Culture, Economics, and Antitrust

DOI10.1177/0003603X18756144
Published date01 March 2018
AuthorAlbert Allen Foer
Date01 March 2018
Subject MatterArticles
Article
Culture, Economics, and
Antitrust: The Example
of Trust
Albert Allen Foer*
Abstract
What role do cultural dimensions of cooperation and competition play in economic life? Taking a
multidisciplinary perspective, this essay uses the example of the concept of trust to consider some
implications for competition policy. The author suggests that the field of competition policy is at core
about the authoritative allocation of categories of economic activity along a spectrum with individu-
alism and competition at one end and collectivism and cooperation at the other. The allocation is a
function of the state, made on the basis of a variety of imprecise inputs—cultural, political, historic,
economic, and institutional—and not merely neoclassical economic theory. Sensitivity to the cultural
aspects of competition and cooperation places constraints on overly optimistic expectations for global
harmonization of antitrust enforcement.
Keywords
culture, trust, competition, competition policy, individualism, collectivism, cooperation, social capital,
global harmonization, convergence
I. Introduction
“Antitrust” is a word that confuses people. Most of the world prefers, quite understandably, to speak of
“competition policy,” and I do, too.
1
The distinctly American word, “antitrust,” is a historical relic
derived from the legalistic form that was used to create corporate holding companies, for example, the
Standard Oil Trust or the Tobacco Trust, in the post–Civil War era. Sometimes it was spelled with a
hyphen, “anti-trust,” clarifying that this was legislation in opposition to the large trusts that were then
appearing on the scene. I will suggest, however, that the originally unintended meaning—treating
“trust” as in “trustworthy”—is actually quite useful in thinking about competition policy. Consider for
*Senior Fellow of the American Antitrust Institute
Corresponding Author:
Albert Allen Foer, 2919 Ellicott Street, NW, Washington, D.C., USA.
Email: bert.foer@gmail.com
1. In fact, in this article, I will sometimes be using the word “antitrust” broadly to cover the wide range of laws and policies
understood to constitute competition policy, such as sectoral regulation. At other times, thecontext will make clear that I am
speakingonly of the threebasic U.S. antitrustlaws,i.e.,the ShermanAct, the Clayton Act,and the Federal Trade CommissionAct.
The Antitrust Bulletin
2018, Vol. 63(1) 65-103
ªThe Author(s) 2018
Reprints and permission:
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DOI: 10.1177/0003603X18756144
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a moment the most widely approved function of antitrust law today: stopping cartels. Cartels are based
on trust among the conspirators that they will cooperate with each other rather than compete on certain
key terms of trade such as price or output. The antitrust enterprise aims to deter and break down that
trust. The extremely effective policy of granting leniency to whistleblowing conspirators is specifically
directed at causing distrust and defection. It is literally a policy of anti-trust.
Is this just wordplay? In this essay, I will reflect upon the importance of trust, as an example of a
cultural value, in the operations of economic institutions in which competition policy is embedded.This
will entail recognizing the intertwining of competition and cooperation, which in turn will lead to a
functional appreciation of antitrust as a state’s authoritative determination of the legitimate roles of both
competition and cooperation in the economic realm. Recognition of the role of cultural values such as
trust will be shown to modifythe universalistic concepts of neoclassical economics based on the model
of the rational self-interested man. Sensitivity to the cultural aspects of competition and cooperation
places constraints on overly optimistic expectations for global harmonization of antitrust enforcement.
Section II of this article begins with a discussion of the meaning of trust as an aspect of culture and
its importance in economic life. Section III, “From Darwinistic Competition to Cooperation,” draws on
a range of academic disciplines to introduce the relationship between competition and cooperation.
Section IV asks whether there can be too much of either competition or cooperation, concluding that
some type of a balance is needed. In the Section V, the article reviews the concept of social capital,
which includes trust, and its role in economic theory. The sixth section takes a short break from more
theoretical considerations to illustrate ways in which the trust factor may be relevant to competition
policy involving the Internet. Section VII discusses cross-cultural data, trust, and competition policy.
Section VIII—“trust and antitrust”—identifies ways in which trust affects various aspects of compe-
tition policy: vertical integration, cartels, mergers and acquisitions, dominance and firm size, the role
of the state and “the missing middle,” growth orientation, and trade. Section IX provides the example
of Abuse of Superior Bargaining Power (ASBP), an anticompetitive claim within a vertical buyer/
supplier context that is recognized by some of our major trade partners but not by the U.S., to indicate
how trust and other cultural values can influence the assignments of competition and cooperation.
Section X raises complexities that occur in thinking about the relationship between competition and
cooperation. It proposes the heuristic value of a spectrum from individualism/competition toward
collectivism/cooperation, onto which can be displayed a state’s chosen treatment of various categories
of economic behavior. Section XI provides concluding remarks.
II. Trust: Meaning and Importance
I was walking on a beach with an old friend about a dozen years ago and we were discussing our
respective retirement plans. He had invested, through an intermediary, in a fund that was paying him a
handsome 10%annually, every year. “How could I get into this?” I asked somewhat greedily. “Not so
easy. You have to know Someone.” A few years later it turned out that the Mr. Someone he knew was
an acquaintance of one Bernie Madoff. My friend is still hoping to recover most of his initial invest-
ment. He had trusted his friend, who had what is known as thick trust in Bernie. That is, it was a
situation of one individual evaluating the character of another, personally. My own friend’s knowledge
of Bernie, however, was indirect, an example of comparatively thin trust. In both cases, however, the
direct and indirect trust were misplaced. The problem: Madoff was not trustworthy.
The modern world would not function without high levels of trust, by which we must include not
only trust in known individuals but als o in systems and institutions. Consid er the levels of trust
required when one boards an airplane. Potential doubts abound. Will the pilot be a sober, well-
trained and quick-witted hero in the image of the legendary Captain Sullenberger, who safely parked
his engine-less plane on the Hudson River after flying into a flock of birds on takeoff? Were the
mechanics not only technicallycompetent but also resolutelyfocused as they maintainedthe plane? Will
66 The Antitrust Bulletin 63(1)
the air traffic controllers not be distracted or tired? And so on. The levels of trust here, as in so much of
modern society, are very thin indeed; some have even referred to this as forced or coerced trust.
2
The efficient functioning of government and the economy often depends on trust, a major facet of
the cooperation that underlies common undertakings of all sorts.
3
Tax revenue, rather obviously, is
essential to a government’s ability to influence its economy and achieve the government’s public
purposes. Institutional factors such as law and its enforcement also clearly affect the collection of
taxes, but without citizens’ trust that most fellow citizens are also paying their share, how many would
consistently make an effort to pay their own taxes honestly? The trusting assumptions also include that
the government is trustworthy in its handling of your money and that the government will identify and
prosecute those who cheat.
4
Thus, the rule of law,theabsence of corruption, the threat of punishment,
and the concept of free riders are brought into play as influencers of what we would commonly speak
of as trust. We need to admit at the outset that segregating trust from other motivations, aspects of
culture, and various sorts of institutions is not always simple.
The very concept of money as a medium for exchange in a market economy depends on trust that a
symbol will be backed by consistent value, requiring faith in the issuing authority and the general
stability of the social order.
5
The social scientist Francis Fukuyama, in a fascinating book titled Trust: The Social Virtues and the
Creation of Prosperity, recognizes that trust has been defined in many ways, but chooses the following
definition, which can also serve our purposes:
Trust is the expectation that arises within a community of regular, honest, and cooperative behavior, based
on commonly shared norms, on the part of other members of that community.
6
Fukuyama places trust on a high pedestal in explaining economic phenomena. He summarizes:
One of the most important things we learn from an examination of economic life is that a nation’s well-
being, as well as its ability to compete, is conditioned by a single, pervasive, cultural characteristic: the
level of trust inherent in the society.
7
2. See GEOFFREY HOSKING,TRUST,AHISTORY, 46–49 (2014). Others mightargue that parts of this example are not about trust at
all, following what is called the “encapsulated interest” model of trust, which says: “we trust you because we think you take
our interests to heart and encapsulate our interests in your own.” KAREN S. COOK,RUSSELL HARDIN,&MARGARET LEVI,
COOPERATION WITHOUT TRUST? 5 (2005). I reply that we don’t know, for example, that an anonymous person—airplane
designer or technician—necessarily has our interest in mind, or that the pilot of our plane, whom we have never met
personally, is necessarily sober or nonsuicidal. I believe the encapsulated interest model is too narrow, making it awkward if
not impossible to speak of trust as we do colloquially, e.g., as having trust in an institution.
3. Using their narrow definition of trust as encapsulated interest, Cook, Hardin, and Levi argue that in the complex modern
economy much, perhaps most, coordination occurs as a result of institutions rather than trust, such as externally regulated
behavior. See COOK ET AL., supra note 2, at 106. This is further addressed at note 41, infra.
4. Trust alone is quite reasonably deemed an insufficient motivator of tax compliance. Thus, in the U.S., we have withholding
and the threat of audits and worse to complement general trust, but audits and penalties are widely known to be quite rare,
yet compliance is the norm.
5. HOSKING,supra note 2, at 89 (“The power of money is derivative: money mediates power because in most times and places
people trust it”). See YUVAL NOAH HARARI,SAPIENS,ABRIEF HISTORY OF HUMANKIND, 180 (2016) (“money is the most
universal and most efficient system of mutual trust ever devised”).
6. FRANCES FUKUYAMA,TRUST, 26 (1995). I will come back to the significance of trust as both an input and result of cooperative
behavior and the mystery of how homo sapiens came to be described as “a cooperative species” or indeed as “super-
cooperators.” See also Christopher R. Leslie, Trust, Distrust, and Antitrust,82TEX L. REV. 515, 529–36 (2004) (discussing
the many definitions of trust and the relationship between trust and cooperation). The Russell Sage Foundation has
published a series of more than ten books on trust, including COOK ET AL., supra note 2.
7. FUKUYAMA,supra note 6, at 7. Cf.ROBERT PUTNAM,BOWLING ALONE (2000). The Cook, Hardin, & Levi book, COOK ET AL.,
supra note 2, seems to have been written in large part as a response to Fukuyama’s book and another popular book this
Foer 67

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