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Document Type

Symposium

Publication Date

Summer 2011

Publication Citation

18 Indiana Journal of Global Legal Stuides 843 (2011)

Abstract

In this article we criticize the so-called more economic approach to European competition law for disregarding the importance of a functional system of private law. Based on the availability of market governance as an alternative mode for organizing transactions, it is presumed that vertical integration, which is the central organizational structure of transnational corporations, is economically efficient. Since the enforcement of cross-border contracts by state-organized systems of private law, however, is insufficient, "make-or-buy" decisions in international commerce are prejudiced against arms' length transactions in markets. Consequently, international transactions are integrated vertically into firms' structures to a higher degree than comparable domestic transactions organized in the shadow of domestic private law. The resulting overintegration of world markets leads to reduced competitive incentives and high bureaucratic costs. Contrary to the fundamental assumptions of the more economic approach, vertical integration does not, therefore, foster consumer welfare in the global economy per se. However, as this overintegration is a reasonable reaction to the deficits in state protection of cross-border contracts, a strict world antitrust law cannot counter it without suppressing cross-border exchange. Thus, international private law policy establishing legal certainty in the enforcement of cross-border contracts currently seems to be the instrument of choice in promoting competition in the global economy.

(First presented at a symposium in the context of the biannual conference of the German Law & Society Association (Vereinigung fur Recht und Gesellschaft e. V) on "Transnationalism in Law, the State, and Society." This conference was organized together with the Collaborative Research Center (CRC) 597 "Transformations of the State" at the University of Bremen from March 3-5, 2010. The Collaborative Research Center 597 'Transformations of the State," U. BREMEN, www.staat.uni-bremen.de)

Available for download on Monday, August 01, 2016

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