1. Ordo-liberalism 2.0 Pierre Larouche, Professor of Competition Law, TILEC

2. Outline What is ordo-liberalism? Core principles and mistaken extensions Ordo-liberalism and EU competition law and policy Ordo-liberalism and Chicago school of antitrust policy What role for ordo-liberalism in EU competition law and policy today? Ordo-liberalism 2.0

3. What is ordo-liberalism? Go back to foundational texts – Eucken, Böhm Ordo-liberalism is not an economic theory It plays more at the level of economic policy (Grundsätze der Wirtschaftspolitik) –Collaboration between lawyers and economists ! It takes its economic theory elsewhere  open movement, with links to economics (as they evolved) Ordo-liberalism is not competition policy It covers more than just competition policy: private law, monetary policy, etc. Historical context: repudiation of historicism and opening to Anglo-American economics

4. Core principles and mistaken extensions Core principles: in general Link between liberal democracy and market economy: freedom as linchpin Economic power (private or public) threatens freedom All economic policy instruments must be directed towards the fight against economic power Core principles: as regards competition policy Prohibit and fight cartels Fight private economic power directly: dissolve dominant firms When economic power is unavoidable, control it to force it to behave ‘as if’ it were in a competitive environment Monopoly control via independent monopoly office, with no discretion and under the rule of law And more fundamentally: Free markets are a precious good, but they are also fragile The State can and must intervene to enable and preserve free markets

5. Core principles and mistaken extensions In the first generation of scholars From a negative normative aim (absence of economic power) to a positive normative aim (perfect competition) (Eucken) Step in reasoning not warranted In the 1950s and 1960s Belief in omniscience, in planning (State vs. market)  ‘als-ob’ (‘as-if’) model (Miksch) Emphasis on price-cost relationship From the 1960s to today Espousal of SCP paradigm of Bain (Behrens) Focus on market structure

6. Ordo-liberalism and EU competition law and policy To what extent is EU competition law and policy based on ordo- liberalism? Divergence in EEC Treaty already: treatment of economic power Interference over time from: Industrial policy tenants within EU institutions and Member States Market integration objectives Lack of economic expertise in enforcement: formalism No 1:1 relationship !! What about the more economic approach then?

7. Ordo-liberalism and Chicago School Chicago School is also applied economics Builds on Friedman’s neo-classical revolution Like ordo-liberalism, subject to revisions in tune with evolution of economics Chicago School opposes ordo-liberalism on two central tenets Markets are resilient and self-healing Public authorities are not good at intervening in market functioning Chicago School was not developed in response to ordo-liberalism ! Careful in relating them to one another

8. Ordo-liberalism and Chicago School Is it a black-and-white world? Opponents of “more economic approach” within Commission present it as “surrender” to Chicago School Critics of “more economic approach” outside Commission argue that it remains ordo-liberal in essence (all the more with ECJ case-law) How about a three-item menu? Formalistic ordo-liberalism More economically sophisticated, yet interventionist policy Non-interventionist Chicago school

9. Ordo-liberalism today What role for ordo-liberalism in EU competition law and policy? Fundamental tenets remain persuasive Markets are fragile Public authorities can intervene successfully Connect to more contemporary economic thinking Post-Chicago economics Leave SCP behind: need to insist on theory of harm!

10. Ordo-liberalism today In light of emphasis on innovation, work on better integration between Austrian economics (Schumpeter, Hayek) and ordo- liberalism Diffusion and adoption are central element of innovation Innovation is not linear  competition as discovery process Ordo-liberalism 2.0 Protect competition – as ability to access markets – because it is the best an authority can do to foster innovation –Static welfare measurements are not relevant –Provide sufficient incentives to all potential innovators Give more meaning to ‘competition on the merits’ Ensure that customers do choose the innovation path