Can competition law break ‘MONOPOLY CAPITAL’
Developing countries require different competition regimes from developed nations
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?”