Antitrust in the Shadow of Market Disruptions
9 Pages Posted: 27 Jul 2020
Date Written: May 4, 2020
In the wake of the COVID-19 crisis, this paper revisits an old antitrust theme: the relationship between competition policy and large-scale market disruptions, such as wars, financial crises, natural disasters, pandemics, political upheavals, and technological change.
Discussions of the topic in the literature emphasize concerns that large-scale disruptions tend to lead to suspensions of antitrust enforcement and assertions that lax antitrust standards are likely to subvert preparedness for large-scale disruptions. These concerns and claims, I argue, are misplaced.
The United States partially suspended antitrust enforcement three times in the first half of the 20th century, when beliefs that competition was ruinous and wasteful were common and influential. By contrast, today, there is a broad consensus that the competitive process is beneficial and that antitrust standards have been overly lax in recent decades. It is, therefore, doubtful that the COVID-19 crisis would lead to further relaxation of enforcement standards.
Assertions that permissive antitrust standards undermine national preparedness for disasters, in turn, incorrectly premise that antitrust enforcement could mitigate systemic risks. In actuality, in the absence of regulatory restrictions on risk-taking, market competition can deter private investments in preparedness measures because firms do not internalize the effects of their conduct on systemic risks. By contrast, when the government sets and enforces preparedness standards, the competitive process is likely to drive down the costs of compliance with the standards and foster innovation in preparedness technologies.
The COVID-19 crisis illustrates that governments often fail to address systemic risks. It is, however, far from clear whether or how the vigor of antitrust enforcement affected private investments in pandemic preparedness.
Keywords: antitrust, competition policy, Covid-19, technological change, market disruptions
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