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Competition policy originated of an economic imperative that has been expressed from ancient societies to modern industrialized societies, and the new economy is no exception. This need stems from market failures that have forced states to regulate [1], going against a strict application of the Smithian theory of the invisible hand [2]. Whatever its form or intensity, competition policy has left its mark on every era.
As far back as Greek antiquity, people recognized the risks that the development of the market economy could entail, with the possibility of the creation of monopolies and the accumulation of considerable wealth by certain individuals and the state [3]. The unfair distribution of wealth not based on merit was one of the main market failures identified by Aristotle – “à chacun selon son dû [4]”.
In this context, merit plays a fundamental role in competition policy, as it encourages players to innovate by promising them rewards proportionate to their entrepreneurial initiative. This approach also encourages states to specialize in products and services by exploiting their natural resources, geography and internal competitive dynamics, in order to benefit from a comparative advantage on a global scale that can boost competitiveness on the international market [5]. Thus, when many states compete, they also specialize in specific areas, facilitating global trade and promoting optimal resource allocation, thus contributing to the general well-being of open states. This interdependence between nations also promotes global prosperity and peace [6].
Post-revolutionary societies had seized the opportunity to regulate economic activity through competition law. France, for example, criminalized cartels, and the USA dismantled certain trusts with the introduction of the Sherman Act in 1890 and, above all, the Clayton Act in 1914. However, the idea of competition having prosperous effects on the economy was called into question during the 1929 crisis, prompting states to favor cartelization and protectionist subsidies to cope with the scarcity of goods and the approach of the war economy. This cartelization proliferated globally [7].
The post-war period, on the other hand, paved the way for the decartelization and protection of the competitive process by law, as advocated by the ordoliberals of the Freiburg School as early as the 1930s. In this respect, the construction of the European Union was notably shaped by the regulation of the competition process in the ECSC Treaty (1951) and the EC Treaty (1957). However, cross-border doctrinal divisions have emerged between neoliberal and structuralist currents concerning the implementation of competition.
On the one hand, neoclassical economists, inspired by Schumpeterian theories, believe that competition represents a dynamic process that can lead to maximum welfare in the long term - even in cases where companies temporarily hold market power that is sometimes harmful in the short term - due to efficiency gains, potential competition and the inevitable destruction and replacement of monopolies. For this school of thought, competition policy should advocate for minimal state intervention, focusing on the economic approach to short-term effects. The state should therefore encourage market freedom as far as possible [8].
Structuralists, on the other hand, believe that the behavior of firms can lead to an increase in market power and the disruption of competitive conditions, to the detriment of welfare. The role of competition policy must then be to keep the economy close to conditions of pure and perfect competition, especially with regard to the atomicity criterion, so that consumers can benefit from a significant surplus in the short term, and to take account of the effects of behavior, which, contrary to the neoclassical view, should lead to the emergence of monopolies creating insurmountable barriers to entry, which is unfavorable to long-term welfare[9].
During the Progressive Era, the structuralist trend was widely followed, particularly under President Roossevelt, who followed the advice of Justice Brandeis to dismantle the trusts that were proliferated in the United States. But this was short-lived, as from the 1980s, with the Reagan administration, neoclassical theses were widely accepted in the United States [10] and then within the European Union [11], resulting in the emergence of new trustsin a new, fast-developing sector: digital [12].
This is the background to the recent New Brandeis (or neo-structuralism) movement in the United States, which calls for a return to the lost principles of the trust era as part of a broader revival of progressive American ideas [13]. The European Union had reacted much earlier by modernizing competition law, which focused on refocusing prohibitions to target the real nuisance power exercised by dominant companies against free market access [14]. Today, the European Union is adapting. The Digital Markets Act, for example, was introduced in response to the new trusts’ attempts to monopolize the digital space. However, the European Union is not stopping at this regulation, and is using all legally possible means to try and limit the harmful use of the market power of these new trusts (taking into account the ecosystemic context on which these new trusts are based [15], a paradigm shift in the implementation of Article 22 of the Merger Regulation concerning the upward referral of merger operations below the thresholds [16], the possibility of controlling an operation ex post, etc. [17]). There it is: the new zeitgeist.
[1] Franck Bien, Sophie Méritet, Microéconomie, Les défaillances de marché, Pearson Education France, 20 June 2014, p 123.
[2] Adam Smith, Recherches sur la nature et les causes de la richesse des nations, tome II, Flammarion, 1991, p. 42-43.
[3] Aristotle, Politiques, Book I, Chapter IV, §6, translation by Jules Barthélemy-Saint-Hilaire, Ladrange, 1874.
[4] Aristotle, Éthique à Nicomaque, Book V, Translation by Jules Tricot (1959), Les Echos du Maquis, January 2014, p. 116 and p. 216 – “to each according to his due” (free translation).
[5] David Ricardo, Des principes de l'économie politique et de l’impôt, Flammarion, 4 January 1999, p. 97-104.
[6] Ibid, pp. 103-104.
[7] e.g.: National Industrial Recovery Act of 1933 in the US. For Europe, see e.g., David J. Gerber, Law and Competition in Twentieth Century Europe, Clarendon Press, 1998, which shows that Germany already had permissive laws regarding cartels before 1933, but that these were renforced under the Nazi regime.
[8] see in this respect: Robert Bork, The Antitrust Paradox: a policy at war with itself, Basic Books, pp. 104-106 (in particular).
[9] Lina Khan, “Amazon’s Antitrust Paradox”, The Yale Law Journal, Volume 125, Issue 3, 2017.
[10] e.g.: Eleanor Fox: “Goals of Antitrust Consumer Welfare v Fairness & Competitive Process, Types of Populism”: “Beware of state intervention, let the market do its work, and everything will be fine for everyone. That’s what the Chicago school whispered into Reagan’s ears, prompting him to change antitrust laws. Even the Supreme Court applied these assumptions subliminally without explicitly discussing them and in a very friendly manner towards companies in dominant positions in the markets, making it difficult to demonstrate the market power of the company and its anticompetitive behavior”, Digital Markets Research Hub, July 2023.
[11] Frédéric Marty, « L’approche plus économique en matière d’application des règles de concurrence », GREDEG, Working Paper No. 2020-16, 2020, p. 9-14.
[12] Frédéric Marty, « La concentration du pouvoir économique depuis la pandémie », Prisme 41, Cournot Centre, October 2020.
[13] Tim Wu, “The Curse of Bigness: Antitrust in the New Gilded Age”, Columbia Global Reports, 13 November 2018.
[14] Catherine Prieto, « Pouvoir de marché et liberté des entreprises, les fondements de la politique de concurrence », Recueil Dalloz, 2006, pp. 1603-1609.
[15] see, e.g., GC, 14 September 2022, Google and Alphabet v Commission, case T-604/18; Decision M.10615 of the Commission, 25 September 2023, Booking/eTraveli.
[16] CJEU, 3rd September 2024, Illumina v Commission and Grail v Commission and Illumina, joined cases C-611/22 P and C-625/22 P.
[17] CJEU, 16 March 2023, Towercast/ADLC and Minister for the Economy, Case C-449/21.
Ridhwane ALLOUCHE
Ridhwane Allouche is an LLM candidate at the College of Europe and a member of the French Association for Competition Studies (AFEC Jeunes). He holds a Master’s degree in Competition and Distribution Law from the University of Paris 1 Panthéon-Sorbonne.
