Antitrust Goals in Developing Countries: Policy Alternatives and Normative Choices

• Publication year: 2015

Washington Law Review Volume 38, No. 3, SPRING 2015

Antitrust Goals in Developing Countries: Policy Alternatives and Normative Choices

Dina I. Waked(fn*)

ABSTRACT

This Article outlines the different policy alternatives that could guide antitrust enforcement in developing countries. These include efficiency-based goals (allocative, productive, economic, and dynamic efficiency) and non-efficiency-based goals (protecting small businesses; achieving international competitiveness; eradicating poverty; and promoting fairness, equality, and justice). The actual antitrust goals selected by fifty developing countries are then presented. Finally, a proposal is made with regards to what developing countries should aim at achieving with their antitrust law enforcement. This normative take is geared towards realizing dynamic efficiencies or technological progress, coupled with redistribution through antitrust rules, as the accelerators of growth and development. Promoting growth through innovation, as an antitrust objective, corresponds to a desire to incorporate antitrust policy within a broader development agenda that is more suitable to developing countries than static efficiency-based goals.

I. INTRODUCTION

It is futile to argue whether developing countries should or should not adopt competition laws. The reality is that, despite adopting them due to Western and international pressure in many instances, most developing countries currently have competition laws and an enforcing authority in place.(fn1) Many scholars have focused their analyses on the kind of laws developing countries should adopt.(fn2) The argument repeatedly made is that developing countries need competition laws adapted to their economic, social, and political backgrounds, and they should not cut and paste laws developed elsewhere.(fn3) However, many developing countries adopt competition laws identical to those established in more advanced countries.(fn4) This renders focusing on the need for specifically tailored laws for developing countries rather pointless. What is worth considering, and what has been addressed in recent literature, is what developing countries should pick as their policy orientation to guide their enforcement strategies.

Contrary to expectations, previous research has shown that developing countries do enforce their antitrust laws.(fn5) From this respect, an analysis of the policies that guide their enforcement process and those that should guide their enforcement is worthwhile. So far, we only know that most developing countries do enforce their antitrust laws and that their enforcement varies given their developmental, ideological, international, political, and institutional frameworks.(fn6) Yet, we do not know what they aim at achieving when they enforce these laws. This Article first discusses different goals of competition law enforcement. It also discusses what goals developing countries actually choose to guide their enforcement activity. The discussion ends with a normative assessment on what the guiding policy for developing countries' antitrust enforcement should be. This normative stance places antitrust as a tool in a broader developmental agenda for developing countries to pursue, with the purpose of enforcement being the realization of growth through dynamic efficiencies or technological progress, coupled with redistribution. Dynamic efficiency, as used by Alice Amsden and Ajit Singh, is used here to refer to the maximizing of the long-term rate of growth of industrial and overall productivity.(fn7)

Antitrust laws can be used as tools to achieve predetermined social and economic outcomes. Developing countries, therefore, have a choice to make as to the normative baseline that drives their competition policy and enforcement process. Their "objectives can shape enforcement policy and priorities. [These objectives] can alert policymakers to any gaps between actual and desired outcomes from current enforcement. They can assist the courts in applying antitrust legal standards to assure that the result is aligned with the objectives."(fn8)

The frequently used quotation from Robert Bork's Antitrust Paradox captures the importance of finding the desirable objectives:Antitrust policy cannot be made rational until we are able to give a firm answer to one question: What is the point of the law-what are its goals? Everything else follows from the answer we give. . . . Only when the issue of goals has been settled is it possible to frame a coherent body of substantive rules.(fn9) This is particularly relevant for developing countries that are still shaping their antitrust legacy and do not have decades of antitrust jurisprudence to fall back on and try to make sense of.

To answer the question of "what the point of the law is," developing countries must assess their own needs and tailor their competition law enforcement in a way that particularly addresses what they consider important, be it development, growth, redistribution, or even poverty eradication.

The selected goal should guide the enforcement process to identifying the ideal market structure that allows realizing such a goal. This entails a two-step process. The first step results in identifying the overall goal of antitrust enforcement, which is often in conjunction with the overall policy orientation of a country. The second step is identifying the market structure that is responsible for accomplishing such a goal. For example, if the goal is lower prices as part of a distributive agenda to protect consumers, regardless of other outcomes, then antitrust policy should target a market structure based on increasing intensity of competition that leads to the realization of lower prices. This choice is straightforward, in the sense that economists agree that lower prices are achieved when the intensity of competition increases, which, in the hypothetical ideal of perfect competition, leads to firms pricing at marginal cost of production.(fn10)

On the other hand, it might be more difficult to predetermine the accompanying market structure to achieve other goals. For example, if the goal of antitrust is dynamic efficiency captured in higher rates of innovation, then two conflicting market structure alternatives are advocated in the empirical and theoretical literature. On the one hand, it is argued that more competition leads to higher rates of innovation.(fn11) Where- as, on the other hand, it is argued that more concentrated markets will allow firms to reinvest their monopoly profits in innovation.(fn12) When such conflicts exist, the task of choosing a guiding principle becomes more daunting, as one cannot have a straightforward answer as to which market structure to encourage.

However, before assessing the market structure that needs to accompany the chosen policy framework, developing countries first have to choose between a wide array of alternative, often conflicting, polices or goals that can guide their antitrust enforcement process. Picking a goal is "not merely a product of economic theorizing, but of political econo-my."(fn13) Evidently, it is also a political choice that countries need to make. Support for such choice being a political one can clearly be seen in the history of American antitrust policy, where the direction of the enforcement radically changes depending on the administration in office.(fn14) It is also "not a once-and-for-all-time decision, but rather reflects a temporary consensus that is likely to morph over time to accord with changing political and economic realities, advancing knowledge, and general fashions in political and economic thought."(fn15)

The intellectual debate in the West, as to the goals of antitrust, is neither novel nor settled. It spans from before the adoption of the Sherman Act in 1890 (given this Act is one of the oldest in the advanced West) to today.(fn16) This is not only a phenomenon in the U.S., but also a debated topic in Europe as well, where member states differ amongst each other in their policy orientations that guide their enforcement ef-forts.(fn17)

The fact that the Western world lacks a clearly defined goal forming its consensus on how to guide antitrust enforcement gives developing countries a rare chance to make a political choice with regard to what policy to choose. Had there been a Western consensus as to the desirable antitrust policy, it would have definitely been transposed together with the transplantation of the antitrust law itself to developing countries.

Nonetheless, choosing which policy to guide the enforcement process is, in and of itself, no easy task. The question about the normative baseline for antitrust theory lies at the root of much controversy in antitrust. The debate is not only with regard to what is the one goal to guide antitrust enforcement,(fn18) but also whether multiple goals are a better alternative to a monist reading of the purpose of antitrust.(fn19)

This Article's aim is to critically analyze these goals and to contribute to these debates by advocating that developing countries should enforce their antitrust laws with the realization of long-term growth and overall productivity in mind. This should also be coupled with redistribution to assure that their often-impoverished consumers are not paying the costly price of allowing firms and industries to grow. These intertwined objectives shall assure that developing countries'...