules of
the social game), in order to reduce competition and to exploit consumers and workers, thus perpe-
tuating patterns of inequality and poverty.
10
A possible risk is also that governments finish by becom-
ing “semi-private in nature”
11
or “private,”
12
relying on the “co-optation and cooperation of diverse
holders of political, military, economic and ideological power to control subordinate populations,” in
other words “the establishment,” something which also constituted the essence of the state apparatus in
“premodern” times.
13
Hence, one may reinterpret the argument as not being that markets increase
inequality to a level that may be con sidered unfair, but rather that co ncentrated or monopolized
markets, forming pockets of centralized governance, may create structural conditions that lead to
inequality and unfairness, beyond their usual effects on price and output.
It is important in debates about equality to agree on what is to be equalized, the
equalisandum,” between whom, and the reasons it should be equalized, before devising ways
to cater for the type and level of redistributiontofollowsothatequalityisrestored.
14
Determin-
ing the appropriate equalisandum has been crucially missing from the recent discussions over the
Competition for a Fairer Society (Speech at the 2016 Global Antitrust Enforcement Symposium, Georgetown, Sept. 20,
2016), https://ec.eur opa.eu/commission/ commissioners/201 4-2019/vestager/an nouncements/compet ition-fairer-socie ty_
en; E. Miliband, UK Member of Parliament, Leader’s Speech (Speech at the Labour Party Conference, Brighton, Sept.
24, 2013), http://www.britishpoliticalspeech.org/speech-archive.htm?speech¼353.
8. J. E. Stiglitz, The Price of Inequality: How Today’s Divided Society Endangers Our Future xliii (W.W. Norton & Company
2012) Preface (noting that “(m)arkets, by themselves, even when they are stable, often lead to high levels of inequality,
outcomes that are widely viewed as unfair”).
9. Id. Ch. 4 (noting that “high inequality makes for a less efficient and productive economy” and that this undermines “trust,
which is essential for the functioning of our society”).
10. J. STIGLITZ ,STANDARD ECONOMICS ISWRONG.INEQUALITY AND UNEARNED INCOME KILLS THE ECONOMY,EVONOMICS (Sept. 9,
2016), evonomics.com/joseph-stiglitz-inequality-unearned-income/; Z. QURESHI,TODAYSECONOMIC PUZZLES:ATALE OF
WEAKENING COMPETITION (Brookings, Apr. 5, 2018).
11. W. SCHEIDEL,THE GREAT LEVELER 47 (Princeton Univ. Press 2017).
12. E. ANDERSON,LIBERTY,EQUALITY,AND PRIVATE GOVERNMENT,THE TANNER LECTURES IN HUMAN VALUES (Princeton Univ.
lecture, Mar. 4–5, 2015) (noting that “(t)he economic system of the modern workplace is communist, because the
government—that is, the est ablishment—owns all the assets, and the top of the establishme nt hierarchy designs the
production plan, which subordinates execute. There are no internal markets in the modern workplace. Indeed,
the boundary of the firm is defined as the point at which markets end and authoritarian centralized planning and
direction begin”: Id. at 95).
13. SCHEIDEL,supra note 11, at 46–47 (noting the link between the formation of premodern states and the development of a
“ruling elite” (often at the “imperial” level), competing but also “closely intertwined” with each other, and capturing “the
political rents and commercial gains mobilized by state-building and imperial integration.”
14. See D. Markovits, How Much Redistribution Should There Be?, 112 YALE L.J. 2291, 2292 (2003) (tracing this necessary
definition of the equalisandum, in Amartya Sen’s Tanner lecture Equality of What?, A. Sen, Equality of What?,in EQUAL
FREEDOM:SELECTED TANNER LECTURES ON HUMAN VALUES 307 (S. Darwall ed., Univ. Michigan Press, 1995). Makrovits
explains that the idea of equality st ems from the principle of the “nonsubor dination among persons,” egalita rianism
requiring that “all people’s lives are equally important and, accordingly, that no person’s fortune may be subordinated to
anyone else’s”: see Markovits, at 2291.
Lianos 5

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