Policy implications of the globalization of competition law

Si Gyeongmin

Sep 15, 2021

Is the spread of competition law around the world a success of economic policy? There are many factors to consider in answering this question. On the positive side, the proliferation of the competition law system in recent decades has produced some significant practical benefits. The implementation of the competition law has clearly won support for the free market, a key element of economic development. International economic institutions, especially the ICN, have established contacts among competition officials around the world, thereby laying the foundation for future cooperation. Large cartels that clearly harm consumer welfare have been successfully detected and prosecuted all over the world, and half a century ago, they were widely tolerated. This shift is a gain for consumers and the global economy.

First, simply enacting a new competition law is not enough to promote the competitive process of improving welfare. In fact, in countries where the rule of law is weak and private property is not well protected, economic development will be hindered. In a country plagued by illegal activities, any economic policy that relies on the judicial system to implement, even the appeal review of administrative regulations, will not affect economic behavior. In other words, the success of competition law in promoting welfare-enhancing economic activities depends on strong government institutions that protect the rule of law.

Second, the enforcement of all competition laws is full of errors, even if increasing consumer welfare is the only goal. The extent to which antitrust enforcement promotes consumer welfare depends on the extent and nature of the enforcement error. For example, the wrongful prosecution of restrictive business arrangements that actually promote welfare has caused economic damage, and this damage is measured by the sum of the following: (1) the socioeconomic benefits reduced by preventing the transaction, (2) unnecessary costs incurred by the private and public sectors due to the prosecution of the transaction, and (3) the loss of economic welfare due to the avoidance of legal risks arising from the initial wrongful prosecution without conducting similar beneficial transactions in the future.

Third, the globalization of competition law has greatly increased the cost of companies engaged in multinational transactions. Such companies must interact with multiple executives, which are often constrained by different procedures and substantive requirements, thereby increasing the cost of socially beneficial transactions. This component cost should be subtracted from the overall benefit of the proliferation of competition law.

Fourth, the differences between national competition law rules create complexity for national institutions as they seek to uphold their own laws. The problem is that a state agency may have major objections to the transfer of control of a high-profile investigation to a foreign agency, especially if it believes that the foreign agency will handle the matter in an inappropriate manner. The Federal Trade Commission and various organizations work together to handle overlapping investigations in an effort to control the costs associated with parallel enforcement.

Fifth, another source of costs associated with globalization is attempts to use competition laws to weaken the interaction between rival agencies and requesting companies. For example, Nokia, Oracle, and IBM’s antitrust case against Microsoft’s antitrust lawsuits, as well as Apple in multiple jurisdictions provoking against Qualcomm’s antitrust lawsuits have wasted the resources of lobbyists and institutions. Once successful, it will encourage companies to replace beneficial competition with inefficient government processes. This not only consumes public and private resources, but the company will worry about antitrust exposure, thus preventing innovative companies from pursuing new business strategies that improve welfare.

Sixth and finally, recent developments around the world indicate that antitrust policies targeting large digital platforms (and perhaps other dominant companies) may be evolving into regulations that are not conducive to consumer welfare. In the past year, the initiatives of the European Union, France, Germany, the United Kingdom, Japan, Australia, and other countries have shown that “digital regulatory patchwork has further magnified the inconsistency and application imbalance between global technology departments and digital market competition mechanisms.” Replacing case-by-case law enforcement with digital competition law may slow down digital innovation, greatly reduce consumer welfare, and harm the economy. In addition, regulation may lead to the "occupation" of regulation by the dominant platform company under regulation. This is an anti-competitive result that will hinder rather than stimulate the entry of competition.

In short, one cannot say with any certainty whether antitrust globalization is "good" or "bad" in economic terms. The beneficial changes are reflected in the cooperation of law enforcement officials in hunting down cartels and coordinating antitrust reviews. Although the benefits obtained through the process of globalization are tangible, they must be recognized based on the established costs that cannot be ignored. The negative impact comes from enforcement errors, transaction costs caused by multiple investigations, abuse of antitrust, and the recent tendency of major law enforcement officers to costly supervision and the neglect of consumer welfare in law enforcement. These thorny issues make net welfare assessment infeasible.

The rapid globalization of competition law in the past three decades has been a distinctive feature of the international political economy. However, it is difficult to say whether this is a successful transnational economic project. People cannot deny the economic benefits brought by the spread of competitive culture, but the harm of new transaction costs and the wrong pursuit of effective business behavior is also obvious. Looking ahead, one can hope that the United States will take the lead in promoting consumer-centered competition policies, especially in the following areas:

(1) Use ICN as a basis to establish a stronger multinational support platform, and promote consumer welfare and prevent cartels;

(2) Promote the participation and compliance of the competition authority in the ICN joint appeal procedure, with the purpose of strengthening the due process of the competition authority;

(3) Use international forums (such as the OECD) to encourage research on the huge consumer benefits generated by dominant digital companies and the risks posed by preventive antitrust and supervision;

(4) Carry out bilateral and regional cooperation to strengthen support for due process in anti-monopoly law enforcement, and support consumer welfare standards as the core of competition law enforcement;

(5) Support the rule of law work in developing countries as a useful supplement to the work of competition law itself.

In short, the globalization of antitrust has now become a reality. The benefit to consumers and the global economy will entirely depend on the rationality of public policies and decisions.

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