In new research, Benjamin Wood, Sven Gallasch, Nicholas Shaxson, Katherine Sievert, and Gary Sacks write that competition underenforcement and a narrow regulatory focus on prices and output has allowed industries that produce harmful consumer products, such as tobacco or ultra-processed foods, to increase demand and, consequentially, harm to society. They argue that competition law must evolve to consider health impacts.
It is no secret that many consumer products harm their very consumers. Research shows that just three industries—tobacco, ultra-processed foods, and alcohol—likely account for over one quarter of preventable deaths globally. Many other consumer products, including gambling and electronic cigarettes, also create substantial health burdens. In many countries, policymakers are calling for the implementation of industry-specific regulatory measures, such as product and packaging regulations, to address this pressing public health challenge.
Could competition law also play a role here? After all, it is one of the most powerful tools that governments have to shape markets and industries. As we contend in our recently published paper, competition law, particularly when underenforced and narrowly focused, has likely facilitated the harms arising from some harmful consumer product industries by tolerating increasing market power and industry concentration. Industry concentration has in turn allowed these industries to ramp up marketing and lobby for less regulation.
Market power increases production in harmful consumer product industries
Many harmful consumer product markets and industries are highly concentrated, with a small number of firms typically dominating each market. Proponents of neoclassical economics may consider this to be a good thing for public health. According to neoclassical economic wisdom, increasing market power tends to reduce output and consumption as firms constrain production to raise prices to their most profitable level. However, in industries that produce harmful products, high levels of market power and industry concentration likely increase the overall output and consumption of the harmful products in question. These reasons are severalfold.
First, dominant firms that command market power are able to accumulate and direct disproportionately large monopoly profits into “war chests,” which can be funnelled towards practices designed to manufacture and maintain demand for their products. Such practices include aggressive and sophisticated marketing.
Borrowing from JK Galbraith’s seminal work The Affluent Society, dominant firms in harmful consumer product industries spend billions to “create desires” and “bring into being wants that previously did not exist.” The combined marketing spending of just three ultra-processed food corporations (Nestlé, PepsiCo, and Coca-Cola), two alcohol corporations (Anheuser-Busch InBev and Diageo) and one gambling corporation (Flutter Entertainment)) exceeded $33 billion in 2023 alone. That’s nearly 10 times larger than the World Health Organization’s approved budget for the same year.
Second, these firms also allocate considerable monopoly profits towards organized political activities, such as lobbying, to undermine “best practice” public health policies and regulations (e.g., marketing restrictions) designed to reduce demand for their products. Research has shown that between 1998 and 2020, the ultra-processed food, gambling, tobacco, and alcohol industries spent more than $3.3 billion on lobbying in the U.S. alone, with spending concentrated among the leading corporations.
Third and relatedly, high industry concentration tends to facilitate political coordination among “rivals” with a shared interest in shaping the same policies, laws, and regulations around the world. It may also increase some governments’ structural dependence on the dominant firms in question for meeting various policies (e.g., GDP growth), in turn fostering hesitancy among policymakers to adopt best practice regulations, including those related to public health.
Lastly, for harmful consumer product industries like tobacco, there’s the issue of addiction as well. Where addiction occurs, price increases are much less likely to reduce consumption. Thus, unlike for many other monopolistic industries, there is less of a trade-off between demand and supply. Harmful consumer product industries thus tend to be especially profitable and ripe for concentration.
Neoclassical views on market power and industry concentration also tend to overlook that dominant firms active in harmful consumer product industries often leverage their power and organizational structure to maximize profits—and thus their capacity to further manufacture and maintain demand for their products—in various ways beyond manipulating consumer prices and output production. This includes tax avoidance, such as through cross-border profit shifting practices. Many also take advantage of their “vertical” monopsony power to reduce the prices they pay suppliers and the wages they pay workers. In competitive markets, firms would be unable to squeeze workers and suppliers, excess profits would be “competed away,” and thus they would be unavailable for the firms to use to market and lobby to increase demand for harmful products.
Protecting whose welfare?
The problem of market power in harmful consumer product industries is in part due to the legal hegemony of the paradigmatic consumer welfare standard, which serves as the lodestar for antitrust enforcement. The consumer welfare standard has abetted the production and consumption of harmful products by focusing narrowly on protecting consumer prices and maximizing output, irrespective of the nature of the product in question. When any and all production is considered good, conflicts arise with public health policies designed to minimize the consumption of harmful consumer products. As a case in point, when the European Commission conditionally approved the mega-merger between beer giants Anheuser-Busch InBev and SAB Miller in 2016, then-Commissioner Margrethe Vestager said:
[This] decision will ensure that competition is not weakened in these markets and that [European Union] consumers are not worse off. Europeans buy around 125 billion euros of beer every year, so even a relatively small price increase could cause considerable harm to consumers.
Not a word was said about how the merger could harm the health of consumers. Even as, at the time, all EU countries had regulations in place to address alcohol-related harms, with some centred on reducing alcohol consumption. One year beforehand, the Court of Justice of the European Union had even upheld that Scotland’s introduction of minimum unit pricing to increase the price of cheap alcoholic drinks was an appropriate public health measure “capable of reducing the consumption of alcohol, in general, and the hazardous or harmful consumption of alcohol, in particular.”
Such cases of regulatory incoherence are problematic. Yet the fundamental problem with the current interpretation of the consumer welfare standard from a public health perspective is not just that it seeks to promote an increase in output and consumption of harmful consumer products. Instead, it is that, beyond a very narrow set of concerns, it fails to account for the wide range of harms associated with market power and industry concentration.
To be sure, in some cases competition regulatory decisions informed by the consumer welfare standard have served to address rising market power and industry concentration (e.g., those targeting price-fixing cartels). Overall, though, the way that the consumer welfare standard has been applied has done very little to curb rising market power and industry concentration in harmful consumer product industries at the national, regional, and global levels. This is particularly evident when it comes to regulating mergers and abuses of market dominance.
Increasing coherence between competition law and public health policies
Competition law is dynamic and, under the right social and political conditions, is amenable to health-promoting change. Below, we outline three potential ways in which it could work more synergistically with public health policies:
1. Stronger merger control to prevent rising market power and concentration. The use of merger control to prevent economic concentration in pursuit of multiple political and economic goals could support public health policies. In this respect, it is promising that various jurisdictions, such as the United States, Australia, Canada, and the United Kingdom have begun processes to strengthen their merger control regimes in recent years (albeit the extent to which such processes will lead to operational change remains uncertain).
Regarding the international coordination of mergers, there could be substantial public health benefits in building mechanisms to address the scale and consequences of excessive market power across jurisdictions. This could include an international framework (e.g., a United Nations convention) to govern cross-border mergers, which could be aligned with health-related international policy and normative frameworks (e.g., the Framework Convention on Tobacco Control, the International Code of Marketing of Breast-milk Substitutes).
2. Ensure that public health considerations fall within the scope of welfare and sustainability considerations. Multiple jurisdictions are starting to incorporate sustainability considerations into their competition regulatory frameworks. Recently, the Netherlands sought to replace the consumer welfare standard with a citizen welfare standard, in which “sustainability gains for society as a whole” may be considered. However, for the moment, the consideration of sustainability objectives in competition regulation has typically involved determining whether or not a particular anticompetitive agreement should be permitted on sustainability grounds. This carries risks, especially if those permitted anticompetitive agreements open space for green or health-washing practices and are treated as a substitute for effective mandatory regulations.
Instead, where relevant, a more robust and health-enabling approach could be to use abuse of market dominance provisions to directly target unsustainable business practices. A strong case could be made for factoring in public health and other socio-environmental sustainability factors when determining what constitutes unsustainable conduct. This could include, for example, cases where dominant firms gain an unfair advantage over other companies by externalizing costs onto third parties, such as through environmental pollution or disproportionately contributing to escalating government healthcare costs.
3. Leverage the growing convergence of competition law and social policy. Competition authorities already mandated to consider various social policy objectives (e.g., protecting the economic welfare of disadvantaged social groups, as South African competition authorities have done) into their decision-making could be required to consider a broader range of harms that undermine these objectives. Drawing from what has been referred to as a “harm-reduction” model to competition regulation, the same jurisdictions could also seek to ensure that public health policies are explicitly and sufficiently regarded.
Amid global debates on the goals of competition policy and growing openness to incorporating sustainability, the absence of public health from the conversation is striking. Given the significant impact of competition law on population health and welfare, we argue that it is essential to expand the discussion to include public health, and to actively engage the public health community in shaping the discourse.
Authors’ Disclosures: The authors report no conflicts of interest. You can read our disclosure policy here.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
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