Antitrust and Economic Crisis, a Difficult Balance

COMPETITION POLICIES ARE LESS STRINGENT IN TIMES OF CRISIS, SOMETIMES WITH DIRE CONSEQUENCES, ACCORDING TO RESEARCH BY FEDERICO GHEZZI WITH LAURA ZOBOLI

The exceptional nature of the current crisis, linked to its non-economic origins, its violence and its impact on market dynamics, has forced all players in the economic system to seek out and head in new directions. Antitrust authorities have also had to review their policies and methods of intervention for managing investigations during the lockdown and to identify the enforcement tools suitable for protecting competition in markets that were suddenly sqeezed, weak and uneven.
 
“In general during crises, authorities tend to adopt a softer, less rigorous approach towards businesses, in order to not exacerbate the struggles faced by companies,” observes Federico Ghezzi, Professor of Business Law and author of two studies on the subject, written with colleague Laura Zoboli, a legal scholar from the University of Warsaw. “This attitude, however, has already proved counterproductive in history because, at the end of the crisis, it leads to a less competitive and dynamic market." A textbook example is the crisis of 1929, when governments removed business oversight, almost completely abandoning antitrust regulation and encouraging agreements of a collusive nature, with the result that they were much less effective in leveraging the recovery. (Click here for one of the two studies, in Italian)
 
“The purpose of our studies therefore was to verify that the mistakes of the past were not being made,” continues Ghezzi. “In recent months we have observed that authorities have been balanced in their actions, continuing to apply the law but limiting interventions, taking a more flexible approach to procedures and trying to adapt them to act more quickly. Among the major changes, prompt and strong cooperation was seen between authorities in Europe and around the world to identify the best modus operandi and encourage companies to resume production in order to once again meet demand. For this reason, for example, increased information flows were allowed along the production chains for essential goods: where products were stored, where raw materials could be found, how goods could be transported... But the issue also concerned financial companies, which were able to dialogue to find an agreement through their association ASSOFIN so their members could adopt a common moratorium scheme for consumer credit.”
 
The time is not yet ripe to be able to judge the work of the authorities. Ghezzi and Zoboli's research therefore extends to a third study that is ongoing, questioning the long-term effects of the practices implemented in the emergency. “Competition is decreasing physiologically: some companies have gone bankrupt, the huge amount of state aid in the long term distorts the market and many governments will adopt protectionist policies in defense of national companies,” concludes the Professor. “Authorities will therefore have to monitor even more carefully so that the forms of cooperation that were necessary during the pandemic do not turn into collusive activities, shifting their action to measures of prevention and awareness in addition to sanctions.”

by Emanuele Elli
Translated by Alex Foti