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Competition Policy as a Political Bargain

73 Pages Posted: 17 Jan 2005  

Jonathan B. Baker

American University - Washington College of Law

Date Written: January 16, 2005

Abstract

Competition policy in the U.S. may be understood as a self-enforcing political bargain emerging from a repeated political interaction between two large and diffuse interest groups, consumers and producers. Absent such a bargain, regulatory policy would fluctuate between pro-producer policies that tolerate the exercise of market power and pro-consumer policies that systematically redistribute surplus from producers to consumers. This perspective is consistent with the broad contours of the historical U.S. experience with antitrust, particularly with the continuity in antitrust enforcement and decline in the political salience of competition policy since the 1940s. The adoption of Chicago school views during the late 1970s and 1980s, a notable recent period of discontinuity and heightened political salience, is best understood either as a demonstration that the political bargain is self-enforcing or as reform to increase the efficiency gains, and not as an episode inconsistent with the political bargain perspective. If competition policy represents a political bargain, enforcers and courts should seek to maximize aggregate surplus, so long as consumers and producers sufficiently share the efficiency gains, so that neither group can do better by reneging on the bargain. Current antitrust rules could not easily be exploited by consumers to transfer rents systematically from producers, so the antitrust laws should be enforced today to protect buyers without regard to aggregate surplus, unless the efficiency costs of doing so would be large.

JEL Classification: K21, L40

Suggested Citation

Baker, Jonathan B., Competition Policy as a Political Bargain (January 16, 2005). Available at SSRN: https://ssrn.com/abstract=649442 or http://dx.doi.org/10.2139/ssrn.649442

Jonathan B. Baker (Contact Author)

American University - Washington College of Law ( email )

4300 Nebraska Avenue, NW
Washington, DC 20016
United States
202-274-4315 (Phone)

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