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Competition

One problem with the way antitrust doctrine is applied today in courts, which itself is an ahistorical interpretation of the law, is the way judges apply the “principles” of economics to their legal analysis of monopoly (anticompetitive) harms, harms sustained by immense market power.

The standard, popular threshold to measure harmful conduct is what is known as the consumer protection standard, which stipulates that so long as prices drop (making them cheaper for consumers) and/r production is efficient (producing the most stuff with the least amount of associated costs)–leading to more good stuff–there is no harm. This is to say that consumers experience harm strictly through price or output effects. Contemporary antitrust law prioritizes efficiency as an outcome, and puts the aforementioned price and output numbers for competition (also not viewed as a process) in the service of that outcome. Many companies from Facebook to AT&T have been under strict antitrust scrutiny but have ultimately walked away unscathed in courts in the wake of their egregious conduct.

Now obviously there are many issues that one can not even be aware of if narrowly focused on the outcome of efficiency. There are many things corporations, like Amazon, can do to achieve higher efficiency from squeeing worker pay to horizontal mergers to absorbing entire companies. Looking at efficiency as an outcome alone does not give you an obvious roadmap as to how it is achieved, nor does it give you any obvious answer as to how these gains are realized or distributed at each of distribution.

This is but one bit of evidence to forward the idea monopolies and monopoly power are not desirable, nor are they beneficial to anyone besides executives on corporate boards. But a less obvious and crucial aspect of the analysis of competition is that it can be, as legal scholar Sandeep Vaheesan notes, wasteful and socially corrosive. As one of the co-authors writing for the joint project “Eleven Things They Don’t Tell You About Law and Economics,” Vaheesan explains that competition itself (as I noted above) is often viewed as the praiseworthy alpha and omega outcome that antitrust courts and many scholars advocate for. There are some non-obvious criticisms of the essence of competition, but the thrust of Vaheesan’s excerpt that a general, categorical application of competition as an end goal–regardless of the context to which it is applied–is ill advised. This is because, depending on the industry, competition can have undesirable outcomes.

The first of which, what was referred to in my first regulation & antitrust class, are “natural monopolies.” What we can confirm from Vaheesan’s insight is that the natural gas, electric, and water industries are all examples of natural monopolies. Because these industries experience great economies of scale, and because they would not work effectively if subject to market competition, “building and operating a single electric transmission line,” for example, “is more cost effective than building and operating five parallel competing lines.” Society at large simply does not want to organize these types of services any other way because of the sheer monetary and non-monetary costs associated with it, including time it would take to reasonably compare all of the options. Imagine dealing with 100 different telecommunications companies with each of their respective thousand of different plans and fees when shopping for the most appropriate WiFi/phone services. Vahessan continues: “At the retail level, the success of competition in essential services requires a critical mass of users to have the time, ability, and interest to comparison shop across providers…” So instead of relying on the market to serve as a medium to allocate these things, he explains, “necessary state and local infrastructure is most effectively and usually provided through publicly-regulated companies.”

The second industry in which a general application of competition can lead to harms because of the potential for abuse by those with power, are in Labor Markets. Too much competition in labor markets essentially leads a race to the bottom as more and more people compete for a limited amount of jobs, which can lead to the erosion of worker benefits and wages. One example would be abolishing child labor laws because the desired goal is competition above all else (like the ethical objections). As noted before, we can see this as well when it comes to the debate about efficiency. It is not always (or should not ever e) implied that efficiency (and especially when thought of as an end goal) advantages could be associated with worker harms.

A final industry Vaheesan covers to make his point about the perils in broadly applying blanket competition is, perhaps more intuitively, the government. From my perspective, I think that in any case of contract, property, or otherwise legal arrangement, there needs to be some remedy, recourse, and standing for adjudicating disputes. Likewise, there should be a representative arbiter that recognizes these agreements and enforces their terms. Otherwise there would be endless blood feuds and wars.

As well, a general promotion of competition between governments that compete for who can give the best tax and corporate advantages to behemoth conglomerates bleeds cities and municipalities of critical revenue and public infrastructure. It literally hampers their ability to adequately provide for the citizenry if, for example, New York City bent the knee to Amazon and absolved them of the property taxes necessary to fund schools in that district, while at the same time benefitting immensely from the public infrastructure surrounding them. Between cities and state governments that compete in these capacities, there exists plenty of reason to not prioritize competition over other societal values. For sure, competition should not eclipse other tangible and widely acknowledged (and popular) initiatives to provide the public with goods they desire for themselves. Doing so come at the cost of society as a whole.

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