Tensions between Antitrust and Industrial Policy

Posted by Social Science Research Network

Tensions between Antitrust and Industrial Policy–  D. Daniel Sokol (University of Florida & George Washington University)

Abstract: Sound antitrust law and policy is in tension with industrial policy. Antitrust promotes consumer welfare whereas industrial policy promotes government intervention for privileged groups or industries. Unfortunately, industrial policy seems to be alive and well both within antitrust law and policy and within a broader competition policy worldwide. This Article identifies how industrial policy impacts both antitrust and competition policy. It provides examples from the United States, Europe and China as to how industrial policy has been used in antitrust. However, this article also makes a broader claim that the overt or subtle use of industrial policy in antitrust and a broader competition policy is a global phenomenon. The US experience teaches that industrial policy can be pushed to the margins in antitrust (and the failure to push such policy to the margins produces economic inefficiencies) and that successful competition advocacy can reduce the competitive distortions of a broader competition policy. This article first identifies the relationship between antitrust and industrial policy. It provides examples of industrial policy in the antitrust experiences of the United States, Europe, and China. Second, the article explores how a lack of procedural fairness in antitrust may be abused by inefficient competitors as a way to push industrial policy goals. Third, the article demonstrates how industrial policy hurts a broader competition policy and suggests potential competition advocacy interventions on the part of antitrust authorities to limit the anti-competitive effects of such policy. The article concludes with the suggestion that industrial policy is in fundamental tension with promoting consumer welfare and fostering long term economic growth and should be abandoned both explicitly and implicitly from the antitrust enterprise. Further, antitrust agencies should implement more competition advocacy interventions to stop the spread of industrial policy globally.