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Imported Antitrust Law: Steel or Slag? A Review Essay

Feb 2004
Working Paper
By  Bruce Owen
This review essay seeks to place Michal S. Gal’s Competition Policy for Small Market Economies (2003) in the context of the explosive global diffusion of antitrust law. Gal’s book is a clearly-written and sensible how-to manual for antitrust enforcers in developed countries with limited domestic markets and some degree of isolation from international trade flows. Israel is an example. In many ways, however, Gal offers valuable advice to competition policy makers in economies of all sizes. The relevance of the book is broader than its title suggests. That said, this book, like others in its genre, does not deal effectively with two difficult challenges facing all antitrust policy makers today. First, very seldom do “relevant antitrust markets” correspond closely with jurisdictional boundaries. This creates technical problems in gathering information, threatens overlapping and potentially conflicting enforcement, and severely limits potential remedies. Far worse, it results in policy enforcement that promotes intra-jurisdictional economic welfare at the expense of extra-jurisdictional consumers. It takes an act of faith to conclude that the result is an improvement in global economic welfare. There is little or no prospect that international (or even improved federal-state) coordination will soon remedy this problem.

The second challenge is perhaps more subtle, but no less important. The bulk of the academic and policy-oriented discussion of antitrust, whether directed at the U.S. economy, transitional economies or developing nations, largely ignores the effects of competition policy on incentives. Given the small number of cases that are brought and the very small staffs and limited resources devoted to antitrust enforcement even in advanced economies, the bulk of the effect of competition policy must result from the alteration of incentives of economic actors who never become defendants in an enforcement action.