In 1890, the U.S. Congress passed the Sherman Act, the first modern antitrust law. The law banned “every contract, combination, or conspiracy in restraint of trade,” as well as “monopolization, attempted monopolization, or conspiracy or combination to monopolize.” In the 135 years since, more than 120 countries have created their own competition enforcement authorities, the majority of them since 1990, banning such practices as firms buying up all of their competitors or creating a cartel to set prices.
Fiona Scott Morton, Yale SOM’s Theodore Nierenberg Professor of Economics and from 2011 to 2012 the deputy assistant attorney general for economics at the Antitrust Division of the U.S. Department of Justice, said in an interview with Yale Insights that antitrust laws are key to a well-functioning market, forcing firms to focus their efforts on meeting their customers’ needs rather than pushing aside the competition.
“If the antitrust laws are strong, and it’s difficult to merge with a competitor, for example, or you’re not allowed to push an entrant out of your market so that you can monopolize your market,” she said, “then it becomes harder to earn profit and you have to earn profit by competing on the merits, which means offering consumers a really good product that they want to buy, at a price that they find competitive.”
As more and more countries have created competition enforcement authorities, the laws governing competition have diverged. U.S. law is focused on competition and how it benefits consumers. But some countries, Scott Morton pointed out, have additional goals for their antitrust regimes. “In South Africa,” for example, “their competition law includes bringing more black South Africans into the economy.” Other countries focus on creating opportunities for small and medium-sized enterprises.
“Those kinds of issues are specific to the background and experience of those countries, and might be perfectly legitimate social goals,” she added. “They’re not really going to converge with U.S. enforcement because U.S. enforcement at this point is based on this consumer welfare, efficiency standard.”
Global companies fall under the jurisdiction of multiple competition enforcement authorities, which creates challenges—and opportunities for collaboration—in enforcement. For example, Scott Morton pointed out, the proposed merger between oilfield service providers Haliburton and Baker Hughes was called off earlier this year in the face of opposition from both U.S. and European authorities. In such cases, she said, “typically the firms will sign waivers that allow the two agencies to talk to each other and to share documents.” The resulting process is more efficient and less likely to result in two authorities considering different facts and arriving at opposite conclusions
European and American authorities have arrived at opposite conclusions in the case of Google, which was recently charged with antitrust violations relating to its mobile Android software by the European Union. “I would say that the recent statement of objections against Google in the European Union is good evidence that we don’t have at the present time have convergence [of antitrust law] in the high-tech sector,” Scott Morton said.
The technology sector presents particular challenges for antitrust authorities, simply because its products are often accessible from around the world, she said. For example, if Google alters its search engine in Europe to conform with local laws, consumers there can simply access the U.S. site. “It is really hard to think about how you design remedies and think about antitrust enforcement in a world where you have one global market.”
Read materials from Problems with Global Antitrust Enforcement, a conference hosted by the Yale School of Management in February 2016.