Competition Policy Out of the Box

 Posted by Social Science Research Network

Competition Policy Out of the Box

By Adriaan Ten Kate

Competition policy is there to promote competition in order to lower prices and enhance economic efficiency. It does so by challenging business conduct deemed anticompetitive. The purpose of this essay is to address two questions. First: Does competition policy really promote competition? Second: Does competition really lower prices and does it enhance efficiency? The problem with competition policy is that it often promotes competition in a narrow sense, but stands in the way of competition in a broader sense. Moreover, after a century of sharpening the pencil its enforcement criteria remain as ambiguous as ever, giving rise to substantial legal uncertainty. The problem with competition itself is that it does not always work the way it should. What makes competition often ineffective is economies of scale, particularly mass production. Unfortunately, mass production is far more effective than competition itself in both lowering prices and enhancing efficiency. What makes it worse is that the main adversary of competition policy, big business, happens to be the main ally of mass production. In that respect, competition policy may be winning some battles now and then, but is waging a lost war.

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