Competition Law as an Instrument of Protectionist Policy: Comparative Analysis of the EU and the US

Today, there is a growing fear of resurfacing protectionism, from United States (US’s) trade-war with China, to UK’s Brexit, to the less popular but trade restricting measures adopted by other countries globally. The GATT, since 1995 superseded by WTO, rendered the classic forms of protectionism such as tariffs obsolete, but it did not defeat protectionism; instead, protectionism has evolved through its protean-capacity to adapt to the environment to new and often undetectable forms, now labelled as ‘murky’ protectionism (e.g., competition law enforcement, and the recent bailout packages). It is argued that there are two ways in which States can utilise competition law to impair free-trade and restrict access of foreign firms to domestic market. One is the exemption of certain anticompetitive conduct under national competition law and two is the strategic application of domestic competition law. The paper considers competition law as an instrument of protectionist policy, with comparative analysis of the US and the European Union (EU) – for example, whereas the US has criticised EU’s merger regulation as protecting competitors and not competition, the US is being encouraged to change their stance on leniency towards export cartels due to its beggar-thy-neighbour effect. Using IPE perspective underpinned by overlapping theories of (legal/political) realism, this paper establishes that whilst there exists no direct robust empirical evidence of protectionist motivations on competition law enforcement, particularly on ‘merger regulation and export cartel exemptions’, the presence of political element on the decision making, the wide discretion granted to competition authorities and the ‘sponge’ nature of competition law, present an opportunity for the use of competition law for protectionist tendencies.