29 Pages Posted: 6 Apr 2004
Date Written: March 2004
There are three central problems with the now-widespread use of advanced-nation competition policy tools by other nations, particularly in the developing world. (1) U.S. antitrust law and enforcement standards may be inappropriate in other economies with different business and economic environments. (2) Sound antitrust analysis and enforcement must always focus on markets. Countries, economies and jurisdictions are not the same as markets. Very seldom do 'relevant antitrust markets' correspond closely with jurisdictional boundaries. This creates technical problems in gathering information, threatens overlapping and potentially conflicting enforcement, and severely limits potential remedies. Far worse, it facilitates policy enforcement that promotes intra-jurisdictional economic welfare at the expense of extra-jurisdictional consumers. This problem worsens as globalization increases. It takes an act of faith to conclude that the result is an improvement in global economic welfare. Yet international coordination and cooperation in competition policy is, essentially, nonexistent. (3) In any country, antitrust law must operate chiefly through its effects on the expectations and incentives of economic actors rather than through the direct regulation of each transaction. Therefore, the economic effects of antitrust policy are mediated by the legal system and other determinants of economic actors' expectations. National legal systems are unique, both in substance and procedure, as are the economic and political histories that influence expectations. It follows that, even if they are 'correct' for the United States or the European Union, standard antitrust policies are very unlikely to produce optimal results elsewhere.
This paper discusses these and related issues in reviewing Professor Michal S. Gal's new book, Competition Policy for Small Market Economies.
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