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1 Intended for The Antitrust Bulletin (forthcoming) Copyright Albert A. Foer 11-16-17 CULTURE, ECONOMICS, AND ANTITRUST: THE EXAMPLE OF TRUST Albert Allen Foer* ___________________________________________________________________________________ What role do cultural dimensions of cooperation and competition play in economic life? Taking a multidisciplinary perspective, this essay uses the example of the concept of trust to consider some implications for competition policy. The author suggests that the field of competition policy is at core about the authoritative allocation of categories of economic activity along a spectrum with individualism and competition at one end and collectivism and cooperation at the other. The allocation is a function of the state, made on the basis of a variety of imprecise inputs—cultural, political, historic, economic, and institutional – and not merely neoclassical economic theory. Sensitivity to the cultural aspects of competition and cooperation places constraints on overly optimistic expectations for global harmonization of antitrust enforcement. KEY WORDS: culture, trust, competition, competition policy, individualism, collectivism, cooperation, social capital, global harmonization, convergence. _________________________________________________________________________________________________ I. INTRODUCTION “Antitrust” is a word that confuses people. Most of the world prefers, quite understandably, to speak of “competition policy,” and I do, too. 1 The distinctly * Founder, former President, and currently Senior Fellow, American Antitrust Institute. This article does not necessarily represent the views of the Institute. AUTHOR’S NOTE: I have benefitted from the knowledge and advice of many during the preparation of this paper, but especially want to thank Neil Averitt, Donald Baker, Henry Balikov, Peter Behrens, Peter Carstensen, Thomas Cheng, John Connor, William

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IntendedforTheAntitrustBulletin(forthcoming)CopyrightAlbertA.Foer

11-16-17

CULTURE,ECONOMICS,ANDANTITRUST:THEEXAMPLEOFTRUSTAlbertAllenFoer*

___________________________________________________________________________________Whatroledoculturaldimensionsofcooperationandcompetitionplayineconomic

life?Takingamultidisciplinaryperspective,thisessayusestheexampleofthe

conceptoftrusttoconsidersomeimplicationsforcompetitionpolicy.Theauthor

suggeststhatthefieldofcompetitionpolicyisatcoreabouttheauthoritative

allocationofcategoriesofeconomicactivityalongaspectrumwithindividualism

andcompetitionatoneendandcollectivismandcooperationattheother.The

allocationisafunctionofthestate,madeonthebasisofavarietyofimprecise

inputs—cultural,political,historic,economic,andinstitutional–andnotmerely

neoclassicaleconomictheory.Sensitivitytotheculturalaspectsofcompetitionand

cooperationplacesconstraintsonoverlyoptimisticexpectationsforglobal

harmonizationofantitrustenforcement.

KEYWORDS:culture,trust,competition,competitionpolicy,individualism,collectivism,

cooperation,socialcapital,globalharmonization,convergence.

_________________________________________________________________________________________________

I. INTRODUCTION

“Antitrust”isawordthatconfusespeople.Mostoftheworldprefers,quite

understandably,tospeakof“competitionpolicy,”andIdo,too.1Thedistinctly

*Founder,formerPresident,andcurrentlySeniorFellow,AmericanAntitrustInstitute.ThisarticledoesnotnecessarilyrepresenttheviewsoftheInstitute.AUTHOR’SNOTE:Ihavebenefittedfromtheknowledgeandadviceofmanyduringthepreparationofthispaper,butespeciallywanttothankNeilAveritt,DonaldBaker,HenryBalikov,PeterBehrens,PeterCarstensen,ThomasCheng,JohnConnor,William

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Americanword,“antitrust,”isanhistoricalrelicderivedfromthelegalisticformthat

wasusedtocreatecorporateholdingcompanies,e.g.,theStandardOilTrustorthe

TobaccoTrust,inthepost-CivilWarera.Sometimesitwasspelledwithahyphen,

“anti-trust,”clarifyingthatthiswaslegislationinoppositiontothelargetruststhat

werethenappearingonthescene.Iwillsuggest,however,thattheoriginally

unintendedmeaning–treating“trust”asin“trustworthy”--isactuallyquiteusefulin

thinkingaboutcompetitionpolicy.Considerforamomentthemostwidely

approvedfunctionofantitrustlawtoday:stoppingcartels.Cartelsarebasedontrust

amongtheconspiratorsthattheywillcooperatewitheachotherratherthan

competeoncertainkeytermsoftradesuchaspriceoroutput.Theantitrust

enterpriseaimstodeterandbreakdownthattrust.Theextremelyeffectivepolicyof

grantingleniencytowhistle-blowingconspiratorsisspecificallydirectedatcausing

distrustanddefection.Itisliterallyapolicyofanti-trust.

Isthisjustwordplay?InthisessayIwillreflectupontheimportanceoftrust,

asanexampleofaculturalvalue,intheoperationsofeconomicinstitutionsinwhich

competitionpolicyisembedded.Thiswillentailrecognizingtheintertwiningof

competitionandcooperation,whichinturnwillleadtoafunctionalappreciationof

antitrustasastate’sauthoritativedeterminationofthelegitimaterolesofboth

competitionandcooperationintheeconomicrealm.Recognitionoftheroleof

culturalvaluessuchastrustwillbeshowntomodifytheuniversalisticconceptsof

neoclassicaleconomicsbasedonthemodeloftherationalself-interestedman.

Curran,ArthurDurst,EleanorFox,GregoryGundlach,ChristopherLeslie,MitsuoMatsushita,JulianPena,DouglasRosenthal,ChristopherSagers,MelissaSchilling,RobertSkitol,RandyStutz,andSandeepVaheesan.Ofcoursetheybearnoresponsibilityformyerrorsorwrongheadedness.1Infact,inthispaper,Iwillsometimesbeusingtheword“antitrust”broadlytocoverthewiderangeoflawsandpoliciesunderstoodtoconstitutecompetitionpolicy,suchassectoralregulation.Atothertimes,thecontextwillmakeclearthatIamspeakingonlyofthethreebasicU.S.antitrustlaws,i.e.,theShermanAct,theClaytonAct,andtheFederalTradeCommissionAct.

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Sensitivitytotheculturalaspectsofcompetitionandcooperationplacesconstraints

onoverlyoptimisticexpectationsforglobalharmonizationofantitrustenforcement.

Sectiontwoofthispaperbeginswithadiscussionofthemeaningoftrustas

anaspectofcultureanditsimportanceineconomiclife.Sectionthree,”From

DarwinisticCompetitiontoCooperation,”drawsonarangeofacademicdisciplines

tointroducetherelationshipbetweencompetitionandcooperation.Sectionfour

askswhethertherecanbetoomuchofeithercompetitionorcooperation,

concludingthatsometypeofabalanceisneeded.InthefollowingSectionfive,the

paperreviewstheconceptofsocialcapital,whichincludestrust,anditsrolein

economictheory.Thesixthsectiontakesashortbreakfrommoretheoretical

considerationstoillustratewaysinwhichthetrustfactormayberelevantto

competitionpolicyinvolvingtheInternet.Sectionsevendiscussescross-cultural

data,trust,andcompetitionpolicy.Sectioneight—“trustandantitrust”--identifies

waysinwhichtrustaffectsvariousaspectsofcompetitionpolicy:vertical

integration,cartels,mergersandacquisitions,dominanceandfirmsize,theroleof

thestateand“themissingmiddle,”growthorientation,andtrade.Sectionnine

providestheexampleofAbuseofSuperiorBargainingPower(“ASBP”),an

anticompetitiveclaimwithinaverticalbuyer/suppliercontextthatisrecognizedby

someofourmajortradepartnersbutnotbytheU.S.,toindicatehowtrustandother

culturalvaluescaninfluencetheassignmentsofcompetitionandcooperation.

Sectiontenraisescomplexitiesthatoccurinthinkingabouttherelationship

betweencompetitionandcooperation.Itproposestheheuristicvalueofaspectrum

fromindividualism/competitiontowardcollectivism/cooperation,ontowhichcan

bedisplayedastate’schosentreatmentofvariouscategoriesofeconomicbehavior.

Sectionelevenprovidesconcludingremarks.

II. TRUST:MEANINGANDIMPORTANCE

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Iwaswalkingonabeachwithanoldfriendaboutadozenyearsagoandwe

werediscussingourrespectiveretirementplans.Hehadinvested,throughan

intermediary,inafundthatwaspayinghimahandsometenpercentannually,every

year.“HowcouldIgetintothis?”Iaskedsomewhatgreedily.“Notsoeasy.Youhave

toknowSomeone.”AfewyearslateritturnedoutthattheMr.Someoneheknew

wasanacquaintanceofoneBernieMadoff.Myfriendisstillhopingtorecovermost

ofhisinitialinvestment.Hehadtrustedhisfriend,whohadwhatisknownasthick

trustinBernie.Thatis,itwasasituationofoneindividualevaluatingthecharacter

ofanother,personally.Myownfriend’sknowledgeofBernie,however,wasindirect,

anexampleofcomparativelythintrust.Inbothcases,however,thedirectand

indirecttrustweremisplaced.Theproblem:Madoffwasnottrustworthy.

Themodernworldwouldnotfunctionwithouthighlevelsoftrust,bywhich

wemustincludenotonlytrustinknownindividualsbutalsoinsystemsand

institutions.Considerthelevelsoftrustrequiredwhenoneboardsanairplane.

Potentialdoubtsabound.Willthepilotbeasober,well-trainedandquick-witted

herointheimageofthelegendaryCaptainSullenberger,whosafelyparkedhis

engine-lessplaneontheHudsonRiverafterflyingintoaflockofbirdsontake-off?

Werethemechanicsnotonlytechnicallycompetentbutalsoresolutelyfocusedas

theymaintainedtheplane?Willtheairtrafficcontrollersnotbedistractedortired?

Andsoon.Thelevelsoftrusthere,asinsomuchofmodernsociety,areverythin

indeed;somehaveevenreferredtothisasforcedorcoercedtrust.2

2SeeGEOFFREYHOSKING,TRUST,AHISTORY,46-49(2014).Othersmightarguethatpartsofthisexamplearenotabouttrustatall,followingwhatiscalledthe“encapsulatedinterest”modeloftrust,whichsays:“wetrustyoubecausewethinkyoutakeourintereststoheartandencapsulateourinterestsinyourown.”KARENS.COOK,RUSSELLHARDIN,ANDMARGARETLEVI,COOPERATIONWITHOUTTRUST?5(2005).Ireplythatwedon’tknow,forexample,thatananonymousperson--airplanedesignerortechniciannecessarilyhasourinterestinmind,orthatthepilotofourplane,whomwehavenevermetpersonally,isnecessarilysoberornon-suicidal.Ibelievetheencapsulatedinterestmodelistoonarrow,makingitawkwardifnot

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Theefficientfunctioningofgovernmentandtheeconomyoftendependson

trust,amajorfacetofthecooperationthatunderliescommonundertakingsofall

sorts.3Taxrevenue,ratherobviously,isessentialtoagovernment’sabilityto

influenceitseconomyandachievethegovernment’spublicpurposes.Institutional

factorssuchaslawanditsenforcementalsoclearlyaffectthecollectionoftaxes,but

withoutcitizens’trustthatmostfellowcitizensarealsopayingtheirshare,how

manywouldconsistentlymakeanefforttopaytheirowntaxeshonestly?The

trustingassumptionsalsoincludethatthegovernmentistrustworthyinitshandling

ofyourmoneyandthatthegovernmentwillidentifyandprosecutethosewho

cheat.4Thus,theruleoflaw,theabsenceofcorruption,thethreatofpunishment,and

theconceptoffreeridersarebroughtintoplayasinfluencersofwhatwewould

commonlyspeakofastrust.Weneedtoadmitattheoutsetthatsegregatingtrust

fromothermotivations,aspectsofculture,andvarioussortsofinstitutionsisnot

alwayssimple.

Theveryconceptofmoneyasamediumforexchangeinamarketeconomy

dependsontrustthatasymbolwillbebackedbyconsistentvalue,requiringfaithin

theissuingauthorityandthegeneralstabilityofthesocialorder.5

impossibletospeakoftrustaswedocolloquially,e.g.ashavingtrustinaninstitution.3Usingtheirnarrowdefinitionoftrustasencapsulatedinterest,Cook,Hardin,andLeviarguethatinthecomplexmoderneconomymuch,perhapsmost,coordinationoccursasaresultofinstitutionsratherthantrust,suchasexternallyregulatedbehavior.SeeCOOKetal.,supranote2,at106.Thisisfurtheraddressedatnote41.4Trustaloneisquitereasonablydeemedaninsufficientmotivatoroftaxcompliance.ThusintheU.S.wehavewithholdingandthethreatofauditsandworsetocomplementgeneraltrust,butauditsandpenaltiesarewidelyknowntobequiterare,yetcomplianceisthenorm.5HOSKING,supranote2,at89(“Thepowerofmoneyisderivative:moneymediatespowerbecauseinmosttimesandplacespeopletrustit.”).SeeYUVALNOAHHARARI,

6

ThesocialscientistFrancisFukuyama,inafascinatingbooktitledTrust:The

SocialVirtuesandtheCreationofProsperity,recognizesthattrusthasbeendefined

inmanyways,butchoosesthefollowingdefinition,whichcanalsoserveour

purposes:

Trustistheexpectationthatariseswithinacommunityofregular,honest,andcooperativebehavior,basedoncommonlysharednorms,onthepartofothermembersofthatcommunity.6

Fukuyamaplacestrustonahighpedestalinexplainingeconomic

phenomena.Hesummarizes:

Oneofthemostimportantthingswelearnfromanexaminationofeconomiclifeisthatanation’swell-being,aswellasitsabilitytocompete,isconditionedbyasingle,pervasive,culturalcharacteristic:theleveloftrustinherentinthesociety.7

SAPIENS,ABRIEFHISTORYOFHUMANKIND,180(2016)(“moneyisthemostuniversalandmostefficientsystemofmutualtrusteverdevised”).6FRANCESFUKUYAMA,TRUST,26(1995).Iwillcomebacktothesignificanceoftrustasbothaninputandresultofcooperativebehaviorandthemysteryofhowhomosapienscametobedescribedas“acooperativespecies”orindeedas“super-cooperators.”SeealsoChristopherR.Leslie,Trust,Distrust,andAntitrust,82TEXL.REV.515,529-36(2004)(discussingthemanydefinitionsoftrustandtherelationshipbetweentrustandcooperation).TheRussellSageFoundationhaspublishedaseriesofmorethantenbooksontrust,includingCooketal.,supranote2.7FUKUYAMA,supranote6,at7.Cf.ROBERTPUTNAM,BOWLINGALONE(2000).TheCook,Hardin,andLevibook,supranote2,seemstohavebeenwritteninlargepartasaresponsetoFukuyama’sbookandanotherpopularbookwhichthispaperdiscusses,BowlingAlonebyRobertPutnam.Cooketal.believethatFukuyamaandPutnamdefinetrusttoobroadly,mistakenlyacceptsurveydatabasedonaverygeneralizedconceptoftrust,andconsequentlyoverstatetheimportanceoftrustintheeconomy,whileunderstatingtheroleofinstitutions.AnotuncommonargumentisthatwhilelevelsoftrustbetweenhumansintheU.S.maybeatalowpointhistoricallyorcomparedtoothercountries,theU.S.hassucceededeconomicallybecauseofstrong

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Amajorreasonforthesuccessoftrustingsocieties,asdocumentedinthe

Fukuyamavolume,isthattrustreducestransactioncosts.8Itisdifficulttoexaggerate

money’sefficiencygainsoverbarter,providedthemoneyistrustworthy.Ingeneral,

thealternativestotrustwithinaneconomyaremanyformalrules,enforcedthrough

heavymonitoringandcostlyinstitutions,orevencoercion.Inhisessayontrust

BritishhistorianGeoffreyHoskingcommenceswithatourofRussiaunderStalinin

the1930’s,“thelandofmaximumdistrust.”9Itisnotaprettylandscape,e.g.,“Asa

result[ofStalin’screationofdistrustthroughouttheSovietsociety]theordinary

everydayexchangeofthoughts,hopes,andfeelingsbecamevirtuallyimpossible.”10

EconomistJoelMokyrrecentlyobserved,“[M]anymainstreameconomists

arenowcommittedtothesignificanceofcultureintheevolutionofmodern

economics.”11InabookfocusedontheculturalunderpinningsoftheIndustrial

Revolution,hearguesthat“culture”affectedtechnology“bothdirectly,bychanging

attitudestowardthenaturalworld,andindirectly,bycreatingandnurturing

institutionsthatstimulatedandsupportedtheaccumulationanddiffusionof‘usefulinstitutionssuchastheruleoflaw,thejudiciary,andacentralbank,whichserveasproxiesfortrust.Thisbegsthequestionofwhythepopulationtruststheseinstitutions–aquestionofhighcurrentimportancewhen,forexample,thePresidentrefusestogivecredittothenation’sintelligencecommunity,itsmedia,andtheinstitutionsofinternationalalliancecreatedbyhispredecessors.8SeeNIALLFERGUSON,THEASCENTOFMONEY,23(2008)(“Money,itisconventionaltoargue,isamediumofexchange,whichhastheadvantageofeliminatinginefficienciesofbarter…”).AlsoseeIlanaE.Strauss,TheMythoftheBarterEconomy,www.theatlantic.com/business/archive/2016/02/barter-the-society-myth/471051/(Feb.26,2016)(arguingthatthereisnoevidenceofabartereconomythatexistedpriortocurrency-basedexchange).9HOSKING,supranote2at10.10Id.at15.11JOELMOKYR,CULTUREOFGROWTH:THEORIGINSOFTHEMODERNECONOMY,7(2017).

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knowledge.’”12Mokyradoptsthefollowingdefinitionofculture,whichIwillalso

use:

Cultureisasetofbeliefs,values,andpreferences,capableofaffectingbehavior,thataresocially(notgenetically)transmittedandthataresharedbysomesubsetofsociety.13

Mokyrseestrustasanaspectofculture.Hesays,forinstance,

Onemechanismthroughwhichcultureisbelievedtohaveaffectedeconomicperformanceisthroughtheideathathighertrustandcooperationreducetransactioncosts,andthusfacilitateexchangeandemergenceofwell-functioningmarkets.14

Trustissoessentialtoeconomicinstitutionsandindeedtothesuccessof

societypreciselybecauseitisanimportantcomponentofcooperativebehavior.

WritesJoshuaGreene,“[t]heproblemofcooperationisthecentralproblemofsocial

existence.”15

12Id.13Id.at8.Like“trust,”“culture”isthesubjectofavastliterature,includingmanydifferentdefinitions.Arecentandcomprehensivebookthatgivescarefulconsiderationtotheroleofcultureinhumanbehaviorusesthedefinitionthatcultureis“howwedoandthinkaboutthings,transmittedbynongeneticmeans.”ROBERTM.SAPOLSKY,BEHAVE,THEBIOLOGYOFHUMANSATOURBESTANDWORST,271(2017).14MOKYR,supranote11at13-14.(“Mostresearchbyeconomistsoncultureastheyseeitfocusesprimarilyonsocialattitudes,beliefs,andpreferencessupportinginformalandformalinstitutionsthatincreasecooperation,reciprocity,trust,andtheefficientoperationoftheeconomy.”)15JOSHUAGREENE,MORALTRIBES,9(2013).

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III. FROMDARWINISTICCOMPETITIONTOCOOPERATION

Theessentialproblemofcooperationisoftendepictedinnarrativessuchas

ThePrisoner’sDilemma16andtheTragedyoftheCommons,17showing(under

selectedconditions)thatwhatisineachindividual’sinterestmaynotbeintheir

commoninterest.CharlesDarwin’stheoryofevolution,stressingnaturalselection

andsurvivalofthefittest,assumedastartingpointforallofnature,includinghomo

sapiens,tobethecompetitivenessofalloflifeinthestruggleforsurvival.Andyet,

asmathematicianandgametheoristMartinNowackobserves,“[h]umansociety

fizzeswithcooperation.”18

Beforegoingfurther,weneedtoconsiderhowcooperationisunderstoodto

arisefromcompetition.

16ThePrisoner’sDilemmais“thetextbooknon-zerosumgame.”ROBERTWRIGHT,NONZERO,THELOGICOFHUMANDESTINY98(2001).Prisoner’sDilemmadescribesthechoicestobemadebytwopartnersincrimewhoareseparatelyinterrogatedbypoliceunderconditionsinwhichiftheytrusteachotherandactcooperatively,theoveralloutcomewillbebest;butiftheydefectinordertotakethedealthatoffersindividuallybetteroutcomes,theirmutualinterestinthebestoutcomewillbethwarted.AsWrightputsit,“[I]fyouthinkyouraccompliceisgoingtorenegeonthedeal,andratonyouafterall,thenyou’rebetteroffcoppingapleaandrattingonhim.Somehowthisfearofbeingcheatedmustbeovercomeforthingstoworkout.”Id.17TheTragedyoftheCommonswasputforthbyGarrettHardinin1968.Hardenusedthemetaphorofapastureopentoall,inwhicheachherderismotivatedtoaddmoreandmoreanimals,thusservinghisowninterest,butwiththeresultofovergrazingthepasture.It“hascometosymbolizethedegradationoftheenvironmenttobeexpectedwhenevermanyindividualsuseascarceresourceincommon.”ELINOROLSTROM,GOVERNINGTHECOMMONS2-3(1990).18MARTINNOWACK,THESUPERCOOPERATORS:ALTRUISM,EVOLUTION,ANDWHYWENEEDEACHOTHERTOSUCCEEDxiii(2011).

10

Agreatdealofthoughthasgoneintotheoriginofcooperation.19Isithard-

wiredintothebrain?Diditevolvethroughexperience?Isthisaboutnatureor

nurtureorsomecombination?

Howdoculturaltraitsliketrustorcooperativenesscomeabout?First,let’s

furtherdevelopwhatwemeanby“culture.”Fukuyamasaysthatcultureis

“inheritedethicalhabit.”20Putdifferently,itisapeople’slanguageofgoodandevil,

rightandwrong,fairandunfair.Itissomethingthatisacquiredthrougheducation

inthefamily,fromfriendsandneighbors,orinschoolorreligion.Andbecauseitisa

matterofethicalhabit,itgenerallychangesveryslowly,thoughitiscriticalto

observethatnotallsuchhabitschangeatthesamepace.

Isanaffinityforcompetitionorcooperationbuiltintothehumanbrain?The

emergingscienceofneuroeconomicshasidentifiedabrainhormonecalledoxytocin,

whichseemstopromotecooperationandtrust,atleastforthein-group.Itmayalso

promoteaggressiontowardout-groups.21AsJoshuaGreeneputsit,ourbrainsmay

bedesignedforin-groupcooperationandbetween-groupcompetition.22

19E.g.ASHLEYMONTAGU,DARWIN,COMPETITION&COOPERATION(1952);ROBERTAXELROD,THEEVOLUTIONOFCOOPERATION(1984);ROBERTWRIGHT,THEMORALANIMAL,WHYWEARETHEWAYWEARE:THENEWSCIENCEOFEVOLUTIONARYPSYCHOLOGY(1995);MATTRIDLEY,THEORIGINSOFVIRTUE,HUMANINSTINCTSANDTHEEVOLUTIONOFCOOPERATION(1996);ROBERTWRIGHT,NONZERO(2001);GEERATJ.VERMEIJ,NATURE,ANECONOMICHISTORY4-21(2004);SAMUELBOWLES&HERBERTGINTIS,ACOOPERATIVESPECIES,HUMANRECIPROCITYANDITSEVOLUTION(2011);SAPOLSKY,supranote13(2017).20FUKUYAMA,supranote6at34.21JONATHANHAIDT,THERIGHTEOUSMIND,WHYGOODPEOPLEAREDIVIDEDBYPOLITICSANDRELIGION,270-74(2012)(“Themenwhoreceivedoxytocin[vianasalspray]madelessselfishdecisions—theycaredmoreabouthelpingtheirgroup,buttheyshowednoconcernatallforimprovingtheoutcomesofmenintheothergroups.”);SAPOLSKY,supranote13,at108-117summarizedat135(“Oxytocinandvasopressinfacilitatemother-infantbondformationandmonogamouspair-bonding,decreaseanxietyandstress,enhancetrustandsocialaffiliation,andmakepeoplemorecooperativeandgenerous.Butthiscomeswithahugecaveat—thesehormonesincreaseprosocialityonlytowardanUs.WhendealingwithThems,theymakeus

11

Asidefromourdisappointmentinrecognizingthatanoxytocinbombwillnot

solvetheproblemsoftheKoreanpeninsula,onedifficultywithGreene’s

generalizationisthatmostpeopletodaybelongtomultiple,overlappinggroupsand

theprioritytheygivetothesegroupsforself-identificationcanchange.Ismyin-

groupdefinedbymyreligion,myrace,myprofession,mynation,orevenmyplanet?

Astheparticulardefinitionofanin-groupenlarges,whathadatonetimebeen

competitionbetweenthein-groupandanout-groupmaybecomecooperation

withinthelargergroup,withcompetitionnowaimedatadifferentlydefinedout-

group.Theoppositewouldalsobetrue.Intheworldofantitrust,manymergers

eliminatesomecompetitionbyextinguishingarival,butaredefendedintermsof

enlargingthesurvivingfirmtoallowittobecomeastrongercompetitoragainstthe

otherremainingfirms.

Studyofthebrain’sconnectiontocompetitionandcooperationisatanearly

stage.Wemightspeculateonwhetheronedaywewillfindthatthepresenceof

oxytocinorsomeotherchemicalorchemicalsvariesbysocietyinawaythatis

correlatedwithmoreorlesscompetitivebehavior,buttherewillstillbeachallenge

todemonstratewhethercausationrunsinaparticulardirection(i.e.wouldwebe

abletodeterminewhetheroxytocinisthecauseofcooperativeeconomicbehavior

orisoxytocincausedbyacooperativeculture,orboth?).

moreethnocentricandxenophobic.Oxytocinisnotauniversalluvhormone.It’saparochialone.”);cf.,PaulJ.Zak,ValuesandValue,inMORALMARKETS,THECRITICALROLEOFVALUESINTHEECONOMY,266-68(PaulJ.Zaked.,2008)(“[W]henapersonmakesanintentionalmonetarysacrificesignifyingthatheorshetrustsastranger,thebrainofthepersonbeingtrustedproducesasurgeintheneuroactivehormoneoxytocin.”)22GREENE,supranote15at54.Thisthemeisdevelopedinchaptereleven,“UsandThem,”inSAPOLSKY,supranote13.

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Forthepresent,whetherculturaltraitsarebiologicallyinheritableisa

controversialtopic.23Thusfar,wehavenotfoundagenethatallowsustoanswer

thequestion,butthisdoesnotmeanthataculturaltraitcannotevolveandina

socialsense,atleast,beinheritedviacollectivelearning.Darwinhimselfsuggested

thatthemostcohesiveandcooperativegroupsgenerallybeatthegroupsofselfish

individualists.24Evolutionarytheoriesofcooperationtendtostartwiththeselfish

individual,andmoveoutwardtothefamily,kinship,lineage,clans,tribes,and

nations.Theenginesforthisoutwardmovementarereciprocityandreputation.

Theevolutionaryviewofcooperationbeginswiththeindividualandthe

individual’sgenes.Theindividualisassumedtobehaveinwayscalculatedto

enhancesurvival,andthisisoftenexplainedintermsoftheindividual’sgenes

23AnthropologistAshleyMontaguewrotein1952:“[W]ecansafelyinterpretDarwintomeanthatnaturalselection,thestruggleforexistence,hasbeenthesupremearbiterindeterminingtheevolutionofman’sphysicalcharacters,aswellashis‘socialinstinct,’butthatoncehearrivedatahighstageofmoraldevelopment,culturalfactorsassumedthesupremeplaceindetermininghissocialdevelopment…Thehighstageofmoraldevelopmentoncebeingreached,culturalfactorstakeoverthefunctionofnaturalselection.”MONTAGUE,supranote19at94.Manywritershaverecognizedtheintimateinteractions(co-evolution)betweengenesandcultureinhumans.Seee.g.,BOWLES&GINTIS,supranote19at14-16(“No‘geneforcooperation’hasbeendiscovered.Norisitlikelythatonewilleverbefound,fortheideaofaone-to-onemappingbetweengenesandbehaviorisunlikelygivenwhatisnowknownaboutgeneexpression,andisimplausibleinlightofthecomplexityandculturalvariationofcooperativebehaviors.”)24CHARLESDARWIN,THEDESCENTOFMAN134-35,quotedinBOWLESANDGINTIS,supranote19at46.ComplexityeconomicsexpertEricBeinhockerwrites,“Overtime,societiesthatarebetterabletoorganizethemselveswillsocially,economically,andmilitarilydominatesocietiesthatarelesssuccessfulatcreatingcooperativestructures.Thus,itisthecompetitiontocooperatethatdrivessocialinnovation.”ERICD.BEINHOCKER,THEORIGINOFWEALTH:EVOLUTION,COMPLEXITY,ANDTHERADICALREMAKINGOFECONOMICS266(2006).[Myitalics.ThisistheonlytimeI’veseenthisexpressionofarelationshipbetweencompetitionandcooperation.]

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seekingtosurvivethroughtheirownreplication.25Inthecaseoftheindividual,the

initialprinciplemightbedirectreciprocity:“I’llscratchyourbackandyouscratch

mine,”whichassumesexpectationofrepeatinginteractions.26

Anuclearfamilyofatleasttwoparentsandtheirchildrencontributestothe

sustenanceoflifeandprovidessocialcomfort.Inthelongeraofforaging,itbecame

habitualforthefamilymemberstoworkcloselytogethertoprovidefoodand

shelter.Thus,thememberscountoneachothertofunctioninterdependentlyasa

team.Todothis,eachmustsacrificesomeaspectofindependenceinreturnforthe

indefinitebutanticipatedreciprocityoftheothers.Thesacrificeisalsoreferredtoin

thecooperationliteratureasaltruism.

Summarizing,cooperationwouldseemtohavefirstarisenwithinthenuclear

familyinthecontextofprovidingasurvivaladvantageinthehuntingandgathering

offoodandprovisionofshelter,leadingtotherecognitionthatthereciprocity

expectedoffamilymembersinrepeatedinteractionsjustifiesthesacrificeofsome

degreeofindividualindependence.Perhapsthisalsoinvolvedthedevelopmentof

emotionalattachmentsinwhichtheindividualcomestocareforandlovetheother

membersofthefamily.27

Fromageneticperspective,thestoryseemstobethattheindividual’sgenes

wanttoreplicate,andthebeststrategyforachievingthatisfortheparenttohelp

thechildrenwhocarrythegenestosurvive,thusgeneratingaspecialprotective

relationshipfromparentstowardchildren.Theparentswouldnaturallytryto

25RICHARDDAWKINS,THESELFISHGENE2(1976)(“[A]predominantqualitytobeexpectedinasuccessfulgeneisruthlessselfishness.Thisgeneforselfishnesswillusuallygiverisetoselfishnessinindividualbehavior.”).26NOWACK,supranote18at270.27WRIGHT,supranote19(2001)at324.

14

inculcatetheteamworkapproachinthechildren,passingonthehabitualethicthat

appearssuccessful.

Thiscanexplainhowcooperationisgeneratedwithinanuclearfamilyandto

alesserextenttonearrelativeswhoshareasmallerportionofthegenes.Buthow

doesitspreadbeyondthefamily,sothatthein-groupcanbeenlargedto

incorporateclustersandnetworks?(Whydosoldierswillinglysacrificetheirlives

fortheircountryortheirbuddies?)Probablyatfirst,familiesgrewlarger,into

kinshipgroups,livingtogetherornearby,sharingsomegeneticmaterial.AsDarwin

suggested,whenthesegroupsworkedtogethercooperativelytheyhadabetter

chanceatsurviving.Forexample,huntinglargeranimalsrequiredmorehunters

cooperatinginthecaptureorkilling,andalsothesharingofthemeat.Thisprocess

probablyevolvedtoincludenon-relatives.Inaddition,whenout-groupsandin-

groupsbecameconfrontational,thesizeofthegroupanditsabilitytocoordinate

andcooperatewoulddeterminewhocameoutontop,whichoftenmeantsurvival.

Asthegroupbecamelarger—lineagegroupings,clans,tribes,nations--the

expectationsofdirectreciprocitybecomesmaller,butthepayoffintermsof

competitivepotential(e.g.,morehunters,morewarriors)isgreater.28Greatersize

anddivisionoflaborascivilizationmovedintoagricultureandurbanization—

increasedcomplexity—wouldentailmoresocialnorms,andthiswouldincreasethe

altruisticsacrificesthatindividualsneedtomaketoconformtotheenlargedsocial

norms.Whymakethesesacrifices?InYogiBerra’smemorableformulation,“Alwaysgotootherpeople’sfunerals,otherwisetheywon’tcometoyours.”Thissentiment28Ofcoursethehistoryofcooperationcouldbetakenbacktoanimallifepriortohomosapiens.MattRidley’sbook,forinstance,includesachapterontribalprimates,wherehetalksaboutanimalscooperatinginordertocompeteagainstothers.RIDLEY,supranote19at151-69.Thedynamicsdescribedinthetextwouldcontinuetoapplyashumansocialandeconomicorganizationevolvedfromforagingtoagricultureandeventuallytoindustry.SeeDAVIDCHRISTIAN,MAPSOFTIME,ANINTRODUCTIONTOBIGHISTORY(2004).IwritethispaperinthespiritofChristian’sBigHistory.

15

containsaself-interestedbasisthatoperatesoveralongperiod,evenbeyonda

lifetime.Itassumesrepeatedinteractionsinsmallgroupsofpeoplewhoknoweach

other.Thefactthat“diversefaithsareunitedbythereciprocityoftheGoldenRule”

suggeststhatreciprocityhasproventobeapowerfulimpulseindeed.29

Trustmayhavebeenthickwhenthecommunitywasquitesmallandpeople

notonlykneweachotherpersonally,butalsointeractedrepeatedly.Theemergence

ofmorecomplexsocietiesraisesthiskeyquestion:Whatmotivatedaltruismtoward

unknownoutsiderswithwhom(a)repeatedengagementsandtheopportunityfor

receivingareciprocalfavorwouldberelativelysmall,and(b)thegeneticpayofffor

survivalwouldbeattenuated?

Entertheimportanceofreputation(alsoknownintheliteratureas

reciprocalaltruismorindirectreciprocity),tocomplementthicktrustwhenthe

personalrelationshipsarenotpresent.Itissaid,perhapscontemplatingthe

exampleofGlaucon’smetaphoroftheringofinvisibilityinPlato’sRepublic,that

mandoesn’tcaresomuchaboutbeinggood,asthatotherpeopleshouldperceive

himasgood.30Weactasifwearebeingwatchedbecauseifwehappentobe

detecteddefectingfromthesocialnorms,wewillbetalkedaboutandgossipmay

leadtosomeformofdisadvantageorpunishment.31Peoplemayshunusorrefuseto

dobusinesswithus,orperhapspunishusthroughstoning,imprisonment,exile,or

worse.HaidtpraisesGlauconas“theguywhogotitright—theguywhorealizedthat

29NOWACK,supranote18at273;PUTNAM,supranote7at135.30InTHEREPUBLICGlaucontellsSocratesaboutaringthatmakesitspossessorinvisible,suchthathecanengageinunjustactswithoutbeingobserved.TheringwasfoundbyanancestorofGyges,whouseditspowersforhisownadvantage.Glauconassertsthatifthereweretwosuchrings,oneownedbyanunjustmanandtheotherbyajustman,thejustmanwouldsoonbeactingasunjustlyasthefirst.31Foraquickinsightintotheimportantroleofgossip,seeDavidDobbs,Gossip,Grooming,andYourDunbarNumber,https://www.wired.com/2011/06/gossip-grooming-and-your-dunbar-number.

16

themostimportantprinciplefordesigninganethicalsocietyistomakesurethat

everyone’sreputationisonthelineallthetime,sothatbadbehaviorwillalways

bringbadconsequences.”32

Thestoryofthedevelopmentofcooperationisnowfairlycomplete.Itis

supportedbyfieldevidencefromculturalanthropologyandmicrohistoriesofsocial

movements,allpointingawayfromthePrisoner’sDilemmaandtheTragedyofthe

Commonsinthedirectionofcooperation.33Thecomponentsofthestory–family,

reciprocity,reputation(withgossipandpunishment)—havebeenmodeledbygame

theoristslikeMartinNowack,aprofessorofmathematicsandbiologyatHarvard

anddirectoroftheProgramforEvolutionaryDynamics,whohavedeveloped

formulaetoexpressthesemechanismsandthendemonstratehowtheycouldevolve

bycomputersimulationsofevolution.34Nowackconcludes,

Thankstothesemechanisms,theessentiallycompetitivedriveofevolutioncan,inmanycircumstances,giverisetocooperation.Becauseourinstinctshavebeenshapedinthiswayoverthegenerations,itisnosurprisethatone

32HAIDT,supranote21at86.33Theevidencerelatingtotrustinsocialdilemmagames(“situationsinwhichgroupsofindividualsfindthemselvesfacingincentivesidenticaltothosepresentedinthefamiliarprisoner’sdilemmaofgametheory”)isexploredinMargaretM.Blair&LynnA.Stout,BehavioralFoundationsofCorporateLaw,149U.PA.L.REV.1735,1761(2001).Theyconcludethattheexperimentalevidenceindicatesthatpeopleshiftbetweenatleasttwopreferencefunctionsormodesofbehavior,dependingonthesocialcontext.Onemightbedescribedasa“competitive”or“self-regarding”personality;theotherisa“cooperative”or“other-regarding”personality.Socialcontext,temperedbyconsiderationofpersonalcost,determineswhenthecooperativepersonalityemerges.Id.at1761-2.34NOWAK,supranote18.SeealsoseeAlbert.A.Foer,BookReview:Competition,Cooperation,andMartinNowak’sSuperCooperators,AM.ANTITRUSTINST.,(July28,2015)http://www.antitrustinstitute.org/sites/default/files/FoerBookReview.7.28.152.pdf.

17

corollaryofthisisthatuniversalbehaviors—suchaslove,friendship,jealousy,andteamspirit—areseenacrossallhumansocieties.35

Economicstextsoftenbeginwiththeassumptionofaworldoflimited

resourcesinwhichcompetitiontoacquireandholdresourcesisthekeytosurvival.

Yethumansociety,includingitseconomicmanifestations,isremarkablyreplete

withcooperation.Competitionandcooperationcoexist.Thequestionis,howisthis

coexistencetobemanaged?

IV. BALANCINGCOMPETITIONANDCOOPERATION

Ifitsometimessoundsasifcooperationisthefinalteleologicalobjectiveof

evolutionandthatwhatmustsoonerorlatercomenextisanall-inclusiveglobalin-

group(thepartyofAll)thatwouldeliminatewarandotherharmfulmanifestations

ofcompetition,thiswouldbeagrossmisunderstanding.Itiswidelyrecognizedthat

intheabsenceofanimportantroleforcompetition,evolutionitselfwouldnolonger

haveanengine.Ofcoursetherearesomewhodon’tcredittheconceptofbiological

evolutionorwhoaresufficientlysatisfiedwiththestatusquothattheyopposeall

changeasthreatening.Soletmeapproachthequestionfromanotherdirection.

Fromasocial,political,oreconomicpointofview,toomuchortoolittle

cooperationcanbeasdamagingastoomuchortoolittlecompetition.Italldepends

oncontextandobjectives.Competitioninitsmostextremeformis“everymanfor

himself”assummarizedinHobbes’famousdescriptionoflifeinthestateofnature

as“solitary,poor,nasty,brutish,andshort.”Cooperationinitsmostextremeformis

thetotaleclipseofcompetition,whetherpoliticaloreconomic.36Monopolymightbe

35NOWACK,supranote18at272.36Everyonewithinanorganizationneednotagreeinorderforanundertakingtobeconsideredcooperative,althoughthepurestformofcooperationwouldexcludeallcompetition.Thisappliestoeveryorganization,wherethefundamentalcooperativeactistoparticipateintheorganization,oratleastnottoexit.Thestateitselfcanbeviewedasthemostcollectivist,i.e.,cooperative,ofunits,representingsomething

18

thoughtofastheprivatemodeofmaximumcooperation.Thestate,Hobbes’

Leviathan,representsthepublicmodeofmaximumcooperation,althoughitcan

takemanyforms,includingdemocratic,autocratic,andtotalitarian.Totheextent

thatastateeliminatesallopposition,onecouldsayitrepresentsacoerciveformof

cooperation,justascertainkindsoftrust(wherethereisnopracticalchoicenotto

trust)havebeendescribedascoerced.TohelpvisualizewhatIamtryingtodepict,if

acompletelyfragmentedsocietyofindividualsispicturedatthecompetitivepoleof

aspectrum,thenacompletelycollectivistsocietywouldbeatthecooperativeend.I

returntoandmodifythisvisualizationinthepenultimatesectionofthispaper.

Intheeconomicrealm,theargumentsagainstmonopoly,wherethereis

virtuallynomeaningfulcompetition,arewell-known,rangingfromthe“deadweight

loss”resultingfromunderproductionofgoodsandservicestomisallocatingwealth,

excludingrivals,andabusingemployees,consumers,andsuppliers.37Economic

monopolymayonoccasionbebeneficentincertainrespects.Forinstance,the

marketmaynotsupportmorethanoneefficientfirm.Theprospectofatleasta

short-termmonopolymayinspireinvestmentinnewproducts.Twocommon

misunderstandingsaboutmonopoliesalsoshouldbementioned.Amonopolistisnot

compelledtochargetheprofit-maximizingprice,thoughithasthepowertocause

damagebyvirtueofcontroloverprice.Also,amonopolydoesnotnecessarilybring

allinnovationtoahaltandmayindeeduseitssurplustoengageinresearch,butit

generallychannelsinnovationintowhatisbestforthemonopolist.Theabsenceof

competitorsthereforedeprivesthesocietyofnewwaysofadjustingtochanging

consumerdemandandtechnologychange,therebytherestrictingthepublic’s

economicpotential.38

likethegeneralwillofthecommunityorthesocialcontract,ordemocraticsupremacy.37See,e.g.,HERBERTHOVENKAMP,FEDERALANTITRUSTPOLICY,ch.1(1994).38SeeJonathanB.Baker,EvaluatingAppropriabilityDefensesfortheExclusionaryConductofDominantFirmsinInnovativeIndustries,80ANTITRUSTL.J.431(2016);

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Withmonopoly,lifecanbeveryeasyfortheinsidersandlessconvenientand

moreexpensiveforsuchout-groupsasthefirm’sconsumersorsuppliers.Moreover,

monopolypowermaygivethefirmresourcestoinfluenceorcapturerelevantparts

ofthegovernment,therebyraisingentrybarriersevenhigherandmaking

avoidanceofefficientperformanceeasier,aswellasunderminingdemocracy.

Perfectmonopolyappearstobeextremelyrare.Therearetypicallypotential

rivalslurkingjustoutsidethemonopolyzoneandnewtechnologycanespecially

threatentounderminethebasisofthemonopoly.Powerfulbuyersorsellersmay

reduceamonopoly’sdiscretion.Oncetherearesuchthreats,itcanbeusefultothink

ofthemonopolyasjustanotherfirmconsistingofanin-groupcommunitywith

cooperationoperatinginsideitsboundariesandbiasoperatingagainstout-groups,

incontrasttowhichitdefinesitself.Internalcooperationisofteninspiredbythe

objectiveofcompetingmoresuccessfullyagainsttheoutsiders.Theindividualsand

divisionswithinafirmlikelyhavetheirowninternalaggressivetendenciesbutthe

successfulfirmchannelsthisfactorintoadesiredlevelofcooperationsothatthe

firmitselfcancompetemoresuccessfullyagainstrivals,therebyfacilitatingboththe

firm’ssurvivalandtheincomeandeasierlifepotentiallyavailabletotheindividuals

andunitswithinthefirmandthefirm’sownership.39

JonathanB.Baker,BeyondSchumpetervs.Arrow:HowAntitrustFostersInnovation,74ANTITRUSTL.J.575(2007).39 AsJudgeFrankEasterbrookwrote,“Everymarketentailssubstantialcooperationoversomedomaininordertofacilitatecompetitionelsewhere…Antitrustlawpermits,evenencourages,cooperationwithina‘firm,’forsuchcooperationisthebasisofeconomicproductivity.”FrankH.Easterbrook,TheLimitsofAntitrust,63TEXASL.REV.1(1984).SeealsohisopinioninPolkBros.v.ForestCityEnters.,Inc.,776F.2d185,188(7thCir.1985)(“Cooperationisthebasisofproductivity.Itisnecessaryforpeopletocooperateinsomerespectsbeforetheymaycompeteinothers,andcooperationfacilitatesefficientproduction....Antitrustlawisdesignedtoensureanappropriateblendofcooperationandcompetition,nottorequirealleconomicactorstocompetefulltiltateverymoment.”).

20

Fromageneticperspective,monopolisticcooperationbringsanendto

competition,whichmeansthatsuccessfulevolutionbecomeslesslikely.Isuppose

theselfishgenecouldviewthisasavictory,butsocietyshouldnot.Thesocietythat

permitsexcessivepoliticalandeconomiccooperationtominimizecompetitionmay

gainsomenear-termbenefitsandstabilityattheexpenseoflonger-termdynamism.

Thislogicsuggeststhatsomebalancingofcompetitionandcooperationis

bothessentialanddesirable.Thisobservation,indeed,shoulddefinethe

fundamentalfunctionofcompetitionpolicy:todetermine,whetherbypositive

actionorpassiveacceptanceofcustom,whatthemixofcompetitionand

cooperationshallbeforvariouspatternsofbehavior.

V. SOCIALCAPITAL,TRUST,ANDECONOMICTHOUGHT

Ihavebeenwritinginthebeliefthatcultureandespeciallyaparticular

aspectofculture–namely,trust--influenceseconomics.40Thequestionofcausation

requiressomecomment.Considerthedebateonwhysomepoorcountries

stubbornlyremainpoor.Oneinstitutionalistviewholdsthatatleastwhenfocusing

onthecausesofglobalinequality,themostinfluentialdriverisnotculturalbut

institutional.ThedebateishighlightedbyinstitutionalisteconomistsDaron

AcemogluandJamesA.Robinson.41Inconsideringtheoriginsofpower,prosperity,

40SeegenerallyAlbertA.Foer,CompetitionCultureandtheCulturalDimensionsofCompetition,inCOMPETITIONPOLICYATTHEINTERSECTIONOFEQUITYANDEFFICIENCY(DamienGerard&IoannisLianoseds.forthcoming2018)(describinghowcultureinfluencesantitrust).41DARONACEMOGLU&JAMESA.ROBINSON,WHYNATIONSFAIL45-69(2012).Moregenerally,considertheinstitutionalistexplanationoftheprocessofeconomicchangepresentedinDOUGLASSC.NORTH,UNDERSTANDINGTHEPROCESSOFECONOMICCHANGE2(2005):“Thedominantbeliefs—thoseofpoliticalandeconomicentrepreneursinapositiontomakepolicies—overtimeresultintheaccretionofanelaboratestructureofinstitutionsthatdetermineeconomicandpoliticalperformance.Theresultantinstitutionalmatriximposessevereconstraintsonthe

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andpoverty,theydiscusswhythreereceivedtheoriesdonotwork.First,theysay,

theoriesrestingongeographicaldifferencesfailasanexplanationofthecausesof

worldinequalitybecause“[h]istoryillustratesthatthereisnosimpleorenduring

connectionbetweenclimateorgeographyandeconomicsuccess.”42Second,the

ignorancehypothesisisalsoexaminedandrejected.Itassertsthatworldinequality

exists“becauseweorourrulersdonotknowhowtomakepoorcountriesrich.This

ideaistheoneheldbymosteconomists.”43Ignorance,theauthorsconclude,can

explain,atbest,onlyasmallpartofworldinequality.

Alternatively,theculturehypothesispositsthatreligionandothertypesof

beliefs,values,andethicshelpintheunderstandingofworldinequality.Theauthors

sayitisusefulinthesensethatsocialnorms,whicharerelatedtoculture,domatter

andcanbehardtochange,andtheyalsosometimessupportinstitutional

differences,

But…thoseaspectsofcultureoftenemphasized—religion,nationalethics,AfricanorLatinvalues—arejustnotimportantforunderstandinghowwegothereandwhytheinequalitiesintheworldpersist.Otheraspects,suchastheextenttowhichpeopletrusteachotherorareabletocooperate,areimportantbuttheyaremostlyanoutcomeofinstitutions,notanindependentcause.44

choicesetofentrepreneurswhentheyseektoinnovateormodifyinstitutionsinordertoimprovetheireconomicorpoliticalpositions.”Northfurthernotes,“Theintimateinterrelationshipofbeliefsandinstitutions,whileevidentintheformalrulesofasociety,ismostclearlyarticulatedintheinformalinstitutions–norms,conventions,andinternallyheldcodesofconduct.Theseinformalinstitutionsnotonlyembodythemoralcodesofthebeliefsystem,whichtendtohavecommoncharacteristicsacrosscultures,butalsoembodythenormsparticulartoindividualsocieties,whichareverydiverseacrosscultures.”Id.at50.Furthermore,“Tounderstandthehumanconditionitisessentialtofocusontheintentionalityoftheplayers.Economistshavethecorrectinsightthateconomicsisatheoryofchoice.Buttoimprovethehumanprospectwemustunderstandthesourcesofhumandecisionmaking.”Id.at170.42ACEMOGLU&ROBINSON,Id.at49-50.43Id.at63.44Id.at57.(emphasisadded.)ComparetoCOOKETAL.,supranote18.

22

Thisappropriatelytreatscultureandinstitutionalcausesofeconomicchange

asofteninter-relatedratherthancompletelyseparatefactors,butitundervalues

thecausalrolethatculturemayplayinmakinginstitutionalchangespossible.Here

aretworeasonsforsayingthis:First,inhiscontextofexplainingtechnological

change,Mokyrobserves,“[O]ncethepossibilityanddesirabilityofeconomic

progresshasbeenaccepted,aconcreteagendaofpolicymeasuresandinstitutional

changehadtobeformulated,elaborated,proposed,andimplementedforlong-term

progresstotakeplace.”45Inotherwords,theattitudetowardprogress(acultural

manifestation)comesbeforeaconcreteagenda(theinstitutions).

Second,intheirdiscussionofhowChinaswitchedfromafailedcommunist

economytoamuchmoresuccessfulmarketeconomy,AcemogluandRobinson

conclude,“Itwaspoliticsthatdeterminedtheswitch…notbetteradviceorabetter

understandingofhowtheeconomyworked.”46Myquestion(andperhapsMokyr’s)

45Mokyr,supranote,11(emphasisinoriginal).Mokyrsuggeststhataculture’shighvalueonindividualismstimulatesinnovation.Id.at18.Intheoverviewandsynthesisofanimportantstudyofexperimentalgamesplayedbytwelvediversegroupsinsmall-scalesocieties,theeditorspointout“theinstitutionsthatdefinefeasibleactionsmayalsoalterbeliefsaboutconsequencesofactionsandtheevaluationoftheseconsequences.Forexample,amarket-orientedsocietymaydevelopdistinctcognitivecapacitiesandhabits.Thefactthatalmosteverythinghasapriceinmarket-orientedsocietiesprovidesacognitivesimplificationnotavailabletopeopleinsocietieswheremoneyplaysalesserrole…Totakeanotherexample,extensivemarketinteractionsmayaccustomindividualstotheideathatinteractionswithstrangersmaybemutuallybeneficial.Bycontrast,thosewhodonotcustomarilydealwithstrangersinmutuallyadvantageouswaysmaybemorelikelytotreatanonymousinteractionsashostileorthreatening,orasoccasionsfortheopportunisticpursuitofself-interest.”JOSEPHHENRICH,ROBERTBOYD,SAMUELBOWLES,COLINCAMERER,ERNSTFEHR,ANDHERBERTGINTIS(EDS),FOUNDATIONSOFHUMANSOCIALITY:ECONOMICEXPERIMENTSANDETHNOGRAPHICEVIDENCEFROMFIFTEENSMALL-SCALESOCIETIES46(2004).46ACEMOGLU&ROBINSON,supranote41at68.

23

is,whydidthepoliticshappentomoveinthesamedirectionaswassuggestedbya

betterunderstandingofmarkets?Whatvaluesandbeliefs,withintheelite

communitythatmadethecriticalpoliticaldecisionsinChina,weredrawnupon,and

whatvalueswithinthelargercommunitywereunderstoodtobeavailableto

supportthedecisions?

Therelationshipbetweencultureandinstitutionsissoclosethatthedetails

oftherelationshipandthedirectionofcausationaredifficulttospecifyandmay

verywelldependonwhetheroneistalkingaboutthecausesoftheIndustrial

RevolutionorthereplacementofcommunismbyrelativelyfreemarketsinChina.In

somecontexts,culturemaysimplybeaninformalinstitution.Iamsatisfiedto

explorehowaspectsofculture,herefocusingmainlyontrust,influence(ratherthan

cause)theinstitutionalcontextofeconomicsgenerallyandantitrustmore

specifically.Idon’tdisputethatinstitutionscanhelpshapeculture,aswell.

Economicsnormallyfocusesonthreeformsofcapital(i.e.,assets):financial

(e.g.,theresourcesneededtoinvestinprojects),physical(e.g.,toolsandmachinery),

andhuman(e.g.,primarilyskillsandeducation).Afourthform,ofmorerecent

vintage,issocialcapital,whichcapturestheideathatthereisvalueinthesocialties

amongindividualsandthenormsofreciprocityandtrustworthinessthatarisefrom

thoseties.47Theconceptofsocialcapitalhadbeenmentionedatvarioustimesinthe

47HAIDT,supranote21,at338.SeeTHEWORLDBANK,WHEREISTHEWEALTHOFNATIONS?MEASURINGCAPITALFORTHE21STCENTURYxvii(2006)(“Byconstruction,theintangiblecapitalvariablecapturesallthoseassetsthatareunaccountedforintheestimatesofproducedandnaturalcapital.Intangibleassetsincludetheskillsandknow-howembodiedinthelaborforce.Thecategoryalsoincludessocialcapital,thatis,thetrustamongpeopleinasocietyandtheirabilitytoworktogetherforacommonpurpose.Theresidualalsoaccountsforallthosegovernanceelementsthatboosttheproductivityoflabor.Forexample,ifaneconomyhasaveryefficientjudicialsystem,clearpropertyrights,andaneffectivegovernment,theeffectswillresultinahighertotalwealthandthusahigherintangiblecapitalresidual.Theregressionanalysisinthischaptershowsthathumancapitalandruleoflawaccountforthemajorityofthevariationintheresidual.Investmentsineducation,thefunctioningofthejustice

24

past,butwaspopularizedinthe1990’sbyRobertPutnam,especiallyinabestselling

bookaboutthecollapseandrevival(mostlytheformer)ofAmericancommunity.48

Socialcapitalreflectstheobservationthatwearenotmerelyindividualsbut

membersofgroupsandorganizationswhereweworktogetherforcommon

purposes.“Thecoreideaofsocialcapitaltheory,”saidPutnam,“isthatsocial

networkshavevalue.”49

Shouldtrustbeincludedinthecategoryofsocialcapital?Cook,Hardin,and

Levisaythatwouldbeamistake:50“Yourtrustingdoesnotdomuchforyouwhen

youneedtocallonanetworkofassociatestohelpyouresolvesomefamilyor

broadersocialproblem.”51Whatisatstake,theysay,isnottrust,butthe

trustworthinessofthepeopleinyournetwork.Ontheotherhand,theysaythat

socialcapitalmaybetakentomeanthesocialvaluethatinheresintheconnections

withingroups.Inthissense,too,theysay,theissueisnotoneoftrust.Socialcapital

is“merelyameanstodothings”whichcanbebeneficialortheopposite.Discussions

ofdecliningsocialcapitalmustbewrong,theysay,becauseindividualaccessto

socialcapitalingeneralisincreasingformanypeopleinmodernsocieties,not

decreasing.Despitethesecaveats,basedonanarrowdefinitionoftrustas

“embeddedinterest,”theconceptofsocialcapitalmakeslittlesensewithoutthe

culture’sleveloftrustbeingcentrallyincluded.

system,andpoliciesaimedatattractingremittancesarethemostimportantmeansofincreasingtheintangiblecomponentsoftotalwealth.”) http://siteresources.worldbank.org/INTEEI/214578-1110886258964/20744844/Introduction.pdf(lastvisitedMay22,2017).48BOWLINGALONE,supranote7at22-24.49Id.at18-19.SAPOLSKY,supranote13at292(“Socialcapitalisthecollectivequantityofresourcessuchastrust,reciprocity,andcooperation….Putsimply,cultureswithmoreincomeinequalityhavelesssocialcapital.”).50COOKETAL.,supranote2at88.51Id.at88.

25

Putnamandothersinhiswakearguethatindividualismbegantoeclipse

communityintheU.S.duringthe1960’s,andthesystemhasbeenincreasinglyout

ofbalanceeversince.52Fukuyama,forexample,pointstotheriseofviolentcrimes,

breakdownoffamilystructure,declineofchurchesandneighborhoods,unions,

clubsandcharities,andageneralsenseofalackofsharedvaluesandcommunity.53

Hepointstosurveysthattracequestionslike“Doyouagreethatmostpeoplecanbe

trusted?”--towhichthe“yes”responsein1960was58%butonly37%in1993.54A

morerecentPewResearchCentersurvey(priortothepresidencyofDonaldTrump,

incidentally)reportedthatonly19%ofAmericanstrustthegovernment“alwaysor

mostofthetime.”Pewnotesthatcurrenttrustlevelsareamongthelowestin

surveysofthepast50years.In2016,Pewsaid,“[t]hetrustleveltodayisabig

changefrom15yearsago,rightaftertheterroristattacksofSept.11,2001.Atthat

time,60percentofAmericanssaidtheytrustedthegovernment.”55

Cook,HardinandLevireportstudiesthatsuggestthatthegeneralityofthese

surveymeasuresoftrustisproblematicforpredictingactualbehavior.56Trust,in

52Foranearlierexpositionoftheargumentthatthingsareoutofbalance,seeALFIEKOHN,NOCONTEST:THECASEAGAINSTCOMPETITION(1986,rev.1992).Foracritiqueof“culturalisttheories,”seeHA-JOONCHANG,BADSAMARITANS,THEMYTHOFFREETRADEANDTHESECRETHISTORYOFCAPITALISMch.9(2008).53FUKUYAMA,supranote6at11.54Id.at314.55Poll:AmericansDistrustTheirGovernment,VOANEWS(Nov.27,2015),http://learningenglish.voanews.com/a/americans-distrust-their-government-poll-says/3077692.html(Nov.27,2015).56COOK,ETAL.,supranote2at24.SeeSAPOLSKY,supranote13at292,tothecontrary(“Youcanlearnatonaboutacommunity’ssocialcapitalwithtwosimplequestions.First,‘Canpeopleusuallybetrusted?’…Thesecondquestionishowmanyorganizationssomeoneparticipatesin…”)

26

theirview,involvespowerrelationships,whichcanonlybeunderstoodinthe

contextofspecifics:

Itishardtosaywhatcouldbethecooperativeendeavorsthatawholesocietywishestosharein—perhapswinningawar.Hence,someoftheconcernwithso-calledsocialorgeneralizedtrust—meaninguniversaltrustintherandomotherpersoninoursociety—issurelymisplaced.Itwouldbepointlessforuseventoassessthetrustworthinessofmostpeople,anditoftenclearlywouldnotbenefitustotrustthegeneralother.Itisonlybeneficialforustotrustthosewhoaretrustworthyintheirinteractionswithus,andthesepeopleconstitutenowherenearallofthesociety.57

Someskepticismisindeedwarrantedtowardthehighlygeneralizedsurveys

oftrust.(IhavenoideahowIwouldanswer,yesorno,whetherIgenerallytrust

otherpeople.Whichotherpeople?Trustthemtobabysit,tonottalkbehindmy

back,tonotmugme?Trustwhenmystomachisfullorempty?Afterataxidriver

overchargedme,afteranactofterrorism?)Apartfromtheselimitationsonhighly

generalizedquestions,however,asubstantialliteraturefocusespersuasivelyon

morespecificmeasuresoftrust,demonstratingpersuasivecross-cultural

differencesinlevelsoftrust.58

Whilepoliticalconservativestendtoblametheturnfromcommunityinthe

U.S.onhippiesandindividualisticliberalismthatseemedtopermeatethe1960’s

and70’s,thefocusonsocialcapitalsincethe1990’smayinsteadreflectanunder-

recognizeddissatisfactionwiththeneoclassicaleconomists’modelofthegreedy,

self-interestedandcoldlyrationaleconomicman—oftenreferredtoas“TheChicago

School”model--,whichcameintoadominanceovernationalpoliciesalongwiththe

electionofRonaldReaganinthe1980’s.Inanyevent,theworldofeconomic

thinkinghasnotbeenstandingstillsincethe‘80’s.Increasinglyrecognized

specialtieswithinortouchingthefieldofeconomicsbroughtforththinkingabout

theroleofinstitutions(includingculture),psychology(behavioraleconomics),

57Id.at68.58SeeSectionVIIinfra.

27

evolution,gametheory,andstrategicmanagement.FiveNobelPrizeswereawarded

toinstitutionalorbehavioraleconomists–ElinorOstrom59,DanielKahneman60,

RonaldCoase61,OliverWilliamson62,andRobertJ.Shiller.63Someofthenewer

economicthinkingquestionedtheneo-classicalmodel’sunderlyingassumptionof

rationaleconomicbehavior.Authorssuchastheneo-conservativeFrancis

Fukuyamawhohavegivenspecialattentionto“trust”recognizeexplicitlythat

economicscannotbedivorcedfromculture.64GeoffreyHoskingsaystherational

choicemodeloftrustitselfisinadequate:wemustincludeamoralelementthat

cannotbededucedfromrationalchoicealone.65

59SeeELINOROSTROM,GOVERNINGTHECOMMONS,THEEVOLUTIONOFINSTITUTIONSFORCOLLECTIVEACTION(1990).60SeeDANIELKAHNEMAN,THINKING,FASTANDSLOW(2011).KahnemanandAmosTverskyintroducedpsychologyintoeconomicthinking.ThestoryoftheirfriendshipandthedevelopmentofbehavioraleconomicsistoldinMICHAELLEWIS,THEUNDOINGPROJECT(2017).61SeeR.H.COASE,THEFIRM,THEMARKETANDTHELAW(1988).Coaseintroducedtheimportanceoftransactioncostsinmarketeconomics.62SeeOLIVERE.WILLIAMSON,MARKETSANDHIERARCHIES:ANALYSISANDANTITRUSTIMPLICATIONS(1975);OLIVERE.WILLIAMSON,ANTITRUSTECONOMICS(1987).WilliamsonfurtherdevelopedCoase’stransactioncostfocusintotheworldofantitrustanalysis.CoaseandWilliamsondidnotquestiontherationalityassumptionofneoclassicism,butrelaxedtheassumptionofzerotransactioncostsandperfectinformation.However,whentherearepositivetransactioncostsandimperfectinformation,mutualtrustisdifficultanddistrustmustbeovercomethroughinstitutionalmeans.63SeeGEORGEA.AKERLOF&ROBERTJ.SHILLER,ANIMALSPIRITS:HOWHUMANPSYCHOLOGYDRIVESTHEECONOMY,ANDWHYITMATTERSFORGLOBALCAPITALISM25(2009)(“Wehaveshownthatagreatdealofwhatmakespeoplehappyislivinguptowhattheythinktheyshouldbedoing.Inthissensemostofthetimepeoplewanttobefair[andtheygetupsetwhentheythinkothersarenotbeingfair.]Fairnesstheninvolvesbringingintoeconomicstheseconceptsofhowpeoplethinktheyandothersshouldorshouldnotbehave.”).64FUKUYAMA,supranote6at13.65HOSKING,supranote2at34describesthe“encapsulatedinterest”viewoftrustasanexampleofrationalchoicetheorybasedoncalculatedself-interest.Hesaysthat

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Forthefieldsofantitrustandeconomicregulation,thedefectionfromthe

modelofrationaleconomicmanisimportantbecauseitundercutstheChicago

School’s66fundamentalfootingthatwasestablishedinantitrustpolicyduringthe

ReaganRevolutionintheearly1980’s,andintheso-calledWashingtonConsensus67

anditsprojectionofuniversalisticrulesfornationaleconomicdevelopment.Amore

culturallyattentivelearningopensthewayforalternativemodelsthatlegitimize

deviationsbasedinculturalheritage,includingethicalaspectsofsocialcapital.68For

example,Section5oftheFederalTradeCommissionAct69prohibits“unfairmethods

ofcompetition”buttheneoclassicalworldhasessentiallypressedthedeletebutton

thiscanonlybeapart,notthewhole,ofanysatisfactorytheoryoftrust,because“Withoutpositingthathumanbeingsseektrustinginteractionsoutofmoralconsiderations,wewillnotunderstandthefullpotentialityoftrust.”Id.at37.Inexplainingtheneo-classicviewofpricetheory,astandardtextputsforththattheassumptionthatmanisgreedy“meanssolelythathewantscommandovermoreratherthanlessgoods…Itisnotassumedthatheisoblivioustootherpeopleornotsolicitousofotherpeople’swelfare…Whatismeantby‘selfish’manisthathewantstherighttochooseamongoptionsthatwillaffecthisensuingaffairs.”ARMENA.ALCHIAN&WILLIAMR.ALLEN,EXCHANGEANDPRODUCTION:THEORYINUSE26(1964,1969ed.)66TheChicagoSchoolfocusedonachievingeconomicefficiencyasthehighestvalue,tobeobtainedthroughminimalgovernmentalinterventioninfreelyoperatingmarkets.OnthehistoryoftheChicagoSchool,includingitsearlierpre-Friedmanversions,seeJOHANVANOVERTVELDT,THECHICAGOSCHOOL,especially287etseq.(2007);KENNETHM.DAVIDSON,REALITYIGNORED,HOWMILTONFRIEDMANANDCHICAGOECONOMICSUNDERMINEDAMERICANINSTITUTIONSANDENDANGEREDTHEGLOBALECONOMY(2011);andRobertPitofsky(ed.),HOWTHECHICAGOSCHOOLOVERSHOTTHEMARK,THEEFFECTOFCONSERVATIVEECONOMICANALYSISONU.S.ANTITRUST(2008).Althoughsomehavearguedthattrustisarationalactivity,itisalsotiedintoemotional,non-rationalaspectsofhumanbehavior.SeeAKERLOFANDROBERTJ.SHILLER,supranote63.67SeeJOSEPHE.STIGLITZ,GLOBALIZATIONANDITSDISCONTENTS(2002).68AsRoscoePoundwrote,”Ingenerallawcannotdepartfarfromethicalcustomnorlagfarbehindit.”ROSCOEPOUND,LAWANDMORALS122(1924).6915U.S.C.sec.45.

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on“unfair,”ineffectsubstitutingtheideathatefficiency-producingmethodsof

competitionare—oratleastshouldbe--legal.Butfairnessisameaningfulconcept,

albeitdifficulttoquantifywithprecision,whichgrowsoutofasociety’scultural

values.Arguably,itdeservesanexplicitplaceinthedeterminationofwhattypesof

competitionorcooperationaretobebolsteredorprohibitedbygovernment

interventioninthemarket.

Inthenextsection,tofurtherillustratetherelationshipbetweencultureand

economics,Iwilldescribeseveralcurrentindustrialorganizationissuesthatwillbe

particularlyinfluencedbytheroleofaparticularculturalvalue,trust.

VI. THEINTERNETANDTRUST:THREEEXAMPLES

Changesintechnologyinteractwithculture,economics,andregulatory

policies.Trustwilllikelyplayacentralroleaswedevelopantitrustandregulatory

policiestowardtheInternetgenerally.Herearethreeillustrations(B2Cretailing

systems,theemerging“sharingeconomy”andblockchaintechnology)—ofwaysin

whichtrustaffectseconomicpoliciestowardtheInternet.

TheInternethaschangedsomuchofmodernsocialandeconomiclifethatit

isdifficulttooverestimateourdependenceonit.70Business-to-Consumer(“B2C”)

commercialinteractionsontheInternetdependontheconsumer’strustthatgoods

andservicespromisedwillbedeliveredinaccordancewiththeagreementandthat

thepaymentsystemwillfunctioncorrectly.Asaretailjewelerintheearly1990’s,I

couldn’timaginethatpeoplewouldactuallybuyontheInternetsomethingassmall,

70FERGUSON,supranote8at28-31(Westilltrustinpapermoneyandcoinsasancientsymbolicstoresofvalue.What’snew?“Evenmoreamazingly,wearehappywithmoneywecannotevensee.Today’selectronicmoneycanbemovedfromouremployer,toourbankaccount,toourfavouriteretailoutletswithouteverphysicallymaterializing.Itisthis‘virtual’moneythatnowdominateswhateconomistscallthemoneysupply…[Whatmustbeunderstood]isthatmoneyisamatterofbelief,evenfaith…Itistrustinscribed.”)

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expensive,orsubjecttofraudasdiamonds;today,however,theydo(instillmodest

numbers)andapparentlydoitwithahighdegreeoftrustbasedonafamiliarity

withtheInternetandavarietyofinstitutionalinventionsoradaptationsofbrick-

and-mortarpromises,suchasinsuredandfreesecureshipping,discreetpackaging,

freereturns,competitivepriceguarantees,professionalappraisals,lifetime

warranties,etc.Diamondmerchantsaswellastheircustomersneedtohavetrustin

theabsenceofface-to-facedealings.Howcantheymaketheircustomersfeel

comfortablethattheyaremakingtherightpurchase?Howcantheyminimizerip-

offs?Insuranceisalargepartoftheanswer,butthatmerelypushestrustquestions

backontotheinsurers.Howsecureisallthistrusttoattack?

Inallon-linetransactionstrustisincreasinglyvulnerable.TheInternetis

highlydependentonanetworkofusersandoperators,anyoneofwhomcan

potentiallycreatescams,viruses,privacybreachesandpaymentabusesthat

challengethetrustworthinessoftheentiresystem.Whethersecurityandprivacy

canbeprotectedandfrauddeterredwillaffectpeoples’willingnesstoutilizethe

webforcommercialtransactions,andthushavealargeimpactontheInternet’s

abilitytocontinuetoreshapeoureconomy.

Withtheseconcerns,companiesarehardatworktryingtobuildand

establishtrustforInternet-basedcommercialactivitiesthatcreatenewefficiencies

andthreatenthestatusquo.Antitrustissuescouldpotentiallyarisedependingon

howInternetServiceOrganizations(ISO’s)andothersintheindustryattemptto

worktogether—throughstandard-setting,jointventures,orotheralliances--to

fashioneffectivecybersecuritystandardsorpracticestobuildorpreservethe

public’strustinthesystem.

ManyoftheInternet’spotentialefficienciescanbefoundinwhatiscalledthe

sharingeconomy.ConsidertheroleoftrustindeterminingUber’sfutureby

comparingwithtaxiservicethecustomer’schoicebetweenhailinganUber—thatis,

aprivatelyownedcaroperatedpart-timeforafeebyitsowner,whoisgenerating

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incomebysharingwhatwouldotherwisebeanunderutilizedasset(bothtimeand

car).(Keepinmindthatinformertimesthetaxidriverhadanadvantageoverother

cardriversbecauseofsuperiorknowledgeoftheurbanmap.Thisadvantage

disappearedwiththeadventofGPSandInternettrafficandnavigationapplications

suchasWaze.)Trustplaysaroleonboththedemandandsupplysides.Fromthe

passenger’sperspective,trustisgainedinthestandardtaxibecausethetaxi

companyisheavilyregulated,resultinginwhatisprobablyperceived,rightlyor

wrongly,ascarefullyscreened,experiencedprofessionaldriverswhoaretypically

employedbycompaniesthatmustprovideinsuranceandhaveanobvious

investmentinreputationtoprotect.Onthesupplyside,thetaxidrivermusttrusta

strangerpickeduponthestreettopay,addatip,andnotcommitacrimeagainst

thedriverorharmthecar.

TheUbercompany,ontheotherhand,hasabusinessmodelthatassumes

minimal,ifany,governmentregulation.Itsdriversmayormaynotbelessexpert

thanstandardtaxidrivers.Theircarsareprivatelyownedandmaintained.The

putativepassengercontemplatingsteppingintoastranger’scarmayworryabouta

fraudulentchargeoranunsafe,perhapscriminallydangerousdriver.Thedriver

mayworryaboutpassengerswhoareunknownandpossiblycriminals,whethera

passengermightdamagethecar,whetherthetripwillbepaidforandwhether

therewillbeatip.Thebusinessmodelthusfarcouldinvolvealargetrustdeficiton

bothsidesofthetransaction.

Uber’strust-buildingstrategyonthesupplysideis(1)tousepre-committed

paymentviatheInternettoassurethedriverofpayment71withoutrisktoeither

partyofmoneyphysicallychanginghandsinthecar;and(2)toassurethatthe

passengerwillberatedbythedriver,providingthepassengerwithanincentiveto

behave,attheriskofnotbeingpickedupbyUberdriversinthefuture.Todevelop

71WhetherUberdriversreceive(orareallowedtoreceive)tips,iscontroversial.StephanieRosenbloom,ToTiporNottoTipYourUberDriver,N.Y.TIMEShttps://www.nytimes.com/2016/05/22/travel/uber-taxi-tipping.html?_r=0

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thepassenger’strust,Uber(1)notifiesthecustomerofthepriceinadvance;(2)

providesthedescriptionofthecaranditslicensenumbertorelieveanxietyabout

whothedrivermaybe;(3)specifiesalmosttotheminutewhenthecarwillarrive,

withthedriver’sprogresstothepickuppointtrackedonacellphoneapplication;

and(4)requeststhepassengertoratethedriver,givingthepassengersome

additionalleverageovertheservice.ThemodelrestsontheInternetinmany

respects.Theentiresystemisdesignedtoestablishmutualtrustofdriverand

passengerinwaysthatUberhopeswillprovesufficientlytrustworthythat

passengerswillreturnand,perhapsmoreimmediatelyimportanttoUber’sbusiness

model,localtaxicabregulationwillbeavoidedorminimized.(Theminimal

regulationmodelprovidesapriceadvantageoverstandardtaxis,buttaxicompanies

canreplicatetheconvenienceadvantagesoftheInternet.)

CentraltoUber’sstrategyisthemutualcreationofreputationsthroughthe

feedbackmechanism,whichisusedsimilarlybyAirbnb,inabusinesswheremutual

mistrustmaypreventpeoplewhohaveexcessresidentialspacetorentfromsharing

theirspacewithpotentialrenters.Saystheowner:“Hereisaphotoofmyavailable

spacethatyoucanviewontheWebandyoucanseehowothervisitorshaverated

myoffering.”Repliestherenter:“Youcanseehowotherhostshaveratedmeasa

guestandbecomfortablethatIamnotahome-wrecker.”Noneofthisisfoolproof,of

course,butitislikelythatmutualratingsystemswillonlyimprovewithexperience.

WelcometotheemergentworldofInternet-basedtrustbuilding.72

72Thereisnothingnewaboutbusinessesinventingwaystopromotethepublic’strust.WhenIwasaretailjeweler,weofferedextensivewarrantiesasawayofguaranteeingthatourwatchesandgemswerewhatwepurportedthemtobe.Forwatches,wepromisedfreelifetimereplacementofbatteries—apotentiallyvaluableadditionthatreducedtheneedfordiscountingwatchprices.Thesetypesoftrust-buildersareespeciallyimportantwherethereisaninformationalasymmetrybetweenbuyerandseller.Additionally,theymayoffercompetitivealternativestoasingularstrategicfocusonprice.

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Itcomesasnosurprisethattheestablishedtaxiandhotelindustriessee

thesesharingeconomyentrantsascompetitorswhooughttoberegulatedtothe

samedegreethattheincumbentsareregulated.Inthisregard,Section1ofthe

ShermanActcouldpossiblybeinvokedinatleasttwodifferentways.Uber’ssystem

mightbeconsideredaformofpricefixingiftheirdrivers(Uberarguestheyare

independentcontractorsratherthanemployees)aredisabledbythebusinessmodel

tocompetewitheachotheronprice.Additionally,iftaxicompaniesorhotelgroups

weretocreatesometypeofboycottaimedatexcludingtheiremergingon-line

rivals,thiscouldbeanunreasonablerestraintoftradeunderSection1.

Notethatantitrustauthoritiesfunctionascompetitionadvocatesaswellas

lawenforcersandtherebybecomeinvolvedinwaysotherthanlitigation.For

example,althoughthemembersofanindustryhavetheFirstAmendmentrightto

workjointlytolobbyregulatorsforregulatorydecisionsthatareanticompetitive,

theFTCortheDOJaswellasstateantitrustofficialsmaytrytoinfluencethe

competitionpoliciesofstateregulators.Generally,thefederalauthoritieshave

advocatedthattaxiregulatorsandhotelregulatorsshouldnotsidewithincumbents

againstinnovations,providedthepublicsafetycanbeadequatelyprotected.Inthe

competitionpolicyprocessofbalancingbetweenthevalueofcompetitionandthe

valueofcooperation,theeffectivenessoftheprivatetrust-inducingmechanisms

maybeadeterminingfactoronhowmuchregulationisrequired.

Nextconsideracutting-edgecomputersoftwareadvancementthatcan

transformmanypartsoftheeconomy,startingwiththefinancialsector.

BlockchaintechnologyunderliestheBitcoinphenomenon.Blockchainisa

distributedledger,anonlinerecordoftransactionsthatissharedandauthenticated

throughaseriesofcryptographicsteps.TheEconomistcallsblockchain“thetrust

machine”73becauseofitspotentialforfixingsomeeconomicinefficienciesthat

73TheTechnologyBehindBitcoinCouldTransformHowtheEconomyWorks,THEECONOMIST,Dec.3,2015,availableathttp://www.economist.com/news/leaders/21677198-technology-behind-bitcoin-

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respondtotheabsenceoftrust.Atrustedregisterhasthepotentialtocutfraudby

verifyingwhoactuallyownsanasset,whetheritbea“wodge”ofdigitalcurrency(as

inBitcoin)oraplotoflandorluxurygoodsorworksofart.TheEconomistreports

that80%ofbankswillhavestartedworkonblockchain-relatedprojectsin2017.74

Blockchainhasthepotentialofrevolutionizingindustriesthatcreated

institutionsforthepurposeofestablishingmutuallevelsoftrust(e.g.banks,

clearinghouses,governmentalunits).Thecreationofblockchainswithinindustries

willlikelyrequirecoalitionswithinanindustryorindustry-widestandard-settingto

agreeuponthenecessaryrulesforcooperation,raisingantitrustquestionsabout

theextenttowhichthereshouldbelimitsonsuchcooperation.75

Inaglobalizedworld,somecountrieswilladoptsharingeconomiesand

blockchaintechnologymoreorlessquicklyandextensivelythanothers,asaresult

could-transform-how-ecconomy-works-trust-machine(“Theblockchainletspeoplewhohavenoparticularconfidenceineachothercollaboratewithouthavingtogothroughaneutralcentralauthority.Simplyput,itisamachineforcreatingtrust.”)74THEECONOMIST,THEWORLDIN2017126(2017).75ForewordbyVitalikButerin,inWILLIAMMOUGAYAR,THEBUSINESSBLOCKCHAIN:PROMISE,PRACTICE,ANDAPPLICATIONSOFTHENEXTINTERNETTECHNOLOGY(“M]anyindustries…aredecentralizedinaninefficientway—awaythatrequireseachcompanytomaintainitsowninfrastructurearoundmanagingusers,transactions,anddata,andtoreconcilewiththesystemsofothercompanieseverytimeitneedstointeract.Consolidationaroundasinglemarketleaderwould,infact,maketheseindustriesmoreefficient.Butneitherthecompetitorsofthelikelyleadernorantitrustregulatorsarewillingtoacceptthatoutcome,leadingtoastalemate.Untilnow.Withtheadventofdecentralizeddatabasesthatcantechnologicallyreplicatethenetworkeffectgainsofasinglemonopoly,everyonecanjoinandalignfortheirbenefit,withoutactuallycreatingamonopolywithallthenegativeconsequencesthatitbrings.”)https://books.google.com/books?hl=en&lr=&id=X8oXDAAAQBAJ&oi=fnd&pg=PR9&dq=blockchain+and+antitrust&ots=jd-_w-0P2D&sig=slFc31xsLqnAmKalvrrRj-PT06U#v=onepage&q=blockchain%20and%20antitrust&f=false.

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ofculturalvariationsreflectedinattitudestowardcooperationandcompetition.The

nextsectionexploreswhatweknowaboutsuchvariations.

VII. CROSS-CULTURALDATA,TRUST,ANDCOMPETITIONPOLICIES

Whenitcomestohowanationdecidestostriketheappropriatebalance

betweencompetitionandcooperation,cross-culturalsurveysrevealtherangeof

attitudesonvariousfactorsthatmayenterthatcalculus.Unlikesomeofthesurveys

abouttrustthatdirectlyquestionedhowmuchpeopletrustedthegovernmentor

eachother,76thistypeofcross-nationalreportingisindirect.Itwouldbeinteresting

tohavecross-nationalsurveysthataskdirectquestionssuchas,“Onascaleofone

toten,ratehowfavorablydisposedareyouto

monopoly/oligopoly/cartels/mergers,etc.”Ihaven’tcomeacrosssuchasurveyand

wouldhardlyknowhowtoevaluatetheresponsesiftheycamefromnon-experts.

Rather,availablematerialstendtoseekoutattitudestowardcertainculturalvalue

dimensionsthatmay,invaryingways,relatetothecompetition/cooperationscale.

Onepossiblesourceistheadvicethatinternationalbusinessesaregivenon

howtonegotiateinvariousculturalcontexts.Forinstance,hereareinternational

businessconsultantDavidLivermore’ssevenculturaldimensionscalesforclusters

ofstatesdemonstratingsimilarprofiles:77

*Individualism/Collectivism:Individualism(“Individualgoalsandrightsaremoreimportantthanpersonalrelationship”);Collectivism(“Personal

76FUKUYAMA,supra,notes53,54andaccompanyingtext.77DAVIDLIVERMORE,EXPANDYOURBORDERS(2013)(describingtendifferentculturalclusters,e.g.,NordicEurope,Anglo,LatinEurope,etc.forbusinessexecutivesencounteringinternationalmarkets);RICHARDD.LEWIS,WHENCULTURESCOLLIDE,LEADINGACROSSCULTURES(3rded.2006).SeealsoGERTHOFSTEDE,CULTURE’SCONSEQUENCES(1980)(AnthropologistGertHofstede’sinitialinfluentialcontributiontotheculturedimensionsmodel).

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relationshipsandbenefitingthegrouparemoreimportantthanindividualgoals”).*LowPowerDistance/HighPowerDistance:LowPowerDistance(“Statusdifferencesareoflittleimportance;empowereddecision-makingisexpectedacrossalllevels”);HighPowerDistance(“Statusdifferencesshouldshapesocialinteractions;thosewithauthorityshouldmakedecisions”).*LowUncertaintyAvoidance/HighUncertaintyAvoidance:LowUncertaintyAvoidance(“Focusonflexibilityandadaptability;tolerantofunstructuredandunpredictablesituations”);HighUncertaintyAvoidance(“Focusonplanningandreliability;uncomfortablewithunstructuredorunpredictablesituations”).*Cooperative/Competitive:Cooperative(“Emphasisuponcooperationandnurturingbehavior;highvalueplaceduponrelationshipsandfamily”);Competitive(“Emphasisuponassertivebehaviorandcompetition;highvalueplaceduponwork,taskaccomplishment,andachievement).*ShortTermTimeOrientation/LongTermTimeOrientation:ShortTerm(“Valuesimmediateoutcomesmorethanlong-termbenefits(successnow)”);LongTerm(“Valueslongtermplanning;willingtosacrificeshorttermoutcomesforlong-termbenefits(successlater)”).*LowContext/HighContext:LowContext(“Valuesdirectcommunication.Emphasisonexplicitwords);HighContext(“Valuesindirectcommunication.Emphasisonimplicitunderstanding”).*Being/Doing:Being(“SocialCommitmentsandtaskcompletionareequallyimportant;diffuseboundariesbetweenpersonalandworkactivities”);Doing(“Taskcompletiontakesprecedenceoversocialcommitments;clearseparationofpersonalandworkactivities”).78

Althoughtheconceptoftrustisnotdirectlyaddressed,itseemspossibleto

extrapolateculturaldimensionsinwhichhighlevelsoftrustwouldbemorelikelyto

befound.Forinstance,inculturescharacterizedbyCollectivism,trustinthegroup

wouldprobablybehigh.InculturescharacterizedbyCooperation,therewouldbe

highlevelsoftrustwithinthein-group.WherethereisLowUncertaintyAvoidance,

risk-takingwouldberelativelylow,becausechoosingrisktendstorequiretrust.78LIVERMORE,supranote77at101.Anationmaybecharacterizedbymultipleculturaldimensions.

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WhereHighPowerDistancecharacterizesaculture,ahighleveloftrustinthose

withauthoritywouldbeexpected.IftheculturewerecharacterizedbyLongTerm

Orientation,itwouldmanifesttrustinthefuture.

Towhatextentcanwegeneralizefromtrusttoculturaleffectson

competitionandcooperation?Itcanbearguedthatmarketswilllikelybemore

popularinculturesassociatedwithIndividualisminthatindividualismsuggeststhat

individualcompetitiveadvantagemustbesought.Competitiveculturesareby

definitionmorecompetitive.CulturescharacterizedbyLongTermTimeOrientation

wouldprobablybemorefavorablydisposedtopatientinvestmentandtomore

speculativepredictionsofcompetitiveeffectsinantitrustcases,bothofwhich

requirestrustintheabilitytoforecastthefuture.Aggressivegovernmental

interventioninmarketsmayreflectHighPowerDistance,whichimpliestrustin

governmentalauthority.HighUncertaintyAvoidancewouldindicateacompetition

policythatispredictable,withrulesonecouldtrust.

Asenticingasthesespeculationsmaybe,theyleavetoomanyquestions

unanswered.First,ofcourse,therearequestionsaboutthevalidityofnational

stereotypes.Whilestereotypesusuallycontainatleastsometruth,thetypesof

generalizationsdiscussedabovetendtobemoresubjectivethanobjective.

Moreover,theyassumethatnationshaveoneculture,whereasmostnationsare

composedofdiversepopulationswithamixtureofculturalbackgrounds.

AreallAmericansequallycompetitive?Wouldtheyallwantthesamedegreeof

competitiontoapplyineducationandrecreationaswellasincommercialmarkets?

Wouldtheyallhavesimilaropinionsaboutregulatorypoliciesaimedatmonopolies

andresearchjointventures?No.Andgiventheprevalenceofsubgroupswith

varyinginterestswithinanation,whichsubgroups’opinionswouldweconsider

mostrelevantincharacterizinganationalculture?

Second,theseareonlygeneralizations,polarscales,whereasinthereal

worldcultureswillnormallybesomewherebetweenthepoles,not“either/or”.

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Theremaybeinconsistenciesinhownationalculturesareplacedwithinthevarious

scales.We’vealreadyseen,forinstance,thatcompetitionandcooperationco-exist

withinthefirmandwithinmarkets,makingitdifficulttostereotypeevenahighly

capitalisticeconomy.Americansareremarkablejoinerswhoarecharacterizedby

theireagernesstoparticipateincommunityendeavors,buttheyalsobelievethat

businessesshouldcompeteaggressively--thatMacyshouldn’ttalktoGimbels(at

leastpriorto1987whenGimbelspassedaway).DoesthismakeAmericansmore

competitiveormorecooperative?(DoesBenFranklin,theiconicentrepreneurand

creatorofprojectstobenefitthecommons,standforcompetitionorfor

cooperation?)Weneedtothinkofcompetitionandcooperationlessasoppositesand

moreassimultaneouslypresentbutinvaryingproportions.

Inthisregard,notethatindividualismmaybetypicalofmarket-driven

economies,butindividualismcanalsocharacterizeahighlycooperativeculture.For

example,LivermoreplacestheNordicclusterofnationswithintheextreme

IndividualismendoftheIndividualism/CollectivismscalealongsidetheAngloand

Germaniccultures,buthealsoplacestheNordicclusterwithintheextreme

CooperativedimensionandtheextremeBeingOrientationdimension,whereasthe

AngloandGermanicclustersarenotonlylocatedwithintheextremeCompetitive

endoftheCooperative/Competitionscale,butalsointheDoingextremeofthe

BeingOrientation/DoingOrientationscale.Theinterplayofvaluedimensionsis

complex,atbest.

Third,whileculturalvaluesaregenerallyslowtochange,theydochangeand

notallvalueschangeatthesamepace.Generationsmaygrowupwantingto

purchaseacar“thatisnotyourfather’sOldsmobile.”Changeinoneareamayimpact

onotherareas.LawrenceRosenarguesthatlawisaculturaldomain.79Lawis

79LAWRENCEROSEN,LAWASCULTURE,4-5(2006).SeeCOLINWOODARD,AMERICANCHARACTER,AHISTORYOFTHEEPICSTRUGGLEBETWEENINDIVIDUALLIBERTYANDTHECOMMONGOOD(2016)foratreatmentoftheriseandfallofdominantculturalvaluesthroughAmericanhistory.SAPOLSKY,supranote13,at266-77,providesauseful

39

enactedthroughpoliticsandpoliticalpowercanshiftratherswiftly,through

election,coup,orconquest.Lawalsoaffectsotherculturalvalues.Placingnationson

cross-culturalscalesmustkeeppacewithchangingvaluesandtheirchanging

interactions.

Wheredoesthistakeus?First,whennationsaregroupedintocultural

clusters(e.g.,Germanic),thecross-culturalmethodologyispremisedontheidea

thatculturaldimensions(e.g.,individualism)varyfromoneculturalclusterto

another.Second,placingagivencountry(or,evenworse,itsculturalcluster)ona

givenculturaldimensionscaleishighlysubjective.Third,whenappliedtoa

particularcountry,differentculturaldimensionsmaypointincontrarydirections,

makingitdifficulttoascertainwhichdimensionprevailsinthebattleofmultiple

aspectsofculturetoinfluenceanation’sinstitutions.Fourth,becausetrustisnot

brokenoutasaculturaldimensionintheLivermoreapproach,itsroleinanyofhis

sevendimensionscanonlybespeculated.Fifth,itwouldappearthattrustcanbean

aspectofeachofthesevencategories,andthusnoteasilyassignableasacauseof

anyparticularpoliciestowardcompetitionorcooperation,muchlesstoward

antitrustpolicy.Andfinally,itisnotclearthattheroleoftrustinagivensocietyis

thesamewhenonefocusesoneducation,recreationortheeconomy,sohowtrust

wouldberankedinacross-culturalcontextwillrequirespecificationofhowitis

beingdefinedandmeasured.Allinall,averytallorder.

Canwecomeclosertodescribingarelationshipbetweentrustandvarious

manifestationsofantitrustpolicy?

discussionofcross-nationaldataondifferencesbetweenindividualisticandcollectivistcultures.Heseesnothingresemblinggeneticdestinyhereandemphasizesthatcultureschangeovertime(e.g.,“Ingeneral,ittakesaboutagenerationforthedescendantsofEastAsianimmigrantstoAmerica[representingcollectivistcultures]tobeasindividualistasEuropeanAmericans.”277).

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VIII. TRUSTANDANTITRUST

Itisatruismthat“businessrelationshipsarebuiltonafoundationoftrust.”80

Marketexchangeistypicallyviewedasawidespreadformofvoluntarycooperation

amongmore-or-lessself-regardingindividualsthatprovidesmutualbenefits.

Marketexchangeisgovernedbyavarietyofinstitutionalformsintheworld,suchas

antitrustandsectoralregulationlaws,whichreflectpolitical,historicalandcultural

factors.Trustisonlyoneoftheculturalfactorstrackedbyculturalanthropologists

thatcontributetotheseinstitutionalforms,81butitneverthelessplaysarolein

competitionpolicy.Thefollowingdiscussionshighlighttrustwithinseveralareasof

competitionpolicy:verticalintegration,cartels,mergersandacquisitions,

dominanceandfirmsize,roleofthestateandthe“missingmiddle,”orientation

towardgrowth,andtrade.

A. VerticalIntegration

Let’sstartwiththequestionofwhetheraneconomicentityshould

manufactureaninputorpurchaseitinthemarket—the“makeorbuy”decisionthat

helpsdeterminethesizeandscopeofafirmandtherangeofindependentplayersin

themarket.LedbyNobel-winningeconomistsRonaldCoase82andOliver

80Leslie,supranote6at547.Leslierecognizesthattrust,thoughgenerallyseenasavirtue,canalsoserveevilends.“Theissue,then,iswhenshouldsocietyencouragetrustandwhenshoulditfosterdistrust.”Id.81Seegenerally,GEERTHOFSTEDE,GERTJANHOFSTEDE,&MICHAELMINKOV,CULTURESANDORGANIZATIONS:SOFTWAREOFTHEMIND:INTERCULTURALCOOPERATIONANDITSIMPORTANCEFORSURVIVAL(2010).82SeeCOASE,supranote61.

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Williamson,83thestrictlymicro-economicanalysistendstoansweron“makeor

buy”questiononthebasisoftransactioncosts.84Theanalysisgoes:ifacommercial

entitycantrustthemarkettoprovidethedesiredinputreliablyatareasonable

price,withoutunduecostsofcontractnegotiation,monitoring,orenforcement,and

therisksofaunilateral“holdup”arenotaconcern,itwilllikelycontracttobuythe

inputinthemarketplace.85Ifthisleveloftrustinsuppliersisnotpresent(for

examplebecausethereisonlyonesupplierorasmallnumberofsupplierswhoare

perceivedtobecapableofcolluding),theentitymaychoosetomaketheproductin-

house,whereitcanreduceoreliminatethecostsandrisksoftransactions.Afirmis

composedofthosefunctionsthatanentityperformsbyitself.

Theunderlyingassumptioninthistheoryofthefirmisthatvertical

integrationoccurswhenthefirm’smanagementhasahigherleveloftrustinitsown

future,viamoreinternalcooperationandoverallefficiency,byimposingits

hierarchicalandcorporateculturalinfluencesonthosewhobecomepartofitsin-

group.Sincemostfunctionsassociatedwithafirm’sbusinesscanbepurchased

outsideorincorporatedinside,governmentregulationcantiltthebuy-or-make

decisionthroughitsimpactontransactioncosts.Totheextentgovernment83SeeWILLIAMSON,supranote62.84Transactioncostshavebeensummarizedas“searchandinformationcosts,bargaininganddecisioncosts,policingandenforcingcosts.”COASE,supranote61at6.85Onemightquestionwhetheritisaproperusageoftheword‘trust’tosaysomeonecan‘trustthemarket’.Ithinkonecantrustaninstitutioninthesamesensethatonecantrustthesuntoriseintheeast.Itisamatterofconfidenceinapredictionofhowaperson,agroup,anorganization,aninstitution—willbehaveundercertaincircumstances.Inthecaseof“themarket,”wearereallytalkingaboutconfidenceinhowanumberofindividualpersonswhomwemaybutmorelikelydonotknowpersonallywillactinagivensituation.Abusiness,however,mayhavesubstantialexperiencewithhowthemostrelevantothers,suchasalimitedgroupofsuppliers,tendtoactinsimilarcircumstances.Itroutinelymakesdecisionsbasedonwhethersomeone,somegroup,orsomeinstitutionisworthyoftrust.Trustofindividualsand/orinstitutionsmaybefullyrationalorbebasedonconsiderationsthatincludevaluesandemotions.

42

increasestransactioncosts,itprobablycontributestothesizeoffirmsandthe

reductionofthenumberofindependentfirmswithinaproductmarket.

AnadditionallightisthrownonverticalintegrationbythelateRobertL.

Steiner,whopersuasivelyarguedthattheout-groupsupplierandthefirmtowhich

itwantstosellin-putsarenotonlycooperatorswithinthesupplychain,buttheyare

also“verticalcompetitors”whoarecompetingfortheshareofprofitthatcanbe

derivedfromtheultimateconsumertowhomthefirmsjointlyexpecttoselltheir

product.86Ihaveneverunderstoodwhythiswell-documentedinsighthasreceived

solittlerecognitionintheU.S.antitrustworld.Byshowingthatcompetitioncan

occurinaverticalaswellashorizontalplane,itraisestherelevanceofvertical

transactionstoahigherlevelthantheChicagoSchoolparadigmhaspermitted.87

IhadanillustrativeexperiencewhenIwasCEOofachainofretailjewelry

stores.Wetypicallyhiredanoutsidecompanytosupplyspecial“re-mounting”

eventswithinourstores.Are-mounteventisintendedtobeatrust-buildingtactic.

Thespecialtycompanywouldprovideastockofblankringsanddiamondsthatcan

beselectedtofitintotheblankorupgradeanoldringprovidedbythecustomer.

Manycustomersareafraidthatiftheirdiamondleavestheirsight,thejewelerwill

substitutealowerqualitygem—ornon-gem.Beingabletowatchthere-mount

86SeeGregoryT.Gundlach&AlbertA.Foer,CombiningHorizontalandVerticalAnalysisinAntitrust:TheAmericanAntitrustInstitute’sRoundtableontheImplicationsoftheWorkofRobertL.Steiner,49THEANTITRUSTBULL.821(winter2004).87Apparently,EastAsiansprocessinformationdifferentlyfromWesterners.Theformerhaveamoreholisticasopposedtofocusedmanner.E.g,typicallyWesterners’eyesfirstlookatapicture’scenter,whileEastAsiansscantheoverallscene.SAPOLSKY,supranote13,at276(Sapolskyinvitesustoconsideramonkey,abear,andabanana.Whichtwogotogether?“Westernersthinkcategoricallyandchoosethemonkeyandbear—they’rebothanimals.EastAsiansthinkrelationallyandlinkthemonkeyandbanana—ifyou’rethinkingofamonkey,alsothinkoffooditwillneed.”)Thisdistinctionmaybeusefulinourdiscussionofdifferentwaysantirustenforcersviewverticalrelations.AspecificexamplewillbeexploredinmydiscussionofAbuseofSuperiorBargainingPower,infratextatnote123.

43

specialistandtheringatthesametimeisdesignedtoeliminatethismistrustand

therebytoencouragecustomerstoupgradethatwhichtheyalreadyown.

Thecontractingre-mountcompanyalsoprovidedanexperiencedre-mount

jeweler,appropriateequipment,securetransportationforthejewelerand

equipment,andinsurancefortheevent.Weworkedthenumbersanddetermined

wecouldmoreprofitablyrunourownre-mountingeventsin-house.Couldwego

intocompetitionwithoursupplierthroughverticalintegrationofthere-mount

function?

Itallsoundedgood.Aftersubstantialplanning,wesearchedforand

employedare-mountspecialist,purchasedanunmarkedvantrucktotravelfrom

oursecurecentralofficetothestores,plusstock,equipment,andinsurance.We

advertisedscheduledproprietaryre-mountingeventsinourstores.Atfirstthiswas

asuccessstory,butproblemssoonemerged.Thein-houseexpertwehiredturned

outtohaveadifficultpersonalitythatclashedwithotheremployeeswhoreported

shecouldn’tbefullytrustedinherinteractionswithourcustomers.Shecouldn’tbe

replacedwhenshewassick.Securityprovedmuchmoredifficultthanwehad

anticipated.Werealizedthatatourscalewedidnothavetheback-upresourcesto

keepavailableareplacementre-mountjewelerwhenproblemsarose.The

incrementalprofitswerelessthananticipatedandnotworththeextraaggravation

wewereexperiencing.Afterayearwedecidedtogiveuponverticallyintegrating

andreturnedtocontractingre-mountingeventswithanoutsidespecialistcompany.

Thetrustfactorparticularlymanifesteditselfinthelargerscaleoftheoutside

company,whichallowedittoexecuteitscommitmentsreliablyandtoreplace

expertre-mounterswhenevernecessaryandonshortnotice.Inthisvertical

competitionbetweenretailerandre-mountsupplier,thesupplierwassomewhat

chastenedbyourtemporaryrevolt,butnonethelessvictorious.88

88Retailersoftencompeteagainsttheirsuppliersbyusingtheirownproprietarybrandsforinsightintothecostsoftheirsuppliersandasalevertohelpkeepsupplypricesascompetitiveaspossible.

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Whenantitrustpolicymakersconsiderverticalrelationships,itisassumed

thattherelationshipbetweenbuyerandsupplierisinfactprimarilyvoluntaryand

cooperativeanddoesnotforecloseasubstantialamountofcommercebyprecluding

adownstreambuyerordealerfromdealingintheproductsofarivaltothesupplier

imposingtherestraint.Byignoringthecompetitivestrugglebetweenlevelsinthe

supplychain,U.S.antitrustenforcerscanbeviewedasoverly-trustingofthe

cooperativemotivationsandbehaviorofbuyerandsupplier.InalatersectionIwill

focusonproblemsthatariseintheabsenceofanantitrustdoctrinefordealingwith,

“abuseofsuperiorbargainingpower”.89

B. Cartels

Anobviousissueoftrustarisesinthenatureandoperationofcartels,which

maybeformedbyexplicitcollusionortacitcollusion.90Acartelcanbeviewedasa

limitedformofhorizontalintegrationinwhichindependentcompetitorsagreewith

eachothertofixprice,allocateoutput,orotherwisemoveimportantelementsof

tradefromthecompetitionzoneintothecooperationzone,forthepurposeof

maximizingthejointprofitsofitsmembers.91Todaymostoftheworld’smarket-

basednationstakeitforgrantedthatcartelbehaviorisundesirableforthesociety,

butonestudentofcartelhistoryremindsus,

89Seetextatnote123infra.90Explicitcollusionis“anagreementamongcompetitorsthatreliesoninterfirmcommunicationand/ortransferstosuppressrivalry.”ROBERTC.MARSHALL&LESLIEM.MARX,THEECONOMICSOFCOLLUSION,CARTELSANDBIDDINGRINGS,ix(2012).Nofansofcollusion,theeconomistauthorsneverthelessrhapsodize,“Thesuccessfulsuppressionofcompetitionisathingofeconomicbeauty.”Id.91JOHNM.CONNOR,GLOBALPRICEFIXING,21(2ded.,2007).

45

InthefiftyyearsbeforeWorldWarII,theworldbackedawayfromtheideathateconomiccompetitionnecessarilypromotedthecommongood.Theretreat,althoughgradualatfirst,becameheadlongwiththeoutbreakofWorldWarIin1914.Amongthechiefmanifestationsofthistrendwastheexpansionofcartels,whichplayedanever-growingroleindomesticandinternationaltradeandby1939hadbecomeamajorfactorintheworldeconomy.92

Duringthisperiod,WyattWellspointsout,“Someobserversevensawinternational

cartelsasthebasisforanewworldorder,offeringaninstitutionalframeworkfor

cooperationthatby-passedgovernments…”93Putanotherway,atvarioustimesand

invariousplaces,theproblemhasnotbeenperceivedbymanyasoneoftoolittle

competition,butratheroftoomuch“cutthroatcompetition”whosepropermedicine

wasprescribedtobemorecooperationamongrivals.Indeed,untiltheeraafter

WorldWarII,cartelswereprobablythedefaultmechanismincapitalistcountries

otherthantheU.S.,andeventheoutlierU.S.succumbedtothecooperationsolution

duringthefirstNewDeal.94

92WYATTWELLS,ANTITRUSTANDTHEFORMATIONOFTHEPOSTWARWORLD,4(2002).SeealsoConnor,supranote90at46-51(providinginformationontheearlyhistoryofcartels,goingbackto17thcenturyHolland.)”Before1914,effectiveinternationalcartelsexistedinthesteelrail(forrailways),explosive,andsyntheticalkaliindustries,amongothersectors.”Wells,supraat5.Betweentheworldwars,theLeagueofNationsendorsedcartelsand“governmentsaroundtheworldactuallyorganizedsomeinternationalcartelsthemselves,mostnotablyforsugar,rubber,andwheat.”Id.at10-11.93WELLS,id.at10.94ELLISHAWLEY,THENEWDEALANDTHEPROBLEMOFMONOPOLY(1966);RUDOLPHJ.R.PERITZ,COMPETITIONPOLICYINAMERICA,115-144(1996);ALANBRINKLEY,THEENDOFREFORM,31-47(1996).Section1oftheNationalIndustrialRecoveryActof1933includedthislanguage:“ItisherebydeclaredtobethepolicyofCongresstoremoveobstructionstothefreeflowofinterstateandforeigncommercewhichtendtodiminishtheamountthereof;andtoprovideforthegeneralwelfarebypromotingtheorganizationofindustryforthepurposeofcooperativeactionamongtradegroups…”

46

Cooperationisthesinequanonforcartelsuccessbecauseeachmemberhas

toovercomeanincentivetocheatonthecartelbysellingbelowthefixedpriceor

producingmorethanitsallottedshare,inordertogainadvantageoveritsnon-

defectingrivals.95Thecartelthereforetriestoerectdeterrencestrategiesfor

detectingandpunishingitsowncheaters.96Thegovernment,understandingthe

dynamicsthatcanleadtocheating,triestounderminethetrustofthecooperating

communitybypromotingtheprocessofwhistleblowing.ThroughitsCorporate

LeniencyPolicy,theDepartmentofJusticesince1993hasofferedfullamnestyon

finesforcompaniesthatarethefirsttoalerttheagencyaboutacartel.97Thishighly

successfulpolicyhasbeenrevisedfromtimetotimeandisnowpopularin

enforcementregimesaroundtheworld,butitalwaysreliesonaPrisoner’sDilemma

dynamicofintentionallygeneratingdistrustwithinthetrustingcartelcommunityby

providingtheearliestconfessorsstrongincentivesto“turnstate’sevidence.”

Whileprice-fixing(“collusion”)isdeemedperseillegalintheU.S.,thereare

othertypesofhorizontal“collaboration”thatarepermittedandevenencouraged,

whetherbystatuteorpolicy.Theseareevaluatedunderamoredefendant-friendly

“ruleofreason”test.Forexample,becauseitissovaluableforadvancingnew

technologies,industry-widestandard-settingisencouragedbystatuteandlimited95Leslie,supranote6(describinghowtrustisbuiltupwithincartels).96Leslie,supranote6at622(“Althoughantitrustlawisnotgenerallythoughtofasamethodofsowingtheseedsofdistrust,itoftensucceedsbydoingjustthat.”)Lesliediscussesvarioustechniquesforcurtailingtrust-facilitatingdevices,aswellasleniencyprogramsinwhichtherewardsstructureofthegovernment’sprogramcreatesaracetoconfess.Id.at640.Thelatterhedescribesascreatingdistrustaboutconfessing.LeslierecommendedincreasinguseofwhathecalledTheDistrustModelthroughoutantitrust,especiallywithregardtotradeassociationsandjointventures.Today,thedistruststrategy,althoughstillnotoftenrecognizedassuch,hasgrowninimportance.97TheDOJprogrambeganin1978.Leniencyisconditionedonthecompanynothavinginitiatedthecartelandthatnogovernmentinvestigationwasalreadyinprogress.CONNORsupranote91at71.Mostoftheeconomicallysignificantmarketeconomiesintheworldhaveadoptedsimilarleniencyprograms.

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byantitrustenforcersonlyinthefaceofextraordinaryabuses.98Unlesscompanies

withastakeinanewtechnologyarepermittedtomeet,communicate,andformally

agreeoncommonstandards,theymayindividuallylacktheincentivetoinvestin

thedevelopmentofthenewtechnology,sothatthecommoninterestofthe

stakeholders(and,presumably,thepublic)willbethwarted.Ontheotherhand,

trusthasitslimits.Agovernmentalcompetitionpolicyencouragingcompetitorsto

meet,shareinformation,andreachagreementsoncommoninterestscanbe

dangeroustosociety—anabuseofthepublic’strust--soantitrustoccasionally

intervenesinstandard-settingtodeteritfrombeingusedforfixingprices,allocating

marketshares,oreliminatingfuturecompetitors.

C. MergersandAcquisitions

Facingagovernment’sstrongandconsistentoppositiontocartels,

companiesoftenlooktoothermeansforcooperatingwiththeirrivals.Thesimplest

means,atleastinsomerespects,istoacquireormergewiththerival,thereby

convertingan“out-group”intoaconstituentofthe“in-group”.Thosewhoformerly

competedwillnowcooperate;bythemagicofM&A,trustingcooperationthatwould

haveoncebeenillegalbecomesblessedbycompetitionpolicy.99Sometimesthisis

easiersaidthandone.Governmentalregulationovermergerscanstandintheway,

usuallyintheformofaClaytonActantitrustinterventioniftheeffectsofthemerger

arelikelytobeanticompetitive.100InrecentU.S.policy,antitrustinterventionhas

beenmostprobableifthetransactionwillreducethenumberofactiverivalsinthe

relevantgeographicandproductmarkettothreeorfewersignificantplayers.98SeegenerallyMICHAELA.CARRIER,INNOVATIONFORTHE21STCENTURY,HARNESSINGTHEPOWEROFINTELLECTUALPROPERTYANDANTITRUSTLAW,323-44(2009).99CopperweldCorp.v.IndependenceTubeCorp., 467U.S.752(1984)(holdingthataparentcompanycannotcolludewithawhollyownedsubsidiarybecausetheyarenotseparateeconomicentities).10015U.S.C.sec.18.

48

Anissueofeconomicimportanceiswhetherthetwocorporateculturesof

mergingfirmscanactuallybemeldedefficiently.Antitrustanalysisofamerger’s

legality(includingthegovernment’sdiscretionarydeterminationofwhetherto

issueacomplaint)oftenincludesevaluatingpredictionsofefficiencygainsthat

mightoffsetanyharmduetothepost-mergerreducednumberofcompetitors.I

doubtthatthefollowingquestionsrelatingtocultureandtrustareconsidered,but

onoccasionperhapstheyshouldbe:Howdifficultwillitbefortheemployeeswho

arebroughttogetherunderonelegalrooftodeveloptrustforoneanother,toadopt

commonattitudestowardbothfellowinsidersandoutsiders,toacceptcommon

proceduresandstrategies?Thiscanbeparticularlydifficultwhereemployeesofthe

twoformerlyindependentcompaniesdonotsharethesamelinguistic,religious,or

otherculturalheritagessuchasattitudestowardhierarchy,althoughthelargest

culturaldivergenceistypicallydifferentcustomarypractices,whichisathinnerand

morechangeableaspectofculture.101Trust,asonereflectionofculture,therefore

playsaroleinwhetherorhowsoonprojectedefficiencygainsactuallyoccur.Itis

conceivablethatanefficiencydefensecouldfailbecauseacourtdiscreditson

culturaldivergencegroundsthemergingparties’argumentthatthemergerwill

produceaparticularmagnitudeoffutureefficiencieswithinareasonabletimeframe.

Amergermayalsohaveinterestingimplicationsfortheleveloftrustthatwill

affecttheentireindustryafterthemerger,ifforexamplethemergereliminatesa

101HOFSTEDE,HOFSTEDE,&MINKOV,supranote81at341-77.Thisworkdifferentiatesnationalculturesfromorganizationalcultures(e.g.,“Nationalculturesarepartofthementalsoftwareweacquiredduringthefirsttenyearsofourlives,inthefamily,inthelivingenvironment,andinschool,andtheycontainmostofourbasicvalues.Organizationalculturesareacquiredwhenweenteraworkorganizationasyoungornot-so-youngadults,withourvaluesfirmlyinplace,andtheyconsistmainlyoftheorganization’spractices—theyaremoresuperficial.”Id.at346).SeeMargaretM.Blair&LynnA.Stout,Trust,Trustworthiness,andtheBehavioralFoundationsofCorporateLaw,149U.Pa.L.Rev.1735,1738(2001)(“Inparticular,wearguethatthebehavioralphenomenaofinternalizedtrustandtrustworthinessplayimportantrolesindiscouragingopportunisticbehavioramongcorporateparticipants.”).

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maverick,i.e.afirmthattendstodeviatefromthenormsoftheindustry,tacit

collusionmaybeeasiertoaccomplish.102

Whenagreementstolimitcompetitionarenotmadeexplicitly,typicallyin

highlyconcentratedmarkets,collusionmayneverthelessoccurtacitly;i.e.,the

competitorscometounderstandandtrusteachothersufficientlythatexplicit

agreementissimplynotnecessary.Incasesofparallelbehaviorbyfirms,thelaw

requiresthat“plus”factorsindicativeofanagreementmustbepresent.This

requirementisvagueandcontroversialinapplication.RichardPosnerhas

suggestedthatexplicitagreementneednotbeproved,butshouldbefoundbasedon

certainobservableeconomiccharacteristicsoftheindustrythatmakecollusion

likely.103ChristopherLesliehasgonenearlyasfar,advocatingthatthepresenceof

trust-facilitatingdevicesshouldbeconsideredasplusfactors,therebymakingit

easiertoproveagreement.104Thesestructurally-orientedproposalshavenot

generallybeenfollowedbutwhetherthecompetitorsareactingindependentlyor

interdependentlymaybeeasiertodetermineifthedynamicsoftrusting

relationshipsisconsidered.Fornow,tacitcollusionamongoligopolistsremainsa

difficultnutforantitrusttocrack.

102 SeeJonathanB.Baker,Mavericks,Mergers,andExclusion:ProvingCoordinatedEffectsUndertheAntitrustLaws,77N.Y.U.L.REV135(2002)(“Theconceptofamaverickisnotnewtoantitrustlaw;itappearsinthegovernment'sMergerGuidelines,whereamaverickfirmisdescribedasonewith‘agreatereconomicincentivetodeviatefromthetermsofcoordinationthandomostof[its]rivals.’'TheMergerGuidelinesprovideasanexampleafirmthathasan‘unusuallydisruptiveandcompetitive’influenceinthemarket,buttheconceptofmaverickalsoencompassesfirmsthatconstraincoordinationfrombecomingmorelikelyormoreeffectivewithoutnecessarilystartingpricewarsorotherwiseappearingobservablydisruptive.”)103RICHARDA.POSNER,ANTITRUSTLAW69-100(2NDed2001).104Leslie,supranote6at675.

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Jointventuresareoftenthoughtofasincompleteorpartialmergers.They

maybehorizontal,vertical,orconglomerateinnature.Likeamerger,theyfacilitate

cooperationwithinalimitedareabetweencompaniesthatmaypresentlyor

potentiallycompete.Becausejointventurersknowthattheventureisneithera

completeintegrationnornecessarilypermanent,mutualtrustmustbeestablished

withregardtonottakingadvantageofinformationgainedduringtheventure.The

antitrustanalysisofsuchcollaborationsisaccomplishedundertheruleofreason;

whethereffectswillbeanticompetitiveiscomplex,butgenerallybiasedinfavorof

permittingcooperation,ifsomespecificbenefits(often,thedevelopmentofanew

productorservicenotpresentlyinthemarket)canbeascribedintheabsenceof

identifiableanticompetitiveeffects.105Asinmostotherareasofantitrustanalysis,

theoutcomedependsonacomparisonofthebenefitofcooperationagainsttheloss

ofcompetition.

D. DominanceandFirmSize

Attitudestowardconcentratedeconomicpowerandthesizeoffirmsvary,

leadingtodifferentantitrustpoliciestowardmarketdominance.Fukuyamapointed

outthatbothGermanyandtheU.S.alwayshadstrongpopulardistrustof

concentratedeconomicpower,despiteeachhavingaproclivityforcreatinglarge

privateorganizations.Germany,hesays,didnottendtodistrustsizeperse,inpart

becauseitwasnotasanti-statistastheU.S.106Thistypeofgeneralizationpresents

difficulties.OntheU.S.side,forinstance,TheodoreRooseveltwashardlyanti-statist,

believingthatbigcorporationswereinevitableandthatgovernmentneededtobe

105TheNationalCooperativeResearchAct,15U.S.C.A.sections4301-4304,providesthatresearchjointventuresshouldbeevaluatedundertheruleofreasonratherthantheperserule.Onjointventuresgenerally,seeofHERBERTHOVENKAMP,FEDERALANTITRUSTPOLICY,CH.5(1994).106FUKUYAMA,supranote6at215.

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biggerandstrongerinordertoregulatethem.Hisstatistview,itistrue,didnot

prevailovertheprogressiveWilson/Brandeisideathatcompetitionandantitrust

ratherthanregulationshouldcontrolbigbusiness,butstateregulationdidwinthe

dayinanumberofkeysectorsoftheAmericaneconomy.107OntheGermanside,the

Ordo-Liberalviewthatfavoreddecentralizationofbotheconomicandpolitical

powerprevailedinthepost-Hitleryearsandhasattimesstronglyinfluencedthe

EuropeanUnion’sstandagainstabuseofdominance.108

Historyandgeography,whichhelpdefineanation’sbordersandinternal

regions,canbeparticularlyimportantinexplainingnationalattitudestowardfirm

size.Forexample,asmallmarketmayonlyhaveroomforasinglemonopolistwho

canachieveminimumscaleofefficiency,implyingthattheremaybeachoicetobe

madebetweenhighconcentrationandsubstantialinefficiencyinasmallmarket.109

Inbothsmallandlargenations,thereisoftenarecognizedlinkagebetween

economicpowerandpoliticalpower,capturedbythefamousobservationofLord

Actonthatpowertendstocorruptandabsolutepowercorruptsabsolutely.

Corruptioninitsvariousformsunderminesamarketeconomybyproducing

allocationdecisionsthatarenotbasedoncompetitivesupply-and-demand,making

itdifficultforbothproducersandconsumerstotrustthemarketmechanismorthe

peopletheydealwith.Inthiscontext,considerthreepossiblecompetitionpoliciesa107JAMESCHACE,1912:WILSON,ROOSEVELT,TAFT&DEBS—THEELECTIONTHATCHANGEDTHECOUNTRY,167(2004)(reviewingtheclashofviewsabouthowtocontrolbigbusiness).AnexampleofstateregulationofakeysectorwastherailroadindustryundertheInterstateCommerceAct.108SeeDAVIDJ.GERBER,GLOBALCOMPETITION167-71(2010);PeterBehrens,TheOrdoliberalConceptof‘Abuse’ofaDominantPositionanditsImpactonArticle102TFEU,https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2658045(critiquingGerber).109MICHALGAL,COMPETITIONPOLICYFORSMALLMARKETS27-35(2003).WOODARD,supranote79,chapter5,describestheriseandfalloflaissezfaireintheU.S.between1877and1930,astheeconomyandthegovernmentgrew.

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governmentmighttake.(1)Agovernmentmighthaveself-preservationmotivesto

keepprivatepowerfragmented,usingcompetitionpolicyasashieldagainstprivate

concentrationofcountervailingpoliticalpowerwithintheeconomy.(2)A

governmentmaywanttoextenditspoliticalpowerthroughcronyalliancesby

favoringselectedprivatefirmswithopportunitiesforgrowthorprofit,inwhich

campaigncontributions,inducementofemployeestobevotersandcampaign

workers,lendingofcorporatejets,andevenoutrightbribescanbeexchangedfor

specialtreatmentsuchasapprovalofeventhemosthighlyconcentratingmergers.

Or(3)amorepublic-spiritedgovernmentmaywanttooperateinascrupulously

rule-basedandneutralway,minimizingtheroleofpolitics.

Thefirstpolicycouldbecorruptifthegovernmentusesitspolitical

discretiontoserveitsowninterestsratherthanthepublicinterest;butifitfollows

universallyapplicablerules,themotivationwouldbelessimportantthanthe

economicandsocialeffects.Thesecondpolicyisplainlycorrupt,basedonquidpro

quobribery.Lackingobjectiveandtransparentstandards,itcouldresultinthe

creationofverylargeandpowerfulcompanies;however,itcouldalsoor

alternativelyincludelimitationsonthesizeofrivalsofcronies.Thethirdpolicy

wouldbetransparentanduniversal.Itcouldimposealimitonfirmsizewithout

discriminationinfavororagainstanyparticularfirmandpresumablyintend

neutrallytomaximizeoverallopportunitiesforcompetitivebehavior.Herethe

questionisnotoneofcorruptionbutofaculture’sattitudetowardconcentrationsof

power.Evaluationofsuchapolicywouldpresumablyrecognizethatlargesize

createscertaininefficienciesandsociallynegativeeffects,thecostofwhichmightbe

estimatedandcomparedtosomelossofefficiencythatwouldarguablyflowfrom

sizelimitations.

Culturesvaryintheregardwithwhichtheyholdthosewithpoweraswellas

attitudestowardcorruption,andthereforemightvaryintheirattitudestoward

largecentersofpowerorwhethertheydifferentiatebetweenpowerheldprivately

andpowerheldbythegovernment.Cross-culturalsurveyssometimesreporton

53

attitudestowardhierarchy,oftenintermsofapowerdistancescale.110Hofstedeet

al.concludefromthesesurveys,“Inasocietyinwhichpowerdistancesarelarge,

authoritytendstobetraditional,sometimesevenrootedinreligion…Mightprevails

overright…Insuchculturesthepeoplewhoholdpowerareentitledtoprivileges

andareexpectedtousetheirpowertoincreasetheirwealth.”111Insmall-power-

distancecountries,bycomparison,“Theuseofpowershouldbesubjecttolawsand

tothejudgmentbetweengoodandevil…Power,wealth,andstatusneednotgo

together—itisevenconsideredagoodthingiftheydonot.”112Onemighttakefrom

thisthatattitudestowardcentralizedanddecentralizedpoweraretosomeextent

culturallybased,withlow-power-distanceculturesmorelikelytosupport

competitionpoliciesintendedtofosterdecentralizedeconomicpower.

Sizelimitationrequiressubstantialgovernmentinterventionintheeconomy.

Ahighleveloftrustingovernmentanditscivilservantemployeesislikelytobe

associatedwithahigherpublicregardforregulationofbusiness.In2001,boththe

U.S.andE.U.competitionauthoritiesreviewedaproposedmergerbetweenGeneral

ElectricandHoneywell,coming,ratherunusually,toblatantlydifferentconclusions.

TheU.S.approvedthemerger,notfindingadirectoverlapofmarkets.TheE.U.

rejectedthemerger,focusingonwhatitsawaslonger-termproblemsinvolvingthe

financialadvantagesofthemergedcompanythatcouldlaterbeusedtoconsolidate

110Powerdistanceisdefinedas“theextenttowhichthelesspowerfulmembersofinstitutionsandorganizationswithinacountryexpectandacceptthatpowerisdistributedunequally.”HOFSTEDEET.AL.,supranote81at61.E.g.,LIVERMORE,supranote77at101,makesthedistinctionbetweenculturesthatvalue“lowpowerdistance”(statusdifferencesareoflittleimportance;empowereddecision-makingisexpectedacrossalllevels)andthosethatvalue“highpowerdistance”(statusdifferencesshouldshapesocialinteractions;thosewithauthorityshouldmakedecisions).111HOFSTEDEETAL.,supranote81at77.112Id.at78.WouldtheU.S.bedescribedashighpowerdistanceorlow?Atwhatpointintime?ComparetheadministrationsofpresidentsTrumpandObama.Howquicklycanthisculturaldimensionchange?

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controlofcertainmarkets.Ibelievetheconflictingoutcomesarefoundedincultural

differences:intheE.U.thereisgenerallymoretrustintheinstitutionsof

government,lendingtheantitrustenforcersgreaterconfidenceformaking

predictionswhichintheU.S.areconsideredtoospeculativeforagovernment

enforcer.Theremayalsobeagreaterconcernaboutcorporatesize,perse,inthe

E.U.,whichresultsinadefinitionofdominance(asin“abuseofdominance”)that

hasalowermarketsharethresholdthanintheU.S.definitionofmonopoly.113This

statementassumesarelationshipbetweenmarketshareandabsolutesize,whichis

onlysometimesthecase.Unfortunately,thereisnotmuchdataavailableoneither

theeffectsoforsurveyattitudestowardaggregateconcentration.

Infact,competitionpolicyintheU.S.(andinmostothercountries)hasnot

placedlimitsonfirmsize,apartfromoccasionalexplicitstatutoryandregulatory

limitationswithinspecifickeysectorssuchasbanking.Whilefull-blown

monopoliesinidentifiable“antitrustrelevant”marketsarerareintheU.S.,markets

characterizedbysmallnumbersoflargeoligopolistsarecommon,asarehuge

conglomerates.Tosomeextentthisstructurecanbeexplainedbyobservingthat

trustingovernmentbureaucratshastendedtorunlowintheU.S.,whereastrustin

businesspeoplehastendedtobegreater.Forthisandnodoubtadditionalreasons,

onquestionsofcorporatesizelimitations,theU.S.generallygivestheedgetosize

ratherthangovernmentally-imposedlimits.

113Althoughtherearenoabsolutethresholdnumbersineitherjurisdiction,itisoftensaidthata40%marketshareinEuropecanbeenoughfordominance,whilea60-70%shareisneededintheU.S.SeeMichaelElliott,TheAnatomyoftheGE-HoneywellDisaster,TIME,July8,2001,http://content.time.com/time/business/article/0,8599,166732-2,00.html(lastvisitedMay3,2017).TheE.U.’s2017decisionagainstGooglemayimplyconcernaboutsizeorpower,butitcanalsoreflectthatGooglewasfoundtoholdamuchhighermarketshare,90%,inEuropethanitheldseveralyearsearlierintheU.S.,whentheFTCcloseditsinvestigationofGoogle.ThedecisionofU.K.voterstoleavetheE.U.mayhavereflecteddistrustinthelargeandevermorepowerfulBrusselsgovernmentortrustinBritain’sabilitytogoitalone,oravarietyofmotivationsincludingstronganti-immigrationsentiments.

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E. RoleoftheStateandtheMissingMiddle

TrulyindividualisticsocietiesarebelievedbyFukuyamatohavelittle

capacityforassociationaldevelopmentinthecivilsociety“middle”spacebetween

thefamilyandthestate.Iflargeprivatebusinessesaretohavespacetogrow,it

mustbewithinthismiddle.Mostculturesplaceahighvalueonfamily,although

whatthismeansinpracticevariestremendously.Inthecategoryofso-called

familistsocieties,trustisparticularlystrongwithinthefamily.Thereareonlyweak

voluntaryassociationsbetweenunrelatedpeople,hencethereislittlebasisfor

trustinganyoneoutsideoftheimmediatefamily.Economicentitiesinfamilist

societiesconsequentlytendtobeownedandoperatedassmallbusinesses.These

businessesfrequentlyhavedifficultyinmakingthetransitionfromfamilyto

professionalmanagement,whichlimitstheirpotentialfordurabilityandlong-term

growth.Smallbusinessescanbeverysuccessful,asinHongKong,Taiwan,and

Singapore,butbeingsmalltheyusuallycannotcompetewellglobally.114Other

Asiancountrieshavedevelopednetworkingmethodsofgrowinglargeprivate

organizations,e.g.,theKeiretsuinJapanandChaebolinSouthKorea,whichhave

sometimesbeenplaguedbyfamilymanagementsuccessionproblemsbutuse

idiosyncraticconglomerateformstoscaleuptointernationalsize.

The“MissingMiddle”istypicalofConfuciansocietiesthatpromotefamily

bonds,leavinglarge-scaleorganizationtothestate.InChina,forexample,state

interventionwasoftentheonlyavenuebywhichthenationcouldbuildlarge

industries.Wasitfamilistculture,imperialpolitics,orCommunistideologythat

hollowedoutthespacebetweenChina’sfamiliesandthepowerofcentraland

114Familistnationssometimesstipulatethatonthebusinessentrepreneur’sdeath,ownershipshareswillbedividedequallyamongheirs,whichalsocontributestothe“missingmiddle”.

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peripheralgovernments?Wewillseewhethertherelativelyrecentadventof

“socialistmarkets”andprivatizationovercomestheConfuciantradition.115

Italyisanon-Confuciansocietywithsimilarfamilistlimitations.Societies

withahighdegreeoftrustandsocialcapitallikeJapanandGermanyarereportedto

bebetterabletocreatelargeorganizationswithoutstatesupport.116Consideration

oftheMissingMiddlehelpsusunderstandthedynamicinterplayofculture,

includingtrust,andeconomicorganization.

F. GrowthOrientation

Itisoftenrepeatedthatthegoalsofantitrustarecompetitiveprices,choice,

andinnovation.Innovationproducesgrowthsothataneconomygainsalargerpie

thatcanintheorybedistributedtothesociety,butinnovationisallaboutchange.

Differentculturalattitudestowarduncertaintywouldseemtoinfluenceoutlooks

towardchange.Whyisitthatsomenations,suchastheUnitedStatesandIsrael,are

characterizedbyinnovationandgrowth,whileothersareessentiallystagnant?

Essentially,thisdifferenceisabouttrustinthefuture,whichmayalsohavereligious

and/orpoliticalaspects.

InJoelMokyr’sstudyoftheoriginsoftheIndustrialRevolution,he

emphasizesthat“culturescanbebackward-orforward-lookinginthesensethat

somemayholdtheknowledgeandlearningofpreviousgenerationsinsuchhigh

115SeeThomasJ.Horton,ConfuciansimandAntitrust:China’sEmergingEvolutionaryApproachtoAnti-MonopolyLaw,47INTERNAT.LAWYER193(2013),https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2488181.116FUKUYAMA,supranote6at28-9,56.IfinditdifficulttosaythattheJapaneseKeiretsulacksstatesupport,giventhecreditandotheradvantagesthatflowedfromthegovernment.Evenapassivetoleranceofcartelsandkeiretsus,however,wouldimplystatesupport.

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esteemthatnovelideasrunaseriousriskofbeingviewedasapostasy.”117Hestates,

“Acriticalculturalbeliefthatdriveseconomicgrowthandcomplementsthebeliefin

the‘virtuousnessoftechnology’isabeliefinprogress,andspecificallyineconomic

progress.”118

Negativeattitudestowardprogressmayhaveculturalrootsinuncertainty

avoidance,definedbyHofstedeetal.as“theextenttowhichthemembersofa

culturefeelthreatenedbyambiguousorunknownsituations.”119Theydifferentiate

this,adiffusefeeling,fromriskavoidance,whichrelatestosomethingspecific.“The

stronguncertainty-avoidancesentimentcanbesummarizedbythecredoof

xenophobia:‘Whatisdifferentisdangerous’…theweak-uncertaintyavoidance

sentiment,onthecontraryis:“Whatisdifferentiscurious.”120

Avigorous,dynamiccapitalistmarketsystemplacesahighvalueon

innovationandthegrowththatinnovationfacilitates.Moretraditionalculturesmay

beleeryofgrowthbecauseitgeneratesuncertaintybyupsettingthestatusquo,

creatinglosersaswellaswinners.

117MOKYR,supranote11at19.118Id.AlsoseeBENJAMINM.FRIEDMAN,THEMORALCONSEQUENCESOFECONOMICGROWTH(2005),whicharguesthateconomicgrowthmakesasocietymoreopen,tolerant,anddemocratic.Friedmanstates,“Itisnotsurprisingthatmanycultures,especiallyWesternsocietiesinthemodernera,havedevelopedmoralpresumptionsinfavorofpreciselythoseaspectsofpersonalbehaviorthatleadtogreaterproductivityandeconomicgrowth,”i.e.,hardwork,diligence,patience,disciplineandasenseofobligationtofulfillourcommitments,aswellasthriftinessandeducation.Id.15-18.119HOFSTEDEETAL.,supranote81at191.120Id.at201.ThedifficultyinreachingsuchgeneralizationsispointedoutinanemailtotheauthorbyThomasCheng(May16,2017),whonotesthatasasocietyJapancannotbemoreuncertaintyavoiding,butitisalsoaveryinnovativecountryandthesamemaybesaidofKoreaandGermany.Onceagainwehavetheproblemofstereotypingcultures.

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Capitalisminitsvariousmanifestationsisnowtheprincipaleconomic

structureofmostoftheworld’scountries,includingsomewhichhadhistoriesof

communism,colonialism,orauthoritarianismnotsomanyyearsago.Mostofthese

market-orientedcountrieshaveantitrustlaws,butbecauseoftheirvaryinghistories

andculturalvalues,theydonotnecessarilysharethesameeagernessforinnovation

andgrowth.Inshort,theyarenotallequallydynamic.Schumpeteremphasized

“galesofcreativedestruction”121astheessenceofadynamiccapitalismdedicatedto

creationofnewproductsandservices,includingnewjobs,evenasitoftendisplaces

thosewhobenefitfromthestatusquo.

Thisstormyprocesscreatesanxietynotonlyinthosewholoseincomeand

status;indynamiccapitalismnobodycanbecertainheorshewillnotbecomethe

nextvictimofchange.Theprocesscanalsocauseresentmentagainsttheoneswho

benefitfromchange.Onnet,dynamiccapitalismseemstobenefitthesociety,butthe

inherentdownsideentailmentofanxietyandresentmentcangeneratepolitical

supportforundulyanticompetitivepoliciesaimedatprotectingthestatusquoor

restoringthestatusquoante.Thusmanycapitaliststateshavedevelopedatleast

somewelfareandsafetynetcomponentsdesignedtoeasethesituationforlosers

andtohelpthemtransitionintodifferentjobs,whileatthesametimereducingthe

anxietyofeveryonelivinginaneconomythatisunderstoodtocreatelosersaswell

aswinners.

Findingtherightbalancebetweenstate-providedwelfareandsafetyneton

theonehandandincentivestoworkefficientlyandtakerisks,ontheother,isa

politicaltaskofthefirstorder.Thatbalanceaffectsandisaffectedbythelevelsof

trustinthecommunity’sintentionandabilitytorespondtoindividualdistress.

121JOSEPHA.SCHUMPETER,CAPITALISM,SOCIALISMANDDEMOCRACYCH7(3ded.,1950);THOMASK.MCCRAW,PROPHETOFINNOVATION:JOSEPHSCHUMPETERANDCREATIVEDESTRUCTION(2007).Foranin-depthexplorationofwhatmakesthenationofIsraelsoremarkablyinnovative,seeDANSENOR&SAULSINGER,START-UPNATION(2009).

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G. Trade

Asnotedearlierinthisessay,afunctioningeconomydependsheavilyon

trust,particularlyinregardtotaxrevenuesandpaymentsystems.Anotheraspectto

considerisinternationaltrade.Whentrustishighbetweencountries,tradeislikely

toflourish.In2014,Hoskingpublishedthischillingdescriptionofwhathappens

whenapolity’strustiseroded:

Whensocialtrustbreaksdown,ittendstoreconfigureatalowerlevelcollective,whichthenerectsrigidboundariesarounditself.Thuswhentrustinthestateisweakened,ittendstorefocusonapoliticalparty,areligiousmovement,anethnicgroup,aregionalortriballeader,amilitarystrongman,oraneconomicallypowerfulfigure.Inacrisisoftrust,politicalleaderswilloftentrytodrawtighterboundariesaroundthecommunityandprojectdistrustacrossthem.122

Asanationalisticin-groupredefinesitseconomiccommunityfromglobalto

nationaltheresultmaybeprotectionofdomesticmarketsandareductionof

internationaltradeandcross-borderimmigration.Barriersagainsttradelikely

decreasecompetitionwithinthedomesticmarketandimmigrationlikelyreduces

competitionforin-groupjobs.Eachofthesepoliciesdiminishesawell-known

contributortoeconomicgrowth.Anotherwayofdescribingprotectionistpoliciesis

thatcooperationwithout-groupsisreducedinthenameofprotectingthein-group

fromoutsidecompetition.

Theimportantthingtonoteabouttradeisthatovertimesovereignnations

haveadoptedawholerangeofpolicies,fromcompletelyopenmarketsto

completelyclosedmarkets,withmanystoppingpointsalongtheway,including

tariffs,subsidies,quotas,biasedenforcementoflawsandregulations,andother

formsofgovernmentintervention.123Eachofthesepoliciesmaybeviewedasa

122HOSKING,supranote2at201.123AhistoryofgovernmentalinterventionininternationaltradeispresentedinCHANG,supranote52.EconomistChangwrites:“[H]istorytellsusthat,intheearly

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politicalassignmentofhowmuchcompetitionorcooperationwilloccuratagiven

pointintimewithrespecttoaparticulartrade-relatedbehavior.

IX. ImportanceofTrustinAssigningRolestoCompetitionand Cooperation:TheExampleofASBP Howmighttheconceptoftrustfitintoanation’sdecisiononwhethera

desiredendresultshouldbetreatedassubjecttocompetitionorcooperation?Let’s

examinethecaseofabuseofsuperiorbargainingposition(“ASBP”).124

ThroughmostofAmerica’santitrusthistory,retailcompanieswererelatively

smallandtheirmarketsfragmented,whereasmanufacturerstendedtobemuch

largerandmorepowerful.Consequently,itwastheconceptofmanufacturer

monopolythatreceivedprimaryattentionfromantitrusttheoristsandenforcers.

Thegrowthofthepowerbuyer,suchasWalMartorAmazon,isofrecentvintage,

withthepowerbuyernowfrequentlyinthesuperiorbargainingposition.125While

theconceptofmonopolyonthesellersidehasbeenappliedtothebuyerside

throughtheconceptofmonopsony,whichisusuallyportrayedasthebuyer-side

mirrorimageofmonopoly,alargebuyerwhodoesnotqualifyashavingenoughstagesoftheirdevelopment,virtuallyallsuccessfulcountriesusedsomemixtureofprotection,subsidiesandregulationinordertodeveloptheireconomies….Unfortunately,anotherlessonofhistoryisthatrichcountrieshave‘kickedawaytheladder’byforcingfree-market,free-tradepoliciesonpoorcountries.”Id.at61.124 SeeAlbertA.Foer,AbuseofSuperiorBargainingPosition(ASBP):WhatCanWeLearnfromOurTradingPartners?,AM.ANTITRUSTINST.WORKINGPAPERNO.16-02(2016),http://www.antitrustinstitute.org/sites/default/files/AAI%20Working%20Paper%20No.%2016-02.pdf.InthissectionIwilloftenbequotingfromorparaphrasingthispaper.125Chainstoresareanintermediatedevelopment.ConcernabouttheA&PSupermarketchainledtopassageoftheRobinson-PatmanActduringtheGreatDepression,withcertainpartsoftheActaimedatcontrollingBuyerPower,butultimatelyhavingrelativelysmallimpactinthisregard.

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marketpowertobedeemedeitheramonopolistoramonopsonistcanoftenhavevery

substantialadvantagesoversmallersuppliers,andthereisamplereasontorecognize

thattheseadvantagesareoftenabused.Themodernimbalancebetweennon-

monopsonypowerbuyersandtheirsuppliershasbeenrecognizedbylawin

Austria,Bulgaria,France,Germany,Italy,Japan,Korea,theSlovakRepublic,and

Taiwan,butnotintheU.S.126

TheInternationalCompetitionNetwork(ICN)issuedafactualreportonwhat

isknownasAbuseofSuperiorBargainingPositioninconjunctionwithits2008

conference.127Ofthe32jurisdictionsrespondingtoasurvey,sevenreported

specificlegalprovisionsrelevanttothequestionnaire’sdefinitionofASBP.128Our

126SeeMasakoWakui&ThomasK.Cheng,RegulatingabuseofsuperiorbargainingpositionundertheJapanesecompetitionlaw:ananomalyoranecessity?J.ANTITRUSTENFORCEMENT,2015,1-32(2015),10.1093/jaenfo/jnv022;MitsuoMatsushita,AbuseofSuperiorBargainingPosition–intheContextofDifferentAntitrustPhilosophies-,presentedtothe2015ASCOLAconferenceinTokyo,Japan,tobepublishedinaforthcomingASCOLAbook(textinauthor’sfiles),slidepresentationat http://ascola-tokyo-conference-2015.meiji.jp;YeeWahChin,WhatRoleforAbuseofSuperiorBargainingPositionLaws?,256N.Y.L.J.,July6,2016;IoannisLianos&ClaudioLombardi,SuperiorBargainingPowerandtheGlobalFoodValueChain.TheWutheringHeightsofHolisticCompetitionLaw?https://www.ucl.ac.uk/cles/research-paper-series/research-papers/cles-1-2016(dealingwiththefoodsectorandalsoreviewshowtheauthoritiesintheE.U.,Italy,Germany,Spain,andtheU.K.definebargainingpower).PeterCarstensendevotesachapter(six)to“marketregulationandotherstrategiestoremedyabuseofmarketpower”inhisforthcomingbook,PETERCARSTENSEN,COMPETITIONPOLICYANDTHECONTROLOFBUYERPOWER:AGLOBALISSUE.TheauthorthanksThomasChengforpointingoutthatalthoughASBPmostoftenarisesinthecontextofbuyerpower,undersomenationalstatutes(e.g.,JapanandKorea)theabusecanalsocomefromapowerfulseller.127ICNTaskForceforAbuseofSuperiorBargainingPosition,ReportonAbuseofSuperiorBargainingPosition,April14-16,2008,www.internationalcompetitionnetwork.org.128TheICNTaskForce’squestionnairerequestedrespondentstoprovidetheirowndefinitionofASBP,butofferedthefollowingguidanceinAppendixEoftheReport:

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majortradingpartners--Germany,JapanandKorea--employedsuchprovisionsas

partoftheircompetitionlawwhilefourothersemployedASBPinothercontexts

suchasprotectinglocalsuppliersinruralareas,tortliabilityunderacommercial

code,aprivatecivilremedystatute,andasanadministrativeregulationofretail

chains.TheReportsimplyconveysthesurveyresultswithouttakingapositionand

althoughtherewasdiscussionoftheReportattheconference,noactionwastaken.

OfparticularinterestherewastheconflictbetweenJapaneseandU.S.

representativesthatwasrevealed.

TheeminentJapaneseantitrustprofessor,MitsuoMatsushita,after

comparingtheJapaneseandU.S.viewsthatwereadvocatedattheICN,explained

thedivergenceinthecontextofdifferingphilosophiesofthepurposesofantitrust

law.129HesummarizedtheJapaneseviewinthisway:

Abuseofsuperiorbargainingpositioninfringesthefoundationofthefreecompetitionwherethepartiestotransactionsdeterminetransactiontermsorconditionsbasedontheirfreeandindependentbusinessjudgment.Incaseswhereapartyinasuperiorbargainingpositionovertheotherparty,byusingthatposition,restrainstheindependentbusinessactivitiesoftheotherpartyandforcestheotherpartytoacceptdisadvantagesthatitwouldnotacceptifthecompetitionworkedproperly,itsconductpreventstheotherpartyfromcompetingfreelyandindependently.Theotherpartyonwhichthedisadvantagesareimposed

Thisquestionnaireseeksinformationontheanalysisandtreatmentof“abuseofsuperiorbargainingposition”inbusinesstobusinessrelationsinICNmemberjurisdictions.Injurisdictionsthatregulate“abuseofsuperiorbargainingposition,”theconcepttypicallyincludes,butisnotlimitedto,asituationinwhichapartymakesuseofitssuperiorbargainingpositionrelativetoanotherpartywithwhomitmaintainsacontinuousbusinessrelationshiptotakeanyactsuchastounjustly,inlightofnormalbusinesspractices,causetheotherpartytoprovidemoney,serviceorothereconomicbenefits.(Forexample,actssuchasrequestforprovisionofsupplier’slaborwithoutcompensationandcoercivecollectionofcontributions,exercisingbuyingpower,areconsideredabusiveinJapan.)Apartyinthesuperiorbargainingpositiondoesnotnecessarilyhavetobeadominantfirmorfirmwithsignificantmarketpower.

129Matsushita,supranote126.

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wouldbeinthedisadvantageouspositionintermsofconditionofcompetitionwithitscompetitors.Ontheotherhand,

thepartyimposingdisadvantagesontheotherpartywouldbeintheadvantageouspositionintermsofconditionofcompetitionthroughthedifferentmeansfrompriceandquality.

AndhesummarizedtheU.S.view:Theconceptofanabuseofsuperiorbargainingpositionisveryvague,and

…anyregulationofsuchabuseislikelytointroduceagreatdealofuncertaintyintothemarketregardinghowbestandmostefficientlytonegotiatecontractswithsmallercounterparts.Substantialuncertaintyisinherentbothindeterminingwhenapartyisinasuperiorbargainingpositionparticularlywherethereisnomarketpowerrequirement,andinassessingwhenparticularcontracttermswouldbedeemedtobeabuse.Theseuncertaintiesarelikelytoraisethecostsofcontracting,tothedetrimentofpartiesandultimatelyconsumers.

ThereareanumberofreasonswhyASBPdoesnotfitintotheprevailing

ChicagoSchoolheritageintheU.S.Forstarters,ASBPisnotaboutmonopoly.Rather,

itisaboutrelativepositionsofpowerwithinaverticalchannel.If“competition”is

viewednarrowly,ASBPthereforedoesnotreducecompetition.Indeed,theChicago

Schooltendstoviewverticalrelationshipsasessentially“cooperative”,sincethey

aretakenasbasedinvoluntarilyarrivedatcontractsanddonotreduceoutput.130

Mostimportantly,ASBPdoesnotfitintotheChicagoconditionthatcompetition

policyshouldhaveasingle-mindedobjectiveofpromotingefficiency.131

130AccordingtoJudgeFrankEasterbrook:“Thegoalofantitrust…ispreventingtheallocativelossthatcomesaboutwhenfirmsraisepriceoverlongrunmarginalcost,andthusdepriveconsumersofgoodsforwhichtheyarewillingtopaymorethanthecostofproduction.Thisimpliesaprogramforantitrust:lookforsituationsinwhichfirmscanincreasetheirlongrunprofitsbyreducingoutput.Cartelsareoneandmergersendinginsubstantialmarketsharesareanother.Verticalrestrictionsdonotfitthiscategory.”FrankH.Easterbrook,WhenIsItWorthwhiletoUseCourtstoSearchforExclusionaryConduct?2003COLUM.BUS.L.REV.345,46(2003).131ButseeAlbertA.Foer,OntheInefficienciesofEfficiencyastheSingle-mindedGoalofAntitrust,60ANTITRUSTBULL.103(2015).

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Manycountries,includingJapan,andmanyadvocatesofantitrustdonot

sharethefullcupofU.S.devotiontoefficiency.ProfessorMatsushitapointsoutthat

inJapantheeconomicstructurehaslongbeencharacterizedbythedominanceof

largebusinessesoversmallbusinesseswithinseveredependencystructures,allof

whichrequiresoversight.InGermany,thepost-warOrdo-Liberalphilosophyheavily

influencedemergenceofasocialmarketeconomy,verydifferentfromtheNazi

periodwhereindividuals’freedomwassuppressed.Ordo-Liberalsfavor

unconcentratedmarketsbecausetheyareconducivetofreedomanddemocracy,

arguingforprivateeconomicpowerstobecontrolledbylawwhile,inother

economicareas,thedirectstateinterventionshouldbekeptataminimum.132

Recognizingfreedomtocompeteasastartingpointforcompetition,theytendtobe

moresuspiciousofpotentiallyexclusionaryverticalrestraintsthantheU.S.

ThusthecontroversyoverASBPsignificantlyreflectscultural,political,and

historicaldifferencesamongnations.ProfessorMatsushitaobserves:

ASBPisoneofthemostinterestingareasinantitrustlawtoseehowmuchharmonizationandconvergenceshouldbepursuedamongnationsandhowmuchindigenousfeaturesshouldberetained.Inotherwords,howmuchdiversityshouldbekeptindiversitywhenlegislatorsofantitrustlawsintheworldseekfor“unityindiversity”.133

TowhatextentmaywesaythesedifferencesbetweentheU.S.andJapanon

ASBPcanbeattributedtoadifferingtrustfactor?TheU.S.positionseemstoreston

atrustinthemarketsystemtoprovideefficientoutcomesthatoutweighinjuryor

injusticethatmayoccuroutsideofthemostdirectcompetitiverelationship,i.e.

132GERBER,supranote108at167-75(“Thecoreideawasthatthelawshouldpreventdeviationsfromwhattheordoliberalscalled‘completecompetition,’i.e.competitioninwhichnofirmhassufficientpowertomanipulatepricesorotherconditionsofcompetition.”).ProfessorBehrensnotesthattheNazisevenforcedwholeindustriestocartelizeonasectorwidescale.These“imposedcartels”werebrokenupbythepost-waranti-cartellegislationenactedbytheAmericanoccupationforces.E-maildatedMay18,2017,onfilewithauthor. 133E-mailfromProfessorMatsushita,onfilewiththeauthor.

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outsideofhorizontalcompetition.134Bycategorizingthebuyer/supplier

relationshipasessentiallycooperativeratherthanbothcooperativeand

competitive,itavoidshavingtodealwithabusesnotcausedbymonopolyor

monopsony,effectuallyholdingthatnothingbutverysubstantialmarketpower–-

poweroveranentiremarket’spricingstructure--cancauseremediableharm.While

thisreflectsanAmericantrustintheabilityofbusinessestoprotectthemselves

throughvoluntarilyenteredcontracts,itignoresthefactthatsomefirmsare,to

paraphraseOrwell,muchmoreequalthanothers.Isuspect,however,thatthe

underlyingrationaleisreallyoneofdistrustintheabilityofgovernmenttomake

betterdecisionsthanbusinesses.135

Appropriately,theU.S.doesnotwantatypeofASBPlawthatwouldlaunch

intolitigationanavalancheofprivatecontractdisputes.Ifantitrustenforcerswere

seriouslytoconsideradoptingaformofASBP,lineswouldhavetobedrawnto

clarifywhenacontractcouldbechallengedandwhennot.Thisisaregulatorytask

forwhichtheU.S.canlikelylearnmuchfromforeignexperiences,althoughitseems

134Here,again,therearecomplexities.ThomasChengpointsoutthatinJapansupplierrelationshipsareoftendeeperandmoreintegratedthanintheU.S.,withsuchrelationshipsoftenlastingfordecades.Hespeculatesthatitisbecausethereissuchahighdegreeoftrustthatthetrustisabusedbythemorepowerfulparty.E-mailfromProfessorChengdatedMay16,2017,onfilewithauthor.135E.g.,FrankH.Easterbrook,WhenIsItWorthwhiletoUseCourtstoSearchforExclusionaryConduct?2003COLUM.BUS.L.REV.345,350(2003).(“Justasweallinsisttodayonproofthatagivenpracticeisbadforconsumers,'sowemustinsistonproofthatagivenlegalregimenimpliedbyaneconomicmodeldoesbetterthantheunregulatedmarket.Topointtoacompetitivefailureisnottoshowthatregulationisbetter.ThatistheNirvanaFallacy.Governmenthasitsowncostsanderrors,whichmaybeworse(andhardertocorrect)thantheproblemsofmarkets.Donotinvokeatheoryofmarketfailureunlessyoualsohaveatheoryofregulatoryfailure-andawaytoshowthatthecostsoftheformerexceedthecostsofthelatter.”)Icomment,inkeepingwithmythemethatculturalvaluesarerelevanttoantitrust,thattheconceptofmarketfailureshouldnotbetiedonlytoinefficiency;itshouldalsobeconsideredamarketfailurewhenamarketfailstosatisfyourstrongsenseoffairnessandjusticeformarketparticipants.

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thattheprevailingU.S.culturepreferstoshunregulationwheneverpossible.The

periodicallyhighleveloftrustforbusinessexecutivesintheU.S.comparedtolow

trustforgovernmentlikelytiltsthebalanceagainstadoptingASBPinthenearterm.

Onemayask,however,whetherwhatIhavereferredtoas“theprevailingU.S.

culture”isculturallythickorthin.136Isthismoreamatterofpoliticsorofculture?

Orarethetwo,politicsandculture,deeplyintertwined?Ifprimarilyculturalinthe

thicksense,whatprevailstodayislikelytoprevailtomorrow;ifprimarilypolitical,

relativelevelsoftrustcouldchangeassoonasthenextmajorpoliticalorbusiness

scandalordisplayofintolerableincompetence,

Ontheothersideofthecoin,acountrythatadoptsASBPmayreflectgreater

culturaltrustingovernment;itmayesteemhierarchyintheformofcivilservants,

includingjudges,morethanAmericansdoandhavegreaterconfidenceintheir

abilitytodrawlines,makepredictions,andexecutewithcompetence;itmaytendto

distrustprivatebusinessesthathaveleverageoverotherlesspowerfulentities.

Ultimately,andnotignoringthatculturalandotherfactorscanshiftwith

timeandpoliticaldynamics,differentcountriesarelikelytodisagreenotonly

whetherASBPisneededandpoliticallyfeasible;eveniftheydoadoptitinprinciple,136SeeAndrewI.Gavil,CompetitionandCooperationonShermanIsland:AnAntitrustEthnography,44DEPAULL.REV.1225,1226-27(1995)(“Morethanjustaneconomicpolicyreflectedintheantitrustlaws,competitionisapervasivecomponentofthefabricofAmericanlifethatemergesindiscussionsofallaspectsofpolitical,socialandeconomicinstitutions.Asacategoryofhumanrelations,however,competitionexistsonlyinrelationtoothernorms.‘Cooperation’and‘individualism’areasmuchapartoftheAmericancultureasis‘competition,’andatthesourceofeachare‘relationships’-social,economic,andpolitical.Wedefineourselves,ourfamilies,ourgovernments,evenourcivilizationsintermsoftheserelationships;bethey‘competitive,’‘cooperative’or‘individualistic.’Eachoftheseconcepts,however,masksacomplexofassumptionsabouthumanbehaviorandcharacter,theroleofgovernmentandthecharacterofbusiness.ThoseassumptionsaredeeplyrootedintheAmericanhistoricalexperience,indeedinthebroaderhistoryofthedevelopmentofwesterncivilizations,andareinacontinuingstateofevolution.”[footnotesomitted]).

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theymaydisagreeonwheretodrawthelinesforenforcement,e.g.,shouldASBPbe

handledwithinthecompetitionlawframeworkorthroughothermeanssuchas

contractortortlaw;shouldtherebedetailedcodifiedrulesthatattempttodefine

howvirtuallyeveryconceivablesituationshouldberesolved;howshouldsufficient

dependencybedefined,tobringtheconceptofsuperiorbargainingpositioninto

play;whatlevelsofcoercionmustbedemonstrated;whatsafeharborsmightbe

designatedtoreducethefrequencyofchallenges;shouldtherebeprivaterightsof

actionoronlycasesbroughtbythegovernment?

Noneofthisistoclaimthattrustistheonlyfactorthatwillbeconsidered

whenagovernmentallocatesbehaviorsalongthecompetitionorcooperationscale.

Farfromit:decision-makerswilllikelyalsoweighpoliticalpressures,the

competenceofparticulargovernmentalinstitutions,estimatesoftheseriousnessof

theproblem,predictedconsequencesofvariousremedies,andotherfactors.137

X. CULTUREANDCOMPETITION:ABASKETOFCOMPLEXITIES Todaythereareapproximately130jurisdictionsintheworldthathave

market-orientedeconomies,someformofantitrustlaws,andwhosegovernment

competitionauthoritiesaremembersoftheInternationalCompetitionNetwork

(“ICN”).TheICNiscommittedtoreachingouttoitsmemberstatestohelpthem

develop“competitionculture”.Asourdiscussionhasdemonstrated,theprospect

forconvergingtowardauniversalagreementontherulesforcompetitionand

cooperationrequiressomecomplexbalancing.Thefollowingaresomeofthe

principalissuesthatemergefromtheforegoingdiscussion.

137Indeed,asProfessorBehrenshaspointedouttome,onecouldmakeanargumentinfavorofASBPthatisnotbasedonaculturalsenseoffairnessbutbybuildingontheabsenceofworkablecompetitionthatwouldbepresentwhenapartyissodependent,duetoabsenceofarealisticalternative,thattheelementofchoice,soessentialtoacompetitivesystem,ismissing.Supranote132.

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A. TheMalleabilityofCulture

Weknowthatculturesgenerallychangeslowly,butwealsoknowthat

variousaspectsofculturecanberelatively“thick”or“thin”withthinneraspects

beingsusceptibletofasterchange.138Howmalleableareculturaltraitsrelatingto

competitionandcooperation?Doesitmatterwhetherwearetalkingaboutmergers,

collusions,ormonopolization?Howquicklycantherelevantculturalheritagebe

changedas,e.g.,majorpoliticaloreconomicbreakswiththepastoccur?

B. MulticulturalNations

Moststatescontainmorethanoneculture.139Withinthenationstatemaybe

regional,ethnic,religious,professionalandgenerationaldifferences,forexample,

andeachofthesesubculturesmaybesimilarwithregardtosomeculturalvalues,

suchaspunctualityorpowerdistance,butmaydifferonattitudestoward

competitionandcooperation.Theso-callednorth/southdivide,sometimesseen

withinasinglecountrylikeItalyorBrazil,oftencreatesvariedlifestylesthatmay

accommodatedifferentattitudestowardcompetition.Multiplecultureswithina

singlestatemayrequirecompromisesontheextenttowhichparticularvalueswill

bereflectedinlawsandtheirenforcement,ormaybethebasisforsubstantialshifts

inpolicyasmajoritycoalitionsorrulingpartieschange.

138CHANG,supranote52at196,arguesthatculturechangeswitheconomicdevelopment,pointingtoexamples(stereotypessuchas“lazyJapanese”and“thievingGermans”)of“apparentlyunchangeable‘habitofnationalheritage’…transformedquitequicklybychangesineconomicconditions.”139SeeERNESTGELLNER,NATIONSANDNATIONALISM,53,64-71(1983).

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C. CultureandInstitutions

Ultimately,aculturalattitudetowardcompetition/cooperationexpresses

itselfthroughinstitutionalmodalitiessuchasthepassageoflegislationandthe

mannerinwhichthelegislationisimplemented.IntheU.S.,theantitrustandmany

oftherelatedsectoralregulationlawsoriginallyreflectedapopular,democratic

rebellionagainstavarietyoflarge-scalechangessuchasthedevelopmentofthe

powerfulnationalcorporation,broughtonbytheindustrialrevolutionand

disadvantagingdiverseinterestgroups.Inmostothercountriestheestablishmentof

competitionpolicyhasbeeninitiatedmorefromthetopofgovernment,perhaps

propelledbycertainprivateelitessuchasacademiceconomistsasinChile,orasthe

resultofpressurestojointheE.U.orobtainassistancefromtheWorldBankor

I.M.F.,subjecttoaconditionofcommitmenttoeffectuatinganantitrustregime.140

Fromthetopittypicallymoveddownward,ratherthanbubblingupfrompopular

demand.

Differentpolitieshavedifferenttransmissionbeltsforthetranslationof

culturalattitudesintopolicyandenforcement.Indigenousculturalandpolitical

subdivisionsarelikelytocreatedifferentmixesoflegislationmarkingofflines

betweencompetitionandcooperation—evenifthelegislativeframeworksof

differentnationsaregenerallysimilar.Andwecannotignorethatinstitutionsalso

canchangeculturalvalues.141

140SeeJulianPena,TheLimitsofCompetitionLawinLatinAmerica,236etseq.,inIoannisLianos&D.DanielSokol(eds),THEGLOBALLIMITSOFCOMPETITIONLAW(2012).141LAWRENCEROSEN,LAWASCULTURE,xii(1941)(“[Lawis]constitutedbyculture,andculture(innosmallway)bylaw.”).

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D. Generations

Thepaceofculturalchangemaybeafunctionofgenerationalchange.We

hear,forexample,aboutgenerationssuchastheso-calledboomergenerationofthe

post-WorldWarIIera,havingtheirdistinctivecultures.Andwegenerally

understandthatolderpeople,whohaveimbibedtheirnationalcultureforamuch

longerperiod,arelikelytobemoreembeddedinanoldersetofvaluesthanthe

youngergenerations.Thissuggeststhateffortstostereotypenationsashavinga

particularculturemusttakeintoaccounttheprospectofgenerationalchanges

outdatinggeneralizations.Forexample,theJapanesegovernment’streatmentof

cartelsandotheraspectsofantitrustchangeddramaticallyfromtheeconomic

miracleyearstothepresent.

E. Economics,Education,andRecreation

Aneducator,AlfieKohn,wroteacontroversialbookin1986thatargued

againstwhathedescribedastheAmericanobsessionwithcompetition,findingin

Americaanextremepositionamongnationsineconomics,education,and

recreation.142Anopenquestioniswhetherthesethree,andotherpossiblerealmsof

activity,arenecessarilyrelatedintermsoftheirtreatmentofcompetitionand

cooperation.Withinagivenmodernculture,themixofcompetitionandcooperation

islikelytovaryineachoftherealmsidentifiedbyKohn;culturedefinitely

influenceslegalandotherinstitutions,buttheseinstitutionsalsoinfluenceculture.

Theinstitutionsofeducationandrecreationareverydifferentfromeconomic

142ALFIEKOHN,NOCONTEST,THECASEAGAINSTCOMPETITION,WHYWELOSEINOURRACETOWIN(reviseded.,1992).(“Differentculturesdependoncompetitiontodifferentdegreesinstructuringtheireconomicsystemorschoolingorrecreation.Atoneendofthespectrumaresocietiesthatfunctionwithoutanycompetitionatall.AttheotherendistheUnitedStates.”Id.at.1-2.)“Ihavebecomeconvincedthatcompetitionisaninherentlyundesirablearrangement.”Id.at9.

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institutionsandtheircustoms,culture,andpoliticscanbeassumedtoevolve,at

leasttoalargeextent,separately.

Countriescompetewitheachotherinsports,economics,andwar,butthey

alsocooperatebyprovidingfora(suchastheOlympicsandtheUnitedNations),

tradingblocs,andrules(e.g.,oftradingorofmilitaryconflict).Bringingthe

discussionbacktoantitrust,insomecountries,aswe’venoted,itmaybetraditional

forprivatebusinessestocoordinatetheiractivitiesveryclosely,inwhatmaybea

cartel-likeatmosphereoraverticalalliance,thebettertocompeteinaglobal

marketplace,withtheresultthatthecompaniesarecooperatinginsomeimportant

ways,butsimultaneouslycompeting.Weneedtoholdopenthepossibilitythat

cross-culturalsurveyswhichdonotfocusspecificallyoneconomicissuesmaybe

misleadingconcerningcompetitionpolicy.

F. TheCompetition/CooperationSpectrum

Ibeganwritingthispaperthinkingthatcompetitionandcooperationaretwo

polesonaspectrumandthatthefunctionofantitrustorcompetitionpolicyisto

authoritativelydeterminewherevarioustypesofcommercialactivityaretobe

alignedonthespectrum.Forexample,thepositiveattitudeoftheU.S.toward

cartelsduringtheearlyNewDeal,encouragingthecooperationofbusiness,labor,

andgovernmenttoreachindustry-by-industryanti-Depressionagreementswould

havebeenplacedtowardthecooperativepole,butinrecentyearssevereanti-cartel

policies,includingincarcerationandtrebledamageclassactionremedieswouldbe

muchnearerthecompetitivepole.Placementwouldreflecttheprevailingculture,at

leastofdecisionmakers,atthesedifferentperiods.Itisnowtimetoask,how

helpfulisthisrathersimplisticcompetition/cooperationspectrum?

Themetaphorthatcompetitionandcooperationexistatoppositeendsofa

spectrumisofsome,butlimited,usefulness.InabookwiththecatchytitleCo-

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opetition,YaleprofessorsBrandenburgerandNalebuffobservethatbusinessisboth

warandpeace.“Businessiscooperation,”theysay,“whenitcomestocreatingapie

andcompetitionwhenitcomestodividingitup.”143“Co-opetition”isacuteword

thatlendslinguisticemphasistoonewaythetwopolesofthe

competition/cooperationscalemayinteractnearthemiddleofthespectrum.But

weshouldnotcarrythemodelofatwo-dimensionalculturalscaletoofar.Itwas,

afterall,notgeneratedbyculturalanthropologistsforthepurposeofguiding

antitrustpolicies.

Howfarshouldwecarryit?Forsometypesofbehavior,the

competition/cooperationscaleseemstoofferareasonablyclosefitforantitrust

analysisandmayhelpusmakecross-culturalcomparisons.Forinstance,insome

countries,tradeassociationsplayacoordinatingroleamongcompetingbusinesses,

withcompetitionlawdefiningthelegalrelationshipbetweencompetitionand

cooperationbyholdingthatitmaybelegitimateforbusinessestocometogether

cooperativelytodiscusstechnology,healthandsafety,ortoshareaggregated

historicbutnon-currentinformationaboutpricesoroutput,oreventoagreeonan

industrystandard--buttheymustnotcooperatetotheextentofdiscussingcurrent

orfuturepricesoragreeinguponkeytermsoftrade.Therulesineachcountryfor

eachtypeoftradeassociationactivitycanpresumablybedisplayedalongthe

spectrum,facilitatingacomparisonofnationalpolicies.

Inotherareasofantitrust,itislesseasytoapplythe

competition/cooperationscale.Forinstance,whenamonopolistabusesits

dominance,theextrememonopolistbyU.S.definitionisnotcompeting--becauseit

istheonlyplayerintherelevantproductmarket,andthushasnodirectrivals

againstwhomitcancompete.Duringthestructurally-orientedgenerationsbefore

theChicagoSchoolrevolution,placementonthescalewouldhavebeenbasedon

marketsharewithinacarefullydefinedgeographicandproductmarket,withthe143ADAMM.BRANDENBURGER&BARRYJ.NALEBUFF,CO-OPETITION4(1996).ThisisalsotheviewofSteiner,textatnote86supra.

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highestmarketsharesdisplayedatthecooperativeendofthespectrum,toindicate

relativelystrongenforcementinthefaceofreducedcompetition.Todayinpractice,

monopolyisdefinedmoreintermsofafirm’sabilitytoignorethecompetitive

effectsofafringeofsmallrivalsortoexcluderivalsfromthemarket.Thusthe

measureisnowmarketpowerratherthanmarketshare.Marketpowercanonlybe

recognizedbycomparisontothepowerofothersbothinandoutsideoftherelevant

market,suchassuppliers,customers,fringerivals,andpotentialentrants.While

thereissomecomplexityindefiningmarketpower(justastherewasinthekeystep

ofdefiningarelevantmarketinthestructuralanalysis),itisatleastpossibleto

comparetherelativedegreeofmarketpowervariousnationsrequireastheir

thresholdsforenforcementconcern.Forinstance,theU.S.isgenerallythoughtto

requireamoreeffects-basedshowingforamonopolizationclaimthantheE.U.does

foranabuseofdominanceclaim,andthuswouldbeplacedclosertothecooperative

polethantheE.U.,withrespecttounilateralactivity.144

Butarewecomfortableenvisioningmonopolyasanexampleof(ortending

toward)cooperation?145Letmediscussthisfirstinreferencetoprivatemonopolies

andtheninreferencetostatemonopolies.EventakingintoaccounttheCopperweld

caseintheU.S.,whichisinterpretedtosaythatinternalsubdivisionsofafirm

cannotillegallycolludewitheachotherbecausetheyarepartofthesameeconomic

entity,146bothunderU.S.andforeignlawtherecanatleastintheorybesomefirms

144 EleanorFox,Monopolizationandabuseofdominance:WhyEuropeisDifferent,59ANTITRUSTBULL.129,130(2014);EINERELHAUGE&DAMIENGERADIN,GLOBALANTITRUSTLAWANDECONOMICS254(2007)(“E.C.[EuropeanCommission]caseshaveallowedadominantpositiontobeprovenwithsmallermarketsharesthanthosenecessarytoprovemonopolyunderU.S.law.Ontheotherhand,U.S.lawrequireslessthanmonopolypowertoproveaclaimofattemptedmonopolization,pricediscrimination,oraviolationoftheFTCAct.ThusthepowernecessarytoshowadominantpositionunderE.C.lawmayliesomewherebetweenthesevariousshadesofmarketpowerrequiredbyvaryingU.S.laws.”). 145SeeEasterbrook,supranote39andaccompanyingtext.146Note99supra.

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thatrepresentthepurestdegreeofmonopoly,thatis,thecompleteabsenceof

meaningfulcompetition,whetheroftheexternalorinternalvariety.Thiswould

seemtoplacethemattheextremeoppositeofcompetition,anditiscommon

parlancetosaythatcooperationistheoppositeofcompetition.Abetterarticulation

maybetorecognizethatcompetitionatitsextremeiscomposedofhighly

fragmentedunits(e.g.,farmfamiliesandsmallfarms),themainpointbeingthat

theseatomicunitsactindependentlyand(attheextreme)engageintheminimum

amountofcooperationwithrivaloutsiders.Thiscanbedeemedindividualism.The

oppositeofindividualismintheparlanceiscollectivism.Itisprobablymore

comfortabletosaythatamonopolyrepresentsacollectivizationofallofthe

horizontalproductionwithinthedefinedmarket,ratherthantheperfectionof

cooperation.

Thisleadsmetosuggestaslightrevisionofthescale,sothatwelabel

individualism/competitionatthefragmentaryendandcollectivism/cooperationat

theunitaryend.Thisbettercapturestherangeofcategoriesofeconomicbehaviors

andgovernmentalpolicyresponses,anditimportantlyhelpsustoavoidhavingto

defendsayingthatthestateistheultimateincooperation,whichmaybetruein

somesensebutsoundsweird.

Theultimateincollectivismisthestate.Astateisabletoholdamonopoly

overtaxcollection,violence,or,forpurposesofourdiscussion,areasofcommerce,

therebyfulfillingapolarroleonthescale.Onecouldarrayvariousnationalpolicies

towardstatemonopolyatvariouspointsonthecollectivism/cooperationendofthe

spectrum:e.g.,comparehavingdoctrinesofessentialfacilities;ornetwork

neutrality;orpriceregulation;orentryregulation;orstateownershipof

monopolisticcommercialenterprises;orstatepoliticalcontroloverprivatelyowned

monopolies.

Similarly,theindividualism/competition:collectivism/cooperationscalecan

beusedtoproduceacross-culturalarrayofnationalpolicieswithrespectto

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mergersandjointventuresorotherhorizontalorverticalorconglomerate

collaborations,accordingtotheirstringencyorleniency,takingintotoaccountboth

stateinterventionsandcivilremedies.Inshort,Ithinkitcanbeuseful,butnot

withoutcomplications,toplacevariationsofcompetitionpolicieswithrespectto

specifictypesofcommercialactiononaindividualism:

competition/cooperation:collectivismscale.

G. StrikingaBalanceBetweenIndividualism/Competitionand

Collectivism/Cooperation

Thereareseveralbenefitsofusingtheindividualism/competition:

collectivism/cooperationscaleasawayofvisualizingcompetitionpolicy.

First,asinmanysocialsciencemethodologies,althoughthereareunavoidable

subjectiveelementstoassigningagivencategoryofeconomicbehaviortoitsproper

placeonthescale,theassignmentisbasedonempiricismratherthanideology.

Second,itcanbeusedtoarraycomparativepoliciesofvariousnationsorcultural

groups.Andthird,itcanbeusedtotracechangesinpolicyovertime.Most

important,itpointstoanessentialfunctionofcompetitionpolicy,whichistostrike

therightbalanceforanyparticularnationataparticulartime.Inthisitemphasizes

thatitisthestate(activelyorpassively)thatisthedriverandnotnecessarilya

particulareconomictheory.Thestatemayandshouldtakeeconomictheoryinto

account,butthedecisionwhetherorhowtohandleacategoryofbehavior,whether

tolegislate,regulate,orpassivelyacceptcustomarypracticeisatbaseapolitical

issueandassuchcanbeexpectedtoreflectcultural,historical,institutional,

economicandpoliticalperceptions.147

147Beinhocker’scomplexityeconomicsrecognizesthestate’sroleinenablingsocietiestostrikeabalancebetweencompetitionandcooperation:“[T]heantigovernmentfreemarketersforgetthateconomiesdon’texistinisolation.TheeconomicevolutionarysystemisconstructedoutofavastarrayofSocialTechnologies,manyofwhichrelyongovernment.Market-basedevolutionrequiresacarefulbalancebetweencooperationandcompetition,andgovernmentsplaya

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XI. Conclusion

Thefieldofcompetitionpolicyisatcoreabouttheauthoritativeallocationof

economicactivityintocategoriesofcooperationorcompetitionor,morelikely,a

mixtureinvaryingproportions.Theallocationismadeonthebasisofavarietyof

impreciseinputs—cultural,political,historic,economic,andinstitutional--in

additiontoneoclassicaleconomictheory,withtheresultthatuniversalagreement

amongthemarket-orientednationsshouldnotbeanticipated.

Explicitandimplicitevaluationsofwheretrustiswarrantedandwhere

distrustshouldbegeneratedbygovernmentpolicieswillplayaroleinthebalancing

thatoccurswithinsovereignstates.Trustisbutonecomponentofthecultural

influencesatplay.

Trustparticipatesinthedevelopmentofeconomicinstitutionssufficientlyto

beembeddedinanaptobservationbyaSouthAmericanantitrustexpert,Julian

Pena,whichcanbeextendedwellbeyondanyLatinAmericanculturalgrouping:

“CompetitionlawsinLatinAmericaintheorylookidenticaltothoseofdeveloped

countriesbuttheirenforcementdifferssubstantiallygivendifferenteconomic,

vitalroleinenablingtheirsocietiestostrikethisbalance.SocialTechnologiessuchascontractlaw,consumerprotectionregulations,workersafetyrules,andsecuritieslawallservetoengendercooperationandtrust,whileantitrustregulationsservetomaintainhealthylevelsofcompetition.”BEINHOCKER,supranote24at425.Beinhockerusestheterm“complexityeconomics”asanumbrellatermtodescribeanewparadigmforeconomics,incorporatingworkotherwisedescribedascomputationaleconomics,agent-basedmodeling,socialdynamics,evolutionaryeconomics,behavioralgametheory,theSantaFeschool,andinteractionseconomics.Hesaysthisisstillmoreofaresearchprogramthanasingle,synthesizedtheory.Id.at96.

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political,institutional,andculturalenvironments.”148Evenwherethewordsarethe

same,themusicwilllikelybedifferent.

Onemaypredictthatculturalimpedimentstouniversalagreement,similarto

thosedescribedinrelationtotheexampleofAbuseofSuperiorBargainingPosition,

willapplytotreatmentofwhattheU.S.calls“monopoly”andtheE.U.calls“abuseof

dominantposition,”aswellastothestandardsandapplicationofmergercontrols.

Withrespecttocartels,thereistodaysubstantiallymoreagreement(notnecessarily

irreversible,however)onthenegativenatureofcartels--morethaneverexistedin

thepast.Nonetheless,evenwithcartelpoliciesthereareculturaldifferences

keepingnationsapartonquestionsofprocedure,149remedy,150andpenalty.151

Finally,withintherealmsofinternationaltradeandsectoralregulation,the

differencesbetweensuccessiveAmericanadministrationswouldappearto

emphasizehowboththepoliticalandculturalshiftsthatcanoccurwithinasingle

nationarecapableofmovingcompetitionpolicies.152

IfthehistoryofcompetitionpolicyintheU.S.reflectscontinualreadjustment

ofprevailingpoliciesinviewofourowndynamicsofcultureandpolitics,whatcan

wesayaboutinternationalconvergence?Itisastretchtobelievethattheworld’s

market-orientednationswilldependuponuniversalisticeconomicmodelsofhow

marketsoughttowork.Thequestforharmonizationorconvergencethroughnon-

148Pena,supranote140at237.149E.g.,arethereanyformsofcollusionthatshouldbedeemedperseillegal?Underwhatcircumstancesshouldthegovernmentbeabletoobtaindocumentsortestimonyfromacompanyunderinvestigation?Whattypesofcollusionshouldbeexemptfromtheantitrustlaws?150E.g.,shouldafinebebasedoninjuryorpercentageofthedefendants’revenues?Whatcivilremediesareavailable?Shouldtherebecivilclassactions?151E.g.,shouldpricefixingbeacriminaloffense?152See,e.g.,Woodard,supranote79.

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coercivepersuasionisappropriateanddesirable,butweshouldnotanticipatethat

universalmodelswillleadtofullorevensubstantialagreementonthespecific

placementofvarioustypesofeconomicbehavioronthescaleof

individualism/competitionandcollectivism/cooperation.