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Archive for September 17th, 2012

Politically incorrect: the political process through an antitrust lens

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Since I joined Chillin’Competition almost 2 years ago I always had the intention to write a couple of long and well thought out posts on antitrust and politics. One would attempt to apply antitrust principles and rules to political markets (one day we should also try to do that with the legal market too!), and the other would ideally explore the political content of antitrust in different jurisdictions. Undertaking such exercises would have the virtue of linking two of my preferred subjects, and -I’m pretty sure- would also yield some interesting results. However, I never found the time to develop these ideas and, since it is unlikely that I will find it soon, I’ve decided to hastily sketch what I had in mind without developing it further despite the obvious risk of sounding obvious. Let’s start with one question: what can antitrust tell us about the dynamics of political systems?

If you compare the “political market” to any traditional market (at the end of the day, parties/firms compete for the favor of voters/consumers), you will inevitably arrive to the conclusion that it would be an ideal market for antitrust enforcement. Think about it, the political systems in most developed countries are duopolies (the U.S. is a clear example or partisan parity with shifting temporary monopolies), oligopolies (also with temporary and assailable monopolies) and even permanent monopolies.

These concentrated market structures with transient or permanent monopolies can give rise to several concerns which are familiar to any antitrust lawyer. Political parties (be it the one in government or the one in government in combination with other major parties) unilaterally or collectively act to protect an individual or collective dominant position. Most often this is done by deciding to implement certain electoral rules that foreclose entry or growth by third parties.

Public choice theory has dealt ad nauseam with the issue of self-interested lawmakers (i.e. the foxes guarding the henhouse). That’s what this is about too. Political parties are the ones in charge of adopting the rules that govern the functioning of the political market (how parties are financed, how electoral regimes work -i.e. how parties are rewarded-, how third-party entry in the political market can take place, etc.) and other related markets (such as media-related ones). These situations are not strangers to antitrust analysis; just think of well-known EU competition law cases concerning regulatory professional bodies such as Wouters or Piau. The main difference between those precedents and the situation at issue in political markets is that the consequences of the latter are much more significant and potentially harmful.

The idea of applying antitrust principles to examine the political process is by no means original. Some well-known scholars have already done it in the past, generally in relation to gerrymandering practices (see, among others,  Issacharoff´s Gerrymandering and Political Cartels or the great amicus curiae that Einer Elhauge submitted to the U.S. Supreme Court, also in a gerrymandering case (available here).

To be sure, political parties are exempt from the application of antitrust rules, and there might be good reasons for this. However, in view of current enforcement trends that have extended antitrust liability to collective bargaining agreements by workers’ unions and even to governmental bodies  -see here for a Spanish precedent-, one can’t help wonder whether political parties are really shielded from the potential application of antitrust rules.

[This may sound subversive, but, we’ve consistently proposed to extend the reach of the antitrust rules to those who appeared to be exempt from them…. remember our post suggesting an antitrust challenge to God? ]  😉

In any event, even if antitrust standards aren’t applicable, they are useful to help us realize -regardless of whatever political beliefes one may have- about legal but undue practices carried out by incumbents with the aim of thwarting political competition. I’m sure most of you can quickly come up with a good bunch of examples…

Written by Alfonso Lamadrid

17 September 2012 at 4:36 pm