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America leads on innovation, and Europe on regulation, or so the conventional wisdom goes. But recently, the US seems to have taken the lead in the latter, particularly in politically powerful industries like technology, pharma and finance. 

Just last week, Eli Lilly, the producer of popular insulin medications Humalog and Humulin, pledged to reduce its insulin list prices by 70 per cent in an effort to make the medicine more affordable. The move was seen as a direct response to Joe Biden’s policy pressure on Big Pharma. In June 2022, the Federal Trade Commission issued a unanimous policy statement criticising pharmaceutical middlemen, known as pharmacy benefit managers, for taking illegal bribes and rebates to keep prices high.

Some competition experts say this supports the theory that even the threat of tough antitrust action can be enough to nudge companies in the right direction. And the threats from American regulators seemed far greater than those from their European peers at a high-profile competition conference in Brussels last week, which brought together policymakers, economists, lawyers and politicians from both sides of the Atlantic.

EU competition commissioner Margrethe Vestager gave the opening speech, which was critical of the US Inflation Reduction Act for offering subsidies to American manufacturers as part of the clean energy transition. But Vestager seemed far less of a force than she did a few years ago. Rather, it was the energetic crop of young American regulators who were the rock stars of the event, complete with their own swag — fan mugs emblazoned with “Wu&Khan&Kanter” were spotted in the venue.

Certainly, Team USA seemed to be thinking bigger and broader than its EU peers. FTC commissioner Rebecca Slaughter stressed that her agency was making policy based on how “people participate in the economy as whole people”, not just as consumers. The Justice Department officials in attendance made it clear they were going after entirely new areas, like labour markets, with a competition lens, and pursuing criminal as well as civil penalties for violators.

American regulators have become more ambitious because they believe the stakes are so high. They view their work not in technocratic but existential terms; a battle against the risk of corporate oligopoly which threatens liberal democracy. Many of their European peers, meanwhile, still think in terms of narrow definitions of consumer pricing, which is perhaps why the average number of mergers prohibited by the European Commission’s directorate-general for competition per year over the past three decades is only one, as Imperial College economist Tommaso Valletti pointed out.

In bank regulation, too, Americans are taking a more aggressive tack than their European peers. The Fed vice-chair for bank supervision, Michael Barr, has pushed back hard against recent efforts by the global financial lobby to water down Basel III requirements, rejecting the usual bank arguments that holding more capital will mean fewer business loans. He’s also pointed out that the lack of bank failures since the pandemic began has less to do with financial institution strength than government backstopping of the economy.

The European parliament, meanwhile, voted in late January to weaken capital rules, which seems to be at least in part a capitulation to the European banking industry’s argument that tougher capital requirements will put them at a disadvantage compared to their larger, more profitable US peers.

It’s a story that neither EU nor US financial watchdogs are buying. Moves to make Basel III transitional arrangements permanent “will not defend EU banks against US ones but only protect the vested interests of European megabanks, vis-à-vis their smaller European competitors,” wrote Thierry Philiopponnat, the chief economist of the European non-profit Finance Watch.

In fact, says Carter Dougherty, the communications director of Americans for Financial Reform, the EU pushback against capital requirements is its own kind of subsidy. “Europeans have gotten their knickers in a twist over American efforts to address climate change [via the Inflation Reduction Act],” he says, but they don’t seem to realise watering down bank regulation for Europe is essentially a subsidy in itself. Carter fears that reducing bank capital levels “will just lead us down the path of financial instability, bigger paychecks for executives, or worse”.

Both the US and the EU have myriad ways of boosting their own companies. But until quite recently, it was assumed that Europe would lead the way in regulating the world’s largest and most powerful corporations. That’s now shifted, perhaps because the more extreme concentrations of corporate power in the US have put the potential dangers, both economic and political, top of mind.

As Franklin Delano Roosevelt put it in a 1936 speech, “We stand committed to the proposition that freedom is no half-and-half affair. If the average citizen is guaranteed equal opportunity in the polling place, he must have equal opportunity in the market place.” The new and more robust American regulatory response harks back to an era when power mattered more than price and politicians weren’t afraid to take on big business.

rana.foroohar@ft.com

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