International Competition Network (ICN) 2015 Annual Conference: A Higher Profile for Competition Advocacy

Alden Abbott —  11 May 2015

The ICN’s 14 Annual Conference, held in Sydney, Australia, from April 28th through May 1st, as usual, provided a forum for highlighting the work of ICN working groups on cartels, mergers, unilateral conduct, agency effectiveness, and advocacy.  The Conference approved multiple working group products, including a guidance document on investigative process that reflects key investigative tools and procedural fairness principles; a new chapter for the ICN Anti-Cartel Enforcement Manual on the relationship between competition agencies and public procurement bodies; a practical guide to international cooperation in mergers; a workbook chapter on tying and bundling (more on this in a future Truth on the Market commentary); and a report on developing an effective competition culture.  Efforts to promote greater openness and procedural due process in competition agency investigations (a U.S. Government priority) – and to reduce transaction costs and unnecessary burdens in merger reviews – continue to make slow but steady progress.  The host Australian agency’s “special project,” a report based on a survey of how agencies treat vertical restraints in online commerce, fortunately was descriptive, not normative, and hopefully will not prompt follow-up initiatives.  (There is no sound reason to believe that vertical restraints of any kind should be given high enforcement priority.)

Most significant from a consumer welfare standard, however, were the signs that competition advocacy is being given a higher profile within the ICN.  Competition advocacy seeks to dismantle, or prevent the creation of new, government regulations that harm the competitive process, such as rules that create barriers to entry or other inefficiencies that have a disparate impact on differently-situated firms.  The harm stemming from such distortions (described as “anticompetitive market distortions” or “ACMDs” in the recent literature) swamps the effects of purely private restraints, and merits the highest priority from public officials who seek to promote consumer welfare.  In the plenary event on the Conference’s closing day (moderated by former UK Office of Fair Trading head John Fingleton), the leaders of the competition agencies of France, Mexico, and Singapore, joined by an Italian Competition Commissioner, addressed the theme of “credible advocacy,” specifically, means by which competition agencies can highlight the harm from government impediments to competition.  Representatives of the World Bank and OECD participated in the Sydney Conference discussions of competition advocacy, reflecting a growing interest in this topic by international economic institutions.  The newly approved ICN report on developing a competition culture pointed the way toward promoting greater public acceptance of procompetitive policies – a prerequisite for the broad-scale dismantling of existing (and blocking of newly proposed) ACMDs.

Notably, in a follow-up breakout session on advocacy toward policymakers, former Mexican competition chief (and head of the ICN Executive Steering Committee) Eduardo Perez Motta cited the example of his agency’s convincing the Mexican Commerce Ministry not to adopt new non-tariff barriers that would have effectively blocked steel imports – a result that would have imposed major harm on both Mexican businesses that utilize steel inputs and many ultimate consumers.  (The proposed steel restraint, a prime example of an ACMD, represented a manifestation of crony capitalism – a growing problem in industrialized economies, including the United States.)  This example vividly demonstrates that competition agencies may occasionally prove successful in the fight to curb ACMDs (and crony capitalism in general), if they have sufficient political influence and are given the correct tools to spot and highlight for the public the costs of such harmful government restraints.

A powerful way to build public support against ACMDs is to highlight their costs.  Scholars from Babson College (Shanker Singham and Srinivasa Rangan), Northeastern University (Robert Bradley), and I have developed a metric that seeks to estimate the negative effects of ACMDs on national productivity.  Our paper, which presents quantitative estimates on how various institutional factors affect productivity, draws upon existing indices of economic liberty, including the World Economic Forum Global Competitiveness Index, the Fraser Index, and the Heritage Foundation Index of Economic Freedom.  We will present this paper at a World Bank-OECD Conference on Competition Policy, Shared Prosperity and Inclusive Growth, to be held next month at World Bank Headquarters in Washington, D.C.  (Hopefully this will lead to annual joint World Bank-OECD conferences exploring this topic.)  Stay tuned for additional information on ongoing efforts by the ICN and other international economic institutions to bolster competition advocacy – and for more details on my co-authored paper.

Alden Abbott

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I am a Senior Legal Fellow at the Heritage Foundation. I write on antitrust, domestic and international regulatory policy, and law and economics. I am an Adjunct Faculty Member at George Mason Law School.