CLACIS discusses - BIG BUSINESS: where shall antitrust law stand?

BIG BUSINESS: WHERE SHALL ANTITRUST LAW STAND? Nowadays, the world witnesses a global concentration of capital. Even developed economies such as, for instance, the US, the EU, the UK, Singapore and others face significant market concentration. This trend resurges concerns over significant market power of big business. These concerns pose substantial challenges for antitrust enforcement. Many antitrust populists argue that excessive economic power concentration will breed antidemocratic political pressures, and corporate giants will squeeze small businesses out and, thus, antitrust laws shall be enforced more aggressively against big business1 . In this article, we will look into the purposes of antitrust law to understand whether and how it can balance redistribution of wealth between market players and efficiencies produced by large business. Goals of antitrust policy: efficiencies vs redistribution Efficiencies often discussed in antitrust policies can be divided into several groups: allocative, productive and dynamic efficiencies.2 The first one, productive, provides that each company shall produce at the lowest possible cost and in case a company makes losses, it has to leave the market.3 Allocative efficiency provides that products are produced in the amount to be valued by the consumers; therefore, ‘none of the players, sellers or buyers, could be made better off without someone being made worse off’. 4 And dynamic efficiency provides for the efficient introduction of technologies and other innovations in the market.5 However, the three types of efficiencies often contradict each other. 6 That must be the reason why efficiencies are generally recognised and pursued but are not considered as the primary goal of antitrust enforcement. Neither Ukrainian nor EU or US laws define efficiencies as the key purpose of antitrust policies. For example, in Post Danmark, 7 the Court of Justice of the EU indicated that alleged entities might submit evidence of efficiencies to demonstrate the absence of an abuse of dominance but it did not recognise that achievement of efficiencies shall be the objective of Article 102 of the Treaty on the Functioning of the European Union (‘TFEU’), which already has a redistributive purpose. 8 On the other hand, one can easily track redistribution among goals of antitrust law. Redistribution can be defined as a disposal of economic power and transfer of wealth to other market participants.9 It is a process of reallocation of wealth and income obtained from the market operations of business entities.10 1 See e.g. Leon B. Greenfield, Perry A. Lange, Nicole Callan, ‘Antitrust Populism and the Consumer Welfare Standard: what are we actually debating?’ (2020) 83 (1) Antitrust Law Journal, 393; Darren Bush, ‘Too Big to Bail: The Role of Antitrust in Distressed Industries’ (2010) 77(1) Antitrust Law Journal 277. 2 Alison Jones and Brenda Sufrin, Competition law: Text, Cases and Materials (6th edn, OUP Oxford 2016), 27. 3 Ibid. 4 Ibid. 5 Ibid. 6 R J Van den Bergh and P D Camesasca, European Competition Law and Economics: A Comparative Perspective (2nd edn, Sweet & Maxwell, 2006), 29. 7 Case C-209/10 Post Danmark [2012] ECLI:EU:C:2012:172, para 41. 8 Doris Hilderbrand, ‘The Equality and Social Fairness Objectives in EU Competition Law: The European School of Thought’ (2017) 1-2017 Concurrences Review 1, 1. 9 Richard Whish and David Bailey, Competition law (8th edn, OUP Oxford 2015), 20. 10 Radu Musetescu, ‘Competition Policy: Between Economic Objectives and Social Redistribution’ (2012) 5 (2a) Economics & Sociology 115, 117. CLACIS Leonardo Business Centre 17/52 Khmelnitskogo str. Kyiv, 01030, Ukraine T +38 044 391 20 21 [email protected] www.clacis.com And antitrust law is considered to be one of the means of redistribution. In the US, redistribution has initially been considered the primary goal of antitrust laws which found reflection in the Sherman Act and Section 7 of the Clayton Act, which respectively prohibit unlawful monopolisation and M&As that can substantially lessen competition or tend to create a monopoly. Primarily because of such policy, the US has a strong history of dissolution of monopolistic entities such as Standard Oil, Alcoa, AT&T since it was considered that monopolies were a threat to democratic values and shall be removed to protect competitors and consumers.11 Article 3 of the Treaty on the European Union provides not only for establishing an internal market but also emphasises the necessity to develop a highly competitive social market economy which, in its turn, provides for the efficiency of the market process and equality through the distribution of wealth between different market participants. 12 Article 101 of the TFEU is aimed at ensuring fair and equal redistribution of wealth gained as a result of an anticompetitive agreement and/or concerted practice as far as Article 101 (3) of the TFEU emphasises that customers shall receive their 'fair share' of wealth and gains achieved. As Doris Hildebrand notes, it does not mean that customers shall always receive the same amount of wealth as producers but rather a fair one in order to allow producers be compensated for their risks and innovation. 13 Ukrainian Law ‘On Protection of Economic Competition’ (the ‘Competition Law’), like EU law, does not explicitly define redistribution as its primary goal, but reference to it can be tracked. The preamble states that the purpose of the law is to ‘support and protect economic competition, to limit monopoly in business activities and ensure efficient functioning of the Ukrainian economy based on the development of competitive relations’. The efficiencies are also envisaged in Article 10 of the Competition Law. Keeping the balance between redistribution and efficiencies The rising concerns about market concentrations through monopolisation or concerted arrangements put the question of whether redistribution considerations shall outweigh significant long-term economies of scale. Perfectly competitive markets indeed provide for efficiencies; however, perfect competition can rarely be achieved, especially in essential markets such as energy, telecom, transport. At the same time, political concerns over concentrated market power can be at the cost of efficiencies that concentrated markets can produce if not abused. Efficiencies produced by the large business include improved production and distribution of products due to economies of scale, a potentially long-term decrease in prices, technological innovation and better control over taxes. It is often difficult to draw a line between anticompetitive and efficient practices of large undertakings. While redistribution remains a top priority for antitrust enforcers, redistribution alone is rarely sought these days. Antitrust bodies challenge business behaviour that abuses monopoly power, mergers and concerted actions that tend to concentrate or coordinate market power and defend behaviour creating efficiencies and, therefore, contributing to consumer welfare.14 Though the line between anticompetitive and efficient practices is rarely clear,15 it is important to keep the balance between efficiencies and redistribution of fair share to all market players. Redistribution can be conducted without loss of efficiencies, while efficiencies that are not shared with other market players shall not be considered.16 Having said this, it should be noted that Ukrainian Competition Law rests on this notion since its aim as 11 Robert Pitofsky, ‘The Political Content of Antitrust’ (1979) 127 University of Pennsylvania Law Review 1571. 12 Hildebrand (no 8), 1. 13 Ibid, 3. 14 Pitofsky (no 11), 1053. 15 Naomi R. Lamoreaux, ‘The Problem of Bigness: From Standard Oil to Google” (2019) 33(3) Journal of Economic Perspectives 94, 95. 16 Bush (no 1), 284. CLACIS Leonardo Business Centre 17/52 Khmelnitskogo str. Kyiv, 01030, Ukraine T +38 044 391 20 21 [email protected] www.clacis.com provided in the preamble is not only to restrict monopolisation but also to ensure efficient functioning of the market as well as to ensure efficiencies shall be transferred to other market players, as for instance sharing of efficiencies in the market as per Article 10 of the Competition Law. So what are the remedies through which sharing of efficiency can be achieved? There are different remedies known to ensure the above-mentioned sharing. There are for instance structural remedies, which include dissolution of a business entity or, a less radical, divestment of a particular part of the business. Such remedies are used to introduce competition on the market and decrease the market power of the dominant entity.17 On the other hand, antitrust enforcers can also apply less radical remedies, such as for instance, behavioural commitments to cases where structural remedies are not possible or desirable considering the peculiarities of each particular market. Examples of behavioural remedies include, among other, an obligation to refrain from certain activities, obligat