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Archive for December 7th, 2018

The climate change challenge: lessons for competition law and policy

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Climate change

These days, competition lawyers and economists spend a considerable amount of time discussing the rise in concentration and profit margins, or the decline of the labour share in the economy. However important, these challenges are not quite as critical as climate change.

It looks like no week passes without at least a new piece of alarming news about global warming and its consequences (just check here from The Guardian alone). The only reason for optimism is that we may be getting so close to the cliff edge that political actors may decide, at long last, to take radical and decisive action.

This year’s Nobel Prize in economics is a sign that things may be changing for the better. William Nordhaus and Paul Romer are two giants that have long deserved the award, but we all know that timing matters, and timing is often not a coincidence. Climate change, in fact, is expressly mentioned in relation to William Nordhaus.

I find myself thinking about climate change pretty much every day. Since competition issues tend to be in the back of my mind quite often too, you will not be surprised to learn that I sometimes reflect on the lessons that the latter can draw from the former.

Is there something that our community can indeed learn from the climate change challenge?

Ideologues will always dismiss expert evidence

Addressing the climate change challenge requires large-scale government intervention and international cooperation. Some conservatives cringe at this idea, which directly contradicts their worldview.

How do they relieve their anxiety and avoid reality? By bashing expert evidence. ‘We do not know whether global warming is actually happening, and even if it is happening we do not know whether it is truly man-made’ is a well-known position.

These same ideologues – a category that happens to include the current POTUS – also love to say that ‘the models used by so-called “experts” are not reliable and simply reflect a political agenda that favours intervention’.

Experts in the competition law community are often bashed in the same way, in particular economists. You are all familiar with these lines too: ‘economists’ models do not reflect reality’; ‘economists are corrupt’; ‘it is a flawed discipline that is fraught with biases’; or, even that ‘it is politics disguised as fancy math’.

Ideologues try to make it all about picking sides

It is not so difficult to read between the lines of ideologues’ mantras and clichés.

The (not so subtle) point is that anyone’s hunch about a given topic is just as valid and relevant as the expert consensus developed incrementally over decades. Since experts have a political agenda or are corrupt (perhaps even both), there is no reason to defer to them. If one’s worldview conflicts with the positions experts happen to advance, such positions can be comfortably ignored.

‘I don’t believe it’ is all one needs to dismiss a report involving 13 agencies and 300 leading scientists.

If expertise does not matter, it all becomes a game of picking the side one prefers. The quest for truth is no longer a worthy cause. What matters is to make noise and to advance one’s agenda.

We observe a similar trend in competition law. Law and expertise are being openly dismissed. Consensus positions, the body of knowledge incrementally refined over the years is seen, by many, as a dispensable and inconvenient obstacle. Such body of knowledge would be ‘out of tune’ with existing realities and demands. Who needs expertise if one can be ‘modern’ and deliver what politicians want?

There will always be opportunists

Some people are aware that climate change is real, is man-made and can have potentially catastrophic consequences, but side with ideologues. Why? For reasons of expediency. In the short-run, it may be profitable to deny climate change, as it may deliver some quick political and/or economic victories. For instance, I am always amazed that some Australian politicians are climate change denialists when their country is particularly vulnerable to the phenomenon and is already suffering its consequences.

There are opportunists in the world of competition law and policy, too. This is natural. Some stakeholders would benefit enormously if consensus positions were ignored, and if enforcement were turned into a discretionalist tool unconstrained by law (and courts).

The more discretionary (and the less legal) competition policy becomes, the faster the burden of proof is reversed, the easier it is for these stakeholders to influence the process and achieve the outcomes they favour. It is not a coincidence that claims that the law is not to be taken seriously, or that it should not be an obstacle to remedy pressing concerns, are frequent these days.

Expertise and law are the way forward

Ideologues and opportunists pose a challenge for the integrity of competition law and policy, in the same way that they pose a challenge for the fight against climate change.

Can something be done about it? I can think of two reasons to be optimistic.

First, a key way forward is to preserve the integrity and trustworthiness of academics, so that expertise is not pre-emptively dismissed by those who feel uncomfortable with it and would rather make it all about politics and picking sides. Fortunately, major steps have been taken in this regard in the competition law and economics community (we will inform about some of these soon on the blog).

The above said, academics should also make a greater effort to explain what we do: the quest for truth is never over, and consensus positions can (and do) always evolve. True researchers are not preachers or activists: they are always open to changing their minds, and to being persuaded by new evidence. Just to mention an example, there are reasons to believe that merger control has been too lenient in the past decades.

Second (and certainly more importantly), one cannot ignore that, at the end of the day, it is for courts to state what the law is. The temptation to see competition policy as a discretionary tool that can be used to save the world may be quite strong. However, competition law (at least EU competition law) is not about fine-tuning markets, but about showing why, in a specific economic and legal context, a given practice amounts to an infringement (or a merger to a significant impediment to effective competition). This analysis is subject to judicial review.

If there is something that my research has taught me, this is that the EU courts are prudent, and that they dislike, above all, arbitrary and unchecked policy-making.

The EU courts have always been particularly suspicious of administrative action that ignores expert consensus. Decisions that go against such consensus are invariably annulled when challenged (think of Airtours and Tetra Laval). Similarly, the EU courts are only willing to depart from the established case law where there are real and powerful reasons to do so, not simply because it is expedient or fashionable.

Written by Pablo Ibanez Colomo

7 December 2018 at 10:43 am

Posted in Uncategorized