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Competition and the State$

D. Daniel Sokol, Thomas K. Cheng, and Ioannis Lianos

Print publication date: 2014

Print ISBN-13: 9780804789394

Published to Stanford Scholarship Online: September 2014

DOI: 10.11126/stanford/9780804789394.001.0001

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Toward a Bureaucracy-Centered Theory of the Interaction between Competition Law and State Activities

Toward a Bureaucracy-Centered Theory of the Interaction between Competition Law and State Activities

Chapter:
(p.32) Chapter 2 Toward a Bureaucracy-Centered Theory of the Interaction between Competition Law and State Activities
Source:
Competition and the State
Author(s):

Ioannis Lianos

Publisher:
Stanford University Press
DOI:10.11126/stanford/9780804789394.003.0003

Abstract and Keywords

Current accounts of the interaction between competition law and state activities are based on a clear-cut old liberalism style distinction between “state”/“government” and “market” that does not take into account the emergence of the neoliberal state. By advancing a “bureaucratic-centered theory” of the competition law and state interaction, this chapter offers an alternative interdisciplinary theoretical framework that can be successfully transposed into different institutional and cultural settings.

Keywords:   state, technocracy, bureaucracy, public choice, ordoliberalism, health care, regulatory impact assessment, reform of the state, comparative institutional analysis

Competition law and economics literature has always portrayed the relationship between the principle of competition and government action in antagonistic terms. According to the Chicago school of antitrust economics, state action or government-induced action is considered the most frequent source for restrictions of competition.1 Public choice theories have also cast doubt on the motivations of state action, thus contributing together with the Chicago school of economic analysis to lay the foundations of a distinct theory of government failure, with the aim to marginalize government, which completes the market failure dominated theories of neoclassical economics.2 The perception that the state constitutes a monopoly, with the ability to coerce any economic provider operating in its territory to adopt and maintain anticompetitive conduct for an indefinite period of time, without any challenge, has formed the core claim of the deregulation agenda worldwide. The anticompetitive effects of government action can even be felt postliberalization with a number of entrenched dominant positions by former monopoly incumbents being preserved through anticompetitive conduct. Some authors have even characterized public restraints as a global limit to competition law, calling for an enforcement of competition law against government action that benefits special interests.3 In contrast, others argue that “the democratic process contains many flaws, but curing them is no antitrust’s assignment” and that “if Congress wanted to draft (p.33) anticapture legislation, it could do so, but one would hardly imagine that this legislation would forbid monopoly or combinations in restraint of trade while explicitly saying nothing about abuses of governmental process.” Such authors have advanced a more limited role for antitrust in the process of “democratic government.”4

These different perspectives illustrate the complexity of the matter. It is unclear how and to what extent the many different variables that authors take into account when comparing “competition law” with “state” action—the “democratic process,” “private interests,” “public” versus “private” restraints, “special” versus “general” interests—are connected or if they are separate issues. For example, in the absence of a proper “democratic process,” should antitrust always apply to be able to preserve some form of market competition? This assumes that in the absence of electoral competition, market or “quasi-market” (in the case of an administered economy) competition is the only option left to promote efficiency, with the latter referring to policies that correspond to citizens’ (for the purpose of political competition) or consumers’ (for the purposes of market competition) preferences.5 How would one go about addressing the distinction between “public” and “private” restraints when the enforcement mechanism of the state is frequently used to orchestrate “private” restraints of competition?6 Would the distinction between “public” and “private,” or between “political” and “market,” competition always hold when restrictions on market competition could be traded for political support (power) and thus limit electoral competition or when governments frequently act through private actors?

An underlying assumption, common to these perspectives, is that the “state” is juxtaposed to the “market,” the two forming different conceptual categories, having a defined timeless meaning across different cultures. No efforts are made to explore the black box of the “state” and understand the operations of the different branches of power, the intersection of politics with scientific expertise in policy making, the beliefs of the agents whose actions comprise the phenomena to be explained, or their interaction within a specific polity. If public choice theory applies to political science analysis the conceptual framework of markets, it has not adequately taken into account the input of the political science or political sociology literature on the concept of “state” when this does not share the rational choice model preferred by economists.7 Yet, this literature may offer useful insights. For example, a predominantly patrimonial state sets very different challenges for competition law enforcement and regulation, more broadly, than a neoliberal or neocorporatist one: one size does not fit all.8 (p.34) At the same time, it is important to acknowledge the different disciplinary and cultural identities of bureaucracies and/or “technocracies” involved in governmental decision making and their evolution, in particular as competition law can also be envisioned as having always been (e.g., Europe) or having evolved to (e.g., the United States) a technocratic discipline.9 This emphasis on the technocratic dimension of competition law also carries some understanding on the relationships between politics and scientific expertise (in this case economics) in decision making, as will be examined later.

This chapter challenges the traditional antagonistic conception of the interaction between competition law and the state by advancing the need to examine in depth the nature of government bureaucracies involved in decision making and their respective claims for expertise and legitimacy. The analysis focuses on the context of a neoliberal state,10 since it can provide useful insights on the erosion of the state/markets binarity and the interaction of competition law with government activity. A different analysis may apply to other forms of states, but this is not within the scope of this study.

I. Unveiling the Concept of the State: Government Bureaucracy and the Principle of Competition in the Neoliberal Tradition

In a liberal state, the power of government to regulate market activity is limited by two factors. One is the set of principles external to the government, such as the concept of natural law or the theory of the social contract between the sovereign and its subjects, from which basic rights were derived, thus distinguishing “the domain of possible governmentality” from the domain of fundamental freedoms (on the basis of a “juridico-deductive approach”11). The other is the emergence of an internal rationality of governmental practice, in essence the new discipline of political economy and the philosophy of utilitarianism. These new “technologies of government” set limitations on governmental reason by separating the sphere of intervention of public authorities from that of individual independence or autonomy, the foundations of the market system.

Yet, there is an essential difference between these internal and external limitations:

Political economy reflects on governmental practices themselves, and it does not question them to determine whether or not they are legitimate in terms of right. It considers them in terms of their effects rather than their origins.”12

(p.35) Hence, governmental action is not only subject to the binary distinction of legitimate/illegitimate but also to the distinction of true/false, introduced by political economy, the market becoming a site of “veridiction-falsification” for governmental practice. This is based on the following assumption:

[I]nasmuch as prices are determined in accordance with the natural mechanisms of the market, they constitute a standard of truth which enables us to discern which governmental practices are correct and which are erroneous.13

Classical liberalism conceived the role of the state as supportive of the principle of individual autonomy; its only precept was for the state not to intervene, with the exception of rules guaranteeing some minimum standards for an equitable exchange (e.g., absence of fraud and coercion in contracts). The political consensus on the minimal intervention of the state in the market to preserve market freedoms (sometimes described as the “night watchman” state) curtailed the need to develop an extensive administrative apparatus in addition to courts (adjudicative system). Yet, the gradual building of a welfare state led to some intense governmental intervention in the market. The neoclassical price theory of market failure and Keynesian economics were the intellectual backbones of modern liberalism. But more importantly, the rise of government bureaucracy offered the appropriate tool, the technology, for that expansion to occur. The role of government in markets is thus closely related to the development of the professional project of public bureaucracies.

The “technicization” of the state through bureaucracy gave birth to a different form of legitimacy.14 Bureaucracy is based on a hierarchical and functional organization, clearly defined areas of expertise, standard operating procedures, and fixed-role descriptions. The essential assumption of the bureaucratic form of organization is that bureaucrats identify their own interest and ideas with the organization of which they are part. Bureaucracy is thus perceived positively, a view profoundly linked to the image of professional expertise and political neutrality to which it is attached. Like all large-scale organizations, the state tends to be bureaucratic in nature. The expansion of bureaucracy is thus inevitable and profoundly linked to the expansion of the state (in a chicken and egg way), because it is the only way of coping with the administrative requirements of large-scale social systems.

One of the main characteristics of bureaucracy is the clear-cut hierarchy of authority, with a chain of command stretching from the top to the bottom, clear rules on the conduct of officials at all levels of government, a clear career path based on seniority, and a separation from politics and ideology, since the (p.36) focus is on means and procedural rituals rather than policy outcomes. Indeed, the role of bureaucracy is not to design policy but to implement policies decided in the political realm. The concept of bureaucracy presupposes by essence a primacy for politics and a clear dichotomy between politics and scientific expertise.15 Under this model, the development of procedural rituals reinforces the top-down control of public bureaucracies and avoids the integration of scientific expertise in decision making if it would have challenged the primacy of the political realm.

In conclusion, bureaucracy is seen as an essential step in the reconceptualization of the role of the state, according to the principle of rationality. It is perceived as a form of sophisticated technology, enabling the state to intervene and regulate markets while preserving the primacy of the political realm. In one of his classic texts, Max Weber notes:

Bureaucracy offers above all the optimum possibility for carrying through the principle of specializing administrative functions according to purely objective considerations. Individual performances are allocated to functionaries who have specialized training and who by constant practice learn more and more. The “objective discharge of business primarily means a discharge of business according to calculable rules and without regard for persons.”16

This positive view of bureaucracy is intrinsically linked to both the expansion of government’s role in various areas that until then had been managed by market activity only and the reinforcement of the institutional apparatus of the state. Along with this, and during the same period, comes the establishment of either central ministerial departments or independent administrative agencies. In some jurisdictions, a specialized judiciary is put in place to deal with issues arising from the normative activity of state bureaucracies.17 In other words, the expansion of government’s role in markets would not have been possible in the absence of the “technology” of professional public bureaucracy.

Yet, this positive account of bureaucracy was soon to be challenged by functionalist sociologists such as Merton, Selznick, and Crozier, among others. Merton emphasized the “dysfunctions of bureaucracy” stemming from bureaucratic ritualism and an emphasis on procedures instead of underlying organizational goals on policy outcomes. His emphasis on goals implicitly eroded the primacy of the political realm, as goals are evolving, they can be interpreted, and tensions between different goals should be dealt with before any effective administrative action takes place.18 Based on the “human relations approach to bureaucracy,” Merton acknowledged the limits of Weber’s ideal type, since the (p.37) discipline necessary for obtaining the kind of standardized behavior required in a bureaucratic organization may ultimately lead to a displacement of goals. This inflexibility of bureaucratic organizations and their overspecialization can impede bureaucrats from innovating and responding creatively to new challenges. The “vicious circle” of bureaucratization is further reinforced through a mechanism of cooptation and the diffusion of a special ideology securing the necessary minimum of conformity and loyalty to the organization.19 Crozier notes how the bureaucratic system of organization “is not only a system that does not correct its behaviour in view of its errors, [but] it is also too rigid to adjust without crisis to the transformations that the accelerated evolution of industrial society makes more and more imperative.”20 The emergence of the field of public policy post–World War II attempted to challenge this ritualistic view of public bureaucracies for an arrangement that would incorporate systematically scientific expertise in policy making and the implementation of policies.21

These criticisms of the bureaucratic state became even more pronounced with the emergence of neoliberalism as a new paradigm for economic theory and policy making. Here we can distinguish between two trends in neoliberal thought: first, the development, partly in parallel with the theory of market failure, of the theory of government failure in welfare economics, and second, the emergence in Germany of the ordoliberal model of neoliberalism, which has profoundly marked the intellectual foundations of the European economic integration project.

The first story is well known and is not detailed here. To Ronald Coase’s virulent criticism of Pigou’s theory of externalities, suggesting that the assessment of the performance of different institutions (firms, markets, regulation) should involve the comparison of alternative institutional arrangements, public choice theorists added the analysis of government from a rational choice perspective: “government, like the market in a pure exchange economy, is viewed simply as an institution for aggregating or balancing individual demands for public policies.”22 The implications of these two standpoints for government intervention in the economy are devastating. Once the supply of government policies is viewed as a proper market, the mechanisms of collective choice are built upon three articulations: voters make political decisions to maximize their utility; lawmakers seek to maximize the votes they obtain and stay in office; and voters are not rational because given that voting and informing oneself about policy are costly and the benefits derived from an individual vote are nil, it makes more sense for them to remain completely uninformed about public (p.38) policy.23 In view of the collective action problem for diffused and large group interests, smaller groups are more likely to win rents from the government and to capture policy makers. Consequently, regulation does not promote the public interest but the goals of powerful interest groups. The analysis has been transposed to nondirectly elected regulators, such as the executive (bureaucracy) and judicial branches of government, which, it has been noted, offer a more durable form of protection.24

The standard model relies on the fact that the nonmarket nature of government’s outputs leads to a measurement problem, since it is not possible to define, as in a market system, the number of units of output produced as such but only to report the level of activities from which output levels may be inferred. This leads to a monitoring problem, where the purchaser of public services— for example, the government operating as the agent of all citizens—cannot observe and thus monitor the bureaucrat’s efficiency. Because of the bureaucrat’s knowledge about her real costs, she might well exploit this information asymmetry if she operates, as is often the case, as a monopolist supplier. Indeed, the monopoly nature of most public service providers frees them from the competition process and does not enable the government (and ultimately the citizens) to dispose of an alternative source of information over the real costs of the provision of public services. The incentives of the bureaucrat are thus by nature in opposition to the public interest. Since the bureaucrat’s salaries are unrelated to improved efficiency, because of the monitoring problem, the bureaucrat does not pursue, as do private business managers, profits but essentially nonpecuniary goals—the maximization of budget size and the expansion of the bureau’s personnel and tasks—both leading to organizational slack and wasteful duplication of competencies.25 Empirical studies have examined the comparative cost structures of private firms operating in a competitive environment and public monopolies or undertakings partly controlled by the state and found that the latter provided the fixed output demanded by the community at a higher cost than necessary.26

One may also remark that empirical evidence is inconclusive on the ability of citizens to control effectively government and bureaucracy and the possibility for democratic competition to produce “efficiency levels comparable to those achieved by market competition.”27 Furthermore, most of the empirical backing of the public choice theory relies on correlations between some limited variables indicating capture to infer causation, without a proper falsifiable analysis of the impact of other variables rather than capture on the regulatory outcomes, such as ideology or structural and demographic characteristics.28 (p.39) Finally, public choice theory mostly assumes a monopolistic setting with regard to the provision of public services29 without taking stock of electoral competition in democratic politics and also competition coming from institutions other than the government, such as the not-for-profit sector, religious organizations, unions, corporations, and families.30

The second is the ordoliberal version of neoliberalism, which is particularly influential in Europe. Born in Germany in the 1930s, ordoliberalism was opposed to any variant of planned state interventionism in any form: Bismarckian state socialism, Nazi autarchic planification, or Keynesian-style interventionism. Attacking New Deal programs or the Beveridge plan as symbols of the welfare state, ordoliberal authors emphasized the risks of state management of the economy, thus adhering partly to the government failure theory but also to the idea that the distinction between the “market” and the “state” is intellectually sterile. They advanced instead market economy as the principle and model for the state, which should be organized on the basis of the principle of competition.31 The ordoliberals’ research program has been nicely summarized by Foucault:

Since it turns out that the state is the bearer of intrinsic defects, let’s ask the market economy itself to be the principle, not of the state’s limitations [as was the case in the liberal model] but of its internal regulation from start to finish of its existence and action. In other words, instead of accepting a free market defined by the state and kept as it were under state supervision—which was, in a way, the initial formula of liberalism—let us establish a space of economic freedom and let us circumscribe it by a state that will supervise it; the ordoliberals say we should completely turn the formula around and adopt the free market as organizing and regulating principle of the state, from the start of its existence up to the last form of its interventions—in other words, a state under the supervision of the market rather than a market supervised by the state.32

According to Foucault, ordoliberalism relied on three major shifts from the old liberal tradition: a shift from the concept of exchange (which limited the role of the state to ensure respect for the freedom of those involved in the exchange on the basis of the principle of laissez-faire) to that of competition (the state actively intervening to prevent a distortion of competition and the creation of monopolies); a shift from the perception of competition as a natural and preexisting given to a view of complete competition as “an historical objective of governmental art” to be actively pursued by the state; and a shift from the view of the relationship between competition and the state as reciprocally (p.40) delimited areas to that of a “complete superimposition of market mechanisms, indexed to competition and governmental policy,” with the market constituting the “general index in which one must place the rule for defining all governmental action.”33 The relationship between competition/markets and the state is thus reversed compared to the classic or modern liberal models without, however, leading to a new form of laissez-faire. It is important to understand here that the ordoliberal version of neoliberalism argues that the competitive market order should be integrated at the constitutional level and not at the subconstitutional level: that of choosing policies. This constitutional dimension requires the institutional framing of market processes: the market being transformed into a constitutional order. Contrary to welfare economics, ordoliberal authors aim to enforce a competitive order in an indirect manner, framing the rules of the game rather than seeking to improve the outcomes directly by way of specific interventions into the economic process.34

II. Implications on the Relationship between Government Activity and the Principle of Competition: Bureaucracy versus Technocracy

These different traditions of neoliberalism may have different implications for the relationship between government activity and competition. If one adopts a public choice perspective, it is possible to argue that any form of state intervention in the marketplace carries the risk of capture and inefficiency. There is a wealth of empirical literature on the inefficiency of sector-specific regulations, but similar claims have also been made with regard to competition law.35 The burden of proof is on the state to establish the need of its intervention through competition law, and the standard of proof is set high on the assumption that the self-correcting mechanism of the market will take care of any eventual failure in the absence of state interference. Such an approach leads essentially to subject state intervention to a stricter competition assessment than private action, as by essence the monolithic (and monopolistic) nature of government intervention departs more from the optimum of competitive markets (and the standard of perfect competition) than even concentrated private market structures. However, it is also clear that from this perspective the field left to competition law versus other forms of state intervention remains open for negotiation, a negotiation conducted through and according to the rules of the communicating tool of scientific expertise—in this case, economics. As a result of a greater recourse to social sciences in public policy, the erosion of (p.41) traditional divisions of labor and the emergence of risk society, bureaucracy has also seen its role change, since it has been gradually transformed from a rigid structure performing merely tasks of execution to a more proactive technocracy, assuming tasks of forecast, knowledge gathering/sharing, and communication with the public. Technocracy presupposes the systematic integration of scientific expertise in policy making, not only at the level of the policy conception but also at the implementation level. The assumption is that the realm of politics and that of scientific expertise have convergent logics and that politics and policy making are driven by scientific/expert consensus, thus inversing the primacy of politics approach that characterized the bureaucratic form of organization.36 The incorporation of specialized scientific personnel (e.g., economists, policy analysts) in public bureaucracies (e.g., ministerial departments, regulatory agencies) exemplifies this new balance of power between the political and the scientific realms.37

It is important here to reflect on the implications that each form of state intervention—for example, antitrust versus regulation—entails to the general claims of expertise and “technicization” that have built bureaucratic legitimacy, on which ultimately rests government’s authority to intervene in the marketplace. Ministerial departments and regulators often possess superior expertise on the characteristics and problems of the industries they supervise than do competition authorities or courts, which are by essence of generalist nature, dealing ad hoc with a plethora of cases across different sectors. This is due to superior technical skills (for example, a telecom regulator understands interconnection better than an antitrust authority), superior expertise, and more information (as a result of their systematic activity in the sector), but also because of different epistemic communities and values represented by these regulators, thus capturing a more diverse set of citizens’ and consumers’ preferences (e.g., environmental regulators often value the protection of the environment more than the protection of competition). In principle, the sector-specific regulators should be better placed to assess the welfare effects of their interventions on consumers and citizens, with the exception, of course, of circumstances where they remain “captured” by the specific interests they are supposed to regulate. However, a similar claim can be made to a certain extent also for competition authorities, thus indicating that from a public choice perspective, the two situations constitute, in practice, functional equivalents. Hence, if there is any claim for an antitrust authority to intervene and control some other form of state activity, this can only happen, under this approach of neoliberalism, because of the antitrust authority’s superior expertise on matters relating to the regulation (p.42) of markets and competition—in essence, economic expertise—or their independence from the other sectors of government bureaucracy.38 This is not the place to expand on the important role and continued presence of economists in government bureaucracies, although there are significant differences across jurisdictions that may justify different approaches in the interaction between competition law and government action.39 In any case, with the probable exception of public utilities’ regulators, competition authorities have been one of the first venues in government bureaucracy, at least in Europe and the United States, where a high level of economic expertise has been progressively developed, either in house or contracted out to the market of professional experts. Competition authorities claim, on average, more expertise than other government departments in competition law analysis. This configuration should lead to an expansion of the scope of competition law and advocacy, with the exception of instances where the specific industry requires some superior form of economic expertise, which antitrust authorities do not possess, in view of the specific characteristics of the industry. In such rare cases, sector-specific regulation may benefit from antitrust immunity.40

In contrast, in the ordoliberal model, competition is a value to be preserved as such, whatever the circumstances and outcomes. This comes out of the constitutional dimension of the principle of market economy. Thus, considerations about the superior technical expertise of government departments and regulators have no place in the analysis of the appropriate scope of competition law intervention versus some other regulatory action. The European Treaties constitute an illustration of this constitutional dimension of the competition principle. Article 3(1)g of the former Treaty of European Communities recognized the vital importance of establishing “a system ensuring that competition in the internal market is not distorted.” The Court of Justice relied on this provision to apply the principle of competition to state measures in a number of cases.41 The Court has placed particular emphasis on Article 3(1)g when confronted with a conflict between competition rules and other EU policies and objectives42 and has pronounced, on the basis of this provision, that competition law constitutes a “fundamental objective of the Community.”43 Finally, the Court referred to this article when it granted to national competition authorities the power to set aside provisions of domestic legislation that jeopardize the effet utile of EU competition law.44

The existence of a specific provision emphasizing the role of competition law in the text of the “Principles” part of the founding treaties led to specific implications as to the interpretation of this provision and its relationship (p.43) with other Community activities. This was reinforced by Article 4 of the Treaty on the European Communities, which was introduced by a treaty revision in 1992, adding a new joint action of the Community and the member states: the “adoption of an economic policy, which is based on the close coordination of member states’ economic policies… and conducted in accordance with the principle of an open market economy with free competition.” The scope of the competition principle was thus extended beyond the narrow confines of the competences of the Community (although these were already broadly defined): the member states should also be inspired by this principle in conducting their economic policies. Although Article 3 of the Treaty of the European Union (TEU) does not refer any more to the principle of “undistorted competition” or “free competition,” following the suggestions made by former president Sarkozy of France, Article 3(3) TEU provides that the EU shall establish an internal market with the goal to achieve “a highly competitive social market economy, aiming at full employment and social progress.” In addition, according to Protocol n. 27, “the Internal market as set out in Article 3 TEU includes a system ensuring that competition is not distorted.” It is too early to assess the impact of the textual modifications introduced by the Treaty of Lisbon, but it seems in general that despite the introduction of the concept of “social market economy” and some horizontal clauses in the European Treaties requiring the consideration of environmental and social policy impacts for EU policies, the principle of free competition remains a primary objective governing all action of the EU.45 This constitutional dimension implies that in the presence of a conflict between regulation enacted by the EU or its member states and the principle of free competition, the latter should take precedence, irrespective of the degree of (economic) expertise of the national or EU bureaucracy implementing the regulation. For example, in subsequent cases, the European Courts have affirmed the absence of any competition law immunity for sector-specific regulation, thus adopting a completely opposite perspective than the Supreme Court.46

The strategy of integrating the value of competition at all levels of government intervention, because of its constitutional status, also had implications on the organization of the provision of public services across the member states of the EU. National approaches and styles diverge and are still exercising a powerful symbolic and rhetorical, if not any more legally binding, influence (because of extensive EU harmonization). For example, the French concept of service public has served for a long time as a battle cry against the expansion of the competition law provisions of the European Treaties to the public sphere, as it (p.44) has been given, at least subliminally, an organic (service public should be provided by public bodies) versus a material (universal service can be dispensed by public and private bodies) meaning. In spite of a slight move toward a less conflicting terminology in the treaties and secondary legislation, with the concept of “services of general economic interest,” the tension remains significant.47 For the proponents of service public, its domain is mutually excludable from that of competition law, as any expansion of the scope of competition law will lead to an automatic restriction of the scope of service public. The introduction of specific competition law provisions for public undertakings or the recognition of the right of citizens to receive public services illustrate that the two principles are perceived as antagonistic to each other.48

On the contrary, the British experience on the interaction of government with the competition principle has been different. The monolithic welfare state that emerged from the Beveridge plan in the 1950s and 1960s was subject to the neoliberal cure of liberalization and privatization during the Thatcher era in the 1980s and to “third way” management in the 1990s and 2000s. A key objective of New Public Management was to achieve a “postbureaucratic” government, where the introduction of purchaser/provider separation, the creation of quasi-markets, outsourcing, and user control would allow multiple forms of provision to be developed to create more competition among potential providers.49 The recent white paper “Open Public Services” by the UK coalition government and subsequent legislation that has been adopted or is still in process also aim to introduce consumer choice and competition in the provision of services by opening public services to a range of providers, not only from the public sector but from the voluntary and private sectors as well. “Open Public Services” goes so far as to declare that “[a]part from those public services where the government has a special reason to operate a monopoly (e.g., the military), every public service should be open so that, in line with people’s demands, services can be delivered by a diverse range of providers.”50 This will be achieved by having suppliers from the private and voluntary sectors enter the public procurement process; providers competing with one another to deliver services directly to individuals armed with personal budgets and entitlements or the power of choice; and the full development of a voluntary, community, and social enterprise (VCSE) sector, accountable to local communities and thus to democratic electoral competition.51 Following these proposals, the provision of most government services in the United Kingdom would be organized according to the principle of free competition. While the approach does not share the constitutional dimension of the German ordoliberal perspective and (p.45) its rules-based approach (it is more outcomes oriented), they both follow a similar direction.

In conclusion, a bureaucracy-centered theory of competition law and the state interaction will be simultaneously more context aware and empirically focused than current approaches. First, at the macro level, it becomes important to analyze the value structure foundations on which competition law enforcement is built by looking at the degree of intrusion of neoliberal values in the design and operation of public institutions. Modern bureaucracy is more knowledge based and outcome oriented (technocracy) than the Weberian description of it as a mere technical, rational, administrative routine–style implementation of public policies decided elsewhere. Second, at the micro level, the knowledge base, the skills, and the disciplinary/professional background of government bureaucracies need to be explored in depth before determining the appropriate method of interaction with authorities entrusted with the implementation of competition law norms (competition authorities and courts). The level of development of the competition law regime and, of course, the intrinsic quality of government bureaucracies, their sources of wisdom, and their ability to produce efficient policies are also among the elements to take into account.

III. Case Studies on the Interaction between the Principle of Competition and Government Action in a Neoliberal State

What are the implications of the transformation of public action in a neoliberal state for the application of competition law to government intervention in markets? To answer this question, I examine two case studies illustrating two possible strategies of interaction between the principle of competition and government action in a neoliberal state. First, the tendency to subject all types of state action to the discipline of competition may be systematized by the establishment of a prophylactic ex ante competition screening of all proposed laws and regulations. Second, competition in the provision of services of general interest should be adequately managed so as to produce the best possible outcomes from a public policy perspective. Hence, competition may only be introduced for some parameters (e.g., quality) but excluded for others (e.g., price). The traditional analytical framework of competition law will in this case need to be adjusted to reflect the proper balance between the different aims pursued by government action. The UK managed-competition system in the health care services sector provides an illustration of how this balancing operates in practice.

(p.46) A. Introducing Competition Screening in Regulatory Impact Assessments

In recent years many countries have introduced the tool of ex ante competition assessment in the process of evaluating legislative bills, draft regulations, or policies. Sometimes, this competition screening is integrated in the general system of regulatory impact assessments (RIAs), and in other cases it has an autonomous existence.

The OECD has prepared a competition checklist in the context of its “Competition Assessment Toolkit,” suggesting a detailed competition analysis of a policy proposal should it have any of the following four effects: setting limits on the number or range of suppliers; limiting the ability of suppliers to compete—for example, by reducing their ability to set prices, advertise, or market their goods, or by raising their costs; reducing their incentive to compete by creating a self-regulatory or coregulatory regime, or increasing transparency over the outputs, prices, sales, or costs of the suppliers by requesting the publication of information; and finally, limiting the choices and information available to consumers.52 If the proposal affects one of these parameters, a detailed, more comprehensive competition assessment should be undertaken by looking at the regulatory proposal’s impact on the main determinants of competitive pressures for the market in question (e.g., the existence of coordinated effects or reduced incentives for innovation). This assessment involves the definition of a relevant market. The proposed regulatory design should be considered in a comparative context in which alternative means of achieving the regulatory objective that are less restrictive of competition are identified and assessed. If these are not found, then a comparison should be made between the costs and benefits of the proposal, the latter being adopted “only if that comparison shows that, after taking into account the costs of the anticompetitive impact the assessment identified, the proposal’s enactment will yield a net benefit.”53 A similar approach is also taken in other jurisdictions.54

Some jurisdictions have put in place more general RIA procedures to examine the impact of proposed regulation and legislation on a number of variables, including economic, social, environmental, and health effects, the competition screening process being, in some cases, cited as one variable among others. For example, the European Commission’s Impact Assessment Guidelines include competition screening as one of the various economic impacts that RIA routinely explores.55 This integration of the competition assessment tool into the broader RIA analysis raises questions on the possible links between the two procedures. First, the OECD Competition Toolkit notes that RIA takes a more static approach, comparing likely outcomes based on the existing economic (p.47) and regulatory environment, whereas competition assessments are more future oriented, taking a dynamic efficiency approach and focusing on the effects of the proposal on consumer choice rather than on the economy and public policy in general.56 However, it is not clear how different these tools are in practice and how much competition assessment has been integrated in RIA analysis (Figure 2.1). Competition authorities and courts have already been using cost-benefit analysis techniques in assessing ex post the competitive impact of various forms of regulation.57 One could finally argue that competition assessment is based upon competition / industrial organization economics methodologies, whereas RIAs tend to use a broader set of methodologies. Yet, the possibility of cross-fertilization and intensive borrowing between the two techniques should not be underestimated now that RIA procedures have become more systematic at the EU and national levels.

Second, the institutional framework of RIA and that of competition screening might be different. Although it is recognized that the assessment should be performed by the “frontline” government departments developing the proposal, under the review of an external party, most frequently an Impact Assessment Board, these bodies in general lack competition expertise. Competition authorities have a role to play in reviewing any proposal with potential effects on competition (as part of their competition advocacy mission) and making (binding or nonbinding) recommendations,58 in engaging in ex ante consultations

Toward a Bureaucracy-Centered Theory of the Interaction between Competition Law and State Activities

Figure 2.1 The place of competition impact assessments in regulatory impact assessments in the EU, 2006–2012

Note: I have analyzed all 659 Regulatory Impact Assessments published at the European Commission website through March 2012.

(p.48) with the “frontline” government department performing the RIA,59 in adopting guidelines for policy makers detailing how competition screening should be performed and integrated in RIAs,60 and in providing advice and training to policy makers at any stage of the process.61

Nonetheless, the generalization of competition screening of draft regulations and laws, as part of the RIA procedures, will inevitably erode the differential of expertise that now benefits competition authorities in comparison to “frontline” government departments. Once the “culture” of competition assessment is integrated across government bureaucracies and once internal expertise in the form of departmental specialists (lawyers and mainly economists) gets fully developed, the integration of the competition screening in the RIA tool would be complete. Certainly, there are arguments for maintaining an independent institutional voice for competition inside government bureaucracies, but in a neoliberal state this institutional complexity might not offer much. In some cases, it might even be counterproductive because the independence of competition authorities might make them ineffective competition advocates—especially in crisis situations—so the need to establish also advocates for competition within the core government departments, and not only outside ministerial departments, in competition authorities.62

In conclusion, the integration of competition screening in RIA challenges the view that competition and government action are antithetical to each other, and it marks the evolution toward a complete integration and diffusion of the principles of competition across government bureaucracies.

B. The Emergence of a New Style of Competition Law for Government Services: Managed Competition in the Health Care Sector in the United Kingdom

The British National Health Service (NHS) was subject to major reforms since the introduction of quasi-markets into the delivery of public services and the separation of the funding and provision role of the state in the national health system in 1990.63 This market-oriented approach aimed to reduce costs without public cuts in entitlements. Its main goal was to respond to accusations that NHS bureaucracy was inefficient by introducing an institutional split between purchasers and providers bodies and more competition in the provision of publicly funded health care. When the state contributes funds, it purchases services from a variety of providers of health services, all operating in competition with one another. These “quasi-markets” replace monopolistic state providers with competitive independent ones (initially public providers and, since 2008, (p.49) private or nonprofit ones). But unlike conventional markets, on the supply side, the providers that are competing with one another are not trying to maximize profits, nor are they privately owned. On the demand side, a third party, not the patients, makes the purchasing decisions.64 In 2006, the National Health Service Act introduced reforms giving patients a choice of where they received health care and introduced nonprice competition among public hospitals and between public and private (also voluntary sector) providers to deliver secondary care to publicly funded (through taxation) patients.65 Hence, NHS patients who get referrals from their general practitioners can choose from four or more specialists registered with the Care Quality Commission (CQC) who are qualified to provide medical services for the tariffs set by the NHS or, where it is not covered by the national tariff, the price set by the local commissioners.66 These are based on a prospective payment system, known as Payment by Results (PbR), where the hospital fee is determined by the government on the basis mainly of patients’ diagnoses with some other adjustments. Since the Health and Social Care Act 2012, all public hospitals are to be organized by 2014 to NHS Foundation Trusts, which are independent of the Department of Health and jointly licensed by two independent regulators, Monitor (economic regulator) and the Care Quality Commission (quality standards).

How does competition work in these “quasi-markets” in view of state funding? As funding follows patients around the system, introducing patient choice creates financial incentives for providers to compete for market share.67 Since a regulator sets the prices, health care providers compete over nonprice dimensions to attract patients. There is empirical evidence that competition on quality, when the administered price is set at the right level, generates significant benefits for the patients and thus provides better value for taxpayers.68 Because the regulated price is generally set above the providers’ marginal costs, the most efficient providers will have the financial incentives to increase the quality of their services until their profits approach zero. But would a public or nonprofit provider respond to these financial incentives at least as much as a private provider would if there is no proper profit to be made? Subsequent reforms were necessary to enable senior management to be responsive to financial incentives:

  1. 1. The hospital remuneration was organized in annual block contracts paying for the use of the hospital’s facilities for a range of services to predefined populations.

  2. 2. Hospitals were progressively allowed to retain surpluses, and their financial situation was subject to central government’s control, which (p.50) still has the power to remove senior management from hospitals that are in deficit.

  3. 3. Patients should be offered an adequate environment to exercise choice and be responsive to quality of care signals.

  4. 4. Intermediaries such as the Clinical Commissioning Groups also should be offered financial incentives and autonomy to ensure that patients are elastic to quality and exercise their choice diligently.

With these reforms, NHS bureaucracies became subject to the disciplines of the competitive process.69 Similar reforms have been initiated in various other EU member states.

The introduction of competition and choice in the mixed market of secondary care (that involved both for-profit and nonprofit providers), in conjunction with the administered price system, raises the question of the application of competition law in this peculiar setting. It is clear that for competition to work, a broad duty of competitive neutrality should be imposed, encompassing the need to clarify if and how competition law may apply in this context.70 This issue has generated much debate, in view of both EU and UK requirements, that the entity to which competition law applies should be an “undertaking”—that is, an entity exercising an economic activity, the latter concept defining the scope of competition law.71 Some feel that public hospitals that provide free services and are funded by the state should not be considered undertakings, so competition law should not apply to them. Others, however, believe they are undertakings and that competition law should apply.72

From a legal perspective, there are two problems with using competition law in this context. First, the case law of the European Courts provides clearly that if an organization purchases goods it does not intend to offer as part of an economic activity but to use for some other activity, such as an activity of a purely social nature, then it is not acting as an undertaking simply because it is a purchaser of those goods.73 In this context, the public hospital’s services are purchased by the NHS, under the direction of the Department of Health, for the social purpose of providing universal health care, funded by tax revenues (a compulsory way of funding). Second, proponents of the application of competition law advance that, at least for some of the health services, public hospitals can potentially make a profit and still be qualified as undertakings.74 Yet, transposing the concept of “profit” in a nonprofit setting is a difficult endeavor. As said previously, the financial incentives offered to public hospitals for inducing them to compete do not relate to monetary profits but to mainly (p.51) bureaucratic-related incentives. These incentives can include, for example, senior management keeping their jobs, the hospitals being granted bigger budgets, or, since the introduction of the Health and Social Care Act 2012 with equal treatment for both public and private providers if they fail, being able to keep their public status, since “failed” and debt-ridden NHS Foundation Trusts may pass to private management.

Thus, it is somewhat ambiguous how competition law can be used—in which case, other principles, public policy, or institutional matters may influence the choice of the adequate interpretative option. From a public policy perspective, if competition law is not used for nonprofit hospitals, whereas private providers are subject to it, it may introduce an anomaly, at least as far as using the competitive neutrality principle, since public and private providers compete for patients and private providers can make profits.75

From an institutional perspective, however, enforcing general competition law in this context might be problematic. First, competition authorities and, to a certain degree, courts, with the mandate to enforce competition law, are experts in competition law principles but not on issues relating to the health and safety of patients. Their mission-oriented role—preserving the competitive process—may also influence their setting of priorities between the value of competition and other values, such as integrated care, which might be of importance to patients. As a recent OECD secretariat report reminds us, the competitive process allows an efficient allocation of resources irrespective of the underlying set of preferences. Yet, it might also result in undesirable outcomes as far as the care patients receive.76 Hence, it should be considered an instrument for the provision of high-quality health care, rather than as an end in itself.

Second, the provision of effective health care requires the cooperation of different providers across—but also at the same level of—the health care chain. To ensure a seamless health service to patients and economies to the taxpayer, providers and commissioners must exchange the necessary information about ways to improve patient safety and joint research and development. Joint purchasing and cooperation may also sometimes be necessary to disseminate and launch innovations faster. In a competitive and segmented health care market, there is always the risk that care will be fragmented and that one provider will not always know what another provider has done, leaving the patients to sort out how and when to deal with different providers for different elements of their care. Cooperation among providers is thus essential for enabling integrated care.

(p.52) Due to their generalist nature, competition authorities or courts are not, however, well placed to develop the technical expertise and acquire the necessary information to guarantee the preservation of integrated care, nor are they generally ready to accept that cooperation might in some cases be more important than competition. It thus becomes essential to entrust the application of competition law principles to a sector-specific regulator. In the United Kingdom, Monitor has extensive competence in ensuring the right balance between cooperation and competition, with the assistance since 2009 of a new statutory advisory committee, the Competition and Cooperation Panel. The new Health and Social Care Act 2012 makes clear that Monitor’s “main duty” is “to protect and promote the interests of health services by promoting the provision of health care services which… is economic, efficient, and effective, and… maintains or improves the quality of the services,” thus ensuring that patient interests always come first.77 The Health and Social Care Act also requires Monitor to “exercise its functions with a view to preventing anticompetitive behavior in the provision of health care services for the purposes of the NHS which is against the interests of people who use such services,” although one should note that promoting competition does not form part of Monitor’s main duty, nor is even mentioned as a secondary one.78 Where an integrated service raises competition concerns, Monitor will focus on what benefits patients, its role being to ensure that the benefits to patients outweigh any negative effects to competition and that any negatives are kept to a minimum.79

Finally, the concept of “restriction of competition” in the health care quasi-markets and the cost-benefit analysis to be performed differ from those employed in competition law. First, the restriction of competition relates to harm to patients (reduced patient choice for NHS-funded services) and taxpayers from lower-quality services, although in some limited circumstances they might also have some effect on prices for nonroutine elective services.80 Second, the benefits to be taken into account to outweigh the existence of a “restriction of competition” in this sector do not always take the form of the usual cost and quality efficiency gains of competition law. Certainly, economies of scale and scope lowering short-run variable costs, increases in the number of patients (the “output” to maximize), or procedures reducing transaction costs are benefits to consumers that are usually taken into account in general competition law. But other factors, such as improved recruitment and retention of staff, better information, shared clinical working practices, and seamless patient care, might not be easily transposable in the context of general competition law. It becomes therefore clear that a different institutional and/or, to some extent, (p.53) substantive law setting is needed to enforce competition law principles in this peculiar setting.

For this reason, before the Health and Social Care Act 2012, the United Kingdom put in place a specific competition law regime that applied to all commissioners and NHS-funded services providers, irrespective of whether they were public, private, or third-sector organizations. These Principles and Rules for Cooperation and Competition (PRCC) were not legally binding provisions enforceable by courts; they were inspired by general competition law but at the same time emphasized a number of other parameters of essence for the promotion of competition in these quasi-markets, such as rules for the commissioning and procurement of health services, the transparency and fairness of the payment regimes, the duty of commissioners and providers to cooperate to deliver seamless and sustainable care to patients, and rules regulating promotional activity. A Competition and Cooperation Panel (CCP) was also set up to provide advice on matters of compliance with the PRCC and has adopted extensive guidelines on the interpretation of the PRCC with regard to conduct and merger cases.81

Following the enactment of the Health and Social Care Act 2012, the CCP has been integrated in Monitor, which also has the power to apply general competition law concurrently with the Office of Fair Trading (OFT). Hence, general competition law will also apply to the health care sector, although through a different institutional framework than nonregulated sectors with the concurrent jurisdiction of both the sector economic regulator and the competition authority.82 How would the interaction between these two competition authorities work in practice? The broad duties of the Monitor will inevitably weigh in the decision-making process and may lead to different outcomes than a situation where the OFT would be involved on its own.83 As it has been clearly formulated in the recently published interpretative notices on the new regulatory regime, when investigating anticompetitive behavior, Monitor will have to take into account the objective of health commissioners “to secure patients’ needs and improve quality and efficiency.”84

Focusing on the different values, competencies, and methodologies used by the respective bureaucracies and on how these could complement one another in the enforcement of competition law in this sector might offer a better predictive tool of their interaction than a normative theory on the relationships between sector-specific regulators and competition authorities or courts. In a neoliberal state, where competition is a value underpinning any form of state action, the exact place of other values becomes a matter for continuous (p.54) negotiation between different segments of public technocracy. These rely on their expertise/epistemic competence on the substantive issues of the policy area to which they intervene, rather than on their general bureaucratic competence or procedures and administrative routines, as would have been the case in the traditional (Weberian) view of bureaucracy. For example, the CCP, and now the Monitor, relies in its decision-making process on the input of two groups of experts: the clinical reference group, which consists of experts in public health and medicine who provide advice on health and safety issues, and the economics reference group, which consists of experts in health economics and competition who offer consultations on competition economics and analytical techniques/methodologies. This expertise is more extensive than what competition authorities usually get (who mainly focus on the economics of industrial organization).

In essence, it is necessary to conduct a comparative institutional analysis85 focusing on the respective expertise, among other criteria, of each bureaucracy (competition authority or sector-specific regulator) before determining the appropriate interaction between these different institutions. Ministerial departments, sector-specific regulators, and competition authorities all constitute imperfect alternatives. The question is which alternative is best (for welfare— the underlying aim of state intervention), given the real world of high information costs and the fragmentation of expertise (over different dimensions of welfare). Comparative institutional analysis makes it possible to choose from these imperfect alternatives.

This is particularly true in the United Kingdom, where sector-specific regulators in charge proceed to a concurrent application of competition law, in addition to their other duties. The efficacy of the competition authority should not be presumed for all regulatory “transactions” aiming to promote competition and welfare, but it should be subject to a comparative analysis of alternative institutions, some of which are sector-specific regulators or self-regulatory bodies. The possibility of capture should, of course, be factored into the comparative institutional analysis, but its impact should not be overestimated in comparison to the possible benefits of regulation. As Oliver Williamson rightly observed, “Even if the benefits of regulation decline over time and go negative, the discounted present value may remain positive.”86 The proximity of the goals of sector-specific regulators to those of government departments (as they are by definition broader than the simple preservation of a competitive market, which is the main task of a competition authority) may facilitate the integration of these different goals within a unified framework (p.55) of rules or standards for undertakings to comply with. Quite often ministerial departments or sector-specific regulators are not only responsible for regulating market failures or market imperfections (which is what competition authorities do) but also for proceeding to some redistributional transactions (e.g., public service obligations), the latter being a highly politicized area of government activity. One would expect that the information asymmetries, with regard to the political/strategic objectives pursued by the government or legislature, would also be lower for ministerial departments and sector-specific regulators than for competition authorities, thus providing some advantages to the first two in the comparative institutional analysis.

* * *

Current accounts of the interaction between competition law and state activities are based on a clear-cut old liberalism style distinction between “state”/”government” and “market,” which do not take into account the emergence of the neoliberal state. By doing so, they also ignore the multifaceted nature of the concept of “state” and the important inputs of political science and sociological literature on the different forms of state and the evolution of the composition and role of public bureaucracies. By advancing a “bureaucracy-centred theory” of the competition law and the state interaction, this chapter offers an alternative interdisciplinary theoretical framework that can be successfully transposed into different institutional and cultural settings. More empirical work needs to be done to explore the hypothesis presented in this chapter in different societal and cultural contexts.

Notes:

(1) . See Milton Friedman, Capitalism and Freedom, ch. 2 (1962).

(2) . Stephen G. Medema, The Hesitant Hand:Taming Self-Interest in the History of Economic Ideas, chs. 4–6 (2009).

(3) . D. Daniel Sokol, Anticompetitive Government Regulation, in The Global Limits of Competition Law 83 (Ioannis Lianos & Daniel Sokol ed., 2012); D. Daniel Sokol, Limiting Anti-Competitive Government Interventions That Benefit Special Interests, 17 Geo. Mason L. Rev. 119 (2009).

(4) . Herbert Hovenkamp, Federal Antitrust Policy (4th ed., 2011), 747; Einer Elhauge, The Scope of Antitrust Process, 104 Harv. L. Rev. 667 (1991).

(5) . Chicago authors may support this statement in view of their conception of the relations between political and economic freedom. See Milton Friedman, 10 (1962) (“It is therefore clearly possible to have economic arrangements that are fundamentally capitalist [preserving economic freedom] and political arrangements that are not free”).

(6) . See, e.g., Case T-321/05 AstraZeneca AB and AstraZeneca plc v. European Commission [2010] ECR II-2085; Case C-457/10 P AstraZeneca AB and AstraZeneca plc v. Commission [December 6, 2012, not yet published] (abuse of procedures relating to supplementary protection certificates for medicinal products) and the vexatious (sham) litigation theory in EU and U.S. competition law.

(7) . See, e.g., the criticisms to public choice by political scientists advancing a more pluralistic research agenda: Donald Green & Ian Shapiro, Pathologies of Rational Choice Theory: A Critique of Applications in Political Science (1994).

(p.244) (8) . Max Weber, Economy and Society 1041 (1978) defines “patrimonial state” as one where “practically everything depends explicitly upon personal considerations: upon the attitude toward the concrete applicant and his concrete request and upon purely personal connections, favors, promises, and privileges.” These distinctions are, of course, ideal types, since in reality some of the characteristics of each form of state may coexist for a certain time.

(9) . Daniel A. Crane, Technocracy and Antitrust, 86 Tex. L. Rev. 1159 (2008).

(10) . Defining neoliberalism or the concept of the neoliberal state may be challenging in view of the various perspectives adopted by the literature. See generally David Harvey, A Brief History of Neoliberalism (2005) 71–81. Some authors have defined neoliberalism as “the ongoing contest between the imperatives of market economies and nonmarket values grounded in the requirements of democratic legitimacy,” neoliberalism advancing “the market side of this contest”; David Singh Grewal & Jedediah Purdy, Introduction: Law and Neo-Liberalism (Yale Law Sch. Pub. Law Research Paper No. 313, 2013), 1–2. It follows that in a neoliberal state there might be tensions between democratic demands “that go beyond or contradict market logic” and market imperatives. According to the tenants of neoliberalism, these tensions should be resolved, while making an effort to preserve “market relations from particular kinds of politicization” and to expand markets in areas from which they were previously excluded. Id. at 2.

(11) . Michel Foucault, The Birth of Biopolitics—Lectures at the Collège de France 1978–1979, 39 (2010).

(12) . Id. at 15.

(13) . Id. at 32.

(14) . Id. at 115.

(15) . Robert Hoppe, Rethinking the Science-Policy Nexus: from Knowledge Utilization and Science Technology Studies to Types of Boundary Arrangements, 3 Poiesis & Praxis 199 (2005).

(16) . Max Weber, Economy and Society 975 (1978).

(17) . See, e.g., the establishment of the Conseil d’Etat in France in 1799 inaugurating the distinction between public and private law in some continental European legal traditions, an influential model to this day. The aim was to exclude from the scope of ordinary general courts the administrative functions of the state, thus providing more discretion to government bureaucracies. By focusing on the control of legality only and providing government discretion in complex economic and technical matters, administrative courts ensured that bureaucracy was acting according to the limits set to its rational-legal authority.

(18) . Robert Merton, The Unanticipated Consequences of Purposive Social Action, 1 Am. Soc. Rev. 894 (1936); Robert Merton, Bureaucratic Structure and Personality, in Social Theory and Social Structure 249–60 (Robert Merton ed., 1968).

(19) . Michel Crozier, The Bureaucratic Phenomenon 186–87 (1964).

(20) . Id. at 195.

(21) . Harold D. Lasswell, A Pre-View of the Policy Sciences (1971).

(22) . Dennis C. Mueller, Public Choice III 359 (2003).

(23) . Jessica Leight, Public Choice: A Critical Reassessment, in Government and Markets—Towards a New Theory of Regulation 213–55 (Edward J. Balleisen & David A. Moss eds., 2010).

(24) . Mark W. Crain & Robert Tollison, The Executive Branch in the Interest-Group Theory of Government, 8 J. Legal Stud. 165 (1979); William Landes & Richard Posner, The Independent Judiciary in an Interest-Group Perspective, 18 J.L. & Econ. 875 (1975); Thomas W. Merrill, Capture Theory and the Courts: 1967–1983, 72 Chi.-Kent L. Rev. 1039 (1997).

(25) . William Niskanen Jr., Bureaucracy and Representative Government (1971); Jean-Jacques Laffont & Jean Tirole, The Politics of Government Decision-Making: A Theory of Regulatory Capture, 106 Q.J. Econ. 1089 (1991).

(26) . See, e.g., the studies listed by Dennis C. Mueller, Public Choice III 373–79.

(27) . Id. at 384; Donald Wittman, The End of Special Interests Theory and the Beginning of a More Positive View of Democratic Politics, in Government and Markets—Towards a New Theory of Regulation 193–212 (Edward J. Balleisen & David A. Moss eds., 2010).

(28) . Leight, supra note 23; Green & Shapiro, supra note 7; Einer R. Elhauge, Does Interest Group Theory Justify More Intrusive Judicial Review?, 101 Yale L.J. 31 (1991).

(29) . Richard D. Auster & Morris Silver, The State as a Firm (1979).

(30) . Wittman, supra note 27, at 207.

(p.245) (31) . Walter Eucken, The Foundations of Economics—History and Theory in the Analysis of Economic Reality (London, 1950); Hanz Rieter & Matthias Schmolz, The Ideas of German Ordoliberalism 1938–1945: Pointing the Way to a New Economic Order, 1 Euro. J. Hist. Econ. Thought 87 (1993).

(32) . Foucault, supra note 11, at 116.

(33) . Id. at 119–21.

(34) . Viktor J. Vamberg, The Freiburg School:Walter Eucken and Ordoliberalism 7 (Freiburg Discussion Papers on Constitutional Economics, April 2011).

(35) . Fred S. McChesney & William F. Shughart II, The Causes and Consequences of Antitrust:The Public Choice Perspective (1995).

(36) . Hoppe, supra note 15, at 208–10.

(37) . Sheila Jasanoff, The Fifth Branch (1990).

(38) . Inbal Faibish & Michal Gal, Six Principles for Limiting Government-Facilitated Restrictions on Competition, 44 Common Mkt. L. Rev. 69 (2007).

(39) . Marion Fourcade, Economists and Societies: Discipline and Profession in the United States, Britain and France, 1890s to 1990s (2009).

(40) . See, e.g., in the United States, Credit Suisse Securities v. Billing, 551 U.S. 264 (2007) (noting there is a serious risk that antitrust courts with different nonexpert judges and different nonexpert juries will produce inconsistent results and mistakes). Of course, this is not the only source of antitrust immunity of regulation. One could add the dual federalism nature of the U.S. Constitution for the antitrust immunity offered to state regulation.

(41) . See, e.g., Case 13/77, SA GB-Inno BM v. Association des détaillants en tabac (ATAB) [1977] ECR 2115, ¶ 29; C-260/89, Elliniki Radiophonia Tileorasi AE & Panellinia Omospondia Syllogon Prossopikou v. Dimotiki Etairia Pliroforissis et al. [1991] ECR I-2925, ¶ 27; Case 229/83, Association des Centres distributeurs Edouard Leclerc v. SARL “Au blé vert” [1985] ECR 1, ¶ 9.

(42) . Case C-67/96, Albany International BV v. Stichting Bedrijfspensioenfonds Textielindustrie [1999] ECR I-5751; Case C-309/99, J. C. J. Wouters et al. v. Algemene Raad can de Nederlandse Orde van Advocaten [2002 ] ECR I-1577.

(43) . Case C-289/04P, Showa Denko KK v. Commission [2006] ECR I-5859, ¶ 55; Joined Cases T-259–264 and 271/02, Raiffeisen Zentralbank Österreich AG and Others v. Commission [2006] ECR II-5169, ¶ 255.

(44) . Case C-198/01, Consorzio Industrie Fiammiferi [2003] ECR I-8055, ¶¶ 54–55.

(45) . On the various interpretative choices offered by the Treaty of Lisbon, see Ioannis Lianos, Competition Law in the European Union after the Treaty of Lisbon, in The European Union after the Treaty of Lisbon 252–84 (Diamond Ashiagbor et al. eds., 2012).

(46) . See, more recently, Case C-280/08 P, Deutsche Telekom AG v. European Commission [2010] ECR I-9555. For a commentary, see Javier Tapia & Despoina Mantzari, The Regulation/Competition Interaction, in Handbook on European Competition Law, Vol. I (Damien Geradin & Ioannis Lianos eds., 2013).

(47) . See, more recently, the adoption of the Services of General Economic Interest Package by the European Commission in April 2012 regarding the conciliation between the competition law provisions of the treaty and the provision of services of general interest, available at http://ec.europa.eu/competition/state_aid/legislation/sgei.html.

(48) . See Article 106 TFEU, subjecting public undertakings and undertakings with special or exclusive rights to the application of the general competition law provisions of the treaty “insofar as the application of such rules does not obstruct the performance, in law or in fact, of the particular tasks assigned to them (services of general economic interest).” Nonmarket services (compulsory education, social protection, etc.) and sovereign tasks (such as security, justice) are also excluded from the scope of competition law, following the case law of the European courts. Article 14 of the Treaty on the Functioning of the European Union acknowledges the place occupied by services of general economic interest among the shared values of the EU, thus balancing the constitutional dimension of the competition law provisions. Article 36 of the Charter of Fundamental Rights, now binding, confirms the importance of Article 14 TFEU and acknowledges the need for EU citizens to have access to services of general economic interest.

(49) . Kenneth Kernaghan, The Post-Bureaucratic Organization and Public Service Values, 66 Int’l Rev. Admin. Sci. 91 (2000).

(50) . HM Government, Open Public Services (July 2011) (white paper), available at http://www.openpublicservices.cabinetoffice.gov.uk/.

(p.246) (51) . Id. at 39–49.

(52) . OECD, Competition Assessment Toolkit, Vol. 1, 8–9 (2011).

(53) . Id. at 63.

(54) . See, e.g., European Commission, Better Regulation:A Guide to Competition Screening (2005), available at http://ec.europa.eu/competition/publications/archive.html; OFT 876, Completing Competition Assessments in Impact Assessments (August 2007), available at http://www.oft.gov.uk/shared_oft/reports/comp_policy/oft876.pdf.

(55) . European Commission, Impact Assessment Guidelines (Jan. 15, 2009), available at http://ec.europa.eu/governance/impact/commission_guidelines/commission_guidelines_en.htm.

(56) . OECD, supra note 52, at 37–38.

(57) . For a recent discussion, see OFT, Article 101(3)—A Discussion of Narrow versus Broad Definition of Benefits (2010) (noting that regarding the difference between cost benefit analysis techniques employed in RIA, competition authorities do not take a positive view toward aggregation of the costs and benefits across relevant markets). Yet, competition screening, if taken seriously, should lead to the aggregation of costs and benefits across markets in the last step of the analysis.

(58) . The competition assessment may be performed by the competition authority (e.g., UK, Mexico, Korea, Hungary, Greece) or by an independent external authority (e.g., the National Competition Council in Australia).

(59) . For example, the procedure provided in Article 63 of the Korean MRFTA, according to which other government bodies intending to legislate or amend the laws under their jurisdiction should ask the KFTC for review of any possible anticompetitiveness of the laws concerned, the KFTC conducting prior-consultation with them. OECD, Korea, ¶ 63, available at http://www.oecd.org/korea/39554122.pdf.

(60) . See, e.g., OFT 876, Completing Competition Assessments in Impact Assessments, supra note 54.

(61) . Id. at ¶¶ 1.2, 1.3.

(62) . See Frederic Jenny, Competition Authorities: Independence and Advocacy, in The Global Limits of Competition Law 158–76 (Ioannis Lianos & D. Daniel Sokol eds., 2012).

(63) . Part I of the NHS and Community Care Act 1990; Julian Le Grand, Quasi-Markets and Social Policy, 101 Econ. J. 1256 (1991).

(64) . This may be understood in view of the information asymmetry between providers and users of health care services: Kenneth J. Arrow, Uncertainty and the Welfare Economics of Medical Care, 53 Am. Econ. Rev. 941 (1963).

(65) . Zack Cooper, The Very English Experience with Competition: Lessons from Britain’s National Health Service, OECD, DAF/COMP(2012)9, 313–31.

(66) . The possibility of private actors to provide NHS services is guaranteed by the provisions conferring the power to regulate procurement, patient choice, and competition under Section 75 of the Health and Social Care Act and the licensing requirement in Section 81. Qualified providers should be registered with the CQC and licensed by Monitor, where required, or meet equivalent assurance requirements. They should also, among other requirements, accept NHS prices and meet the terms and conditions of the NHS Standard Contract, which includes an obligation to have regard to the NHS Constitution, relevant guidance, and law.

(67) . Cooper, supra note 65 at 317.

(68) . Martin Gaynor, Reform, Competition and Policy in Hospital Markets, OECD, DAF/ COMP(2012)9, 333–58. Office of Health Economics, Competition in the NHS (January 2012).

(69) . Id. at 321, noting that a growing body of empirical research suggests that for-profit and nonprofit hospitals behave similarly if allowed to retain surpluses.

(70) . OFT1242, Competition in Mixed Markets: Ensuring Competitive Neutrality (July 2010), available at http://www.oft.gov.uk/shared_oft/economic_research/oft1242.pdf. A narrowly defined requirement of competitive neutrality would aim to ensure that state-owned and private businesses compete on a level playing field.

(71) . Case C-41/90 Höfner v. Macrotron [1991] ECR I-1979.

(72) . For an analysis of the different positions, see Okeoghene Odudu, Are State-Owned Health-Care Providers’ Undertakings Subject to Competition Law?, 5 Eur. Common L. Rev. 231 (2011).

(73) . Case C-205/03 P, Fenin v. Commission [2006] ECR I-6295.

(74) . Odudu, supra note 72, at 236.

(75) . See the profit structure deal signed with the transfer of the Hichinbrooke’s public hospital management to Circle, a private firm co-owned by doctors (available at (p.247) http://www.bbc.co.uk/news/uk-england-cambridgeshire-16812998), according to which, if Circle succeeds in reversing the debt-hit hospital’s fortunes, then it will receive a predefined part of the yearly surplus.

(76) . OECD, Secretariat, Competition in Hospital Services—The Policy Dimension, DAF/ COMP(2012)9, 23–67, in particular at 28.

(77) . Section 61(1) of the Health and Social Care Act 2012.

(78) . Section 62(3) of the Health and Social Care Act 2012.

(79) . Sections 62(4) and 66 of the Health and Social Care Act 2012.

(80) . Routine elective services are paid for at a uniform national tariff for each procedure (subject to local flexibilities), so there is little scope for some forms of price-related anticompetitive activity (price fixing by providers). However, for other services, the price paid may be determined by negotiation or a competitive tender, in which case there might be scope for price fixing.

(81) . Cooperation and Competition Panel, Conduct Guidelines (October 2010); Cooperation and Competition Panel, Merger Guidelines (October 2010).

(82) . As a result of these modifications, the PRCC will not apply the same as general competition law. On the definition of anticompetitive behavior in this context, see Section 10 of The National Health Service (Procurement, Patient Choice, and Competition) Regulations 2013. In addition to (i) the PRCC and (ii) the concurrent powers to enforce general competition law, the Monitor may also tackle anticompetitive behavior through (iii) the enforcement of license conditions (relating to choice and competition or Condition C2).

(83) . To some extent, the UK model constitutes a step in a continuum moving from the nonapplication of competition law, to the application of competition law–inspired principles, to the enforcement of general competition law by a sector-specific regulator (in conjunction with the competition authority), and to the application of general competition law by the regular institutional mechanism (albeit with some guidance on the way this will be applied). The last model is that followed in the United States: statements of the USDOJ and the FTC on antitrust enforcement policy in health care, available at http://www.justice.gov/atr/public/guidelines/0000.htm.

(84) . Department of Health, Response to Opinions of David Lock and the Opinion of Ligia Osepsiu, published by 38 degrees, on the application of the NHS (Procurement, Patient Choice and Competition) Regulations 2013, ¶ 25. See also, on the competition framework to be applied by Monitor and on the need to preserve “patient choice,” Sections 9 and 10 in Monitor, Substantive Guidance on the Procurement, Patient Choice, and Competition Regulations (May 20, 2013). This takes into account different objectives than those usually taken by the OFT and more generalist competition authorities. Monitor may also have different priorities from the OFT, in view of its wide-ranging role as economic and competition regulator. See Section 3, Monitor, Enforcement Guidance on the Procurement, Patient Choice and Competition Regulations 2013 (May 20, 2013).

(85) . For an account of a comparative institutional analysis using transaction costs economics, see Oliver Williamson, Public and Private Bureaucracies:A Transaction Cost Economics Perspective, 15 J.L. Econ. & Org. 306 (1999). For a framework focusing on “participation,” see Neil Komesar, Imperfect Alternatives: Choosing Institutions in Law, Economics and Public Policy (1994).

(86) . Williamson, supra note 85, at 318.