Jan Broulík’s new article explores whether so-called cultural capture may develop in antitrust policies on either side of the Atlantic and what can eventually be done to prevent it. This post summarizes the first part of the article, analyzing the risk of capture.
As a reaction to the global financial crisis, James Kwak introduced the notion of cultural capture. He proposed that one of the reasons why US financial policy became too lenient toward the banking industry was that financial officials had socially identified with representatives of the industry, held them in high regard, and maintained intense interpersonal relationships with them. Labeling those effects of social interaction as cultural capture, Kwak admonished that it may also arise in other areas of economic policy, possibly without any awareness on the part of the officials or even the industry.
Cultural capture is a species of capture concerning public officials’ minds. For one commentator, such capture of minds obtains when “officials’ actions, interpretations, and perceptions of reality come into alignment with those of the actors they are supposed to be regulating.” For others, it entails “institutionalization of industry views as the regulator’s view,” respectively “align[ing] the way in which regulators think about problems with the view of the industry they regulate.” Others still say that the officials “come to see the world the way that [the] regulated entities do,” “end up sharing the views of the industry,” or start to “think like it.”
This is all to say that the concept of cultural capture differs from the traditional account of regulatory capture according to which public officials serve special interests because doing so benefits them privately. Instead, cultural capture takes place through the officials developing (an excessive amount of) genuine pro-industry views.
Public officials’ views may be shaped in favor of the industry in numerous ways. Social interaction with its representatives is just one of them. Other possibilities of influencing what public officials believe include, for instance, corporate funding of opportune academic research. Such other pressures on the mindset of public officials are, however, outside the scope of cultural capture.
Against this backdrop, a person interested in American and European antitrust policies might wonder how they fare with regard to the risk of cultural capture.
Antitrust Practitioners as Representatives of the Private Sector
Antitrust policy is arguably rather special in terms of the social interaction between enforcers and the private sector. Unlike financial and other sectoral policies, it cuts across the entire economy. As a result, antitrust officials will hardly have significant social interaction with the core staff of businesses that they regulate and investigate.
Rather, they will regularly come into contact with people who specialize in antitrust and provide their services to these businesses, i.e., with antitrust practitioners. These practitioners are primarily trained in law or economics. Businesses that demand their services will most frequently acquire them externally.
The main client of antitrust practitioners is big business and in particular – actual and potential – antitrust defendants. This is apparent for instance when browsing through the profiles of law firms and economic consultancies featured in GCR 100, a ranking of the world’s top antitrust practices.
One can have very good reason to believe that antitrust practitioners have – on average – a rather anti-interventionist mindset. This is in part because of what Lancieri and Zingales have called a Chomsky effect: since the main clients of antitrust practitioners are defendants, mainly people with pro-defendant views will become antitrust practitioners. In addition, even those practitioners who may not hold such views at the outset are likely to develop them over the course of their career in order to avoid the discomfort of cognitive dissonance.
Antitrust Officials Interacting Socially With Antitrust Practitioners
Antitrust officials appear largely to self-identify with a community dominated by antitrust practitioners. A major indicator of a shared identity is the frequency with which people transfer between the public and private sectors. For example, of the 73 officials who left the FTC’s Bureau of Competition between 2014 and April of 2020 and whose subsequent job could be tracked down, 52 became private practitioners. The community of antitrust professionals is then dominated by those who represent corporate defendants. This is due to their financial strength as well as sheer number.
Further, there are indications that antitrust officials often hold antitrust practitioners in high regard. This is evidenced by the fact that even the most senior competition officials regularly leave the government for jobs in the private sector. For instance, of the 20 most recent DoJ’s Deputy Assistant Attorneys General for Economic Analysis, 17 went on to work for an economic consultancy. The arguably higher prestige of working in private practice in the eyes of antitrust officials may have to do with a huge income gap between the sectors. To illustrate, a partner at a top law firm earns ten times more than an FTC chair.
And, finally, it is common for officials and practitioners to develop interpersonal relationships. These may start early on, either during studies or before the door revolves for one of the individuals. They may also develop after the experts have already assumed their roles, either due to working on the same cases, at policy consultations, or at professional events such as conferences. In any case, “personal ties between lawyers, consultants, civil servants, lobbyists, and judges are inevitable [and they] often end up developing nonprofessional relationships.“
In sum, the preconditions for all three channels of cultural capture identified by Kwak are present in US antitrust. There is thus a risk that anti-interventionist positions arguably held by antitrust practitioners may exert a disproportionate influence on the mindset of competition officials.
While EU antitrust officials also show social interactions with their counterparts in private practice, the risk of their cultural capture seems somewhat lower. This is because some of the relevant factors are absent or less prominent in Europe. Namely, transfers of antitrust practitioners to public office are rather rare, especially as regards higher positions. And the difference between the socio-economic status of working in the public and private sectors isn’t as large as in the United States.
The Economist found that both American and European antitrust agencies often serve the interests of big business. Barry Lynn argued that US antitrust officials have captured minds. Insofar as one accepts these assessments, cultural capture clearly suggests itself as a mechanism that may have contributed to this grim situation.
But even if one doesn’t believe the policies to be captured, it may still be sensible to recognize the risk and adopt appropriate preventive measures. To be sure, the last few years have witnessed some reinvigoration of American antitrust. This development has hardly been initiated or supported by a majority of antitrust practitioners, whose social influence on the mindset of antitrust officials could slow down the progress or, perhaps, even reverse it if combined with other factors.
The antitrust community has become inherently suspicious of any argument that is not based on economic logic. However, it would be a mistake to ignore cultural capture only because it is animated by social-psychological phenomena rather than by rational actors trying to maximize their well-being. The world is more complex than can be captured by economics alone, and we need to make sure that antitrust policy is resilient against any sort of threat.
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