Limiting Anti-Competitive Government Interventions that Benefit Special Interests

Abstract

When government regulates, it may either intentionally or unintentionally generate restraints that reduce competition (“public restraints”). Public restraints allow a business to cloak its action in government authority and to immunize it from antitrust. Private businesses may misuse the government’s grant of antitrust immunity to facilitate behavior that benefits businesses at consumers’ expense. One way is by obtaining government grants of immunity from antitrust scrutiny. This Article offers a new contribution to the extensive literature on the globalization of antitrust. The present Article focuses both on the processes of creating public restraints, as well as upon the negative impacts of these restraints. Government can exempt a company from antitrust regulation, which allows the firm unbridled discretion to monopolize and harm consumers. The issue of government intervention in the economy and its competitive impacts has taken on renewed importance as the global financial crisis has led countries to provide various benefits to favored companies, which may distort competition. Distorting competition may keep the world in recession longer, as countries may retaliate with new distortions of their own, creating a downward spiral for the global economy. Thus, local “solutions” may cause international problems, and require international resolutions. This Article addresses the important domestic and international institutional dynamics of how to reduce such anti-competitive immunities. It then provides a theoretical framework to identify potential domestic and international institutional responses to public restraints and the costs and benefits of these responses. The institutional framework developed in this Article proposes both substantive policies and institutional structures that can undertake these policies. The framework builds on both new institutional economics and international organization literatures, while recognizing the difficult limitations in design and capacity that existing institutions face. Part I of this Article explores the causes and effects of public restraints. Part II analyzes the potential institutional choices to address public restraints. In Part III, this Article undertakes a case study of the current inadequacies of existing institutional solutions to the problem of government restraints. Part IV then suggests a set of reforms to correct for the existing institutional shortcomings. The Conclusion suggests that a modified WTO is the least bad alternative to address international antitrust public restraints.