The Interaction Between Competition Law and Corporate Governance

Abstract

The purpose of this chapter is threefold. First, it provides the theoretical motivation for this book. It explains why the economic theory of considering the firm as a 'black box' integrated the internal and organisational dimensions of the firm into economic thinking. Specialisation of labour, limited information and opportunism of actors are at the heart of the existence of firms. These considerations also justify the need for competition law, metaphorically, to 'open the black box', for a variety of purposes. Secondly, this chapter describes the theoretical and analytical features of the firm and of its boundaries that are essential to determining the substantive reach of competition law vis-a `-vis corporate governance. The so-called 'theory of the firm', in all its variations, explains the existence and the nature of the firm, as well as its boundary with the market. 1 Thirdly, this chapter introduces the agency theory, which focuses on the behavioural implications of bounded rationality within firms, in which ownership and control are separate functions. The agency relationship is the raison d'eˆtre of corporate governance mechanisms, and is designed to reduce the adverse consequences of bounded rationality. The agency relationship will be a core object of analysis in developments on enforcement of competition law. These three aspects will be discussed successively. why does organisation matter?The theory of the firm is based on the argument that the internal organisation of the firm matters for economic efficiency. It explains why a transaction is carried out either within a firm, in the market, or in the framework of a long-term contract 1 'An actual or nominal place where forces of demand and supply operate, and where buyers and sellers interact to trade goods, services, or contracts or instruments, for money or barter' (Businessdictionary .com).

Competition Law, Big Tech, and Financialisation

“…As a discipline, competition law treats firms' internal dimensions as a 'black box' that left to corporate law. 49 Here, we open this black box and interrogate the validity of the conglomerate hypothesis, assessing whether GAFAM resemble the conglomerates that were a prominent feature of the post-war economy or if they are closer to the financialised firm typical of the post-1980 period.…”