Can Competition Regulation Enhance Economic Development: Views From Edinburgh

Amongst Scotland’s many gifts to humanity, alongside its fine spirits and the stirring sounds of bagpipes, is being home to the renowned economist Adam Smith. Smith is widely considered to be the father of capitalism, and his thinking continues to influence market regulation across the world. It was only proper then, that the world’s competition regulators should meet in Edinburgh for the annual “International Competition Network” conference to discuss the future direction of competition regulation in this unprecedented post-Trump economic environment.

While the three-day Edinburgh conclave was blessed with record turnout, miraculously good weather and news of the selection of a new pope in the Vatican; it’s fair to say that the substantive conversations amongst its participants revealed the fault lines between the regulatory approaches being taken in Europe, the United States under the new Trump Administration and back home - in India. Unsurprisingly, there were equal areas of convergence and divergence amongst regulators on the role played by competition regulation in promoting economic growth in a possibly recessionary and increasingly fractured global economy.

The invisible hand and the light touch approach

There appears to be a shared recognition across several countries that governments should not enforce competition law to the detriment of their economic growth. The UK, which had post-Brexit taken a tough line on enforcing competition law now appears to have pivoted to striking a “balance” between enforcement action and stifling economic growth. Its Minister for Competition & Markets Justin Madders underscored the importance of regulation that minimizes uncertainty for businesses. This echoes the remarks of the Indian Finance Minister Nirmala Sitharaman, who’s remarks a few days later, at the Competition Commission of India (CCI)’s annual day in new Delhi called for a "light-touch" approach and adopting a pro-growth mindset while regulating markets.

In fact, observers could be forgiven for mistaking the origin of each regulator's remarks given their similarity. Madders and Sarah Cardell (the Chair of the UK CMA) linked competition enforcement directly to the UK's growth mission, while the US regulators both newly appointed by the Trump Administration- Gail Slater from the Department of Justice (DOJ), and Andrew Fergusson from the Federal Trade Commission (FTC) connected it to ensuring flourishing markets and consumer and worker welfare in their country. India’s own Finance Minister M Sitharaman and Chairperson Kaur also emphasized the importance of competition in driving economic growth, innovation, efficiency, and consumer benefits in India. It would seem from this broad-based consensus, that countries will place their economic growth at the front and centre of their priorities at the time of enforcing competition law.

However, while acknowledging the link between competition and growth, the European regulators prioritize the use of competition enforcement to ensure a level-playing field in a globalized market. The European consensus appears to be that competition regulation alone can't be used to ensure economic growth. Instead, competition enforcement must go along with other economic policies, such as tax reform, reduced bureaucracy, and infrastructure investments.

So how much competition regulation is too much?

A clear divide emerges between the US and other jurisdictions regarding the extent and timing of competition intervention. The FTC’s Fergusson expressed a strong preference for ex-post enforcement of competition law, where competition authorities must identify specific anti-competitive conduct, demonstrate consumer harm, and take specific steps to remedy the damage caused. He singles out the EU’s Digital Markets Act (DMA), as lacking the finesse that a typical competition law assessment would entail and allowing bureaucrats to target US tech companies. The US clearly views such government regulation as a potential "enemy" of competition and prefers the scalpel of enforcement to the sledgehammer of regulation.

This contrasts sharply with the European approach expressed by its competition czar: Teresa Ribera who emphasized the benefits of "upfront guidance," aligning with the EU's ex-ante approach contained in the DMA. The UKs approach to tech regulation is more nuanced and expressed through its Digital Markets, Competition and Consumers Act which suggests a move towards direct intervention but with an emphasis on flexibility and proportionality. The Indian view acknowledges the need for both regulatory vigilance and a pro-growth mindset. The FM’s call for agile regulations and international cooperation, particularly in digital markets, resonates with the EU's approach but with an emphasis on balancing it with a light-touch domestic framework.

In essence, the debate that unfolded in Edinburgh reflects a broader global struggle to adapt competition policy to the realities of a rapidly changing global economic order and digital landscape. It’s safe to say that back home in New Delhi, our competition regulator and government will watch developments closely, but have proposed a unique blend of approaches: balance regulatory vigilance, with a pro-growth mindset, and empowering consumers in an increasingly digital world. A pragmatic strategy which reflects India’s unique economic and political reality and will likely require a close relook at the draft Digital Competition Bill which at last count, closely resembled a sledgehammer, and not a scalpel.