This document provides an overview of ordoliberalism, including: - Ordoliberalism advocates for state regulation of competitive markets to protect individual economic freedom. - It arose in the 1930s in response to failures of the Weimar Republic and rise of Nazism. - Central tenets include establishing clear legal rules, respecting private property, and preventing abuse of market power. - Ordoliberals advocated for a "social market economy" and influenced the drafting of the EU treaty. - Competition is seen as key to coordinating the economy efficiently but requires rules and oversight to function properly.

1. www.beccle.no
post@beccle.uib.no
Ordoliberalism &
Competition Law
Ignacio Herrera Anchustegui
PhD Candidate / Post-doctoral research
University of Bergen

2. Content
• Ordoliberalism in a nutshell
• Birth and waves of ordoliberalism
• Central themes of ordoliberalism
– Basic postulates
– The Economic Constitution
– Social Market Economy
– Economic Freedom
• Ordoliberal competition
– The past
– Some thoughts on the now
• Protecting competition and economic freedom
• Competition itself as economically efficient
• Ordoliberalism and the more economic approach
• Conclusions and discussion

3. Ordoliberalism in a nutshell
• State regulated competitive process for the protection of
individual economic freedom
• Arises on the late 1920s and early 1930s
• Freiburg Imperative
– the regulation of the competitive order of market freedom
– Protection of private property
– Trust in the market-price system
• The societal Ordnung dictated by the state imposes
competition rules
– Respecting individual freedoms

4. Ordoliberalism in a nuthsell
• Therefore, ordoliberalism is a liberalism “European Style”
• Often labelled as the “third way”

5. Birth of ordoliberalism
• Late 1920s and early 1930s as consequence of WWI, the great
depression, the Weimar Republic failure and the Nazism
• Private market power can be abused to the detriment of
economic freedom and preventing the state to function
• Inspiration from classical liberal theory and the Historical
School (Germany)
• Emphasis on individual freedom and preventing of public
power in private spheres
– But argued for the control of private economic power

6. Waves of ordoliberalism
• The Freiburger Schule: 1930s and 1940s in Freiburg: Eucken,
Böhm and Grossmann-Doerth
• Second wave: more social than economic. Rüstow, Röpke,
Müller-Armack and Erhard (Economic minister and then
German Chancellor). Major impact in the EU project: Social
Market Economy and direct influence in the drafting of the
Rome Treaty
• Freiburg tradition: focused on economic order and
competition policy: Hayek, Hoppmann, Mestmäcker, Vanberg

7. Waves of ordoliberalism

8. Central themes
• Ordoliberalism as a full social/economic policy: social-
philosophy
• Third way between neo-liberalism and state-planned
economic
– Large laissez-faire but… ‘advocating the creation of ‘an institutional
framework which brings order to economic processes in a liberal
atmosphere’
• Not a compromise or midway
– Institutional framework for better regulation of market economic

9. Central themes
• Set economic policy based on clear legal rules of the game
• Price system is key (Freiburg Imperative)
• But the market and the invisible hand is insufficient, the
efficiency depends on ‘the appropriateness of the economic
constitution’s rules’
– Good economic rules = efficiency (distribution is another issue)
• Therefore, the state imposes an ‘order’ in the market based
on the rule of law to bring economic development

10. The Economic Constitution
• Wirtschaftsverfassung: the child of Böhm.
“defines the rules of the game under which economic activities can be
carried out in the respective jurisdictions” (Kerber, Vanberg 2001)
Anchored on the “private law society” = freedom of contract and voluntary
transactions (Böhm in Peacock and Willgerodt 1989).
• Both positive and negative limits on state intervention and also for
undertakings towards enhancing private cooperation.
• Synchronize law and economics
• In my view, the economic constitution protects and defines the
limits of the private sphere.

11. The Social Market Economy
• Is the result of the 2nd wave of ordoliberals, in particular Müller-
Armack who claim that it is
‘market freedom with social balance’, combining the productive
prosperity of a capitalist-driven economy with institutions and
regulations guided by the pursuance of social justice (Müller-Armack,
1946)
• Incorporated in the TEU Article 3.3:
“The Union shall establish an internal market. It shall work for the sustainable
development of Europe based on balanced economic growth and price
stability, a highly competitive social market economy, aiming at full
employment and social progress, and a high level of protection and
improvement of the quality of the environment. It shall promote scientific and
technological advance.”

12. The Social Market Economy
• Hayek: the most interventionist of the ordoliberal-related ideas:
compromises individual freedom.
• Seeks the individual satisfaction and implies a redistribution of
wealth “to the less fortunate, although not in ways which will defeat
the basic aim.” (Peacock and Willgerodt, 1989 quoting from Müller-Armack)
• Three (+2) pillars:
– Competition policy on the Ordnungsökonomie
– No unsystematic state interventionism
– No central planning
– Welfare measures (Barry, 1989)
– Preservation of individual freedom (Barry, 1989)

13. Economic freedom
• Private economic freedom protected and
limited by legal rules that
‘define mutually compatible private domains
within which individuals are free to act,
protected from encroachment by other private
law subjects as well as from government
intervention’ (Vanberg, 2009)
• Protection from both the state
(traditional liberalism) as well as from
private market power that is detrimental
to competition
• Based on contract freedom, but with
limits to avoid abuses of unilateral
behavior (exploitation) or cartels

14. Ordoliberal competition – the past
• Ordered competition is the key to the Ordoliberal economic
system
• Goal is to protect competition as such, as a process and
freedom to compete among players
• Should be based on pre-existing rules rather than pure
case-by-case decision making
• Was developed before the more “economic schools” of the
current state (Chicago & Post-Chicago), but not devoid of
economic knowledge or grounds

15. Ordoliberal competition – the past
• Competition is consequence of scarcity and needed to
coordinate social and economic life.
• Economic order enables market to function effectively and
efficiently
• Surrogated to the rules of the economic constitution –
competition laws
• As put by Van Miert (European Commissioner)
‘Privatisation, deregulation, releasing initiative are clearly important. Only market forces
will in the end get the collapsed state economies out of the rut. But market forces not only
have to be released, they also have to be contained by accepted and enforced rules of the
game. The invisible hand is not sufficient. Like a football match it needs rules of the game
and a referee. The market is not anarchy but a subtle construct of human ingenuity’ (Van
Miert, 1998).

16. Ordoliberal competition and the now
• Ordoliberalism is a living school,
not only rooted in the 1930s
and 1940s.
– Changes and developments can
be adjusted to ordoliberal ideas
• Three main discussions on the
now
– Protecting competition and
economic freedom
– Competition as a process =
economically efficient
– Ordoliberalism and the ‘more
economic approach’

17. Protecting competition & economic
freedom
• Main goals are the protection of individual economic freedom
to compete, and the competitive order (or competition as
such)
• By protecting the competitive process the interest of
consumers and market players is supposed to be guaranteed
– Implies preventing the distortion of competitive price setting
– Abuses of market power – particularly exclusion (parties are not free)
– Based again on some pre-existing rules that tell in advance which
behaviors are allowed or not
– Economic arguments and efficiencies, therefore, must ‘fit’ the pre-set
rules

18. Competition as economically efficient
• A ordered competition that is protected avoids undertakings
trying to cheat or going to undercompetitive choices
• Rules are designed in an economically informed manner and
set a standard of performance competition (behaviors allowed
and desired)
• If competition therefore as such is protected:
economic efficiency and social peace should follow. In this sense, if freedom to
compete is preserved, economic efficiency is a derived consequence because
performance competition is allowed to naturally take place, which would lead
towards economic progress. Such freedom to compete, however, requires that
economic players have equal legal standing and that economic activities are
coordinated through voluntary contracting and exchange. (Herrera Anchustegui, 2016)

19. Competition as economically efficient
• More (perhaps quite so) interventionist than Chicago and Post
Chicago schools
• Protecting competition as such and economic freedom does
not imply protection of inefficient firms
• The focus is more on the medium and long term of the
wellbeing
• This means that some abuses of economic freedom are
prohibited (even if strict) to avoid dynamic inefficiencies
• The aim, therefore is to protect competition and not
economic efficiency (Akman, 2011)
– But…if you protect competition as such then the result should be also
economic efficiency in the long run

20. Ordoliberalism & more economic approach
• Since the ‘more economic
approach’ ordoliberal views
have been criticized
• Mixing ordoliberalism with
formalism and ‘form-based
approaches’
• Mixing ordoliberalism with
criticism to the Court’s
decisions (which do sound
quite ordoliberal at times)

21. Ordoliberalism & more economic approach
• Ordoliberalism advocates for clear rules of the game
(conducts allowed and forbidden) and, therefore, forms are
helpful
• This does not mean that economic considerations are
eliminated
– Not all is pure formalism and devoid of efficiency considerations
• Ordoliberalism is compatible with modern microeconomics
and industrial organization
– It is not a different type of economics
– What it does is to have goals and values; economics therefore bring
information about what is pursued

22. Ordoliberalism & more economic approach
• What ordoliberalism is incompatible with is
Departure from the rule of law and just using a ‘a case-by-case assessment
based on pure welfare considerations as a guiding policy instrument without
the existence of more formal or structured rules defining the economic game’
(Herrera Anchustegui, 2016)
• But compatible with ‘advocating for the use of economic insights
and in accordance and as allowed by the rules in place’ (Herrera
Anchustegui, 2016)
• Different levels of application: Ordoliberalism plays a “macro
level”: shapes and sets the rules and aims of an institutional
framework, whereas a neo-classical microeconomic analysis of the
cases is the concrete application of the competition policy

23. Which welfare standard?
• Tricky question. Traditional ordoliberals did not speak in such
language, but seems to be the pursuit of what I call an “aggregated
consumer welfare standard”
• No pure short term end consumer
• Consumer is not only the end buyer, but also other players in the
market that acquire goods (to resale a product)
• The idea is a focus on medium to long term efficiency in which the
competitive structure (both in the upstream markets and
downstream markets) remains healthy = not excessive
concentration of private market power

24. Which welfare standard?
• In practice? The harm required to trigger the application of the law
• A short term end consumer welfare standard triggers upon direct end
consumer harm (US and the ‘more economic approach)
• A broader perspective triggers CL even absent direct end consumer harm
because there might be damage to competitive structure in the long run =
harm to end consumers (ECJ and the ordoliberal view)
• Broader and more protectionist/interventionist against conduct that
diminishes competition
• This, however, does not imply protection of inefficient firms = which are
better off the market. Means let small firms have a chance of develop to
become efficient

25. Conclusions and
Discussion