The Contrasting Approaches to Power of the Modern State and the Antitrust Laws: Lessons for Platform Regulation

Ramsi Woodcock

No 73fnh, LawRxiv from Center for Open Science

Abstract: If the state is a force monopolist, as Max Weber famously claimed, then the law is a kind of antitrust policy, with criminal law securing the state’s monopoly on force and constitutional law regulating the exercise of the force monopolist’s power primarily through the right to vote, which makes of the state the equivalent of a consumer cooperative dedicated to the production of security. One consequence of the cooperative approach is that the state’s approach to vertical integration—in this context state ownership of enterprise—has mirrored antitrust’s own approach to the vertical integration of private firms: to authorize integration only where it is likely to benefit consumers, which is rarely when the monopolist sells security, but often in the case of most products sold by private enterprise. Another consequence, low tax rates, differs greatly from antitrust’s own approach to private enterprise, which broadly exempts the charging of high prices from liability. This difference in approach offers a useful lesson for antitrust policy, particularly in the area of digital platforms: that the heart of monopoly power is price, and the best way to dull the power of the platform monopolist is to regulate the prices it can charge and leave the question whether to permit it to integrate vertically to be decided on efficiency grounds. This suggests that the rule proposed by Senator Elizabeth Warren, that no big firm should be allowed to compete on its own platform, which amounts to a prohibition on vertical integration, is likely to be unhelpful. A better approach would be to regulate the fees platforms charge competitors and consumers and allow the tech giants to integrate when doing so would benefit consumers.

Date: 2020-10-03
New Economics Papers: this item is included in nep-com, nep-law and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:osf:lawarx:73fnh

DOI: 10.31219/osf.io/73fnh

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