Competition in times of economic turmoil?!

Only recently, we have blogged about cooperations in times of crisis (here). The string of bad news does not seem to end. So, one might ask the question whether it is (finally) time to relax antitrust rules and release companies from the firm grip of antitrust authorities (in which some companies claim to find themselves for many years). A recently published ICN paper provides a straightforward answer to this question.    

The fundamental issue

Is competition a good thing? Basic economic theory (comprehensible even for lawyers) demonstrates that competition leads to better prices, better quality of products and services and more innovation. So, in case one agrees, it is only consequent to demand the best possible conditions for competition and to have authorities ensure that companies can and do compete.

The discussions between antitrust authorities, lawyers and companies are therefore usually not concerned with the fundamental question whether antitrust law makes sense in the first place, but rather with whether individual measures are suitable for ensuring more competition. This can include questions as to whether a certain coordination between companies or the behaviour of a single, supposedly dominant company, really does have a restrictive effect on competition, or whether it is really necessary to prohibit a certain merger (and from the top of my head I am able to name several cases in which I don’t agree with the view of competition authorities). Nevertheless, competition is a good thing.

Does that change in time of economic crisis?

The ICN (the international network of competition authorities with approximately 140 member authorities from 130 countries) addresses this question in a new paper. Already during the so-called banking crisis in the wake of the Lehman crash in 2008, the ICN published a paper on this topic, so it is not entirely new.

The new paper emphasizes that “competitive markets are resilient, inclusive, dynamic, productive, innovative and efficient”. It describes that – in view of its authors – competitive markets are key to deal with an economic crisis and lists some examples of how competition and competition policy can address the effects of an economic crises, inter alia:

  • Promoting growth by ensuring competition with regard to (scarce) resources and for employees
  • Promoting green innovation and support a “green economic revocery”
  • Eliminate bottlenecks and ease supply chain constraints
  • Help markets adjusting to energy price shocks
  • Mitigate impacts of inflation

I leave it to everyone to judge for themselves whether they share that these goals can be achieved through antitrust law. What is noteworthy, however, is the paper’s explicit call for policymakers to support antitrust law also in times of crisis. It is worth mentioning that the benefits of competition for employees are mentioned in various spots in the paper – an indicator of upcoming enforcement priorities (also see here)?

In the crisis is before the upswing

So far, every economic crisis has been followed by an upswing. Competition certainly didn’t hurt. There is also a saying that cartelization increases during times of crisis. Regardless of whether this is true, however, one can be sure that antitrust enforcement will generally not be reduced during a crisis (let alone after it).

While the paper emphasizes that antitrust enforcement will not be neglected in time of crisis, various cases and statements from officials also show that competition authorities across the globe are willing to discuss certain matters and promise to take an “pragmatic view” (although this is not mentioned in the paper which “focuses” more on tough enforcement). For example, as we reported on an earlier blog, two recent cases of the German Federal Cartel Office give helpful guidance on if and how cooperations can be justified in times of economic turmoil even when the setup might raise concerns at first glance. So, the key message is: While (clear-cut) antitrust infringements will still be investigated and prosecuted by competition authorities, they are (and will stay) open to discuss borderline cases, as is also shown by the European Commission’s recently published guidance paper on its leniency regime (see our blog here).

Photo by Alexandre Lecocq on Unsplash