Master of None
In Sarah Long’s recent speech about gender and competition law she quotes Sandi Toksvig’s 2018 Adam Smith Lecture in which Sandi tells the story of Barbara, a woman who is juggling at least 6 jobs, including being a mother, housekeeper, carer, parent governor, volunteer, and community supporter. None of them are the job she is actually trained to do, which is being a senior nurse, because she can’t afford to go back to work and have someone else look after her children and do those other jobs for her. The jobs she does do are unrecognised and unpaid, and Sandi informs us that “she is officially classified by the UK government as ‘economically inactive’. Zero contribution to the world”. It’s funny because it’s true. In my house we have always referred to this as the “Zero Contributor”, or “ZC” for short, ever since I was labelled as such by a mortgage broker (in fact I was less than a ZC, I was a “negative dependent” at the time, getting in line behind our two infant children). I was heartened to see voices like Sarah’s highlighting the plight of ZCs such as myself and asking: what can competition law do about it?
No one wants competition law to become a politicised tool for special interests, but it is interesting that these days this concern is not being expressed by civil society, wary of big corporate money capturing the regulatory process. Rather it is coming from the antitrust mainstream, resistant to any muddying of the analytical waters. We are told over and over that we should not throw everything into the competition pot and stir; antitrust should focus on the neat, apolitical assessment of competitive dynamics and efficiency.
Leaving aside for one moment the argument that the consumer welfare standard is not after all politically neutral because the politics is baked-in to the economics, would it be so difficult to balance the interests of different constituencies with the tools of modern economics that are currently available?
We already do conduct a balancing exercise — when we encourage firms to pass on efficiencies in the form of low prices rather than in the form of good wages, trading off the interests of consumers over workers. But this is supposedly a clean trade-off, there are no hard cases — under consumer welfare, versus say total welfare, low prices and the interests of the consumer always win.
This is a disingenuous characterisation, though, because we have only indirect methods for ensuring low prices in free markets, and merger retrospectives show a poor track record for doing so. A 2016 study by the US Federal Reserve showed that most mergers lead to price mark-ups with little evidence of greater efficiency. Meanwhile, in John Kwoka’s retrospective review of dozens of mergers he found that when the deal resulted in a reduction of competitors to six or fewer (a high bar in antitrust terms), post-merger prices rose in the vast majority of cases. And in fact, under the principle of corporate governance known as “shareholder value”, about which competition law has almost nothing to say, the efficiencies within the firm are actually earmarked for shareholders. And so our neat balancing in favour of consumers is systematically undermined by market imperfections, rent seeking and the accumulation of capital and power by shareholders and the fortunate few who actually own a slice of the economic pie, and who are not just renting it or paying for it through debt, like most other people.
The fact that even the consumer welfare standard has not been entirely successful by its own standards, in keeping prices low and ensuring allocative efficiency, will cause some to rightly take pause before piling in with even more factors for consideration — after all, we haven’t gotten it right for consumers yet so how can we hope to protect workers, the environment, small businesses, democracy. But in truth we were never really meant to protect consumers, with some accusing Robert Bork and others of using the “consumer” phrasing as a Trojan Horse to import into antitrust a pro-shareholder agenda with the unwitting support of politicians who would have been quite unwilling had they known how it would turn out (see here for Barak Orbach’s interesting discussion of this theory).
I don’t think the answer is to double down on consumer welfare, and to continue to rely on the idea that the benefits of maintaining competition will trickle out from efficient firms, and the efficient allocation of resources, across the economy. Instead we can look at how to protect other interests directly, within competition law, but without undermining the integrity of the discipline.
The question I have been left with is: would the consideration of a broader range of factors within antitrust really lead to an impossible balancing exercise and a hopelessly unworkable and unpredictable regime? It is easy to assume yes in the abstract, but what if we take a particular example: gender.
Competition law has historically had very little to say on the topic of gender but a recent OECD paper by Estefania Santacreu-Vasut and Chris Pike, as well as the speech by Sarah Long of Euclid Law, have both explored the contribution competition law may make to the fight to create gender equality.
What is the impact of existing market structures on gender inequality? An obvious one is the fact that women participate less in the labour market, they get paid less for the work that they do and they are more likely to do involuntary, part-time or informal work. This acts as a drag on global GDP to the tune of $12 trillion or 16% of global income. That’s huge. And we can’t put an economic price on the fact that 1 in 5 women are victims of violence, often sexual violence. You may not think that this is happening “on the market” but it might be happening “because of the market” or because of limitations in the access some women have to the market, which puts them in the position of being reliant on abusive menfolk.
The crusade that has attracted some attention in the West is the gender pay gap or the lack of representation of women at board level, but all across the world, including in the West, women are doing enormous amounts of work for free, with no economic value assigned to it and on which the whole economy relies. Perhaps I am not such a ZC after all? [My husband, incidentally, would be the first to point this out — he places a huge value on the work I do, both intellectual, maternal and practical, even if I, like Barbara, do not show up in government statistics.]
At a basic level, we can see discrimination against women in the marketplace as itself a restriction of competition. The market cannot be said to be free and frictionless if it ignores certain market actors or charges them higher prices not related to higher costs. But what can competition law really do about gender inequality? One of the interesting themes of both papers is that there is a two-way relationship: competition influences gender inequality and gender inequality is a barrier to competition and the proper functioning of markets. This means that there is scope for a virtuous feedback cycle if we get the interventions right.
According to Estefania and Chris, competition authorities can contribute to the fight for gender equality without compromising, and possibly even by furthering the objective of, efficiency. Increased market competition helps achieve gender equality through at least two mechanisms. One is based on the idea that it is only where there is some element of market power that firms can afford to discriminate against women, in a perfectly competitive market they do not have the opportunity. The second mechanism is based on the fact that competition in markets for substitutes to female unpaid work (such as childcare and elder care and cleaning) and complements to female paid work (such as finance and safe transportation) will help women get out of the informal economy and into the formal one.
The OECD paper also explores how the gender lens can be applied to market definition and compliance incentives, all within the bounds of traditional efficiency analysis. There is also an important question of prioritisation. By focussing on promoting competition in the sorts of markets in which women supply the biggest share of unpaid work (i.e. substitutes), competition authorities can directly address what Sandi calls “Grossly Undervalued Domestic Product (GUDP)”.
If authorities were to engage in this kind of thinking, would it make a difference on a significant scale though? Perhaps not on its own. To truly help the billions of women in the Global South, for example, where life can be stark, choices limited, freedoms circumscribed and hope in short supply, we may need to develop new theories of harm incorporating concepts of extraterritorial effect. This would allow the CMA, for example, to approve coordination between British firms to agree on supply-chain practices that would support living wages for farmers or seamstresses on the basis of “efficiencies” (or perhaps we should just call it “humanity”) that accrues to people outside their jurisdiction. This would indeed be pushing the antitrust envelope. But I believe we have to start somewhere.
In the UK, the application of the “public interest test” is still within (unpleasant) living memory and its abuse for purposes of protectionism and nationalism was real. If you applied a public interest test to Siemens / Alstom would the Commision have found itself bound to back a European champion? And yet we should not pretend that we would approach such questions with the same naivete of the 1990s, when the Cold War had only just been won. Instead we can bring to bear decades of fine tuning of the kinds of economic tools that have been indispensable in applying the consumer welfare standards to the complex and nuanced problems of balancing other interests, as well as the insights of pluralistic and heterodox economics. And saying that we will consider a broader range of factors does not necessarily make any one factor dispositive nor predetermine the outcome.
It’s hard to say that competition authorities are fulfilling their missions to ensure markets work well when at least half the global population (and probably quite a bit more than that) still has a very uneasy relationship with markets, and for whom competitive outcomes seem to tend towards the unfair and discriminatory. The thing with challenging market outcomes is that it feels retrograde — as if you are not sophisticated enough to understand why the market actually is fair, giving to each person their true value in gold. But markets are not fair, they do not determine our worth, and it is increasingly becoming acceptable to say so, even in rarefied circles. We know the market is not always right and it often needs guidance. There is of course a role for other regulation and policy, including redistribution, subsidies for childcare, employment law that makes entering the formal workforce a viable option for women and mothers though maternity pay and parental leave. But since we are talking about the very operation of the market it seems that there should be a role within this space for competition law too.
