Developing Countries, Political Clientilism, and Weymouth’s “Tug of War” Model of Antitrust Reform

• Author: Raju Parakkal
• Published date: 01 June 2016
• Date: 01 June 2016
• DOI: http://doi.org/10.1177/0003603X16644123

Article

Developing Countries, Political

Clientilism, and Weymouth’s

‘‘Tug of War’’ Model of

Antitrust Reform

Raju Parakkal*

Stephen Weymouth’s article, ‘‘Competition Politics: Interest Groups, Democracy, and Antitrust

Reform in Developing Countries,’’ argues that the political determinants of competition policy reform,

which includes both competition legislation and its enforcement, lie at the intersection of two com-

peting forces: the insiders that comprise incumbent businesses and organized labor in these businesses;

and the outsiders that comprise entrepreneurs, consumers, and unorganized labor. The main contention

is that the insiders will deter competition reforms while outsiders will demand these changes. The

underlying motivations for these competing groups to act in these ways are intuitive: the insiders,

including the affiliated labor groups, gain by keeping their markets uncompetitive and extracting

‘‘monopoly rents’’; while the outsiders would want costless entry to these markets (entrepreneurs),

competitive prices (consumers), and more firms and employment (unorganized labor). Very impor-

tantly, Weymouth introduces into the analyses the relevant political context within which these inter-

actions take place. The a priori argument is that if the political system is characterized by more

democracy rather than less, the probability of competition reform would be higher since the outsiders

represent a bigger voting bloc that can effectively decide electoral outcomes in a democracy.

The results from the battery of empirical tests support these arguments: the rent-preserving alliance

of insiders is found to slow down the competition reform process for both legislation and enforcement;

while democracy increases the chances of an earlier competition reform, but it also, ironically, enables

regulatory capture by the insiders. Weymouth undertakes a series of robustness checks, and the results

are insensitive to the new measures as far as the main estimates are concerned. The empirical analyses,

therefore, support the theoretical arguments and hypotheses.

In this article, Weymouth has taken on a very important and largely underexplored topic within the

broader research area of global antitrust reform and practice. As far as this symposium is concerned,

the subject matter of this article and the examinations contained therein illuminate the intricacies

involved in the political and economic calculus that influence antitrust reform and enforcement. In a

rigorous manner it looks at the economic and political incentives that dictate support for or against

antitrust reforms in developing countries. As explained in the article, developing countries serve as an

*Philadelphia University, Philadelphia, PA, USA

Corresponding Author:

Raju Parakkal, Philadelphia University, Philadelphia, PA 19144, USA.

Email: parakkalr@philau.edu

The Antitrust Bulletin

2016, Vol. 61(2) 317-319

ªThe Author(s) 2016

Reprints and permission:

sagepub.com/journalsPermissions.nav

DOI: 10.1177/0003603X16644123

abx.sagepub.com