Legal and Economic Perspectives
- New Horizons in Competition Law and Economics series
Edited by François Lévêque and Howard Shelanski
Chapter 1: Synthetic Competition
Douglas H. Ginsburg In the 1960s academic lawyers and economists began focusing upon economic regulation, that is, regulation by an administrative agency typically limiting market entry, fixing prices, and setting other terms of competition. These scholars asked what turned out to be an embarrassing question for regulators and regulated firms alike: Where did economic regulation come from in the first place? In time, the answer to this question and the insight gleaned from it would lead to the deregulation of some industries and the advent of a regulation-driven form of competition, which I call “synthetic competition”, in others. The latter development – a hybrid of New Dealstyle economic regulation and orthodox antitrust or competition policy – has challenged many, particularly judges, to reconsider the standards by which agency regulations should be reviewed. I. NEW DEAL REGULATION The crucial intellectual event in the creation of the modern regulatory state in the United States was the New Deal experiment with corporatism. Prior to the New Deal, commerce was “regulated” solely on economic grounds almost exclusively through antitrust law, starting with the Sherman Act of 18901 and the Federal Trade Commission Act of 1914.2 Enforced by the Department of Justice and the Federal Trade Commission respectively, these statutes prohibit firms from entering into contracts, combinations, or conspiracies in restraint of trade, and from engaging in anticompetitive behavior and unfair methods of competition;3 they are not tailored to any specific industry or industries. The New Deal, with its emphasis upon regulation rather than competition and...
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