Competition Rules for the 21st Century: Principles from America's Experience.

• Author: Ginsburg, Douglas H.
• Position: Book Review

COMPETITION RULES FOR THE 21ST CENTURY: PRINCIPLES FROM AMERICA'S EXPERIENCE. By Ky P. Ewing. The Hague: Kluwer Law International. 2003. Pp. xxi, 456. $110.

The globalization of business has resulted in a host of new issues facing antitrust regulators. As they rush to meet the challenges presented by the vastly greater volume of international business transactions, the increasing consolidation of global business operations, and the rapid evolution of computing and communications networks, the regulators leave in their wake an increasingly onerous burden on businesses engaged in international commerce. There is little guidance available, however, to the antitrust neophyte who wants to become familiar with these developments. They, as well as legal and economic scholars, lawyers, and others already steeped in antitrust law--or as it is known outside the United States, competition policy--will find Ky P. Ewing's Competition Rules for the 21st Century: Principles from America's Experience (1) to be of great help.

Beyond its utility as a user's guide of sorts for regulatory authorities, Competition Rules for the 21st Century is a book about the development of antitrust in the United States. It is this latter aspect that serves as the basis for Ewing's policy prescriptions. He relies upon the U.S. experience in formulating several conclusions (or "lessons") designed to inform future antitrust policies.

The book is arranged as follows: Chapters One and Two present the challenges to antitrust arising from the increasingly global marketplace, in the course of which Ewing presents new survey data on the size of the antitrust authorities in different countries and the resources they devote to their principle activities; Chapter Three provides a historical examination of antitrust as it has developed in the United States; and Chapters Four and Five set forth the lessons Ewing draws from the U.S. experience. Ewing synthesizes history, case law, and, as important, economic studies in formulating suggested guidelines for competition policy. The book is also a useful reference guide, with citations to hundreds of authorities and seven appendices ranging from detailed statistics about antitrust and competition spending across countries to reprints of economic studies.

1. THE INTERNATIONAL PROBLEM

   Ewing identifies several specific problems facing courts and regulatory authorities entrusted with administering a national antitrust law in a global economy. Harmonizing such laws across countries is one of Ewing's primary concerns, as well it should be. Businesses currently face a maze of duplicative requirements in effecting multinational mergers and conflicting rules governing the conduct of their business activities. Not that attempts at international coordination have been lacking. Ewing reports several such efforts, including failed attempts some thirty years ago by the United Nations Council on Trade and Development and its Technology Transfer Conferences to adopt competition codes, efforts by both the OECD and the WTO--although with slow progress--to harmonize competition policies, as well as the more recent and arguably more successful efforts of the International Competition Network ("ICN") to promote cooperation among national antitrust authorities (p. 51).

   Ewing appears most optimistic about the work of the ICN because of its dedication to "antitrust only; antitrust all the time" (p. 51). The ICN has already adopted "Guiding Principles for Merger Notification and Review" and has recommended "best" practices concerning the "nexus" between the effects of a transaction and the reviewing jurisdiction (pp. 51-54). The continued success of this international joint venture is constrained, however, by the difficulties inherent in a collective effort of this magnitude.

   For example, countries across the globe have different reasons for subjecting businesses to antitrust regulation; some countries are no doubt concerned with consumer welfare, but others may have adopted competition laws in order to raise costs to foreign rivals. In any event, maximizing the benefits of the group may not coincide with the desired outcome for any individual country. (2) The objectives of regulators in a transition or a developing economy, for instance, are likely to be quite different from those in a developed economy.

   As a result, success is inextricably linked to the ability of the collective to convince some participants to adopt competition laws that, while harmonizing the global effort, may inflict greater costs upon them. (3) Although Ewing does not delve deeply into the mechanics of collective action, he recognizes the difficulty inherent in such efforts in stating that "real harmonization" is "a distant goal that will require extraordinary effort and willpower to achieve" (p. 71 n.87).

   As Ewing points out later in the book (and as discussed later in this Review), the United States' century of experience with antitrust may be a powerful predictor of the pitfalls potentially facing the many newer competition regimes around the globe. These pitfalls include, to mention but a few, targeting "big business" at a substantial cost in terms of lost efficiencies; protecting small (and often inefficient) competitors merely because they are small; and using competition policy to redistribute wealth. Many of the lessons learned in the United States are applicable both to countries new to the regulation of competition and to countries that have been promulgating and enforcing such regulations for decades--indeed, the United States itself could and should (but too often does not) learn from its own failures and shortcomings in administering its antitrust laws.

   For countries new to the field of antitrust, observation and study is far preferable to learning-by-doing; doing should be limited, at least at the outset, to such steps as are necessary to prevent practices that, in the experience of countries with a long history of antitrust enforcement, have been proven to be anticompetitive. A country should not, therefore, require premerger notification based solely upon a merging entity having derived revenues from that country, as do some of the countries Ewing examines (p. 32). This type of overreaching sacrifices consumer welfare for no apparent reason other than the government's desire to collect merger review fees.

   Errors of over-enforcement are likely to be particularly costly in today's high-tech economy, where "information goods" and other forms of intellectual property account for an increasingly substantial portion of economic activity. Ewing makes this point in his discussion of network effects. Direct regulation of the competitive process--price controls, for example--in old-economy industries such as utilities, may impose costs upon both the producer and the consumer if the regulated price is set too low. (4) The cost to the producer is equal to the difference between the market-clearing price and the regulated price, multiplied by the quantity supplied, plus the producer's share of the deadweight loss attributable to units not produced. The burden of such costs, though, will not necessarily...