Competition law
Competition law is the field of law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies.[1][2] Competition law is implemented through public and private enforcement.[3] It is also known as antitrust law (or just antitrust[4]), anti-monopoly law,[1] and trade practices law; the act of pushing for antitrust measures or attacking monopolistic companies (known as trusts) is commonly known as trust busting.[5]
"Antitrust" and "Anti-Monopoly Law" redirect here. For the film, see Antitrust (film). For the law specific to China, see Anti Monopoly Law of China.
The history of competition law reaches back to the Roman Empire. The business practices of market traders, guilds and governments have always been subject to scrutiny, and sometimes severe sanctions. Since the 20th century, competition law has become global.[6] The two largest and most influential systems of competition regulation are United States antitrust law and European Union competition law. National and regional competition authorities across the world have formed international support and enforcement networks.
Modern competition law has historically evolved on a national level to promote and maintain fair competition in markets principally within the territorial boundaries of nation-states. National competition law usually does not cover activity beyond territorial borders unless it has significant effects at nation-state level.[2] Countries may allow for extraterritorial jurisdiction in competition cases based on so-called "effects doctrine".[2][7] The protection of international competition is governed by international competition agreements. In 1945, during the negotiations preceding the adoption of the General Agreement on Tariffs and Trade (GATT) in 1947, limited international competition obligations were proposed within the Charter for an International Trade Organisation. These obligations were not included in GATT, but in 1994, with the conclusion of the Uruguay Round of GATT multilateral negotiations, the World Trade Organization (WTO) was created. The Agreement Establishing the WTO included a range of limited provisions on various cross-border competition issues on a sector specific basis.[8] Competition law has failed to prevent monopolization of economic activity. "The global economy is dominated by a handful of powerful transnational corporations (TNCs). ... Only 737 top holders accumulate 80% of the control over the value of all ... network control is much more unequally distributed than wealth. In particular, the top ranked actors hold a control ten times bigger than what could be expected based on their wealth. ... Recent works have shown that when a financial network is very densely connected it is prone to systemic risk. Indeed, while in good times the network is seemingly robust, in bad times firms go into distress simultaneously. This knife-edge property was witnessed during the recent (2009) financial turmoil ..."[9]
Competition law, or antitrust law, has three main elements:
Substance and practice of competition law varies from jurisdiction to jurisdiction. Protecting the interests of consumers (consumer welfare) and ensuring that entrepreneurs have an opportunity to compete in the market economy are often treated as important objectives. Competition law is closely connected with law on deregulation of access to markets, state aids and subsidies, the privatization of state owned assets and the establishment of independent sector regulators, among other market-oriented supply-side policies. In recent decades, competition law has been viewed as a way to provide better public services.[10] Robert Bork argued that competition laws can produce adverse effects when they reduce competition by protecting inefficient competitors and when costs of legal intervention are greater than benefits for the consumers.[11]
Competition law is enforced at the national level through competition authorities, as well as private enforcement. The United States Supreme Court explained:[50]
In the European Union, the so-called "Modernisation Regulation",[51] Regulation 1/2003,[52] established that the European Commission was no longer the only body capable of public enforcement of European Union competition law. This was done to facilitate quicker resolution of competition-related inquiries. In 2005 the Commission issued a Green Paper on Damages actions for the breach of the EC antitrust rules,[53] which suggested ways of making private damages claims against cartels easier.[54]
Some EU Member States enforce their competition laws with criminal sanctions. As analysed by Whelan, these types of sanctions engender a number of significant theoretical, legal and practical challenges.[55]
Antitrust administration and legislation can be seen as a balance between:
Chapter 5 of the post-war Havana Charter contained an Antitrust code[57] but this was never incorporated into the WTO's forerunner, the General Agreement on Tariffs and Trade 1947. Office of Fair Trading Director and Richard Whish wrote sceptically that it "seems unlikely at the current stage of its development that the WTO will metamorphose into a global competition authority".[58] Despite that, at the ongoing Doha round of trade talks for the World Trade Organization, discussion includes the prospect of competition law enforcement moving up to a global level. While it is incapable of enforcement itself, the newly established International Competition Network[59] (ICN) is a way for national authorities to coordinate their own enforcement activities.