Can com­pe­ti­tion law break ‘MO­NOP­OLY CAP­I­TAL’

De­vel­op­ing coun­tries re­quire dif­fer­ent com­pe­ti­tion regimes from de­vel­oped na­tions

CityPress - - Business - DEWALD VAN RENSBURG dewald.vrens­burg@city­press.co.za

Com­pe­ti­tion law could do more to ad­dress South Africa’s in­fa­mously high con­cen­tra­tion of eco­nomic power, but there are lim­its, said lead­ing com­pe­ti­tion law ex­pert Eleanor Fox, pro­fes­sor of trade reg­u­la­tion at New York Univer­sity School of Law.

Fox, a vo­cif­er­ous ad­vo­cate for how de­vel­op­ing coun­tries re­quire dif­fer­ent com­pe­ti­tion regimes from de­vel­oped ones, spoke to City Press be­fore de­liv­er­ing a Man­dela Day lec­ture at the Wits law school.

“Com­pe­ti­tion law has not been a very good in­stru­ment to at­tack con­cen­tra­tion ... I know South Africa is think­ing about the prob­lem right now; about whether mar­kets are too con­cen­trated and big busi­ness is too big.

“There is a prob­lem with ex­pec­ta­tions ... I do worry about ex­pec­ta­tions,” she told City Press.

What can ac­tu­ally be achieved in what Amer­i­cans call an­titrust is, how­ever, of­ten con­strained by ide­ol­ogy, not law.

The orig­i­nal the­o­ret­i­cal prob­lems at the heart of com­pe­ti­tion law are still very much alive more than a cen­tury af­ter the field emerged in the US.

“There is a very big ide­o­log­i­cal de­bate in the United States,” said Fox. “Right now the case law co­in­cides with a very free mar­ket ide­ol­ogy and it has for a num­ber of years and it prob­a­bly will for a num­ber of years.”

“In terms of what is per­mis­si­ble, what we see now are merg­ers that were un­think­able 20 or 30 years ago. Huge merg­ers of very im­por­tant com­peti­tors.

“Very of­ten the dom­i­nant ide­ol­ogy fol­lows the ad­min­is­tra­tion in power. The pres­i­dent al­ways has a lot of power to ap­point judges...”

The con­ser­va­tive turn in the US un­der pres­i­dent Ron­ald Rea­gan in the 1980s re­versed a his­tory of more in­ter­ven­tion­ist com­pe­ti­tion law, said Fox.

In the 1960s, US com­pe­ti­tion law was far more con­cerned with “eco­nomic democ­racy”, she said.

The free-mar­ket bent in the US should con­cern the rest of the world, said Fox. “The US want the rest of the world to adopt its law.”

In June this year, Fox tes­ti­fied be­fore the US Congress – against the pos­si­ble ex­pan­sion of Pres­i­dent Don­ald Trump’s power to veto multi­na­tional merg­ers.

This is seen as a tit-for-tat for the far more in­ter­ven­tion­ist com­pe­ti­tion poli­cies in China, but also Europe, that af­fect US multi­na­tion­als.

Be­cause other coun­tries’ com­pe­ti­tion laws are dif­fer­ent from the US’s does not make them wrong, ar­gued Fox.

For one thing, many US multi­na­tion­als are uniquely pow­er­ful in the world, es­pe­cially dig­i­tal gi­ants such as Google, Ap­ple, Face­book and Ama­zon.

Dif­fer­ent mar­kets also sim­ply re­quire dif­fer­ent rules. Ex­ces­sive pric­ing is not even an of­fence in the US and this is not en­tirely un­rea­son­able, said Fox.

“It prob­a­bly ex­ists less in the US be­cause the mar­kets work pretty well.

“I think de­vel­op­ing coun­tries have to be far more con­cerned with en­try bar­ri­ers. Af­ter that, most de­vel­op­ing coun­tries think they should be con­sid­er­ing pub­lic in­ter­est fac­tors, at least in merg­ers.”

EU law is a more sym­pa­thetic model. There is some­thing un­der­ly­ing EU law that should un­der­lie South African com­pe­ti­tion law. It should al­ways try to open doors to out­siders

WHAT IS COM­PET­I­TIVE?

Fairly ob­scure dif­fer­ences in eco­nomic the­ory can lead to com­pletely dif­fer­ent con­cep­tions of what a com­pe­ti­tion law regime should be do­ing.

In the real world, some as­sump­tions are re­al­is­tic in What can be done to re­duce the high con­cen­tra­tion of eco­nomic power in the lo­cal econ­omy?

SMS us on 35697 us­ing the key­word COM­PE­TI­TION and tell us what you think. Please in­clude your name and province. SMSes cost R1.50 large de­vel­oped mar­kets, but ridicu­lous in small de­vel­op­ing mar­kets.

Win­ner of the No­bel Me­mo­rial Prize in Eco­nomic Sciences Joseph Stiglitz has re­cently ar­gued for a massive ex­pan­sion of the work of com­pe­ti­tion law to ad­dress new forms of eco­nomic power based on net­works and in­tel­lec­tual prop­erty.

How­ever, Fox, who Stiglitz thanks for com­ments on his essay on the topic, pro­motes a less dra­matic pro­gramme.

“Even if your idea of an­titrust is just to make mar­kets work, you still have an ide­o­log­i­cal split,” said Fox.

“The free-mar­ke­teers will struc­ture the law so there is very lit­tle in­ter­ven­tion other than for price-fix­ing. The other side of that spec­trum is a strong school of thought that be­lieves that a good deal of in­ter­ven­tion is nec­es­sary in or­der to give peo­ple ac­cess to mar­kets.

“That re­sults in a dif­fer­ent pro­gramme ... A lot of time is spent analysing merg­ers. On the free-mar­ke­teer side, merg­ers are al­most al­ways con­sid­ered fine.”

A sim­i­lar con­test has emerged in South Africa’s young com­pe­ti­tion law regime, es­pe­cially in the few abuse of dom­i­nance cases that have gone to court.

The Com­pe­ti­tion Ap­peal Court tends to “have a more con­ser­va­tive view” than the Com­pe­ti­tion Tri­bunal, said Fox.

“Maybe leg­isla­tive amend­ments can, say, be more sym­pa­thetic to the out­sider and if there is a choice, go for the out­sider,” said Fox.

She con­trasts the Amer­i­can and Euro­pean ap­proaches. “EU law is a more sym­pa­thetic model. There is some­thing un­der­ly­ing EU law that should un­der­lie South African com­pe­ti­tion law. It should al­ways try to open doors to out­siders.”

In the more in­ter­ven­tion­ist cli­mate of 1950s and 1960s Amer­ica, there were at­tempts at ad­dress­ing eco­nomic struc­ture as op­posed to nar­rowly de­fined of­fences like price fix­ing.

“There were sev­eral big cases in­ves­ti­gated but they never re­sulted in en­force­ment,” said Fox.

A bias to­wards eco­nomic out­siders is none­the­less nec­es­sary, she said.

“There was cer­tainly a seg­ment of the pop­u­la­tion that felt much bet­ter off. I think they re­ally were bet­ter off. I spoke to a lot of small busi­ness peo­ple be­fore and af­ter the change. They felt be­trayed by the law,” she said.

“One ques­tion is whether you break up dom­i­nant com­pa­nies for the sake of break­ing up. Do peo­ple think it is just too much power? Does it pre­vent the mar­ket from func­tion­ing?

“There are ways; they are rare and sel­dom taken. “Then there is this ques­tion: Does any­one want to go fur­ther?”

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