Fair Competition Policy without a Fair Competition Philosophy

PUBLISHED

Sandeep Vaheesan (@sandeepvaheesan) is legal director at the Open Markets Institute.

PUBLISHED

Sandeep Vaheesan (@sandeepvaheesan) is legal director at the Open Markets Institute.

This post kicks off a week-long symposium on President Biden’s Executive Order on Promoting Competition in the American Economy.

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President Biden’s Executive Order on Promoting Competition in the American Economy is a laudable directive. The July 9 order calls on cabinet departments and independent agencies to use their statutory authorities to tame corporate power. It recommends actions to address pressing public concerns, such as unaffordable prescription drugs due to collusion among pharmaceutical companies, non-compete contracts that bind workers to their employers, and the expensive and slow broadband service available to millions of Americans under telecom monopolies. With six dozen enforcement, regulatory, and policy recommendations covering much of the economy, the executive order has a grab-bag quality to it. Nonetheless, many of the recommended actions, if undertaken by the relevant secretaries and agency heads, would make life materially better for American consumers, workers, farmers, and business proprietors. To the president’s credit, his order repeatedly cites these groups as its intended beneficiaries.

Yet as a statement of philosophy, the order is a disappointment. Executive orders, like budgets, are moral documents: they should offer not only policy prescriptions but also a broader vision of justice. In this case, what do fair business rivalry and a fair market look like? While using the language of “fair competition” and “unfair competition” repeatedly, the order does not articulate what conduct constitutes fair or unfair competition, let alone the underlying principles that should guide competition rules. In other places, the order falls back on the prevailing language of “anticompetitive conduct” and “promoting competition” (including in the title), implying that certain competitive practices offend some platonic ideal of competition itself. Fortunately, this document is only a starting point. In implementing its recommendations, agencies, such as the Federal Trade Commission, should articulate and expand on antitrust law’s existing, but largely unstated, notions of fair competition.

The president correctly recognized that competition is not categorically good. The law unavoidably limits certain methods of competition. Indeed, many of these restrictions are taken for granted and hardly questioned at all, even by members of the so-called free market right. For instance, laws on deceptive marketing and industrial sabotage prohibit businesses from gaining a competitive advantage using these methods.

Speaking of fair versus unfair competition is, moreover, an intellectual advance over the dominant modes of antitrust discourse. Today, courts and antitrust enforcers describe desirable business conduct as “procompetitive” (or even “hypercompetitive”) while characterizing undesirable conduct as “anticompetitive.” These terms have little substantive content and merely serve as labels that follow from an antitrust official’s or judge’s moral intuition about a challenged business practice. In federal court, a practice that offends a judge’s sense of justice (whether rooted in traditional notions of the moral economy or the allocative efficiency of neoclassical economics) is condemned as “anticompetitive” while conduct that strikes a judge as fair is blessed as “procompetitive.” Courts even blithely assert that Congress enacted the antitrust laws for “the protection of competition, not competitors.” This contention ignores that not all forms of competition are legal and that competitors injured by antitrust violations can and do obtain treble damages and injunctive relief.

Even where it embraces the language of fair competition, however, the order fails to articulate the principles of fair competition. What makes a practice fair or unfair? To borrow language from a 1966 Supreme Court antitrust decision, what distinguishes “the willful acquisition of maintenance of [monopoly] power,” which is illegal, from monopoly “as a consequence of superior product, business acumen, or historic accident,” which is legal? The order says hardly anything about which practices are unfair and why. It is thin on details and presents just a few examples of unfair competitive practices, including restrictions on owners’ right to repair durable goods and bundling of real estate brokerage and listing services. What makes these practices unfair? The order is silent and does not offer principles to guide the departments and agencies.

While it speaks in the register of fair competition in some sections, the order elsewhere falls back on the mainstream antitrust community’s conception of competition as always good and certain practices as representing a deviation from “competition.” The order uses “anticompetitive” five times to characterize certain business practices. This language conflicts with the theme of fair versus unfair competition in other parts of the order.

One example from the executive order illustrates the problem of promoting competition without qualification. The president directs the Secretary of Agriculture to submit a plan to the chair of the new White House Competition Council “to promote competition in the agricultural industries,” with special attention to the interests of farmers. The secretary is directed to consider employing means such as “investments or other support that could bolster competition within highly concentrated agricultural markets.”

What forms of competition should Secretary of Agriculture Tom Vilsack promote? Should he prod the covered agribusinesses to compete by any means necessary? Does “support” for meatpackers include declining to limit processing line speeds (to the detriment of worker health and safety) as a means of increasing the output of beef, pork, and poultry and potentially allowing smaller packers to gain market share? For President Biden, who has touted his commitment to worker justice, the answer to the question is presumably no, but here, the directive asserts competition, whatever its form, is good.

Despite these limitations, the executive order offers a foundation from which to build. The president exhorted his entire administration to use their broad (but largely dormant) statutory authorities against corporate monopoly and malfeasance. The order itself does not have the force of law. Its eventual effect, if any, depends on the identified cabinet secretaries and agency leaders implementing its recommendations. By failing to articulate a vision of fair competition, the White House has also delegated to these officials the task of moral exposition. This may not prove to be fatal to the administration’s agenda and the aspirations of antimonopolists, as some agencies are well positioned to do the work. For instance, Congress created the Federal Trade Commission to articulate, over time, the meaning of “unfair methods of competition” through adjudication and rulemaking.

As I explain in a forthcoming essay in the William & Mary Law Review Online, the Sherman Act’s prohibition on monopolization, even in its current desiccated state, embodies standards of fair competition. Specifically, the courts, in interpreting act’s anti-monopoly provision, have held, implicitly, that monopolists and near-monopolists do not have license to use their market dominance to marginalize rivals (an anti-coercion norm), to use their financial advantages to run losses to discipline or exclude rivals, or to employ competitive practices that violate generally applicable laws and public policy, such as fraud or property destruction. In contrast, firms are free to gain market share and even acquire monopolies by offering higher quality goods and services and improving their production processes. The FTC and sister antimonopoly agencies should broaden and codify these norms of fair competition to promote widely shared prosperity and check corporate domination of consumers, workers, farmers, and business proprietors. Will they now follow through and implement the president’s policy agenda?

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