The Limits of Antitrust in a Developing Country: the Austrian View
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The Limits of Antitrust in a Developing Country: the Austrian View Vadim Novikov
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Report to the International Scientific Conference "Economics and bureucracy in an open society" (Lviv 30.09.2011)
Transcript of The Limits of Antitrust in a Developing Country: the Austrian View
The Limits of Antitrust in a Developing Country: the Austrian View
Vadim Novikov
Disclaimer:
I write expert opinions for antitrust litigations
Cost Benefits
What’s the cost of antitrust?
Free cheese, anyone?
Cost Benefits
Traditional view: benefits outweigh cost
What are the benefits?
John Sherman 1823–1900
The coal trust’s one dollar per ton increase...
Coal
Sugar
Zinc
Steel
Iron
Paper
Oil
Salt …
In 1890 trusts were everywhere:
Price fixing
What is the reality?
Source: Thomas DiLorenzo, “The Origins of Antitrust Rhetoric vs. Reality" Regulation, Volume 13, Number 3, Fall 1990
In 1890-‐1990 most “monopolized” industries grew faster than average
Real GNP Sugar Coal Zinc Steel
Source: Thomas DiLorenzo, “The Origins of Antitrust Rhetoric vs. Reality" Regulation, Volume 13, Number 3, Fall 1990
Overall Lead Zinc Sugar Steel
Prices in “monopolized” industries went down
What about current economy?
“ The scope of the competition law does not have a statistically significant impact on purchasing power parity...
Source: Keith N. Hylton, Fei Deng , “Antitrust Around The World: An Empirical Analysis Of The Scope Of Competition Laws And Their Effects”, Antitrust Law Journal No. 2 (2007).
Although for the time being the sugar trust has perhaps reduced the price of sugar [...] that does not alter the wrong of the principle of any trust.
— Sen. Edwards
“
Antitrust Anti-‐price-‐cutting
legislation
The 'trusts' [...] have destroyed legitimate competition and driven honest men from legitimate business enterprises.
— Congressman William Mason
“
Antitrust Anti-‐too-‐much-‐
competing legislation
What are we really afraid of?
Concentration of power
developed countries
developing countries
The market’s invisible hand in...
Antitrust anti-‐oligarchy law
Impact of the law’s scope suggest that it has a positive impact on perceived competitive intensity...
Source: Keith N. Hylton, Fei Deng , “Antitrust Around The World: An Empirical Analysis Of The Scope Of Competition Laws And Their Effects”, Antitrust Law Journal No. 2 (2007).
“
Antitrust legislation illusion
perceived competitive intensity
What’s the price?
Enforcement & compliance
1
Antitrust cases in Russia
0
500
1,000
1,500
2,000
2,500
3,000
1996 1998 2000 2002 2004 2006 2008 2010
R² = 0.91
0
500
1,000
1,500
2,000
2,500
3,000
0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000
More budget = more cases
Law enforcement in developing countries:
militiaman corrupt militiaman shot free rider militiaman beating grannie militiaman corrupt lyrics
If the size of compensation for purchasing a certain amount of goods under a contract for delivery of foodstuffs is equal for all the suppliers of a certain category of foodstuffs, differing in size depending on the certain amount of the goods purchased for each of the suppliers, are the purchasing terms for this supplier equal to other suppliers with the same terms for the size of compensation, as long as the purchasing price and retail price are not equal?
One of many questions I had to answer as an expert:
This is a cruel and unusual punishment
The Boeing effect
2
William Boeing 1881–1956
After his company was split, Boeing retired and spent next 20 years breeding horses.
Antitrust law demotivates entrepreneurs
The pitfall of deficit
3
10 20 30 40 50 60 70 80 90
Regulating the price might actually work!
Willing to sell
Willing to buy
10 20 30 40 50 60 70 80 90
Unfortunately, it might blow the whole deal too.
Willing to sell
Willing to buy
The appropriate comparison is not between an existing product supplied at a high price and that same product supplied at a low price. It is between a product supplied at high price and no product at all.
“ — Stephen Littlechild
It’s easy to see at this level…
Not so easy here.
Antitrust law creates deficits
Costs:
Enforcement
Entrepreneursh
ip
Deficits
Benefits:
Illusions
My job
Isn’t the cost a bit too high?
What happens if you abolish anti-‐trust legislation in a developing country?
Georgia actually did it. Nothing happened.
Abolish antitrust now!
www.inliberty.ru
www.mises.org
