Challenges and Changes

The chapter focuses on two profound and lasting changes in competition. One is the deepening and widening of globalization, which alters the dimensions of markets; the other is the digital economy, which creates new forms of competition. Together, they challenge both domestic regimes and the global system. The chapter describes how these two changes combine to challenge competition authorities, courts, and legal professionals. It notes how individual regimes are responding to these changes and identifies key factors that shape their responses. It then shows how these challenges are altering many aspects of the relationships among competition law regimes—that is, the global competition law system.

The Global System: Interacting and Adapting

This chapter relates the pieces of the competition law world to each other. It presents individual laws, institutions, experiences, and influences as parts of a whole—an interactive and adaptive system. It outlines the formal framework of the system—the jurisdictional principles of international law that guide and constrain states in applying their laws to conduct outside their borders. It then looks at the system in motion—how ideas, incentives, and pressures cross regime borders to shape and drive decisions. Institutions and individuals are in frequent contact—either directly or through the use of internet content, including social media. Each adapts to the content it receives from others, and thus their messages and relationships continually adapt to new circumstances and information. This creates a new kind of system. Recognizing how it works makes competition law decisions everywhere more comprehensible and more predictable.

Competition Law in Europe

European competition law is the other central player in the competition law world, so an entire chapter is devoted to understanding how it works and how to deal with it. Virtually all firms operating beyond their own national boundaries need to pay attention to it, many regimes use it as a model and reference point, and its institutions have broad and often deep influence on many others. Some aspects of the substantive law are similar to US antitrust, but the similarities are sometimes misleading. For example, EU law uses economic analysis in ways that often differ from how it is used in the US. Procedural and institutional arrangements are often complicated. They represent multiple voices, as national and EU institutions function together to create, apply, and enforce competition law. The chapter reveals how this system functions and what factors guide decisions in it. It looks, in particular, at the institutional arrangements between the EU and its member states, including the role of the European Competition Network.

Us Antitrust Law: Central, but Unique

US antitrust law has long influenced all who deal with competition law—sometimes as a model, sometimes as a source of experience and insights, and sometimes as a surrogate for an “international standard.” It also has great practical importance in international business. This chapter provides information and insights necessary for understanding its roles and engaging with its rules and procedures. The chapter explains its institutional structures, basic principles of substantive law, and the central role of economic analysis in deciding cases. In particular, it throws light on the unique way in which judicial decisions (case law) guide decisions in all institutions and on the central significance of the categories of “rule of reason” and “per se treatment.” It also provides insights into the dynamics of the regime—the factors that drive antitrust decisions. It also sketches the ways in which it exercises influence on other competition law regimes.

Mergers and Acquisitions

Most major competition authorities are authorized to prohibit mergers and acquisitions affecting their territory and to condition approval of a proposed merger on changes to the merger agreement (e.g., requiring a participant to divest certain assets). Many laws also require the participating parties to notify the competition authority before the transaction is completed (premerger notification). Combining independent firms into one unit (known generally as a merger) can greatly increase the power of the resulting entity and affect markets in many parts of the world. For example, if the two largest and most successful manufacturers of computer chips in the world combine, the consequences will be felt almost everywhere. Some competition law regimes have greater capacity (e.g., economic and political leverage) to influence mergers than others, and the chapter identifies the factors that determine how much influence a particular merger law is likely to have. It examines the procedures common to these regimes and the standards that competition law institutions use in evaluating them. The chapter also looks at how these rules and procedures create a complex global web of firms, competition authorities, and economic experts.

What is It? Competition Law’s Veiled Identity

Both domestic factors and transnational influences shape competition laws, so there are many versions of competition law. In part for this reason, competition law is also often misunderstood. Some see it as a technical domain concerned only with economic efficiency. For others it is a tool for supporting fairness and openness in an economy. There are also those who view it as a legal mechanism to be used more broadly for social, political, and privacy goals. These variations and misunderstandings are barriers to understanding and communication. This chapter notes the veils that obscure competition law and distort perceptions of it. It then penetrates these veils by identifying the basic problems that all competition laws address, providing a definition of competition law that can apply to all competition laws, and outlining variations on the main theme. This provides a base that can provide insights into competition law and facilitate communication about it, especially across borders.

Anticompetitive Agreements

Chapters 5, 6, and 7 examine the targets of competition law. Key questions: Why is the conduct considered harmful? How is it pursued—for example, which remedies are used? What are the incentives and obstacles in pursuing the conduct? Where is enforcement likely—global patterns? Chapter 5 answers these questions for the two types of anticompetitive agreements. The first type includes horizontal agreements—that is, agreements between competitors. These are the most commonly pursued and heavily penalized violations in the world. Where such an agreement influences a market, it necessarily restrains competition, reducing efficiency, harming consumer welfare, impinging on economic freedom, and interfering with economic development. All competition laws target them, but they also allow justifications such as the need for cooperation in research, and competition laws vary significantly in the extent to which they allow such justifications. Vertical restraints—for example, between a manufacturer and a distributor—have a very different profile. They include, for example, agreements to fix consumer prices and to divide markets. Economists call for case-based analysis to determine their effects, and often such effects are difficult to prove, so competition laws in which economic analysis is central typically face limited enforcement against them. Many other competition laws contain specific rules condemning them.

The Goals and Uses of Competition Law

All competition laws have goals, and these goals direct decisions about what the law is and how it should be enforced. Some goals are set out in statutes; others are set by competition law institutions and courts (these are usually consistent with the formal statutory goals, but not always) formal government goals. In order to understand a specific competition law regime, it is necessary to identify the goals that shape them. Some goals are economic. These include efficiency, consumer welfare, and economic development. Other goals include fairness, privacy, and economic freedom. This chapter identifies each of these goals, probes the reasons for them, traces relationships among them, and follows some of their consequences. A key question here is: What factors determine how much influence stated goals will have on the decisions of institutions? Some institutions and individuals pursue goals that are not stated, but rather serve their own interests (e.g., corruption). The chapter refers to these goals, their origins, and their influence.

Institutions and Methods: Implementing Competition Law Goals

Institutions, procedures, and methods shape the paths from goals to decisions. This chapter examines that path. The following questions are central: Who makes the decisions? What are their incentives and influences? Which methods do they use for which purposes? The focus is on decisions both formal and informal and on the influences that shape them. The chapter examines the institutions of competition law—legislatures, competition authorities, and courts, identifying the structures and incentives of each as well as the roles played by size, structure, and capacities. Methods are the tools the institutions use in reaching decisions—or at least justifying them. The chapter reviews the use of economic and judicial methods in competition law and the ways in which economic methods interact with conventional legal and judicial methods to shape decisions.

Competition Law and Antitrust: A Global Introduction and Guide

Competition law shapes the conduct of business firms by deterring conduct that can harm both private interests—businesses and their employees, owners, and customers—and public interests such as the efficiency of markets, economic development, economic growth, and perhaps even social and political and economic stability. Despite its often immense importance, competition law is often poorly understood, and there are major differences among competition law regimes. This Guide makes competition law understandable and accessible to people everywhere. It provides a new set of tools that help the reader to make sense of competition law in any country and to recognize differences among them. It presents an integrated picture of competition law that is both domestic and global, and it uses this view to cut through the vast amount of data about competition laws and shape it to maximize access and understanding. It asks a central question: What factors influence decisions? Decisions in any competition law regime are often influenced by factors outside the host country, so the Guide shows how competition laws influence each other. It pays particular attention to the most influential competition law regimes—US and EU—and notes patterns of competition law in East Asia, Latin America, and developing countries.