Can Antitrust Promote Sustainability and Reduce Inequality?

How can antitrust best serve social goals? For the many who argue that market power yields greater wealth inequality, vigorous antitrust enforcement is necessary  to close the gap. Yet equality is not a consideration for current antitrust policy, which is concerned almost exclusively with consumer welfare (understood as a synonym for economic efficiency). In the absence of high prices or diminished output or consumer choice, antitrust intervention is unlikely.

More recently, we have heard that antitrust may stand in the way of environmental business collaborations. An entire industry might wish to implement a costly green initiative that could affect prices and reduce choice by removing non-sustainable goods from the market. Such arrangements are essential, companies claim, for creating incentives for a green transition. Yet from an antitrust perspective, they could require forgiving the unforgivable. The Sherman Act prohibits competitors from raising prices and limiting consumer choice. These restrictions of competition are often treated as per se illegal.

The relationship among competition, wealth inequality, and sustainability is much more complex than these views would suggest. In some cases, competition could make wealth inequality worse if, for example, routine jobs were replaced with computers. That could lower prices but also affect low-wage jobs. Similarly, antitrust enforcement could have a beneficial impact on environmental causes. In 2021, the European Commission fined various carmakers for colluding to hamper innovation in diesel car emission standards. It seems, therefore, that whether more or less antitrust enforcement is necessary depends on the circumstances. At the same time, the wider policy repercussions of specific decisions call for a coherent approach.

Predictably, advocates for (robust) enforcement that promotes equality and (weak) enforcement that does not hamper sustainability often have an agenda. In the latter camp are practitioners, who could be eyeing a new path to absolution for their clients’ potentially anticompetitive deals. Among the former would be the representatives of the New Brandeis school. They claim that current antitrust policy sets the bar too low and is inconsistent with the will of Congress that enacted the legislation. They want to do away with consumer welfare as the gold standard for measuring anti-competitiveness. They have a valid point, but a solid alternative standard has yet to emerge. Moreover, the woes Neo Brandeisians identify are not exclusively consumer-welfare related. The judiciary would have room to adopt a harsher approach within the boundaries of current antitrust policy.

It would not be unthinkable to establish that green collaborations between competitors are compatible with the Sherman Act, since it should be possible to prove that they have redeeming virtues. The courts have accepted similar arguments when restrictions on competition have been necessary to attain a justifiable goal. However, judges have also been reluctant to embrace environmental pursuits, often portraying them as politically inspired rather than science based. Moreover, the courts have also missed opportunities to protect both competition and equality. Examples of this include refraining from ruling per se illegal payoffs from pharma patent holders to generics producers for keeping generic drugs off the market, allowing American Express to block businesses from directing customers to cheaper alternative payment methods, and approving mergers that resulted in health insurance companies having access to their clients’ health data, potentially leading to greater premiums for high-risk patients.

Competition enforcers around the world are aware of these challenges. In recent years, sustainability guidance has been drafted in the European Union, the Netherlands, the UK, Austria, and Singapore, to name but a few. While these guidelines include attempts to facilitate environmental collaborations, they also reveal concerns about the weakening effect green antitrust could have on the law’s potential to deter anticompetitive conduct. It is regrettable that no such guidance has been issued in the United States.

In a recent paper, I argue that antitrust can have a positive impact on social goals, and enforcers should consider the broader effects of their decisions on society. However, the social role of antitrust is secondary. Pressuring enforcers to focus too heavily on  non-competition pursuits could place an unrealistic burden on them, and risks giving them overly broad powers. Legislatures  ought to give precedence to other mechanisms, such as taxation and regulation, to boost social goals that exceed the role of antitrust.

To reap antitrust’s full social potential, the focus should be on the “ripple effect” of enforcement actions on societal aims. One size does not fit all, but robust enforcement is a far superior option. When competition is protected, it is often the case that other indirect benefits ensue, including environmental or egalitarian ones. The social impact of antitrust could be boosted with relatively simple measures, including adjusting the agencies’ priorities when selecting the cases they will look into, or alleviating the heavy standard of proof enforcers must meet by placing greater onus on the companies suspected of breaching the law to justify their harmful behavior. It makes no sense to sacrifice antitrust because it cannot always address problems it was not designed to tackle. We would be losing out on the positive social impact of well-functioning markets and the potential to neutralize the harms that come with excessive market power.

This post comes to us from Sandra Marco Colino at the Faculty of Law of the Chinese University of Hong Kong (CUHK). It is based on her recent article, “Antitrust’s Social ‘Ripple Effect’,” available here.

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