International Antitrust Explosion in the FT
Financial Times (HT: Danny Sokol) highlights the problem of multi-jurisdictional antitrust enforcement, emphasizing the rise of India and China. The article repeats the basic point, worth repeating, that international cooperation can help avoid bad outcomes with multiple regulatory stakeholders with different incentives and institutional environments:
That is not a criticism of the new competition rules in either country – both are modernising laws on which the legal profession has been consulted. If enforced both promptly and evenhandedly, strong antitrust laws will mark a step towards competitive capitalism, rather than crony capitalism, in both countries. Local consumers will benefit.
On international deals, however, China and India (and the US and European Commission) should leave mergers to the one jurisdiction best placed to handle them. If a merged company would have $200m sales and a 5 per cent market share in India, but $10bn sales and a 30 per cent share in the US, it is obvious who should take the lead. A forum to co-ordinate regulators – the International Competition Network – already exists. China should join it.
I’m pleased to see the FT calling attention to this issue. Its an important one. Perhaps one the most important on the antitrust enforcement policy landscape. Joining the ICN and the international antitrust community more broadly is one way to generate cooperation and avoid bad outcomes. But count me a skeptic with respect to the proposition that assigning jurisdiction to the competition policy agency with the greatest dollar value interest in the activity at issue will solve the problem. The problem of mitigating the costs of multiple international competition agencies is a complex one with a lot of moving parts (Chairman Kovacic’s recent speech is a must-read on these issues).
I’ve argued previously that the policy discussion ought not emphasize “convergence or divergence per se, but jurisdictional competition combined with facilitation of superior substantive analytical norms.” In other words, lets talk about getting optimal substantive standard adopted, say what we mean when we use code words like “convergence” (e.g. in the U.S. this appears to mean, movement to the standards adopted by our courts, and in particular, the Supreme Court), and respectfully but firmly and consistently hold competition agencies accountable for their decisions and enforcement philosophies. This means that there is a lot of work to be done by economists and lawyers in figuring out the competitive effects of various forms of conduct, both in theory and testing these theories with data, in order to come to some sort of agreement about the design of optimal standards with sensitivity to important institutional differences between countries.
To be sure, jurisdictions will disagree about the state of the evidence of strength of opposing theories. Differences in legal institutions and history will also drive divergence. The optimal level of divergence is not zero. But the substantial current level of divergence, in my view, could be reduced to the benefit of consumers with international agreement on a few important and (to my mind at least) not-so-controversial principles, e.g. the adoption of the error-cost framework as an appropriate lens through which to evaluate optimal antitrust rules. The ICN and the international antitrust community can and do make substantial efforts to instigate this type of discussion and so must be, along with other institutions which facilitate cooperation, part of the solution. But my sense is that the current debates focus too little on the actual state of economic theory and evidence and too much on everything else.