Flatten the coronavirus curve, but don’t flatline competition

Tanja Goodwin & Georgiana Pop (World Bank)

Rising mark-ups, superstar firms, “killer acquisitions” and competition among digital platforms—for the past few years, academia and policymakers have been increasingly concerned about lack of competition. But in the face of a major economic recession caused by the coronavirus disease, does competition still matter?

We say definitely, for at least two big reasons. First, competitive prices for goods and services will matter even more in the weeks and months to come. Households will have reduced incomes, and firms will depend on competitively priced inputs for financial recovery. Second, the economic crisis may affect smaller firms and market entrants more than the big powerful firms.

Emergencies like COVID-19 require extraordinary measures. Single-source procurement, more than 1.3 trillion euros in state aid in the EU, and antitrust exemptions in at least 10 countries plus the EU—these may all be justified in a time of unprecedented shocks to supply and demand. Yet, response and recovery policies are not necessarily at odds with competition principles…

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