Untangling the Market and the State

By Zheng, Wentong | Emory Law Journal, January 1, 2017 | Go to article overview

Untangling the Market and the State


Zheng, Wentong, Emory Law Journal


INTRODUCTION

The government is on the march. Having grown out of the pre- progressive mode of governance where all commercial disputes were resolved through private litigation, the tentacles of the government are reaching far and wide, extending regulatory oversight over a plethora of social and economic activities, including competition, railroad pricing, food and drug safety, and many others.1 Supported by a rapidly growing number of regulatory agencies, the government has assumed greater control over the economy, expanding its role from correcting market failures to administering social and economic justice.2

Aside from its traditional role as a market regulator, the government is also emerging as a major participant in market activities. Among other things, governments own corporations,3 employ workers,4 and buy large amounts of goods and services.5 The footprint of the government has grown larger particularly because of the 2008-2009 global financial crisis, which sparked unprecedented state intervention in the marketplace.6

The rise of the government is even more dramatic if one's horizon is broadened to include emerging economies on the world stage. Powerful stateowned enterprises from countries like China, Russia, and Saudi Arabia are ushering in a new form of doing business, generally dubbed as "state capitalism."7 As one indication of the ascendancy of state capitalism, the thirteen biggest oil firms in the world, which control more than three-quarters of the world's oil reserves, are all state-backed.8 The government has been so successful in the new era of capitalism that one influential commentator has pronounced "the end of the free market."9

The changing dynamics between the government and the market have farreaching implications not just for the economy, but for the law as well. Courts and dispute settlement tribunals around the world are grappling with the increasingly active and diversified roles of the government. Since 2007, the U.S. Supreme Court has ruled on whether the government could require waste hauling firms to bring waste to publicly owned waste transfer and processing facilities,10 whether a state-owned hospital should be required to answer antitrust complaints when it attempted to acquire the only competing hospital in the region,11 and whether a state dental licensing board should be accorded immunity from antitrust law when it prohibited nondental practitioners from providing teeth-whitening services.12 In the meantime, the World Trade Organization (WTO) opined on whether Chinese state-owned enterprises should be treated as public bodies akin to government agencies13 and whether a Canadian provincial government provided a subsidy to renewable energy producers when it purchased electricity from them at above-market rates.14

This Article is an attempt to systematically examine how the government interacts with the market and how the law treats such interactions. For ease of reference, this Article labels the various issues arising from the governmentmarket interactions as "market-versus-state"15 issues. While the market-versusstate dynamics have shifted in leaps and bounds, legal scholarship has not kept up with the changes. Scholarly discussions of the market-versus-state divide date mostly back to several decades ago, when the state was still playing a static, confined role in the economy.16 And the existing academic literature approaches market-versus-state issues in isolated manners, paying essentially no attention to the systemic implications of the different ways of handling market-versus-state issues in different areas of law.17

This Article sets out to narrow the gap in understanding how the law should deal with market-versus-state interactions. It starts with a survey of how market-versus-state interactions are being treated in three distinct areas of law: constitutional law, antitrust, and international trade.18 This Article discusses how the law in those areas employs four tests, based on ownership, control, function, and role, respectively, to draw the boundary between the market and the state. …

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