The Friction Paradox: Intermediaries, Competition, and Efficiency

Arizona Legal Studies Discussion Paper No. 23-05

68 Antitrust Bulletin 234 (2023), https://doi.org/10.1177/0003603X231162999

17 Pages Posted: 23 Mar 2023 Last revised: 13 Jul 2023

Date Written: April 6, 2023

Abstract

Commentators sometimes say that the elimination of impediments to trade—namely, market friction—tends to expand trade and foster competition. This casual assumption is known to be erroneous. Antitrust law recognizes that restraints of trade—which are forms of market friction—are often pro-competitive and frequently have both pro- and anti-competitive effects. Accordingly, antitrust law prohibits unreasonable restraints of trade, but not all restraints of trade. Trustbusting advocates promote a different approach to market friction. They argue that the antitrust laws intend to maintain fragmented industries and favor small businesses. This approach, which has been embraced by the antitrust agencies in recent years, implies that high-friction markets are more competitive than low-friction markets. It is an expression of a phenomenon that can be called the “friction paradox”: the elimination of market friction is desirable until this goal is accomplished. Notable examples of the friction paradox include hostility toward new generations of market intermediaries, such as supermarkets, chain stores, department stores, big-box stores, digital platforms, and digital ecosystems.

This Article observes that antipathy for large intermediaries results in a willingness to sacrifice the core benefits of competition—low prices, convenience, efficiency, and innovation. It, therefore, argues that antitrust expressions of the friction paradox place competition policy at war with itself.

Keywords: antitrust, competition policy, big tech, digital intermediaries, friction paradox

Suggested Citation

Orbach, Barak, The Friction Paradox: Intermediaries, Competition, and Efficiency (April 6, 2023). Arizona Legal Studies Discussion Paper No. 23-05, 68 Antitrust Bulletin 234 (2023), https://doi.org/10.1177/0003603X231162999, Available at SSRN: https://ssrn.com/abstract=4396886 or http://dx.doi.org/10.2139/ssrn.4396886

Barak Orbach (Contact Author)

University of Arizona ( email )

1201 E. Speedway Blvd.
Tuscon, AZ 85721-0176
United States
520-626-7256 (Phone)

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