The United States wants to update its trade competition rules

की मूर्ति "business man" This is one of two painted by Michael Lantz in front of the Federal Trade Commission building in Washington, United States.  <a href="" rel="नोफ़ॉलो नोओपनर" लक्ष्य="_खाली" डेटा-ylk="slk:रोज़मेरी मोस्टेलर/शटरस्टॉक;elm:context_link;itc:0" वर्ग="जोड़ना ">Rosemary Mosteller/Shutterstock</a>” src=”–/YXBwaWQ9aGlnaGxhbmRlcjt3PTk2MDtoPTYzOQ–/ 3e” data-src= “” “/></div>
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The “Man Controlling Trade” statue is one of two statues by Michael Lantz in front of the Federal Trade Commission building in Washington, United States. Rosemary Mosteller/Shutterstock

At the beginning of his mandate, President Biden condemned that, over the past 25 years, the power of business monopolies has grown. He attributed this to the lack of rigor of US courts in enforcing (and which are required to enforce) laws that protect competition. This permission may have contributed decisively to the high level of business concentration in recent years.

The problem (excessive concentration of economic power) and its solution (competition as an antidote) are clear. The pending task is how to measure competition in markets taking into account the peculiarities arising from the technological (digitalization) and commercial (globalization) changes of the 21st century.

Therefore, the US Department of Justice (DJ) and the Federal Trade Commission (CFC) – which are in charge of enforcing federal antitrust laws and preventing corporate mergers and acquisitions that could reduce competition between companies – have published a new guide. Consulted to publish the draft. For corporate mergers (MG-2023). Last updated is 2010.

With these new guidelines we want to:

Industrial Organization and Competition

Structure-Behavior-Consequence (ECR) Model scp framework) examines the cause-and-effect relationship between industry structure, firm behavior, and market performance. ECR includes three approaches to competition:

  1. One that focuses on market structure (concentration).

  2. The one that does this in the behavior of companies (rivalry vs harmony).

  3. One that links competition to outcomes for society (contribution to consumer welfare).

Thus, competition increases with less concentration, more rivalry and prices closer to the cost of production.

However, according to the logic of the paradigm, the three views of competition are summarized into one by proposing a unidirectional causal relationship from structure to outcome. It not only devalues ​​behavior but also recognizes the power of structure to achieve desired results.

utilitarian criteria

It emerged in the 1970s new industrial economy (NEI) claims the importance of behavior in business competition through game theory, through two premises:

  1. Concentration in markets is determined by competition.

  2. Companies only care about short-term results (optimizing resources, producing and selling as much as possible at the lowest possible cost) and medium-term (increasing the value/cost ratio achieved through innovation).

Since then, in trials of anti-competitive actions, arguments with economic content have gained prominence and judicial decisions have leaned towards utilitarian criteria such as:

  • Consumer surplus criterion: For a merger to be approved, it is sufficient to demonstrate that it will allow customers to purchase at lower prices than would be expected without the merger.

  • Aggregate surplus criterion: A merger may be approved, even if prices rise, if producers increase profits enough to offset losses to consumers.

The disqualification of business structure as the core of conduct and the prevalence of utilitarian norms in judicial decisions have contributed to the high concentration and loss of competition in US markets diagnosed in Biden’s presidential order.

21st century competition

The updated MG-2023 Merger Guidelines seeks to recapture and reinforce the fundamental principles of competition:

  • Market concentration.

  • Barriers to entry of new competitors.

  • Preference for organic growth over mergers to gain market share.

Furthermore, it confirms the effective possibility of choosing customers, suppliers, workers, investors and citizens as better criteria to assess market competition.

The question is to know how to resolve conflicts between the three dimensions of competition, structural, behavioral and outcome.

The opinions of economists, jurists and consultants on the content of the MG-2023 Guidelines will contribute not only to improving the final wording of the text but also to achieving precision regarding the meaning, scope and measurement of competition in technical and commercial conditions. Of the XXI century.

Emilio Huerta Arribas does not receive any salary, nor does he do consulting work, nor does he own shares in, nor does he receive financing from, any company or organization that could benefit from this article, and he declares That it doesn’t have any relevant links other than that. Above educational status.

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