Online workshop on „Complexity-Minded Antitrust” - SPK

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SPK News Online workshop on „Complexity-Minded Antitrust”

Online workshop on „Complexity-Minded Antitrust”

On May 17, 2023, the Competition Law Association held an online workshop on “Complexity-Minded Antitrust,” led by Prof. Thibault Schrepel.

Prof. Schrepel went to great lengths to present – nomen omen – complex economic ideas in simple terms, pointing out for example that, essentially, Darwin’s On the Origin of Species “is all about complexity theory”.

In this vein, in order to understand the possible implications of injecting the complexity theory into antitrust policies, one must first understand the difference between rivalry and competitive pressure. Simplifying greatly, rivalry denotes a situation in which there is more than one competitor in the market, whereas competitive pressure measures the intensity of competition irrespective of how many market participants’ there are. Prof. Schrepel gave two analogies to describe the difference between rivalry and competitive pressure:

  • Firstly, if you run a 100-meter race and you are an adult, but all your rivals are 2-year-olds, you have rivals, but you have no competition; you know for a fact that you are going to win that race.
  • Secondly, if you run a marathon, then – unless you are a very famous marathon runner – most likely you do not have the ambition to win the marathon, but you are running against yourself. You have no rivals; the true rivalry is with yourself and against the uncertainty as to whether you will beat your best time running a marathon.

Complexity theorists propose therefore that it is uncertainty that should be encouraged in the market. As prof. Schrepel put it, “we need to protect the appearance of random events or inject random events”. Uncertainty is what begets competition and therefore an antitrust agency’s aim should be to increase complexity, which leads to uncertainty. In other words, the goal of competition law is not, and should not be, to protect a competitive market structure. The goal should be deepening uncertainty, not rivalry.

Now, complexity theorists admit that rivalry often correlates with uncertainty. Crucially, however, rivalry is neither a necessary, nor a sufficient condition for uncertainty. When several firms compete but one is clearly superior to others, rivalry does not create uncertainty. Conversely, firms that compete under uncertainty are motivated by threats not limited to rival products. It is not plurality but change that is desirable. Competition agencies should therefore act like “park rangers, maintaining dynamic and unpredictable processes”, rather than as “physicists engineering static and predictable outcomes”.

Another implication of applying complexity theory to antitrust is that antitrust authorities should factor in that micro-level interactions lead to the emergence of (sometimes counterintuitive) macro-level patterns of behavior (the butterfly effect). Hence, if a small competitor of a hypothetical dominant firm is not yet “as efficient” as that firm, one should look at its “black box” and search for the micro-level factors that will in the future affect the firm’s macro-level patterns of behavior – for example, who are its managers, how they operate, what they think or even who they meet.

Interestingly – although prof. Schrepel did not want to drop any names – apparently some competition agencies are already looking into the possibility of injecting complexity theory into their enforcement policies. This can have far-reaching practical implications, especially for antitrust and merger control decisions in the digital economy, where the degree of inherent complexity, and therefore uncertainty, is particularly high.

We attach a few screenshots from the webinar.