The Poverty of Competition Law

By Ioannis Lianos (University College London)

For a long time considered a fringe topic, of interest for developing and emergent economies, the question of inequality and poverty has recently taken centre-stage in mainstream competition law scholarship in developed countries. Some of this literature deplores the current state of competition law, which has largely ignored this issue, and argues for a different paradigm that would actively engage with economic inequality and its causes. While thought-provoking and suggesting a variety of reforms, these studies have not so far offered a coherent theoretical argument and framework explaining why equality, and its various facets, should become a concern for competition law, and how this will interact with the existing economic efficiency- and/or consumer surplus-oriented paradigm of competition law. If one is to take equity concerns seriously, it becomes essential to provide a solid theoretical framework that would engage with the arguments put forward by those defending the status quo.

These are essentially three:

(i) the need for competition law to develop concepts and measurement tools that justify, from a welfare perspective, the recourse to state intervention in markets, welfare being narrowly defined, for methodological and ideological reasons,

(ii) the availability of other, presumably more effective, institutions than competition law to deal with inequality and

(iii) the existence of a trade-off between equality and efficiency, meaning that focusing on equality may harm economic efficiency.

The study engages with these three arguments. Taking a social contract perspective, and noting the hybrid nature of competition law, which is a tool of economic order, but also a form of social regulation, it explores the main difficulty in enriching competition law with equity concerns: the economic foundations of mainstream competition law in welfare economics, and the crucial separation of the economic efficiency dimension from that of distributive justice. It then examines alternative traditions in economic thought, which are more compatible with an egalitarian perspective. The study then turns to the institutional question, exploring the various instruments that governments dispose in order to equalise, and the respective role of more conventional tools against inequality, such as taxation, concluding that the institutional argument against equity concerns in competition law does not stand serious scrutiny. The study also critically engages with the argument that there is a trade-off between equality and efficiency, and again concludes that this argument does not stand serious scrutiny. The final part revisits the thorny question of what is to be equalised. Drawing on the idea of “complex equality”, it presents the contours of a fairness-driven competition law.

Continue Reading…