Comparison of Competition Law and Policy in the US, EU, UK, China, and Canada
The world has seen a significant leap in the growth in the number of laws dealing with competition over the last few years. From only 12 jurisdictions around the world having had a competition law in 1970, there are now more than 125 that maintain a competition law regime, with the vast majority of them conducting active competition enforcement activities (OECD, 2020). This brief provides an overview of the competition law landscape in five major, influential jurisdictions over the last few years, and how ongoing developments therein could impact the future of competition law in the years to come. For each of the jurisdictions, the technology sector plays an important role in their national economy and has a significant presence of US tech firms. Part of the reason why we choose to highlight these legal frameworks is that they are actively working to regulate the sector, which has an impact on how US companies operate in general.
The origins of modern competition law roots back to the United States’ enactment of the Sherman Antitrust Act in 1890. Courts have interpreted Congress’s intention as enacting a “comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade” aimed at prohibiting monopolistic business activities, then referred to as trusts. It was followed in 1914 by the Clayton Antitrust Act, which addressed price discrimination, exclusive dealing, interlocking directorates, and acquisitions of competing companies through stock purchases. The same year also saw the enactment of the Federal Trade Commission Act, which established the Federal Trade Commission (FTC). It shares antitrust enforcement with the Antitrust Division of the Department of Justice, which can prosecute certain violations of antitrust laws by filing criminal cases. In addition to these federal laws, most states also have antitrust legislation that is enforced by state attorneys general. Private enforcement, however, comprises the majority of antitrust litigation in the US, wherein competitors, suppliers, and customers seek damages for injuries caused by anti-competitive conduct.
The competition law of the European Union is codified under Articles 101 to 109 of the Treaty on the Functioning of the European Union (TFEU). The treaty covers prohibitions on agreements that have the object or effect of restricting competition, abuse of dominance, and state aid. Apart from this main instrument, other rules, guidelines, and notices have also been issued to regulate other areas such as mergers and concentrations. The primary enforcer of these rules is the European Commission, which is responsible for functions including fact-finding, taking action against infringements, and imposing penalties. Actions for annulment of Commission decisions in competition cases are first brought to the General Court, while appeals are heard by the Court of Justice. EU competition law is often applied by the Commission and the EU courts with consideration of single European market integration (European Parliament, 2019). The member states also have their own domestic competition laws, modeled after Articles 101 and 102 of the TFEU, and domestic enforcement activities are undertaken by the 27 National Competition Authorities.
The United Kingdom’s legislative framework on competition was established by the Competition Act 1998 and the Enterprise Act 2002 and amended by the Enterprise and Regulatory Reform Act 2013, which created the Competition and Markets Authority (CMA). The prohibitions in the UK law on abuse of dominant position and anti-competitive agreements were based on and underpinned by equivalent provisions in EU law (UK Parliament, 2021). A key feature of the UK competition regime is the concurrent powers held by different sectoral regulators for the enforcement of competition rules. Aside from the CMA, other agencies possessing a competition mandate include the Ofgem (energy), Ofwat (water), Ofcom (communications), and the Financial Conduct Authority (financial services).
In Canada, The Competition Act is one of the oldest competition regimes in the world, as Canada’s first legislation prohibiting conspiracies and businesses in restraint of trade was already in place a year before the US enacted the Sherman Antitrust Act (Goldman, 2013). The law is enforced by the Competition Bureau, while cases are adjudicated by the Competition Tribunal. Apart from traditional antitrust offenses like price-fixing, bid-rigging, and abuse of dominance, Canada’s competition law includes prohibitions on deceptive marketing practices, deceptive telemarketing, and pyramid schemes.
China’s Anti-Monopoly Law contains prohibitions on monopoly agreements, abuses of dominance, anti-competitive mergers, and abuses of administrative power. Previously, China’s competition legislation was enforced by three different agencies. In 2018, all antitrust powers were concentrated into a single agency, the State Administration for Market Regulation (SAMR), which is under the direct supervision of the State Council. The SAMR can delegate enforcement power to local authorities at the provincial, regional, or municipal level. Courts continue to retain their jurisdictions to hear private commercial disputes involving competition claims.
Primary Policy Objective
The dynamic nature of competition law is best illustrated by how policy considerations have evolved over time. The Sherman Antitrust Act’s relative brevity and ambiguous legislative intent led to various legal interpretations of its text. Initially, courts and political actors were concerned about protecting small businesses from anti-competitive business practices by large companies. Over time, this developed into a more sophisticated objective based on the Harvard School of Economics’ emphasis on competition that is deeply skeptical of market concentration. This approach came under attack with the emergence of the Chicago School’s focus on maximizing efficiency (Hovenkamp, 2010). Today, consumer welfare—with a narrower focus on price—stands as the prevailing standard. Initial proponents of consumer welfare were primarily concerned with the “maximization of wealth or consumer want satisfaction” (Bork, 1966). While this approach has gained broad acceptance, it remains contested, especially regarding digital markets.
A similar debate has also influenced the development of competition policy in the EU. Many competition cases decided in Europe are guided by the Freiburg School’s twin beliefs that legal rules are necessary to constrain the economic power of large firms, while at the same time, governments should not be given blanket control to police market behavior (Gerber, 2001). While this approach has benefited small- and medium-sized firms, it has also been criticized for placing emphasis on protecting competitors rather than the process of the competition itself (Whish, 2012).
The overall prerogative of EU competition rules is the single market imperative. The fundamental charters of the EU emphasize enabling the proper functioning of the internal market in line with the principle of the free movement of goods and services across member-states (EU Fact Sheet, 2021). Article 3(1)(b) of the TFEU provides that the EU shall have exclusive competence in establishing the competition rules necessary for the functioning of the internal market, and article 119(1) states that the activities of the Member States and the EU shall be conducted in accordance with the principle of an open market economy with free competition. These references have proved to be significant in the decisions and enforcement actions of the European Commission as well as the judgments of EU courts, such as when an entity was fined for taking action to prevent exports of its products from the UK to the Netherlands and Germany. The UK’s exit from the EU, however, will not have a significant impact on this objective, as even prior to Brexit, UK law had contained reservations stipulating that EU court judgments motivated by single market considerations would not necessarily apply (Competition Act, Sec. 60).
The overall aim of Canada’s competition law is to maintain and encourage market competition, efficiency, and equitable access for small businesses (OECD, 2002). Specifically, its purpose is to encourage competition in Canada in order to: (i) promote the efficiency and adaptability of the Canadian economy; (ii) expand opportunities for Canadian participation in world markets; (iii) provide consumers with competitive prices and product choices.
In China, competition law was enacted for the purpose of preventing and restraining monopolistic conduct, protecting fair market competition, enhancing economic efficiency, safeguarding the interests of consumers and the interests of society as a whole, and promoting the healthy development of the socialist market economy (Anti-Monopoly Law, Art. 1).
Key Similarities and Differences
While motivated by different values and goals, competition law in these jurisdictions generally seeks to prevent the same type of behavior, namely anti-competitive agreements, abuse of dominant position, and anti-competitive mergers. However, competition laws typically diverge regarding the methods and enforcement, and advocacy tools available to authorities towards enforcing their respective antitrust laws.
The EU has an administrative system that imposes fines on firms that violate the law, whereas there are both criminal and civil enforcement in the US. The DOJ carries out criminal enforcement, which imposes financial and custodial penalties on individuals (EPRS, 2014), while FTC follows an administrative process. However, EU member states are increasingly taking individual liability more seriously; some countries have begun sanctioning criminal penalties for specific instances of anti-competitive behavior (Slotboom, 2013). In Canada, individuals engaging in cartel behavior may face imprisonment (Competition Bureau). In China, there is no criminal liability against monopolistic conduct. An individual can face hefty fines but cannot be penalized with imprisonment. Meanwhile, private enforcement activity plays a more significant role in the US, where victims of anti-competitive behavior are awarded treble damages (EPRS, 2014). Private enforcement is also becoming a significant driver of antitrust enforcement in other jurisdictions such as China (GCR, 2021).
Procedures surrounding the review of mergers and acquisitions are also enforced differently around the world. Merger control regimes can either be mandatory or voluntary. A regime is mandatory when the transaction notification to the relevant competition authority is compulsory. In such a case, parties to a transaction are legally prevented from closing a deal until they have received merger clearance. In a voluntary regime, merging parties are not prevented from closing their deal and implementing transactions before applying for and receiving merger clearance (APEC, 2018). However, they run the risk that merger parties may be investigated and interim measures imposed on the deal. Many regimes use mandatory merger control to prevent anti-competitive transactions efficiently; however, some regimes with young economies or small authority power find it economical to adopt a voluntary notification system (UNCTAD, 2017). The US, EU, China, and Canada all impose mandatory merger control regimes, while the UK remains one of the few countries with a voluntary framework.
Another point of divergence relates to government policies that restrict competition. In some jurisdictions, competition authorities are given the additional mandate to scrutinize legislation or regulations that could potentially distort competition in specific markets. In the EU, the rule on state aid acts as the most potent tool to prevent the occurrence of public restraints. Subject to certain exceptions, EU law prohibits any aid granted directly or indirectly by an EU Member State in favor of a particular business or the production of certain goods and services that distorts, or threatens to distort, competition and affects trade within the EU. Following Brexit, the UK is no longer bound by EU state aid rules but has recently proposed the Subsidy Control Bill as a framework for a new, UK-wide subsidy control regime. Apart from the World Trade Organisation’s Subsidies Agreement and free trade agreements which adopt and complement these subsidy rules, there are no domestic subsidy control regimes applicable in the US, Canada, and China.
Finally, Chinese competition law prohibits administrative authorities from abusing their administrative power by eliminating or restricting competition through various means, with an emphasis on local administrative abuses. It prohibits any exercise of administrative power which hinders (i) the free flow of goods across regions; (ii) participation by parties based elsewhere in the PRC in local tendering processes or (iii) local investments by parties based elsewhere in the PRC. (Anti-Monopoly Law, Chapter V).
Overview of Key Similarities and Differences
Intensity of Enforcement Action
The differences in policy objectives and enforcement tools available to regulators have a profound impact on the intensity with which jurisdictions can enforce their competition rules. Generally, EU regulators are seen as taking a more aggressive stance than other authorities when reviewing similar matters (Bradford, et al., 2019). This has been more apparent in the last few years, as the EU has taken action on the increased market power held by big tech companies. The UK CMA has become increasingly interventionist in the past few years, especially on mergers reviews (Brandenburger, 2020), despite only having a voluntary merger control regime. In China, not only has the SAMR been aggressive in its enforcement actions at the state level, but provincial authorities have started to issue their own antitrust compliance guidelines as well, thus opening up a dynamic of regulatory competition among local enforcers (Emch, 2021).
Ongoing and Future Developments
As competition policy continues to evolve, there is an ongoing debate over what regulators should use as their primary goals of competition policy. For example, in Europe, the Commission under EVP Margrethe Vestager has adopted a renewed commitment to fairness as a key goal of competition law (Dunne, 2021). Environmental considerations are also now being recognized in competition assessments, with competition policy being regarded as key support in the Green Deal (Vestager, 2021). In the US, Biden-appointed FTC Chair Lina Khan will likely challenge the primacy accorded to the consumer welfare standard. The “New Brandeis” movement, which places renewed emphasis on the structures and processes of competition, may receive more prominence together with questions of equality and democracy (The New Yorker, 2021). For Khan, “the current framework in antitrust—specifically its equating competition with ‘consumer welfare,’ typically measured through short-term effects on price and output—fails to capture the architecture of market power in the twenty-first-century marketplace” (Khan, 2016).
Several jurisdictions have placed a renewed emphasis on policing the increased market power of large tech companies, as evinced not just by aggressive enforcement actions but also by new rules being issued to fill in the gaps of conventional competition legislation. Below are some examples of increased scrutiny attracted of tech firms from different jurisdictions.
- Europe has recently introduced the Digital Markets Act (DMA), which establishes a set of narrowly-defined objective criteria for qualifying a large online platform as a so-called “gatekeeper.” The DMA attempts to improve fairness and contestability in the digital sector by imposing positive obligations and restrictions on these gatekeepers—a move seen as far-reaching and globally revolutionary as the GDPR.
- The US has several bills proposed to reform antitrust rules, some of which have already received bipartisan support. Among others, these include the Ending Platform Monopolies Act, which bars conflicts of interest for platform operators by prohibiting them from selling their own products in marketplaces they control; the Platform Competition and Opportunity Act, which shifts the burden to tech giants in proving that their proposed acquisitions are good for competition; the American Innovation and Choice Online Act, which would prohibit dominant platforms from abusing their gatekeeper power by favoring their own products or discriminating against rivals; and the Competition and Antitrust Law Enforcement Reform Act, which aims to lower the standard to find a merger or acquisition unlawful to a threshold preventing deals that “create an appreciable risk of materially lessening competition.”
- UK has recently established the Digital Markets Unit (DMU) within the CMA to begin work operationalizing the future competition regime for digital markets. Should it be approved, the DMU will be empowered to designate tech firms that are deemed to have Strategic Market Status (SMS). Similar to the DMA’s approach to gatekeepers, SMS firms will potentially be subjected to increased obligations and restrictions.
- Canada has been proactive as well in its approach to tech firms. In 2017, the Competition Bureau issued a Discussion Paper covering big data, innovation, and their implication of competition policy in the country.
- China has taken a similar level of aggressiveness, even towards domestic companies like Alibaba. Aside from cracking down on internet giants, the SAMR has also recently published Guidelines for Internet Platforms and has opened a period of comments on the proposed regulations on the prohibition of unfair competition on internet platforms.
Laws crafted for and by individuals outside the US should not be the default for American tech regulations. As competition policy grows in jurisdictions that are major trading partners with the US, American firms are at risk if they do not update their business practices to comply. Major tech firms are fined for violating competition laws with a fair amount of frequency. As one of the largest markets for this sector, the US should be leading the conversation around tech and competition policy. BPC will continue to research these issues and provide content that creates a common language for debate.
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