Price regulation and antitrust are alternative mechanisms to control market forces in the presence of market failure.2 As the Division accurately points out in its description of this Roundtable, regulation accompanied by centralized decision making supplants competitive market processes and threatens to harm competition.3 Or, as Judge Frank H. Easterbrook succinctly states it: “Regulation displaces competition.”4 The determination of prices through the dynamic interaction of supply and demand is a fundamental characteristic of well-functioning markets. Prices serve a critical signaling function in market economies, allowing market participants to adjust their behavior in response to the relative values of goods being bought or sold.5 Government control over prices is inherently less efficient in responding to ever-changing conditions compared to the ordinary market forces that exist in competitive markets. Regulatory schemes “require centralized decisions instead of a free market process” and “set static rules devoid of the dynamic realities of the market.”6
GAI Response to the United States Department of Justice(“DOJ”) Antitrust Division’s Public Roundtable on Anticompetitive Regulations
This comment is submitted in response to the United States Department of Justice(“DOJ”) Antitrust Division’s Public Roundtable on Anticompetitive Regulations as a part of its Discussion Series on Competition and Deregulation. We submit this comment based upon our extensive experience and expertise in antitrust law and economics.
As an organization committed to promoting sound economic analysis as the foundation of antitrust enforcement and competition policy around the world, the Global Antitrust Institute commends the Division for inviting discussion concerning an important topic. Expert competition agencies such as the DOJ’s Antitrust Division and the Federal Trade Commission (“FTC”) play an important role in ensuring that competition and consumer welfare are taken into account when regulation is contemplated. This comment highlights the costs of regulation and the harm to consumers that can result from impairment of the competitive process. Specifically, this comment addresses the use of government price controls to regulate competition. We illustrate the consequences of price controls with historical examples and identify modern markets subject to price regulations that will likely result in similar anticompetitive consequences and harm to consumers.
