Competition Wrongs.

Author:Cornell, Nicolas
 
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ARTICLE CONTENTS INTRODUCTION 2032 I. THE STANDING CLAIM 2037 A. Interference 2038 B. Exclusivity 2039 C. Marketing 2040 D. Other Misconduct 2043 E. Competition Law as Private Law 2044 II. THE INDEPENDENCE CLAIM 2048 A. A Right to Ownership or Control 2049 B. Two Ideas of Fair Play 2053 C. The Competitor's Right to Rule Compliance 2055 D. The Contributor's Right to Fair Contribution 2060 E. Other Possible Rights 2063 III. COMPETITION WRONGS AS UNJUSTIFIABLE HARMING 2064 A. Competition and Justification 2064 B. Tortious Interference and Justification 2069 C. Antitrust and Justification: Apple and Amazon 2071 D. Competition Wrongs Beyond the Market 2075 INTRODUCTION

In any minimally developed economy, market participants will sometimes be wronged by the conduct of others. Due to my illicit business tactics, you may lose profits, customers, employees, reputation, access to capital, or other sources of value. My misconduct, in such a case, leaves you personally aggrieved. (1) How are we to understand the wrongs that occur in the course of competition? In what does the complaint of the injured competitor consist? I think that probing these questions may shed light on deep moral and legal issues about rights, wronging, harm, and accountability. Competition tests the relationship between these basic concepts.

The wrongs that occur in the course of competition are noteworthy. Most instances of lost profits or lost consumers are hardly grounds for complaint. On the contrary, such economic setbacks offer a prime example of unobjectionable harming. For this reason, they are frequently cited to illustrate the conceptual distance between wronging and harming. Here, for example, is how Arthur Ripstein puts it:

Examples of harms that are not wrongful are... familiar.... If you build a better mousetrap, I may lose customers; if you close your hotel, my neighboring restaurant may suffer; if you show up before me, there may be no seats left on the bus or milk left at the store.... If contests really are fair, and the undertakings voluntary, any harm that ensues is not an interference with sovereignty. (2) The point is that many economic harms--even those that may have grave repercussions for the livelihood of the sufferer (3)--are not wrongs. The competitor who drives others out of business with a better product or price is not answerable to those who fall by the wayside. This is an important insight that I have no intention to dispute.

That insight might, however, lead one to imagine that the harms that arise in competition contrast with those harms that do wrong others. Ronald Dworkin describes the contrast as follows:

We need to... distinguish [] between two lands of harm you might suffer because other people, like you, are leading their own lives with their own responsibility for their own fates. The first is bare competition harm, and the second is deliberate harm. No one could even begin to lead a life if bare competition harm were forbidden. We live our lives mostly like swimmers in separate demarcated lanes. One swimmer gets the blue ribbon or the job or the lover or the house on the hill that another wants.... [E]ach person may concentrate on swimming his own race without concern for the fact that if he wins, another person must therefore lose. That inevitable land of harm to others is, as the old Roman lawyers put it, damnum sine injuria. It is part of our personal responsibility--it is what makes our separate responsibilities personal--that we accept the inevitability and permissibility of competition harm. (4) Dworkin's thought is that competition harms can provide a useful contrast to illuminate the wrongs of deliberate (and negligent) harming. (5)

There is some element missing from bare competition harm that prevents it from amounting to a wrong. For Ripstein and Dworldn and other like-minded thinkers, that missing element is a right or entitlement. The mousetrap manufacturer has no right to his or her customers, so when a competitor comes along with a better design, the harm does not constitute a wrong. The restauranteur has no right to an advantageous business environment, so there is no wrong when the neighboring hotel closes. And the swimmer has no right to the blue ribbon, so when a faster swimmer takes the prize, no wronging transpires. In each case, no right has been violated, even if a harm has been suffered. The harm arises simply in the course of--to use Dworkin's evocative metaphor--everyone swimming in their own lanes.

The conclusion, for these thinkers, is that wrongs require a rights violation. Wrongs arise when a party's sovereignty is compromised--when a party is denied independence in a sphere in which he or she is entitled to independence. (6) Wrongs arise, that is, when someone crosses over into another's lane. Thus, from the fact that not all competitive harms constitute wrongs, one arrives at the conclusion that wrongs are constituted by transgressions into another's sphere of control.

I reject this lesson that rights-oriented thinkers like Ripstein and Dworkin draw from the existence of nonwrongful competition harm. In particular, I believe that a rights violation is not, in fact, a necessary ingredient of a wrong. (7) We can and do wrong one another in ways that do not involve crossing into another's lane. A closer examination of competition injuries reveals as much. Through such an examination, I will argue that sometimes a market actor wrongs a competitor by his or her illicit tactics even though no rights have been violated. (8)

This thesis can be broken down into two subtheses. First, I claim that, in the context of illicit competition, competitors suffer a distinctive wrong. When a party engages in, say, false advertising or monopolistic practices, this conduct will often constitute a violation of norms that protect the public at large. Nonetheless, I claim that the competitor is specially (though not always uniquely) positioned to complain about the violation. Her grievance is personal, not generalized. Call this the standing claim.

Second, I claim that some competition wrongs cannot be explained in terms of any independently specifiable right of the competitor. That is, there is no right of the competitor grounding the wrong. Call this the independence claim. Of course, it is always possible to say that parties have a "right" not to suffer a certain land of wrong. But my question is whether the distinctive wrong to a competitor can be explained in terms of some entitlement--some sphere of control. Such an explanation, to be meaningful, would require that the entitlement play some explanatory or functional role apart from merely labeling what actions may count as wrongs.

To understand my full aims here, it is necessary to appreciate that the arguments of Ripstein and Dworkin above--to which I am responding--are manifestations of much broader normative disputes. Both moral theorizing and private-law theorizing tend to divide between consequentialist and nonconsequentialist approaches. Consequentialist approaches typically take harm (and benefit) to be the foundational normative idea, and they tend toward a collectivist balancing of overall harms and benefits. (9) Nonconsequentialist approaches, in contrast, typically reject harm as a starting point and reject collectivist balancing, preferring instead to start from individual rights and freedom. In contemporary theorizing about private law, this division largely manifests as the division between law and economics, on the one hand, and corrective justice, on the other hand.

Two related arguments often figure prominently in these debates. First, non-consequentialists argue that consequentialist approaches cannot explain the way that both morality and private law connect individuals. (10) It is not merely the fact that some acts are wrongful that needs explaining but rather the fact that some acts wrong others. To be wronged is to have a grievance, to have the personal standing to hold another person accountable. That familiar interpersonal accountability cannot be explained merely by showing that an action is impermissible. Rather, the action must connect the parties in some noncontingent way. (11)

Second, nonconsequentialists argue that harm itself lacks the normative significance to explain why some acts are wrongs. There are wrongs without harm, and harms that constitute no wrong. (12) We need some other foundational normative concept, and rights--individual claims or entitlements--fill the explanatory void. The idea that rights ground our accountability relations becomes the core axiom of corrective-justice theorizing. As then-Chief Judge Cardozo famously put it,

What the plaintiff must show is 'a wrong' to herself, i. e. [sic], a violation of her own right, and not merely a wrong to some one else, nor conduct 'wrongful' because unsocial, but not 'a wrong' to any one .... [T]he commission of a wrong imports the violation of a right.... (13) As illustrated by Ripstein and Dworkin, competition is taken to illuminate both the divergence between wrongs and harm, as well as the connection between wrongs and rights.

I agree completely with the first argument: both morality and private law are deeply and essentially relational, not merely instrumental. In this sense, I stand firmly with the nonconsequentialists. Indeed, part of my aim is to suggest that this relational accountability--the distinctive standing of one who is aggrieved and wants to hold another accountable--is even more pervasive than is typically appreciated by theorists attuned to the relational character of law and morality.

But I am skeptical that interpersonal accountability must always be grounded in individual rights. It is true that harms do not always generate wrongs and that, in this sense, harm is not itself sufficient to explain the relation between wrongdoer and victim. But that does not mean that all wrongs are about individual rights and...

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