LPE Project - Fair Competition Policy without a Fair Competition Philosophy

 

Legal director Sandeep Vaheesan describes the important difference between promoting fair competition versus just promoting competition.

***This post kicks off a week-long symposium on President Biden’s Executive Order on Promoting Competition in the American Economy.***

President Biden’s Executive Order on Promoting Competition in the American Economy is a laudable directive. The July 9 order calls on cabinet departments and independent agencies to use their statutory authorities to tame corporate power. It recommends actions to address pressing public concerns, such as unaffordable prescription drugs due to collusion among pharmaceutical companies, non-compete contracts that bind workers to their employers, and the expensive and slow broadband service available to millions of Americans under telecom monopolies. With six dozen enforcement, regulatory, and policy recommendations covering much of the economy, the executive order has a grab-bag quality to it. Nonetheless, many of the recommended actions, if undertaken by the relevant secretaries and agency heads, would make life materially better for American consumers, workers, farmers, and business proprietors. To the president’s credit, his order repeatedly cites these groups as its intended beneficiaries.

Yet as a statement of philosophy, the order is a disappointment. Executive orders, like budgets, are moral documents: they should offer not only policy prescriptions but also a broader vision of justice. In this case, what do fair business rivalry and a fair market look like? While using the language of “fair competition” and “unfair competition” repeatedly, the order does not articulate what conduct constitutes fair or unfair competition, let alone the underlying principles that should guide competition rules. In other places, the order falls back on the prevailing language of “anticompetitive conduct” and “promoting competition” (including in the title), implying that certain competitive practices offend some platonic ideal of competition itself. Fortunately, this document is only a starting point. In implementing its recommendations, agencies, such as the Federal Trade Commission, should articulate and expand on antitrust law’s existing, but largely unstated, notions of fair competition.

The president correctly recognized that competition is not categorically good. The law unavoidably limits certain methods of competition. Indeed, many of these restrictions are taken for granted and hardly questioned at all, even by members of the so-called free market right. For instance, laws on deceptive marketing and industrial sabotage prohibit businesses from gaining a competitive advantage using these methods.

Speaking of fair versus unfair competition is, moreover, an intellectual advance over the dominant modes of antitrust discourse. Today, courts and antitrust enforcers describe desirable business conduct as “procompetitive” (or even “hypercompetitive”) while characterizing undesirable conduct as “anticompetitive.” These terms have little substantive content and merely serve as labels that follow from an antitrust official’s or judge’s moral intuition about a challenged business practice. In federal court, a practice that offends a judge’s sense of justice (whether rooted in traditional notions of the moral economy or the allocative efficiency of neoclassical economics) is condemned as “anticompetitive” while conduct that strikes a judge as fair is blessed as “procompetitive.” Courts even blithely assert that Congress enacted the antitrust laws for “the protection of competition, not competitors.” This contention ignores that not all forms of competition are legal and that competitors injured by antitrust violations can and do obtain treble damages and injunctive relief.

Even where it embraces the language of fair competition, however, the order fails to articulate the principles of fair competition. What makes a practice fair or unfair? To borrow language from a 1966 Supreme Court antitrust decision, what distinguishes “the willful acquisition of maintenance of [monopoly] power,” which is illegal, from monopoly “as a consequence of superior product, business acumen, or historic accident,” which is legal? The order says hardly anything about which practices are unfair and why. It is thin on details and presents just a few examples of unfair competitive practices, including restrictions on owners’ right to repair durable goods and bundling of real estate brokerage and listing services. What makes these practices unfair? The order is silent and does not offer principles to guide the departments and agencies.

Continue reading on LPE Project here.