Annual Review 2019
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As global trade becomes less open, expect antitrust regulators to act

Trade restrictions can result in increased anticompetitive behavior

International trade law and antitrust law have a complex relationship. On one level, an “open” international trading system and robust enforcement of competition laws are consistent and mutually reinforcing: Both tend to favor competition and its expected benefits (lower prices, more and better product selection). Antitrust regulators in markets that are relatively open to import competition may tend to worry less about domestic market concentration in markets faced with the threat of competing imports. Why worry about the merger of two domestic rivals when imports may compete actively in the market?

There are, however, many more levels of analysis, and the relationship becomes complicated when trade becomes less open. The World Trade Organization warns that it sees such a trend, with more countries questioning the benefits of an open trading system. This skepticism is not universal and does not affect all markets and all products uniformly, but there is little doubt that import barriers and economic nationalism are on the rise. 

If the trend accelerates, business leaders should expect to see changes in the application of competition law in many markets. These changes may include increased government investigations searching for potential cartel behavior; greater government scrutiny of mergers, joint ventures and other competitive collaborations; and more antitrust class actions challenging both categories of conduct. 

History teaches that excessive trade restrictions can isolate markets and may encourage undesirable economic behavior, such as price fixing or market allocation schemes. And, while restricting import trade may be deemed necessary to remedy unfairness or protect national security, companies that abuse their market position tend to enjoy less support from policymakers and the public. The degree of import restrictions and their timing will be important, but it is folly to expect competition law enforcement to be unaffected by a less open world trading system.


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