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The Global Limits of Competition Law

Stanford University Press

Contents

Preface.....................................................................................................................................................viiContributors................................................................................................................................................xiIntroduction Ioannis Lianos and D. Daniel Sokol............................................................................................................11. The Limits of Antitrust and the Chicago School Tradition George L. Priest...............................................................................152. Competition Law and Human Rights: Striking a Balance Between Business Freedom and Regulatory Intervention Arianna Andreangeli...........................223. Limits of Imports from Economics into Competition Law Anne-Lise Sibony..................................................................................394. Complications in the Antitrust Response to Monopsony Jeffrey L. Harrison................................................................................545. Antitrust and the Close Look: Transaction Cost Economics in Competition Policy Herbert Hovenkamp........................................................666. Anticompetitive Government Regulation D. Daniel Sokol...................................................................................................837. A Global Perspective on State Action Damien M. B. Gerard................................................................................................998. IP's Advantages over Antitrust Daniel A. Crane..........................................................................................................1179. Competition Law and Consumer Protection Against Unfair Commercial Practices: A More-than-Complementary Relationship? Paolisa Nebbia.....................12710. Judicial Scrutiny and Competition Authorities: The Institutional Limits of Antitrust Javier Tapia and Santiago Montt...................................14111. Competition Authorities: Independence and Advocacy Frédéric Jenny............................................................................15812. Competition Law Remedies: In Search of a Theory Ioannis Lianos.........................................................................................17713. How Culture May Change Assumptions in Antitrust Policy Thomas K. Cheng.................................................................................20514. Promoting Convergence of Competition Policies in Northeast Asia: Culture-Competition Correlation and Its Implications Ki Jong Lee......................22115. The Limits of Competition Law in Latin America Julián Peña...................................................................................236Notes.......................................................................................................................................................253Index.......................................................................................................................................................283

Chapter One

George L. Priest

The Chicago School Antitrust Tradition

As is well known, putting aside a few stray endeavors that had no abiding influence, law and economics as a field began with the work of Aaron Director and Ronald Coase centered on papers published in the Journal of Law & Economics, which began publication in the late 1950s. Looking back on those efforts, law and economics as developed by Director and Coase was not exactly ideological, but derived from what might be called a deeply held belief system that political interference in market activities interfered with freedom and reduced societal welfare. The phrase "reduced societal welfare" is a modern, technocratic concept. The opposition of Director and Coase to governmental interference in market activities was much deeper. Director was one of the founding members (along with Milton Friedman, Frank Knight, Ludwig von Mises, and George Stigler, among others) of the Mont Pelerin Society, organized by Friedrich Hayek in 1946. Hayek had published The Road to Serfdom in 1944. Following themes of The Road to Serfdom, the Mont Pelerin Society was, and to some extent still is, dedicated to the proposition that political interference with market activities is harmful to freedom—though the Society avoided a purely libertarian approach—and to broader individual and societal goals. Coase was not present at the first meeting of the Society but became a member two years later, in 1948, and at some later point, a Life Member.

The early volumes of the Journal of Law & Economics illustrate the commitment of the editors—first Director, succeeded by Coase—to the belief in the superiority of the market to political allocation of resources. The first issues contain some articles that might be regarded as economic science, but they also contain numerous articles that are essentially essays in political economy—market-oriented political economy: in volume 2 of the Journal, Hirshleifer's articles Capitalist Ethics—Tough or Soft? and The Sumptuary Manifesto, and Buchanan's Positive Economics, Welfare Economics, and Political Economy; in volume 3, Jacob Viner's The Intellectual History of Laissez Faire; in volume 4, Stigler's Private Vice and Public Virtue. Though these early volumes of the Journal do not ignore the scientific application of economic analysis, they resemble more closely a high-level journal of promarket political philosophy than a journal of economic science.

The political philosophy, however, would not entirely generate the law and economics movement; the philosophy combined with empirical work would. From the earliest issues, the editors—Director and Coase—encouraged articles of an empirical nature critical of specific governmental interventions in the market, first to complement, later to completely supplant, the essays on political economy.

Antitrust law and economic regulation were particular subjects of criticism, though articles in the Journal also addressed the effects, economic and otherwise, of the minimum wage, unionization, licensing, and even the British National Health Ser vice, among others. In the first issue of the Journal, Director published John McGee's reanalysis of the Standard Oil case, showing that the basic theory of predatory pricing underlying the Supreme Court's opinion had misunderstood the economic practices at issue entirely. Rockefeller and associates had created the Standard Oil monopoly not by predatory practices such as undercutting prices or through railroad rebates (hard to distinguish from volume discounts), but by buying out rivals, giving them a share of potential monopoly profits. Note that the point of McGee's argument is not that the Standard Oil monopoly was not a monopoly and perhaps ripe for dissolution (McGee expressly put aside that question), but rather that the economic analysis of predatory pricing adopted by the Supreme Court and in popular understanding was naive, if not idiotic. McGee's point, surely encouraged by Director, was to demonstrate that the justification given by the Court and accepted in popular opinion for governmental interference in...