NEW YORK/CHICAGO/BERKELEY, Calif. (Reuters) - Modern antitrust laws were invented in America. Yet it’s Europe that’s now acting as the global authority on competition regulation. The United States is losing the global race.
The Department of Justice is staffing up its online-platforms unit to probe antitrust violations by technology giants like Facebook, Apple, Alphabet and Amazon, yet will be playing catch-up to its European Union counterpart. In fact, it’s the EU that has kept these and other U.S. companies in check for years with its vigorous antitrust enforcement. Since 2017, the European Commission has fined Google, for example, nearly $10 billion for breaching EU antitrust laws. But beyond holding American companies to account, the EU has become the global authority on antitrust regulation.
To date, over 130 countries have adopted a domestic antitrust law, most of them reflecting what the EU has put in place. In a new study published in the Journal of Empirical Legal Studies, the authors of this column, together with Alexander Weaver, analyzed antitrust statutes from 125 countries for over 50 years, and compared them to U.S. and EU antitrust laws. First, by looking for linguistic similarity – seeing whether countries copied key pieces of language from U.S. or EU laws when writing their antitrust laws. Secondly, by considering whether the substantive provisions found in those laws mirrored more closely the provisions embedded in U.S. or EU antitrust laws.
Both analyses showed that countries with very different geographical, linguistic, and cultural ties overwhelmingly gravitate towards the EU. Indicatively, important regional leaders in antitrust law and major emerging markets like Brazil, China, India, Mexico, Russia, South Africa, and South Korea all now have laws more similar in substance to the EU than the United States.
This declining American influence is surprising. Modern antitrust rules were first formulated in the United States, and its law schools have continued to been profoundly influenced by the law and economics movement. The United States also masterminded the creation of the main venue for global antitrust regulatory dialogue, the International Competition Network.
Nevertheless, the EU has been pushing harder to spread its rules around the world. It has promoted its regulatory model actively through trade agreements, making access to its vast consumer markets contingent on the adoption of an antitrust law. Being able to offer market access to over 500 million consumers gives it tremendous influence. The United States has been much more reluctant to use trade treaties as instruments to export its antitrust model.
Europe’s approach also appeals in other ways. Laws that tend to be more stringent, and defer less to markets, tend to resonate with governments that want to maintain their regulatory authority. In addition, the EU offers a detailed regulatory template that is easy to copy without further technical expertise. EU rules are already available in French, Spanish, and Portuguese, further facilitating their adoption in Africa and Latin America.
The EU’s power shows in flashes, such as when the commission imposes record fines on American tech giants or data providers around the world unveil new EU-compliant privacy policies. But analysis reveals a much more entrenched process of regulatory influence. The EU’s global antitrust dominance illustrates the ability of a single jurisdiction to attract countries with starkly different characteristics into its orbit, creating a regulatory impact that far exceeds its economic, linguistic and political boundaries.
All this is good news for an embattled European Union – but not for the United States. While it’s still home to the most robust economic theories underlying modern antitrust laws, theories and ideas alone do not determine how global regulatory races are fought and won. The more the United States, under the administration of President Donald Trump, deregulates domestically and turns its back to global trade deals and regulatory cooperation, the weaker its ability to shape other countries’ regimes becomes.
The unprecedented attack on global trade rules and traditional alliances under the Trump administration will only accelerate these longstanding trends. When U.S. regulators take a back seat, the antitrust example shows the EU is prepared to step in and write the rules for the global markets, alone.
Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.
Sign up for a free trial of our full service at https://www.breakingviews.com/trial and follow us on Twitter @Breakingviews and at www.breakingviews.com. All opinions expressed are those of the authors.