Inequality: the qualified promise of competition law

Abstract

Infamously, a tiny portion of society in most nations and across the world own most of the wealth, earn most of the income, and enjoy the lion’s share of economic opportunity. Is market competition a cause? Can competition law usefully contribute to solutions? Two decades ago, the competition law community answered, ‘Not my problem’. But gradually, it began to make connections, both on causes and solutions. This article identifies the various dimensions of the inequality problem, summarizes the literature, interrogates claims of rising inequalities and linkages to market power and antitrust violations, reviews how selected competition laws apply an equality value, and offers a list of possible competition law reforms or emphases that could help push back the rise of disparities rather than facilitating them. While the through-line from rising inequalities as a problem to markets as a problem to competition law as a solution is not as robust as many scholars contend, this article argues for an inequality consciousness of competition law, lest the exploitations, exclusions and deprivations continue to fall predominantly on the lower middle class and poorer populations and their plights are obscured by the meme of aggregating welfare.

1. INTRODUCTION

Since the start of the new millennium, we have seen steeply rising inequality of wealth and income and persistent and growing poverty. The anxieties and concerns of inequality were at first received by much of the competition law family as human rights, not antitrust; ‘not our problem’. But gradually the competition community began to make connections, both on causes and cures.

This article examines the various issues entailed by the linkage of competition and inequality. Section 2 examines the dimensions of the inequality problem in its relation to competition. Section 3 summarizes the literature. Section 4 observes complexities related to the linkages. Section 5 examines how an equality value has been applied in the competition law of selected jurisdictions. Section 6 discusses options for integration: what competition law/policy can contribute to alleviating inequality. Section 7 concludes.

2. DEFINING AND SITUATING COMPETITION AND INEQUALITY

What do we mean by ‘competition and inequality’ in a sense relevant to competition law? What dimensions are relevant to the competition conversation?

There are many dimensions of inequality. The three most commonly discussed are inequality of opportunity, of income, and of wealth. Of these, inequality of opportunity is most directly relatable to competition law because competition law in many jurisdictions aims to afford opportunity to contest markets on one’s merits, free of anticompetitive obstructions. Equality (or less inequality) of outcomes, as in wealth and income, is not commonly a stated goal of competition law other than in South Africa, and indeed competition itself naturally produces winners and losers. As long as firms’ conduct is on the merits and not anticompetitive, ‘losing’ in competition is normally a socially accepted part of a system designed to produce a best array of goods and services that people want and can afford to buy at cost or more. One might regard inequalities produced naturally by lawful market competition as not a bad phenomenon; various jurisdictions address some of the disparities by aid, taxes, and other tools.

Within the three categories of opportunity, wealth, and income, there are subcategories. Subcategories include inequality within countries, inequality between countries, geographic such as North–South inequality, and gender and racially based inequality. Racial and gender inequalities may derive from historically imposed barriers to full participation in the market. North–South inequality and the legacy of colonialism may similarly result from deliberately constructed barriers to participation. Widespread persistent barriers to participation can undermine efficiency of markets by screening out large segments of the population who could add dynamism and creativity to the market. For both dignity and efficiency reasons, policymakers in nations of embedded discrimination may adopt an ‘inclusivity’ goal for competition law, as has been done in South Africa and followed in other African countries. Historical suppressions can result in impaired capacities—such as difficulties of small businesses to advance in the digital economy without a helping hand from Gatekeepers to be lifted onto their platforms—and can produce legal standards that expand competition law duties.

Income disparities tend to be lower than wealth disparities.¹ As of the end of 2021, the top 10 per cent accounted for half the world’s income, while the bottom 40 per cent held only 8.4 per cent of the world’s income.² The World Inequality Database shows:

The increase in inequality has been especially marked at the top end of the income distribution, with the income share of the top 10 percent (and even more so that of the top 1 percent) rising sharply in many countries …. Those in low- and middle-income groups have suffered a loss of income share, with those in the bottom 50 percent typically experiencing larger losses of income share. These trends in inequality have been associated with an erosion of the middle class and a decline in intergenerational mobility …³

Causes of wealth inequality are in part historical—industrial conditions that resulted in great accumulation of wealth by a few, such as the Industrial Revolution magnates (the Robber Barons in the USA), royalty and ruling families elsewhere, and tax policies that let the wealthy keep their wealth. New wealth is accumulated by technology leaders and superstars, who similarly enjoy favourable tax policy.

Both forms of inequality are exacerbated by new technologies, globalization, and high-skill premiums for the digitally adept⁴; while at the low-skill end of the income scale, workers face diminished returns by reason of outsourcing, the waning power of labour unions, loss of unskilled jobs to technology, and racial segregation.⁵

In capitalist and market systems, not all inequalities are deemed bad and to be avoided and corrected. Absolute equality of outcomes is not the goal. But the immense and increasing disparities between the very rich and the middle class and poorer populations sounds social and political alarms.⁶ A recent Brookings article reports:

Rising inequality and related disparities and anxieties have been stoking social discontent and are a major driver of the increased political polarization and populist nationalism that are so evident today. An increasingly unequal society can weaken trust in public institutions and undermine democratic governance. Mounting global disparities can imperil geopolitical stability. Rising inequality has emerged as an important topic of political debate and a major public policy concern.⁷

Martin Wolf, chief economics commentator at the Financial Times and author of The Crisis of Democratic Capitalism, observes: ‘if people cannot gain a sufficient standard of living, a peaceful and democratic order becomes difficult to maintain’.⁸ A similar theme is struck by Jonathan Baker and Steven Salop, who write:

Another problem is political. The wealthiest have a disproportionate influence on public policy. This gives them an ability and incentive to skew public investments and government policies to favor themselves … . This political effect can make inequality self-reinforcing: the economic power of those at the top gives the wealthy political power, which can be used to entrench and enhance their economic power, further increase their political power, and so on. This vicious cycle creates the possibility that inequality could threaten our democracy.⁹

The poverty problem may be included in concern for wealth/income disparities. But the problem is different, and to many it is more compelling and the better point of focus. Millions of people are starving, and unnecessarily so, for enough food is produced to feed everyone on the planet.¹⁰ More millions of people are so desperate for their next pennies that they must make tragic choices between sending their children to school and having a slice of bread to eat.¹¹

While large disparities in wealth and income may be unfair, unbalance society, and even threaten democracy, macroeconomics adds subtleties. Some studies indicate that inequalities have positive effects on growth and development in early stages of economic development, following Kuznets’ inverted U-curve hypothesis—which is both supported and criticized.¹²

3. A BRIEF SUMMARY OF THE LITERATURE ON COMPETITION LAW AND INEQUALITY¹³

This section cuts a path through the growing body of literature on competition law and inequality. It draws from four seminal articles that illuminate the competition–inequality links, while noting literature that disputes the links. The four selected articles make a powerful case for a role for competition law and give flavour, even passion, to the claims.

We begin with the work of Lina Khan and Sandeep Vaheesan, who stress market power as a principal vehicle for transferring wealth to the very rich. While the authors focus on the USA, their observations can fairly be generalized to the world. In their article Market Power and Inequality: The Antitrust Counterrevolution and its Discontents,¹⁴ they write:

In recent years, economic inequality has become a central topic of public debate in the United States and much of the developed world … . As top intellectuals, politicians, and public figures have come to recognize inequality as a major problem that must be addressed, they have offered a range of potential solutions [in fields such as tax, labor, trade, investment, and financial institutions].

One underexplored theme in this larger debate is the role of monopoly and oligopoly power. Given the current distribution of business ownership assets in the United States, market power can be a powerful mechanism for transferring wealth from the many among the working and middle classes to the few belonging to the 1% and 0.1% at the top of the income and wealth distribution.¹⁵

Secondly, Tommaso Valletti and Hans Zenger document a ‘significant body of empirical research showing increases in margins across a wide range of industries … ’. They write in their article, Increasing Market Power and Merger Control:

A significant body of empirical research has documented a structural increase in margins across a wide range of industries and countries. On average, firms enjoy appreciably greater pricing power today than used to be the case in prior decades. Research also showed that this increase in mark-ups coincide[s] with a decline in the labour share of output, higher aggregate concentration, larger corporate profitability, and a slump in business dynamism …¹⁶

Thirdly, Sean Ennis, Pedro Gonzaga, and Chris Pike construct a model to measure the effect of market power on inequality. They report a sizeable effect of market power on the middle class and the poorest segment of the population. Their article, Inequality: A Hidden Cost of Market Power, concludes:

This paper provides evidence that market power can contribute substantially to wealth inequality, augmenting wealth of the richest 10% of the population on average by 12% to 21%, depending on … saving behaviour, and reducing the income of the poorest 20% of the population by 11% or more. The groups of the population who are typically harmed by market power are the 0 to 80th percentiles, and interestingly the harm appears to be particularly accentuated on a middle class comprised somewhere between the 20th to 60th percentiles.¹⁷

Fourthly, Shi-Ling Hsu offers a nuance. Hsu is sceptical that increased concentration produces greater inequality, and sceptical that concentration harms consumers, but identifies a major shift in the capital–labour ratio as relevant to inequality. He writes in his article Antitrust and Inequality: The Problem of Super-firms:

[L]arge, consolidated “super-firms” have grabbed ominously large market shares, limited consumer choices, and threatened to render local provision of goods and services anachronistic … . [Unrest has exploded into politics and] populist anger … . Monopoly or oligopoly rents transfer wealth from consumers to producers, which would seem to naturally lead to an increase in inequality.

But the linkage between inequality and the rise of this new trend towards industrial concentration is not always so clear. For one thing, as Daniel Crane argues,¹⁸ heterogeneity among consumers and producers render it extremely difficult to determine whether on net, industrial concentration redistributes wealth from poor to rich. On the consumer side, the rise of these super-firms that seek to dominate markets for internet search, retail, social media, telecommunications, electronics, and seemingly everything important have, despite their ominously large market shares, incontrovertibly produced enormous consumers surplus… .

[Still, competition law may] contribute to inequality in a subtle but important way: by contributing to a shift in the capital-labor ratio of some of the most dominant firms.¹⁹

Other scholars dismiss or qualify claims of linkages between business concentration and inequality. They dispute the claim that concentration is increasing beyond a handful of markets that require large scale for better service (high tech, health care, energy, transportation, on-line retailing). They disagree with the broad generalization that business concentration undermines competition, pointing to markets with few firms where competition is intense. They would not infer monopoly profits from higher prices, which could reflect higher quality or better service. They question whether, when higher mark-ups are observed, the increment is traceable to concentration, not efficiency. They dispute the narrative that firms are currently making higher than normal profits. They question whether monopoly profits, when made, go systematically and disproportionately to the rich and high-income earners.²⁰

For those of us who have not prepared the studies or mined the data, it is not easy to work through this briar patch of literature. There appears to be a tendency of scholars writing on competition and inequality to cite the narrative that fits predilections for either more robust or more reluctant competition law enforcement.

4. OBSERVATIONS ON THE COMPLEXITY OF THE PROBLEM

This section makes six observations that add complexity to the inquiry into whether competition or competition law is a cause or partial solution to the wide inequality gap.

First, there are many causes for the rising inequality gap.²¹ First among causes commonly identified are globalization, technological advances, and the catapulting of super firms especially in the digital sector. The world is witnessing ‘The Rise (and Rise and Rise) of the 0.01%’.²² It is also witnessing stagnation in the middle class and the fall of the standard of living of people on the bottom rungs of the inequality ladder.²³ While competition law has not caused the rise or the fall, market competition has played a role. The market, in the context of new technologies and their global deployment, pushes towards greater concentration of wealth and income; it plays into the hands of those who have the skills and money.

Similarly, competition law has not caused the growth of market power. Nor, apart from the important category of mergers, is it charged with preventing growth of market power. In other words, competition law is positioned to control just a fraction of market power, and only in specific circumstances. Nonetheless, a number of scholars and policymakers claim that competition law has stood by while market power has accumulated and flourished.

Secondly, where economic power is created by mergers or anticompetitive conduct or is used to harm competition that is a problem that competition law does and ought to address for efficiency and consumer welfare concerns, without regard to increasing inequality. When competition law is successfully enforced against firms with market power, the enforcement tends to help people without power or privilege and thus tends to move the law in the direction of less inequality.

Thirdly, in a number of jurisdictions, competition law primarily addresses allocative efficiency, not distributive equity. The question—how to reduce the wealth-and-income inequality gap—is distributive. Those who support the allocative-only view of competition law argue that introduction of non-economic factors will shrink the pie, undermine incentives to invent and invest, and make even the poorest people worse off.

Fourthly, focus on wealth and income inequality obscures other inequality problems. Two prominent such problems are: deep systemic poverty and corporate power procured by and used for vested interests. Much of the literature on inequality of wealth and income veers off to discuss poverty and power. We look here briefly at deep systemic poverty and at corporate power.

Deep systemic poverty

The problem of poverty and of the people who are the worst off is different from the problem of the skewed spread of wealth and income. The skewed spread is a huge sociological, psychological, and political–democracy problem, with consequences to economic growth. The constant flow of wealth to the elite and the hollowing out of the middle class undermine dignity, breed personal disaffection and depression, and weaken democracy and its legitimacy, as discussed above. The wealth/income gap is different from the poverty problem on three counts. Its causes are different, its effects are largely different, and its cures are largely different.

As noted above, the main causes of the skewed spread include inherited wealth, globalization, and technological advances—especially in high tech and data, the rise of superstars—entertainers and firms, and rags-to-riches financial successes (especially from globalization and high-tech advancements) such as Elon Musk with $250 billion net worth. The persistence of educational inequalities is a critical structural factor. The effects of the skewed spread on people are diffuse; they include disaffection and a feeling of a stacked deck, loss of control, and profound unfairness; but the problem is not typically where starving people will get their next meal. An obvious cure for extreme inequality of wealth would be a generous wealth tax on the very rich. This would immediately shrink the wealth gap without (directly) making the poor better off. Similarly, increasing taxes on high incomes and closing tax loopholes would shrink the take-home income gap. Lifting up the bottom is another story, and is urgent.

The two, however, interrelate. Jain-Chandra and others relate that higher income inequality may ‘caus[e] the rich to block growth-enhancing redistributionary policies’; it can ‘hamper growth in the presence of credit constraints causing underinvestment in human capital and health … and entrepreneurial activity …’.²⁴ Higher inequality can slow growth and slowing growth is bad for the poor. Moreover, prioritizing pro-poor and inclusive issues in competition enforcement and advocacy, and more aggressive enforcement, can help both groups.²⁵

Corporate power

Competition law is about power, its accumulation and abuse. In modern times it is about efficiency and undistorted markets, but in earlier times it was centrally also about socio-economic and political power. As Big Tech/Big Data got bigger and more invasive, people began to worry (again) about grabs of power and manipulation of power in the interests of the rich and powerful.²⁶

Fifthly, there are tasks that competition law can and cannot do well. Preventing anticompetitive conduct cannot perceptibly shift the existing wealth distribution. Competition law cannot cap CEO or superstar income. But competition law can do something significant about keeping markets open, thus enhancing mobility and helping people and firms without power. Competition law can directly help promote equality of opportunity, empowering people and giving them a better chance.²⁷

Competition law can help prevent growth of economic power by preventing anticompetitive mergers and can prevent use of dominant power to create more power; and both merger and monopoly litigations can prevent appropriation of income and wealth by those who tend to be at the top of the scale from those further down. But competition law has been doing this all along—preventing wealth transfers that often would have gone to the wealthier quadrant as a by-product of condemning anticompetitive behaviour and transactions, and even so we are experiencing or have recently experienced an unprecedented widening of the inequality gaps, probably because the major causes of the attenuation such as technological progress overwhelm what competition law can contribute to a fairer distribution.

The five points above relate exogenously to competition and competition law’s effect in creating or reducing inequality. A sixth point relates to a stand-alone equality value inside the competition law and to the possibility of adding such a value in jurisdictions where it is not already there. Equality, like democracy, can be embedded in competition law, as it is in South Africa. It can be the music behind the words. It can entail a vision of society in which people have opportunity to join the economic enterprise on their merits, in which they can expect to get a fair share of value in goods and services that they make or buy, and in which they have a reasonable share of the ownership of assets. The next section instantiates various ways in which jurisdictions do incorporate equality.

5. HOW ‘EQUALITY/INEQUALITY’ IS RECEIVED INTO COMPETITION LAW

In this section, we look at how an equality value is received into competition law in three selected jurisdictions: the USA, the EU, and South Africa. Thereafter we comment more briefly on reception in Latin America and Asia.

The history of US competition law and equality

At its origins, US antitrust law had a sympathetic relationship with equality. The symbiosis reached its high point in the 1960s. But the sympathetic relationship waned in the late 1970s; and, especially since the early 1980s, equality and all other non-market factors have been systematically expunged from US antitrust. Contemporary US Supreme Court caselaw, especially since the Trinko case in 2004,²⁸ has ushered in a long wave of devotion to ‘the market’, even when ‘the market’ comprises only a few producers/suppliers.²⁹

A backlash may be occurring. Public perceptions by the people that the market has not worked for them, and a consciousness of severe inequalities exacerbated by the Covid pandemic, led to powerful popular rhetoric for turning the tide. The neo-Brandeis School arose³⁰ and the Biden administration appointed antitrust enforcers with an equality-consciousness.³¹ At this writing, in view of the incoming Trump administration, the political future of humanistic-centred antitrust in the USA is in doubt.

The history of EU competition law and equality

Whereas US antitrust valued equality in its first phase and disowned it in its second phase, EU law has followed a steady course. Equality is a basic EU Treaty value.³² It is diffused into all EU law. While the most basic equality principle is equality of treatment of all EU citizens regardless of their Member State,³³ the equality principle in EU law has a stronger purview.

EU law is driven by a goal of market integration. Pursuit of market integration is inherently inclusive,³⁴ and inclusivity is inherently pro-equality.³⁵ Market integration demands openness of and access to markets; thus contestability of markets. It demands a level playing field, not to be distorted by power and privilege, including state-granted privilege. The openness principle creates an environment welcoming and incentivizing outsiders (those not in the inner circle of power).³⁶ A second and third thread promote equality independently from market integration. They derive from a posture on political economy and control of power. They are: equality of opportunity to contest markets on the merits, and a right not be (excessively) exploited. Of course, EU competition law also proscribes mergers and dominant firm conduct that increase market power and these prohibitions can tend towards a better distribute wealth. Finally, EU law shows special regard for workers through exemptions or immunities.

The significance of equality of opportunity in EU competition law is underscored in the recent judgment of the Court of Justice of the EU in Google Shopping.³⁷ As background to Google Shopping, Google, with a super-dominant position in online search engines, entered the online shopping comparison market and demoted its rivals on its platform to give preference its own service. The judgment stresses the importance of a clear path for competition on the merits. A dominant firm in the position of Google may not use its leverage to enjoy competitive advantages over rivals; it must not repress competition on the merits.³⁸

The history of South African competition law and equality

South Africa tells its own brutal story of inequality and, in New South Africa, the affirmative use of competition law as a tool to correct it. In South Africa competition law is one means to help lift up, empower, and provide mobility for the great majority of the population who were heinously excluded from economic life by the white supremacist government during the dark years of apartheid, 1948 to 1994. Apartheid was formally abolished only when Nelson Mandela was freed from prison. The new competition law was designed both for economic performance and for black empowerment and empowerment of poorer, weaker and excluded persons in general.³⁹ More than any other nation in the world, South Africa affirmatively uses competition law and policy to provide greater equality and to be a cornerstone of justice in society.

Equality is deeply embedded in the South African competition law and its jurisprudence. It is a source of wisdom both to prioritize enforcement and to decide cases. The competition authorities use competition law decrees for extensive conditionality in favour of Small and Medium Enterprises (SMEs), small suppliers, workers, and historically disadvantaged persons (HDPs). The substantive law embodies affirmative action for HDPs and SMEs. If the world wants a touchstone for how far a competition law might go to advance equality, it is South Africa’s.⁴⁰

In 2004, then Deputy Chief Justice Dikgang Moseneke captured the depth of the Constitutional guarantee:

The achievement of equality goes to the bedrock of our constitutional architecture. The Constitution commands us to strive for a society built on the democratic values of human dignity, the achievement of equality, the advancement of human rights and freedom. Thus the achievement of equality is not only a guaranteed and justiciable right in our Bill of Rights but also a core and foundational value; a standard which must inform all law and against which all law must be tested for constitutional consonance.⁴¹

Van Heerden, quoted above, is not a competition case. It upholds the constitutionality of affirmative action. The equality principle in competition law evolved separately.

The South African society had hoped, in the early years of the New South Africa, that competition law would be a strong instrument for economic transformation; that open markets, guarded by competition law, would naturally draw the historically discriminated people into the economic life of the country including into economic leadership. But the law did not meet this promise of transformation. In 2018, accordingly, the President and Minister proposed, and got enacted, sweeping amendments to facilitate the transformation, giving special rights to HDPs and SMEs. The amendments require the Commission and Tribunal to consider whether every notified merger promotes a more equitable spread of ownership.⁴² To support its mandate on spread of ownership, the Competition Commission has issued guidelines that would require merging parties to give a percentage of assets to workers and/or to sell a minimum percentage of equity to HDP entrepreneurs.⁴³

In October 2021, in a merger case, Mediclinic South Africa,⁴⁴ the Constitutional Court affirmed the critical role of equality and dignity in the competition law. Chief Justice Mogoeng Mogoeng famously said:

Colonialism, neo-colonialism and apartheid orchestrated an institutionalised concentration of ownership and control of all things of consequence in our national economy along racial lines. Unsurprisingly, the commanding heights of the corporate sector are seemingly the exclusive terrain of our white compatriots. It is this indisputable reality and our shared commitment to ensuring that South Africa really does get to belong to all who live in it, that the constitutional imperatives, laid out in the Preamble, to improve the quality of life of all citizens and free the potential of each are realised, that the likes of the Competition Act had to and got to see the light of day….

Institutions created to breathe life into these critical provisions of the Act must therefore never allow what the Act exists to undo and to do, to somehow elude them in their decision-making process. The equalisation and enhancement of opportunities to enter the mainstream economic space, to stay there and operate in an environment that permits the previously excluded as well as small and medium-sized enterprises to survive, succeed and compete freely or favourably must always be allowed to enjoy their preordained and necessary pre-eminence. The legitimisation through legal sophistry or some right-sounding and yet effectively inhibitive jurisprudential innovations must be vigilantly guarded against and deliberately flushed out of our justice and economic system.⁴⁵

Equality and competition elsewhere in Africa, Asia, and Latin America

Elsewhere in Africa, nations commonly adopt a perspective motivated by inclusiveness. The new African Continental Competition Protocol, still subject to ratification, recognizes inclusive growth among its aims.⁴⁶ The Protocol includes Article 11, a provision against ‘Abuse of economic dependence and any other anti-competitive practices’. This provision prohibits abuse of economic dependence, including by gatekeepers. It could support competition rules that require dominant gatekeepers to empower small businesses, gig workers, and financially challenged consumers to engage with their platforms, and thus to help meet the promise for these disadvantaged or insufficiently capacitated entities to engage meaningfully with the digital economy. Otherwise, the global inequalities will simply expand.⁴⁷

Asian countries pioneered the competition offense of abuse of superior bargaining power. Indeed, examining and explaining this offense was the special project of Japan when it hosted the annual conference of the International Competition Network in Kyoto in 2008.⁴⁸

In the Caribbean, comprised of many small island economies, the vulnerability of the economies and the need for inclusiveness and regard for the marginalized masses informs all laws.⁴⁹ In Latin America in general, the extreme inequalities and severe poverty have led the competition authorities to give primary emphasis to these issues in their enforcement and advocacy. The OECD Background Note for the session on Competition and Poverty of the Latin American and Caribbean Competition Forum, 6 June 2023, specifies poverty-related initiatives in Argentina, Brazil, Chile, Columbia, Costa Rica, Ecuador, Mexico, and Peru. Attention is given to bid-rigging and procurement, to relief in megamergers to protect small farmers, and to expansion of microfinance services that would improve the lives of poor women.⁵⁰

Summary

The USA, EU, and South African competition laws represent three points along a continuum, from the neo-liberal approach of current US Supreme Court antitrust case law, which holds no quarter for an equality value; to EU law, which, by its nature of integrating markets, stresses open markets and a right to contest markets by competition on the merits; to South Africa, which, in the aftermath of the abhorrent apartheid regime, uses competition law as one prominent vehicle to bring about the still dearly sought transformation. Numerous other countries, especially developing countries and emerging or recently emerged economies, follow the example of equality–sensitivity in their competition law and enforcement.

6. OPTIONS FOR INTEGRATION: HOW COMPETITION LAW, CONSISTENTLY WITH ITS CORE TASKS, CAN PLAY A ROLE IN EXPANDING OPPORTUNITY AND DECREASING THE INEQUALITY GAP

Numerous possible reforms have been identified. They entail various degrees of ease of implementation, likelihood of implementation, and likelihood of having an impact. Nearly all proposals include more aggressive enforcement and prioritization of cases likely to help middle class, working class, and poorer populations. Both tacks—aggressive enforcement and prioritization—are very important but come with this caveat about expectations for change: More aggressive enforcement is high on the list of proposals for competition law reform without regard to inequality, and prioritizing cases most likely to help the masses is a task most enforcers say they already do.

This section on possible reforms categorizes the options as follows: (1) appreciation of the problem, (2) rethinking competition law and economics—concepts of efficiency and distribution, (3) rethinking goals and perspective, (4) changes in substantive law and refocus of existing substantive law, (5) changes in procedural law and process, (6) remedies, (7) prioritization, (8) more aggressive enforcement, and (9) affirmative action.

1. Appreciation.⁵¹ Understanding the impact of market competition and lack of it on attenuating inequalities is a first step. Equally important is understanding the impact on inequalities of: enforcement, choices not to enforce, and remedies. For example, a higher consciousness that lack of competition in basic goods such as food hurts the poor before and much more than it hurts the rich⁵² can influence choices of enforcement and remedies.

2. Rethinking competition economics.⁵³ Classical economics aggregates the rich and the poor, the strong and the vulnerable, in calculating whether a particular transaction or conduct causes harm and whether a particular remedy will cure the harm.⁵⁴ If the rich win more than the poor lose, that is ‘efficient’ by the Kaldor-Hicks paradigm. Equality-sensitive economics would consider whether the poorer populations are systematic losers from certain behaviours or rules of law. It may question remedies that, despite making the richer better off, make the poorer worse off.⁵⁵ Equality-sensitive economics may place more weight on friendly conditions for entry and participation, and may value entry even if merging parties ‘prove’ that enough firms remain in the market to maintain ‘competitive conditions’.

3. Rethinking goals and perspective. All competition laws aim either to keep business acts or transactions from undermining market performance or, more robustly, to help make markets work better. Formulations and perspectives on goals range from non-interventionist (often in the name of ‘consumer welfare’) to protecting market process for the benefit of all stakeholders. Equality-sensitive policymakers may wish to embrace the latter formulation and may include fair distribution of the gains as part of the analysis.⁵⁶

4. Changes in substantive law.⁵⁷ Since market power has been identified as creating inequalities, inequality-sensitive policymakers might naturally consider proscribing the status of having significant market power⁵⁸ or the status of sustained monopoly.⁵⁹ Efficiency defences could be available—and would illuminate the costs, in most cases, of a status offense. More modest changes include more attention to entry conditions, as by adding an inclusiveness value. Jurisdictions could facilitate easier shifts of burdens in abuse of dominance and merger cases, and easier proof of concert among oligopolists, especially in view of AI. The law can be clarified or, if necessary, amended to prohibit market harms to upstream players—workers, farmers, and small suppliers. It can be amended or clarified to cover exploitative offenses, which often evidence themselves in unaffordable life-saving medicines and health care. An exemption could be created for joint bargaining by very small players such as gig workers who do not have the benefit of a labour exemption and are caught in the wide net of cartel law; the exemption can be consistent with consumer welfare.⁶⁰

5. Changes in procedural law and process. Ezrachi, Zac, and Decker⁶¹ propose several innovative changes in procedure and process. These include: (a) Targeted compensation. The competition agency, at the end of an investigation, may impose not only a fine but also an award of compensation to the injured class. This equitable compensation might help address unequal access to justice.⁶² (b) Additional support for damage claims. Jurisdictions can consider ‘increased incentives, subsidies, and measures for cost and risk mitigation … ’, recognizing that these cases may involve weaker communities and individuals with limited access to justice.⁶³ (c) Facilitating initiation of a complaint with the competition authority for groups with lower incomes. Inspiration can be taken from the super-complaint procedure in the UK that privileges certain consumer bodies.⁶⁴

6. Remedies. Remedies (including investigated firms’ proposed fixes) are critical, and get insufficient attention. Remedies for cartels—as well as calculations on the benefits of enforcement—should take account of the fact that, post cartel, prices do not usually go down and especially do not fall to pre-cartel levels.⁶⁵ In global merger cases such as Bayer/Monsanto, recognition that the biggest harms in seeds and fertilizers fall on the most vulnerable farmers and consumers could inform the choice of remedy: for example, to prohibit the merger rather than to accept spin offs and behavioural promises.⁶⁶

   Baker and Salop list merger conditionalities that might be considered by competition authorities and sector regulators. These include divestitures or price caps placed on certain products or technologies, including drugs, and commitments to low-priced distribution.⁶⁷

7. Prioritization. Ezrachi, Zac, and Decker offer rich detail on prioritization.⁶⁸ They draw from the World Bank’s approach to ‘the asymmetric impacts that natural disasters have on the well-being of poorer citizens in a community’, acknowledging ‘that the same harm or losses can have differential effects on wealthier and poorer citizens of a society and the severity of a loss depends on who experiences it … ’. They suggest an ‘equality impact checklist’ in which indicators relate to distributional impacts.⁶⁹ They reference work of the UK and Dutch competition authorities.

      Subjects for priority that could help push back the inequalities include health care, medicines, food, transport, energy, communications, information, and payment systems—access to financial services. Important issues include attention to ease of entry and market participation on merits, and attention to offenses against labour that deprive workers of competitive wages or opportunity.

      Prioritization also entails choices not to bring suit where the litigation would harm the most vulnerable, as Baker and Salop point out.⁷⁰ Equality-minded US enforcers are unlikely to have sued the low-income public-interest lawyers who lobbied the Council of the District of Columbia to pay higher than pittance wages to the lawyers who represented indigent criminal defendants.⁷¹

8. More aggressive enforcement. More vigorous enforcement would call to account aggrandizing market power and abusing it. More vigorous enforcement in the priority areas, above, would especially help the most vulnerable. The agencies would need increased budgets to match the greater activity. ⁷²

9. Advocacy. Advocacy can contribute on two fronts. First, the agency can draw attention to conduct or deals, or formulation of rules of law, that exacerbate inequalities and hurt the vulnerable. They can further the message that ‘the losses associated with less competition would likely be most acutely experienced by those on lower incomes’.⁷³

      Secondly, competition authorities can increase their efforts to identify and oppose harmful government barriers. Government-imposed barriers are a large cause of harm to poorer populations. World Bank experts report compelling examples in which removing protectionist barriers on food and agricultural products can lead to immense consumer welfare gains and decrease poverty by significant percentages.⁷⁴

      China’s Fair Competition Review sets up a system to examine laws, rules, and regulations before they are adopted, to delete measures that would unnecessarily restrict market entry or block the flow of goods and services. It gives China’s competition authority, State Administration for Market Regulation (SAMR), the responsibility to oversee the system.⁷⁵ This gives SAMR an excellent position to advocate against the adoption of regulations that would otherwise privilege the elites and vested interests at the expense of the people. Advocacy can take the form of or lead to market studies in areas critical to the poorer population.

10. Affirmative action. South Africa is the prime example of a society that has chosen to impose positive action obligations on dominant firms and merging parties to further the transformation of the society. Still deeply scarred by the exclusions and indignities of apartheid, South Africa imposes special obligations on dominant firms not to use buyer power against HDPs and SMEs, and it requires merging firms to contribute positively to a greater spread of ownership by devoting a percentage of assets to worker stockholding plans and/or selling a percentage of assets to HDP entrepreneurs, while also providing capacity-building funds and training.⁷⁶

7. CONCLUSION

Severe, systemic inequalities plague society. Market power is one among many contributing causes. Competition law offers tools and perspectives that can increase economic opportunity and can work with other policies to help alleviate the disparities. Traditional modes of antitrust analysis obscure the impact of corporate conduct, transactions, and strategies on the poorer populations; the less privileged, skilled or endowed. Equality-conscious competition law should fill this breach.

Footnotes

Acknowledgements

The author thanks Frédéric Jenny for discussions and correspondence, on which this article draws, and Emmett Tabor, JD candidate, NYU Law 2025, for his helpful research assistance. This article is based on the author’s background note written for the OECD Global Forum for Competition, 2 December 2024.