Insight
Why big business may learn to love EU competition policy by Zach Meyers 1 February 2022
Big multinationals sometimes criticise the EU’s competition policy, which is more aggressive than America’s. But in the long term, Brussels’ approach could prove more balanced and predictable than Washington’s. Law-makers around the world have become fearful that markets are becoming too concentrated, with a few firms making most sales, especially in innovative sectors like pharmaceuticals and digital markets. Reports show that large firms’ market power is increasing, leading to less investment and innovation in developed economies. EU policy-makers believe these concerns justify the Union’s competition policy, which since the 1980s has been more aggressive at tackling market concentration than America’s. Now, even America acknowledges the problem. In July 2021, Joe Biden issued an executive order encouraging stronger antitrust enforcement. He has also appointed two hawks, Lina Khan and Jonathan Kanter, to lead the two US agencies responsible for competition law enforcement, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) Antitrust Division. Pressure across Congress to reform US competition law is also growing. Two important aspects of competition policy are the way competition authorities regulate dominant firms, and how authorities review corporate mergers and acquisitions. In these two areas – and leaving aside the sweeping laws it proposes for digital platforms – EU reforms are likely to remain modest, thanks to the guardrails provided by the EU treaties and EU courts. In comparison, the US risks overcompensating for its past timidity – banning activities which benefit consumers. In the long run, the EU’s competition policy may prove less volatile and overzealous than America’s. Regulating dominant firms In the EU and the US, competition law prohibits dominant firms from engaging in anti-competitive conduct. Nominally, both EU and US authorities identify whether conduct is anti-competitive through the ‘consumer welfare standard’. The standard tests whether the dominant firm harms consumers – for example, by making it impossible for efficient competitors to remain viable, thereby reducing consumers’ choices. Conduct is not anti-competitive just because it harms individual competitors – after all, the point of competing is to become more efficient, innovative or to offer better or cheaper products, and that way to gain advantages over rivals. CER INSIGHT: Why big business may learn to love EU competition policy 1 February 2022
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