CHAPTER 1

Economic Development andGlobal Competition Law Convergence

David J. Gerber

Global convergence seems to many to be the best, perhaps the only, availablestrategy for reducing the conflicts, costs, and uncertainties that the currenttransnational competition law regime imposes on global economic activity.The failed attempt to include competition law in the World Trade Organizationin the early 2000s has led many to conclude that multinational coordinationregarding competition law has little or no chance of success and thattherefore convergence is the only available strategy for improving the legalframework for transnational markets. This convergence strategy is based onthe idea that the countries of the world (or at least most of them) will voluntarilymove toward a central model of competition law and that this processwill reduce the costs, uncertainties, and risks associated with the currentjurisdictional system.

This chapter examines a fundamental assumption on which the globalconvergence strategy is based—namely, that a large number of countries outsidethe United States and Europe will voluntarily adopt a specific conceptionof competition law that we will here call the "economics-based model"of competition law (EBM). This view of competition law relies on a specificform of economic analysis as the basis for competition law. The EBM hasbeen developed primarily in the United States, and thus the issue is whethera model of competition law created in a highly developed country with a large,open market can attract widespread acceptance and emulation by decisionmakers in a large number of countries that are not highly developed economicallyand that do not operate in a large, open market. The entire convergencestrategy is built on this assumption, because it can achieve its statedgoals only if there is widespread participation by developing countries. Thisassumption has received little systematic attention, at least until recently, butits central importance calls for closer scrutiny of its conceptual and empiricalfoundations.

The chapter reviews some of the support for this assumption. Specifically,it explores the basis for expecting developing countries to converge towardthe EBM. It identifies some of the incentives for decision makers in developingcountries to follow this model and some of the factors that may influencethose decisions.

Two themes are central to the analysis. The first is that claims for convergenceas global policy are often built on inadequately supported assumptionsabout the participation of developing countries. The second is that there is afundamental tension between the goals of economic development and thestrategy of global competition law convergence.

Concepts and Assumptions

Two concepts that are central to this analysis call for clarification. "Developingcountries" refers here to countries in which levels of economic developmentare low by international standards. This definition is obviously loose,but two factors sharpen its contours. First, my concern here is with economicdevelopment, as distinguished from social, political, or other forms of development.And second, I use a country's level of per capita income as the measureof economic development. There are other measures of economic development,and for many purposes they may be more appropriate than the"growth" standard that I use here. In most contexts, however, economicdevelopment continues to be primarily measured by per capita income levelsand I follow that usage here.

Clarifying the concept of convergence is particularly important, not onlybecause it is the focus of this chapter but also because there is much confusionabout its use. The term "convergence" is often used loosely to refer to thereduction of differences, but without clarifying which differences are involved,in what ways they are reduced, and between which actors they arereduced, the term is too vague to be useful and it is often misleading. Thecore meaning of convergence, and the one we will use here, refers to a processthat reduces the distance between individual points and a central point(the all-important convergence point). Here the convergence point is a competitionlaw model with a particular set of characteristics, and convergence is...