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The Politics of Delegation The Politics of Delegation: Constitutional Structure, Bureaucratic Discretion, and the Development of Competition Policy in the United States and the European Union, 1890-2017 The Harvard community has made this article openly available. Please share how this access benefits you. Your story matters Citation Foster, Chase Michael. 2019. The Politics of Delegation: Constitutional Structure, Bureaucratic Discretion, and the Development of Competition Policy in the United States and the European Union, 1890-2017. Doctoral dissertation, Harvard University, Graduate School of Arts & Sciences. Citable link http://nrs.harvard.edu/urn-3:HUL.InstRepos:41121359 Terms of Use This article was downloaded from Harvard University’s DASH repository, and is made available under the terms and conditions applicable to Other Posted Material, as set forth at http:// nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of- use#LAA The Politics of Delegation: Constitutional Structure, Bureaucratic Discretion, and the Development of Competition Policy in the United States and the European Union, 1890-2017 A dissertation presented by Chase Michael Foster to The Department of Government in partial fulfillment of the requirements for the degree of Doctor of Philosophy in the subject of Government Harvard University Cambridge, Massachusetts January 2019 ©2019 Chase Michael Foster All rights reserved. The Politics of Delegation: Constitutional Structure, Bureaucratic Discretion, and the Development of Competition Policy in the United States and the European Union, 1890-2017 Abstract Over the last three decades, European competition enforcement has become both more intensive and extensive. Meanwhile, American antitrust enforcement has stagnated. Why has the European Union, a supranational organization created by governments with long histories of organized cartels and state direction of the economy become the world’s competition policy leader? And why is the United States, the birthplace of antitrust, and a polity with less of a cartel and industrial policy tradition, now a competition policy laggard? I argue that the divergent pattern has depended on differences in the construction of administrative power in each system. In Europe, a broad zone of bureaucratic discretion allowed the European Commission to intensify competition policy enforcement following the diffusion of neoliberal economic ideas during the final decades of the 20th century. In the United States, antitrust regulators had similar policy preferences but were comparatively constrained: by their narrow legislative mandate, the adversarial legal enforcement system, and extensive ongoing political controls that limited bureaucratic autonomy. Drawing from archival material, comprehensive enforcement data, and an extensive secondary literature in history, economics, sociology, and law, I use systematic process analysis to demonstrate that the dissimilarity in the design of bureaucratic discretion in the competition policy field is rooted in the distinct political origins of each regulatory regime, and the way in which bureaucratic delegation was shaped by the constitutional organization of power within each political system. The agrarian populist origins of the American antitrust laws, together with the congressional dominance of lawmaking under the U.S. Constitution, led to the establishment of a regulatory regime characterized by a narrow zone of bureaucratic discretion and a judicial system of enforcement. In Europe, by iii contrast, the integrationist origins of competition law, combined with the executive-dominated organization of political power under the European Treaties, led to the creation of a comparatively broad zone of bureaucratic discretion, including the establishment of an administrative system of enforcement, and the delegation of significant policymaking and enforcement autonomy to the European Commission. A close analysis of institutional design choices over more than a century of political development, points to some of the ways that the organization of powers within each political system has systematically conditioned subsequent reforms, leading to the maintenance and reinforcement of the core institutional features of each regulatory regime. Through a comparative analysis of the pattern of competition enforcement within key sectors from 1975 to 2017, I highlight also some of the consequences of the design of bureaucratic discretion for regulatory capacity. With little risk of political intervention or judicial sanction, the Commission has been able to use competition law to systematically reform economic development policy, promote regulatory liberalization, and restructure the behavior of dominant firms—in the process, creating a more integrated and competitive European economy. By contrast, the more limited discretionary authority possessed by U.S. regulators has tied antitrust enforcement to electoral outcomes and judicial opinion, limiting the ability of federal regulators to use antitrust law to support liberalization and public subsidy reform, and thereby allowing dominant firms and subnational governments to maintain significant barriers to competition in the American economy. iv Table of Contents Acknowledgments………………………………………………………………………………vi Introduction………………………………………………………………………………………1 Chapter One: The Divergent Trajectories of American and European Competition Enforcement: An Empirical Analysis…………...………………………………………………………………. 32 Chapter Two: Bureaucratic Delegation and the Institutional Organization of American and European Competition Law………………………………………………………………………44 Chapter Three: Explaining Differences in Bureaucratic Discretion: Theoretical Perspectives……. 67 Chapter Four: Industrial Development and the Madisonian Constitution: The Origins and Institutionalization of American Antitrust, 1890-1950…………………………………………… 84 Chapter Five: Credible Commitments and European Integration: The Origins and Institutionalization of European Competition Law, 1950-1990…………………………….…… 137 Chapter Six: Constitutional Structure, Bureaucratic Delegation, and Varieties of Regulatory Liberalization, 1975-2017…………………………………………………………….…………. 186 Conclusion ………………………...…………………………………………………………… 236 Works Cited………………………………………………………………….…………….….…254 v Acknowledgments This project began with a simple puzzle. I wanted to understand why European competition law seemed to constrain the anti-competitive behavior of global multi-national companies more than American antitrust. The predominant view, particularly within the legal literature, was that the divergence related to law and economics: American antitrust was more narrowly concerned with consumer welfare than European competition law, which was also infused with political goals— thus, the reason European and American enforcement differed. My research demonstrated that this could not be the entire explanation since, within many areas of competition policy, the economic analysis was similar across the two systems. I concluded that an institutionalist theory was needed to explain the distinct trajectories. Further, to understand the design of regulatory institutions, it was necessary to analyze the political origins of each regulatory regime, and the political coalitions that shaped their establishment and institutionalization. Thus, my journey down more than a century of history, exploring periods and places as varied as the populist agrarian movements in the 19th century United States, and the birth of the European Coal and Steel Community in postwar Europe. And thus, my efforts, some more successful than others, to trace the links between these foundational moments and the practices of regulators today. As the project progressed, I realized that, to understand these historical developments, I also needed to grasp the technical details of competition law. This meant turning to lawyers and law review articles to learn the intricacies of American antitrust and European competition law, as well as the rules governing enforcement and judicial review within each legal system. Understanding competition policy also necessitated engaging with economics—to understand the theories and methodologies that inform enforcement. So, what started out as a political science project, became increasingly interdisciplinary, incorporating the work of historians, legal scholars, and economists as much as political scientists and economic sociologists. Completing such a project has required extensive support from family, friends, and colleagues. Thank you first to my dissertation committee members: Peter Hall, Jeff Frieden, Dan Carpenter, and Kathy Thelen. My thinking about the relationship between political coalitions and economic institutions, and the historical threads between the institutions of the past and the present, has been deeply influenced by Kathy’s scholarship and advice. Dan’s course on bureaucratic politics, which I took my first semester of graduate school, set me on a path dependent process of studying the regulatory state. Ever since, his research and recommendations have been fundamental to my understanding of its political development. As a teacher, collaborator and mentor, Jeff taught me how to develop theoretically-motivated research questions and explanations, and to articulate clear arguments in article-length form. This project has benefited tremendously from his incisive critiques and tireless effort to find the economic interests lurking behind every regulatory enforcement action. Very little of this dissertation would have been
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