Such was the topic of my session in New York City a few weeks ago. Sitting on the panel with the head of the OECD Competition Division and a former judge of the General Court of the European Union was only the tip of the iceberg. The remaining hidden parts gradually revealed their charm as I began to immerse in discussions with many heads of competition commissions and agencies from every continent, specialised attorneys and influential academics who had all come to impress.
To entertain the 52nd Annual Conference on International Antitrust Law and Policy, we needed to say a few words about what industrial policy is. I’d rely on recent works in development economics which routinely take it to mean continuous experimentation led by the state trying to refine its role in regulating some targeted sectors in the economy including both manufacturing and services industries (Dani Rodrik et al, The New Economics of Industrial Policy, 2023). A definition hardly unchallenged but impossible to dismiss. A former Cambridge economist has long viewed it as “a policy aimed at particular industries (and firms as their components) to achieve the outcomes that are perceived by the state to be efficient for the economy as a whole.” (Ha-Joon Chang, The Political Economy of Industrial Policy, reprint in 1996). The argument is never about whether the state shall be involved but rather the extent and the timing of such involvement. Pick up any book on industrial policy, stories of past successes and failures will illuminate pages after pages (i.e., Steve Coulter. Industrial Policy, 2023). With a flat white in your hand, you’re quite right to observe that the growing tensions in the global trade regime these days are pushing major states to strengthen their role as a protectionist. Imposing tariffs and import quotas, best known elements in trade policy, is an aged version of industrial policy that can’t seem to get out of sight.
But, among other things, here is the catch: timing may well be everything. At times we want an aggressive private sector because we need stuff in great quantity. At times all we long for is an assertive state that adopts regulations to ensure the economy would support entrepreneurs in general and not just a handful of huge corporations. Moreover, findings from climate science have partially rendered ‘de-industrialisation’ thinking quite fashionable.
Of course, I know not of permanent fixes and not all fixes are fair. It is, in my mind, the sort of policy-making that continually requires handling opposites in the hope of creating an awesome private sector while maintaining an equitable ecosystem that allows a healthy competitive environment to flourish. And right there lies the tricky part. Market dominance can breed abuses. Ensuring that there be a fair and competitive process means we need a passionate adjudicator. The nuts and bolts of competition law have to throw in their full weight, especially when state interventions do end up favouring particular industries over the others. As we live with limited resources, interventions would mean selections of some firms or some sectors over the rest. Doesn’t matter whether you drink wine or tea, policy choices must meet the political and social demands of the day, however uncertain. The eye-catching rise of real estate development and physical infrastructure in Chinese economy is well documented and so is that of the automobile industry in Japan: two Asian states that used industrial policy very effectively for a while.
Whenever firms receive aid from the state there is always a perceived industrial policy being at play, and not always in a good way since state-led interventions can cause anticompetitive harms. Privileges, subsidies for state-owned enterprises, erecting barriers to entry through occupational licensing requirements that deter potential new entrants are common examples of arguably harmful acts. In the European Union, for instance, the “State Aid” is a hotly debated industrial policy because subsidies by member states can very well distort the EU internal market competition. Thus, when an EU member state wishes to provide aid to its local companies, such provision must be both proportionate and appropriate (Pro-competitive Industrial Policy: OECD Roundtables on Competition Policy Papers, 2024).
Private sector and governments can go on blaming each other for all sorts of misfortunes (‘market failure’, ‘state capture’, ‘information asymmetry’…) in order to justify why they do what they do but the real issue at hand is how we may turn industrial policy and competition law into beneficial bedfellows. True, competition law is blind in the sense that it applies to all industries whereas industrial policy tends to be sectoral in nature. However, there are industrial policies which apply across the economy too, which benefit most sectors, for instance, when the state intervenes to ensure quality in the general education up to, say, the secondary level.
One can make the argument that competition law itself is a manifestation of some version of industrial policy when the outcome of law enforcement leads to needed innovation in particular industries. Indeed, the US experience has shown that mergers — a favourite beast in competition law — can threaten innovation when merged corporations become too comfortable and won’t feel the pressure to innovate (Herbert Hovenkamp, The U.S. Supreme Court and the Merger Efficiency “Defense”, 2025). So, if a competition commission chooses to prohibit mergers frequently enough, the commission may be seen as trying to preserve innovation in the litigated industry.
Consequently, competition law as applied does assist industrial policy that supports innovation. On the other hand, since big factory mergers tend to result in low salaries for employees, mergers might strangely get credit for supporting the so-called export-driven economic model (an industrial policy) because wages suppression is one way to keep export prices low. Well, most competition laws around the world exist to oppose just this kind of monopolistic mergers.
Seen through this lens, industrial policy and competition law must nurture their love affair as best they can. Just like couples who argue in the day and yet cuddle at night, the trick rests with appropriately articulating the boundaries of a potential clash so as to generate some healthy outcome for the economy. While the purpose of an industrial policy is usually well explained, the real impact of competition law forever depends on the learnings of the adjudicators (commissioners and judges).
If we agree that the ultimate objective of competition law is the maximisation of consumer welfare, we shall ponder over the effects of particular enforcement on output, price and innovation, then evaluate how these three outcomes are served or severed by particular industrial policies. Remember that the US calls it ‘antitrust’ (rather than competition law) because the American law — starting with the Sherman Act of 1890 — was enacted to help burst commercial trusts that had been employing anticompetitive business practices. Blending the necessity of economic freedom with the need for an orderly society often calls for tough exchanges.
Although well over a century has now passed, the economics of antitrust in the US still remains unsettled (D. Francis and C. Sprigman, Antitrust, Chapter II, 2025). With this in mind, competition laws around the world have opted to include the so-called public interest exceptions that permit the otherwise anticompetitive actions to be legalized as long as certain socio-economic-technological conditions are met. Most couples have come to realize that sharing the bed requires some art of interpretation. As such, how the enforcers implement those exceptions will strongly set the night tone of these strange bedfellows. Whatever happens, I bet the same topic will keep coming back.
Dr. Virak Prum is the chairman of CamEd Business School where he also teaches business law. The views and opinions expressed are solely his own.
