Introduction

This symposium issue of The Antitrust Bulletin focuses on the utilization of public policy objectives ¹ as goals of competition law. The topics discussed in this collection are important; ² no other set of current issues commands the same amount of attention within the competition law community.

The inboxes of journal editors are filled with submissions on the subject, it is a common topic on academic and continuing legal education programs, and it is often the focus of op-ed pieces. Importantly, it is not just a topic of debate and discussion. The subject has significant currency in the U.S. political arena, with prominent politicians urging legislative action. It is an important subject not only in the United States but internationally as well.

Whether competition law policy is on the right track is a more important topic than it has been in decades. A very significant aspect of the current discussion is the push by some (who generally identify themselves as “progressives”) to foster a new antitrust agenda ³ —one that rejects what is perceived to be a myopic fascination with consumer welfare ⁴ and the “Chicago School” of antitrust, ⁵ and instead embraces the incorporation of environmental, employment, and other often labeled “populist” objectives. ⁶ A “new” approach to competition law for many jurisdictions, ⁷ a change in course—if you will. ⁸

What many fail to perceive is that this is not a new topic. Indeed, it is an old topic. In the United States and many other jurisdictions, a “populist” competition agenda characterized competition law for most of its history. Rather the focus on consumer welfare is new, and some introductory attention to this history is warranted.

The U.S. experience has been more dramatic than others and therefore serves as a good point of departure. Defining the policy objectives of American competition law has been a rocky road. Defining the objectives of competition laws policy was not aided by the statutory language of the Sherman Act itself, that is, contracts, combinations, and conspiracies in restraint of trade are deemed illegal. ⁹ When confronted with legislation that is opaque, one usually consults the legislative history of the law. This history may tell us what the legislature sought to accomplish.

Unfortunately, the legislative history of the Sherman Act also is less than clear. ¹⁰ The very general language of the statute coupled with the unhelpful legislative history has foisted the task of providing both purpose and content on the courts. Essentially U.S. antitrust law is federal common law—that is to say, “judge-made law.” ¹¹ The antitrust trail has been unclear at times and almost always a winding road. Thus, over time we have seen public policy objectives wax and wane. ¹²

What does the common law evolution of U.S. competition law teach us? From the earliest days of U.S. antitrust, public policy considerations were invoked as a rationale for judicial decisions. In its 1897 decision in United States v. Trans-Missouri Freight Ass’n, ¹³ the Supreme Court considered a joint venture of otherwise competing railroads that regulated members’ pricing. In their defense, the railroads argued that the resulting prices were lower than those that would otherwise have prevailed absent the joint venture. In finding a violation, the Court’s decision invoked the protection of “small dealers and worthy men whose lives have been spent therein, and who might be unable to readjust themselves to their altered surroundings.” ¹⁴ The Court concedes that the conduct may be efficient and lead to lower prices for consumers, but the dealers’ interests seem to trump. ¹⁵

The high-water mark for such considerations was attained in the 1960s and 1970s and can be seen in numerous Supreme Court decisions of that period. The protection of small businesses was an important element. In United States v. Aluminum Co. of America, ¹⁶ the Second Circuit, sitting in lieu of the Supreme Court, ¹⁷ observed that “[t]houghout the history of [antitrust laws] it has been constantly assumed that one of their purposes was to perpetuate and preserve, for its own sake and in spite of possible cost, an organization of industry in small units[.]” ¹⁸ Moreover, the Court explicitly recognized that consumer welfare could be sacrificed on the altar of small business.

The degree of deference paid to these populist objectives can be seen in merger decisions that condemned very small increases in concentration. For example, in United States v. Pabst Brewing Co., ¹⁹ Pabst, the 10th largest brewer in the United States, acquired Blatz, the 18th largest, to form the 5th largest brewer with a combined 4.49% market share. The Supreme Court found the merger objectionable. ²⁰

The preservation of local control over the local business was another populist objective. In United States v. Falstaff Brewing Co., ²¹ Justice William O. Douglas, concurring, expressed the importance of this objective:

Control over American business is being transferred from local communities to distant cities where men on the 54th floor with only balance sheets and profit and loss statements before them decide the fate of communities with which they little or no relationship. As a result of mergers…states are losing major corporations and their local communities are losing major corporate headquarters and their local communities are becoming satellites of a distant corporate control. ²²

Although the Court recognizes that such objectives come at a cost, for example, an increase in prices to consumers, it is noteworthy that there is no discussion of how one balances one objective over another. How much should consumers be willing to pay in terms of increased purchase prices to preserve local control of business or some other policy objective?

These populist sentiments were not limited to the Sherman and Clayton Acts. The Robinson Patman Act ²³ provides yet another example. ²⁴ Unlike the Sherman Act, there is a well-developed legislative history of this legislation, and that history clearly demonstrates that the protection of small businesses was the underlying purpose. ²⁵ Indeed, the proposed legislation was originally—and appropriately—entitled “The Wholesale Grocers’ Protection Act.” ²⁶ The Robinson Patman Act was conceived to thwart the disruptive force of the modern grocery store which, left unchecked, would seriously threaten the business model of the “mom and pop” grocery markets that were owned and managed by “small dealers and worthy men.” It is an excellent example of “populist antitrust” and was championed by populist politicians at the time. Illustrative is populist Louisiana Governor Huey Long’s statement that he “would rather have thieves and gangsters in Louisiana than chain stores.” ²⁷

Although one can find the seeds for reform earlier, ²⁸ the tide began to turn in the late 1970s which saw calls for reform to the traditional populist model. This effort had its origins in the academy where scholars criticized the traditional populist wisdom and embraced an economically oriented approach. ²⁹ Students of this literature would shortly assume leadership positions in U.S. antitrust enforcement and within the federal judiciary. Precisely when the tide turned is not easy to discern, but hindsight suggests that the 1974 publication of Industrial Concentration: The New Learning emanating from an Airlie House Conference comprised of the “great and the good” of U.S. competition law would be a good marker. ³⁰

The old order did not collapse immediately, and advocates for the populist model continued to urge a more vigorous enforcement program. Former Federal Trade Commission (FTC) Chairman Michael Pertschuk was one of its most prominent advocates of an antitrust policy informed by public interest considerations. His tenure as FTC Chair from 1977 to 1981 provided a pulpit from which to maintain and advance the cause. Perhaps the most noteworthy salvo was fired by him at the 1977 address to the Eleventh Annual New England Antitrust Conference in Boston. There he urged that social objectives ought to play an expansive role in antitrust law enforcement. Pertschuck stated that the antitrust enforcement agencies had lacked both “historical perspective and imagination.” ³¹ There had been a failure of leadership. Finding a mandate “to develop competition policy in its broadest sense,” Pertschuk believed that “resource depletion, energy waste, environmental contamination, worker alienation, the psychological and social consequences of marketing-stimulated demands” were important objectives. ³² Not only did Chairman Pertschuk conceive an activist agenda, he also sought to implement it—a development that embroiled the agency in conflict during his term in office. ³³

With the advent of the Reagan Administration in 1981 came important changes in the antitrust agency enforcement agency leadership with the appointments of Stanford Law School Professor William J. Baxter as head of the U.S. Department of Justice Antitrust Division and economist James C. Miller as Chairman of the FTC. From that point until the present, consumer welfare ³⁴ has been the underlying predicate for U.S. antitrust enforcement policy in both Democratic and Republican Administrations. ³⁵ As important (if not more so), the evolution within the Courts toward a consumer welfare standard continued. ³⁶ Thus, one can argue that the current push for a “new” antitrust is really a quest to return to the past—“old wine in new bottles.” ³⁷

We are fortunate to have assembled a very distinguished set of authors to discuss public policy objectives from many good perspectives. Much of the discussion of competition law public policy objectives have focused on merger review. Should competition enforcement officials take into account policies such as employment, the environment, data privacy, national security, industrial policy, or trade policy in their review of proposed transactions? Jenn Mellott and Ruzica Ceric (Freshfields Bruckhaus Deringer LLP) explore this important topic in their review of some seventy-two merger regimes. ³⁸ In their survey, they find that forty jurisdictions today incorporate some elements of nonefficiency-oriented public policy into their decision making. Mellott and Ceric group most of these jurisdictions into one of four types and then explore the comparative modes of the administrative organization of each type.

Professors William Kovacic (Kings College, London and George Washington University) and Alison Jones (Kings College, London) then focus on the current status and future role of public policy objectives in the United States. ³⁹ They begin observing that the topic has moved from competition law blogs to front-page political discourse and is now front and center in the U.S. presidential campaign. Kovacic and Jones then review the specific objectives under consideration, for example, protection of the small businesses. More importantly, the authors address the important, but often neglected, topic of implementation. Assuming the need for such change, the authors explore the challenge of how to convert the proposals into results noting that failure to consider implementation issues “invites serious disappointment by creating a chasm between elevated policy commitments and the capacity of responsible public institutions (competition agencies, new regulators and the courts) to produce expected outcomes.” ⁴⁰ The authors focus their contribution to the “implementation blindside.” ⁴¹ Drawing on past experience, this article identifies some of the obstacles that would likely impede successful implementation if not carefully addressed, and—importantly—makes specific recommendations.

Professor Niamh Dunne (London School of Economics) then examines specifically the role of public policy objectives by the European Commission, and specifically in the context of its enforcement of TFEU Article 101. ⁴² The author notes that the Commission has within the past ten years highlighted the importance of economic efficiency in its competition law analysis. The recent admonition by the Commission to the effect that such considerations only are relevant in the consideration of Article 101(3) in the Alstom Siemens ⁴³ matter is a good example. While one might be tempted to conclude that efficiency has supplanted public interest objectives, the author suggests that the reality is more nuanced. Dunne then examines how public interest policies have been considered in the cases where such objectives were employed. Illustrative is the exclusion of conduct by some groups promoting “social solidarity” from antitrust coverage because the actors are found not to be “undertakings” as required by the Treaty. She very ably maps this complicated landscape looking both to the acts of the Commission and the Member States, and considers these issues in the context of currently important markets such as “digital economy” and pharmaceuticals.

Directing addressing the current debate on the need to incorporate public policy objectives into competition law enforcement, Chairman Rod Sims and Graeme Woodbridge (Australian Competition and Consumer Commission) argue the case for the consumer welfare standard. ⁴⁴ While many public policy objectives may be very important, they argue that such objectives ought not to be incorporated into competition law analyses. The authors then address the underlying predicate for competition law enforcement in Australia and provide an interesting discussion of some of the unique aspects of the Australian legislation in this regard.

China has adopted a different view. Public interest is often cited as an important element in Chinese competition law enforcement. Indeed, the Chinese statute explicitly allows its consideration. Professor Wendy Ng (University of Melbourne) analyzes the Chinese record and interestingly finds that a great many Chinese competition decisions focus on competition factors such as consumer welfare and efficiency. ⁴⁵ However, a subset of the Chinese decisions has attracted criticism abroad. Favoritism of state-owned enterprises and disregard for intellectual property rights are often cited examples of the employment of industrial policy as the guiding principle of Chinese competition law. Professor Ng seeks to examine the role of public interest in Chinese competition law enforcement. Interestingly, her review of outcomes suggests that one cannot understand Chinese competition law policy until one recognizes that its enforcement is a part of the state’s management of the “socialist market economy.” Throughout most of the West, the state and the market are viewed as quite separate; the system is quite different in China. Ng finds that the Chinese noncompetition factors are broader than the public interests commonly asserted by other jurisdictions. Rather, they are arrows in the quiver of officials managing the state economy that the state may employ when advantageous to do so. That said, the role played by these factors is often opaque. The formal analysis may appear conventional, but the outcomes are sometimes difficult to understand without reference to the government’s role in the management of the economy. She separately explores merger policy, anticompetitive agreements, abuse of dominance, and the treatment of state-owned enterprises in this light.

South Africa has long embraced public policy considerations in its competition law analysis. ⁴⁶ Employment effects, the interests of small- and medium-size enterprises, and black integration into the ownership and management of the domestic business have all been important to South African merger analysis. These public interest objectives are set forth explicitly in both the legislation and the legislative history. Maryanne Angumuthoo, Derek Lotter, and Shakti Wood explore the South African experience and trace the history of public interest as a factor in South African merger analysis. They begin by introducing multiple actors that may play important public interest roles in the merger review process and caution counsel representing merger parties to early formulate strategies to deal with each. Trade unions, for example, pay attention to merger applications. Importantly, the authors examine the difficult issue of how the authority balances the traditional competition effects with the social goals of the legislation. They observe that mergers that present no injury to the competition may be challenged on public interest grounds and that mergers presenting competitive injury may be allowed because of public interest considerations. As one of the oldest and clearly one of the most active and best administered African competition law regimes, one anticipates that the South African experience will continue to be model for other African jurisdictions in the development of their own competition regimes. Accordingly, this experience is important not only to South Africa; it has much broader ramifications.

When your editors submitted the proposal to undertake this issue of the Antitrust Bulletin, “the public interest” as a competition law objective had become an important topic both in the United States and internationally. During the preparation of the symposium, it has become even more prominent. The authors’ contributions, taken as a whole, cover a broad waterfront. A global survey, contributions on the three most prominent antitrust jurisdictions (the United States, European Union, and China), and articles on two jurisdictions with significantly different perspectives—Australia and South Africa—are included. The authors bring not only diversity of geography but also of analysis—descriptive, normative, and implementational.

The last article remains to be written and likely will not be for some time as the discussion (in some instances, the debate) continues. Whether large-scale change in competition law enforcement policy occurs remains to be seen. We hope this collection of essays provides the reader with a quality survey of the important issues encompassed by the topic.