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Where Do You Draw the Line? Exploring Antitrust Enforcement and the Regulation of Big Business in Modern America

July 23, 2018
In towns and cities across America, mom and pop shops seem to be closing down at a rampant rate. It is no secret that as America moves further into the 21st century, consolidation is placing more power in the hands of fewer companies. With billion dollar companies becoming the norm and giants like Target and Walmart seemingly on every corner, it becomes hard to understand the dynamics of today’s complex economy. There is a strong argument against big businesses; it is bad for the average consumer and allowing companies to grow only allows them more ability to exercise their advantage and prey on consumers. On the other side, there is compelling theory that with healthy competition, big business expedites innovation and optimizes production in ways small companies cannot, which results in lower prices and a more efficient consumer experience. Within this environment, the regulation of big business is known as antitrust law and as the economy grows more complex, so does the enforcement of these laws in America.

The United States is unique in that two federal enforcement agencies have antitrust enforcement jurisdiction. The Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ) both enforce antitrust law.[1] The Sherman Antitrust Act of 1890 was the United States’ first attempt to curve anticompetitive business practices by firms followed by the Clayton Act of 1914 and the Federal Trade Commission Act of 1914 designed to add depth to their regulation.[2]

President Teddy Roosevelt unleashed antitrust enforcement to break up the enormous trusts existing in the United States at that time. The successful dismantling of Northern Securities Co. (a JP Morgan trust company) in 1903 solidified antitrust law as a powerful force protecting consumers from unfair business practices.[3] However, as time progressed and companies became more complex and more nuanced in their respective markets, antitrust enforcement grew more complex as well. Today, the existence of companies like Google and Amazon that reach across market boundaries makes modernizing the interpretation of antitrust law difficult.

The original goal of breaking up existing trusts and large companies after a merger is consummated is no longer the primary goal of antitrust enforcement agencies. In the age of consolidation, the agencies now do not let companies merge until the completion of a proper investigation.[4] Big mergers like United Airlines and Continental Airlines and more recently AT&T and Time Warner are examples of highly publicized antitrust cases that make headlines. However, there are smaller mergers that never make the front page, like hospital mergers or chemical company mergers. There is a threshold of monetary value between the two companies that the merger must exceed in order to initiate a review prior to the companies merging.[5] However, if a smaller merger occurs and the FTC receives a complaint, then they can retroactively investigate the merger.[6] Typically, antitrust enforcement only focuses on horizontal mergers (companies that perform the same service coming together). Vertical integration (merging with companies above or below on the supply chain) is not typically viewed as anticompetitive.[7] Once companies file a merger under the provisions set forth by the Hart-Scott-Rodino Act and if the government feels that it is unlawful, then either the FTC or the DOJ investigates, not both. Each agency specializes in certain markets. For example, the DOJ typically deals with airline and telecommunications mergers while the FTC typically deals with chemical and healthcare mergers.[8]

(Image: Flow chart depicting airline consolidation. Airlines are one of the most obvious example of horizontal mergers. Source: CNN Money )  

(Image: Consumer product diagram showing which parent companies control everyday items. Source: Visual Capitalist )

The most common area of contention during antitrust investigations is defining the relevant markets and determining the market share of the companies. Unlike other areas of law, antitrust law relies heavily on econometrics and economic analyzation of markets. The FTC has its own Bureau of Economics that employs economists full time to analyze the markets for each investigation.[9] Some cases have clear market definitions, but today with companies dabbling in so many different affairs, determining the relevant market information for investigations becomes challenging. For example, the government tosses around the idea of challenging Amazon’s business practices as a violation of antitrust law often, but with the company spanning across so many industries, such an investigation has been deemed nearly impossible to conduct.[10]

Another nuanced area of antitrust enforcement in the US is how blocking a merger occurs. In the United States, the government must file a lawsuit to block a merger and convince a judge that the merger will be anticompetitive. The burden falls on the government to not only investigate, but then also prove their case in a court of law.[11] This is different than other countries. For instance, the European Commission, located in Brussels, is the European Union’s antitrust enforcement agency. If the European Commission finds a merger to violate antitrust law then they have the power to block it without ever presenting a case in front of a judge.[12]

  (Image: Flow chart depicting airline consolidation. Airlines are one of the most obvious example of horizontal mergers. Source: CNN Money )

(Image: Flow chart depicting airline consolidation. Airlines are one of the most obvious example of horizontal mergers. Source: CNN Money )

In modern America, the Presidential administration also plays a powerful role in dictating what cases the Justice Department and the FTC pursue. For example, The head of DOJ’s antitrust division and the Chairman of the FTC are both Presidential nominees.[13] Typically conservative administrations take a more lackadaisical approach towards antitrust enforcement as they prefer to have an open, laissez faire type economy. However, the status quo is not what it used to be in politics today. The first antitrust matter President Trump commented on was the AT&T/ Time Warner merger and the President made it clear he was not in favor of the deal.[13] There is a Constitutional debate as to whether Trump infringed upon the Justice Department’s autonomy to evaluate the case, but either way the case was brought to trial. The AT&T/Time Warner case is a great example of a classic vertical integration merger. Most antitrust scholars agree that this case had no business being brought to court. A common theme in recent years for big mergers like this is instead of blocking the merger fully, the government will make the company divest or sell certain aspects of one of the merging parties to limit the anticompetitive effects. Instead of asking for some concessions from AT&T and Time Warner, the government tried to block the merger completely. Judge Richard Leon issued his ruling on June 12th saying he saw no evidence that the merger would cause harm to the market, using unusually harsh language to lambaste the government’s case. Judge Leon’s decision agrees with years of precedent stating that vertically integrated businesses pose no harm to consumers or the market as a whole.

With big business at an unprecedented size and the government struggling to find its identity when it comes to enforcement, the coming years will be fascinating to watch as a new chapter of antitrust enforcement begins.

Student Blog Disclaimer
  • The views expressed on the Student Blog are the author’s opinions and don’t necessarily represent the Penn Wharton Public Policy Initiative’s strategies, recommendations, or opinions.

References:

  [1] https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/antitrust-laws

  [2]https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/antitrust-laws

  [3] http://www.theodorerooseveltcenter.org/Learn-About-TR/TR-Encyclopedia/Capitalism-and-Labor/The-Northern-Securities-Case.aspx

  [4]https://www.ftc.gov/enforcement/merger-review

  [5] https://www.ftc.gov/system/files/documents/federal_register_notices/2018/01/revised_jurisdiction_7a_1-29-18.pdf

  [6] https://www.ftc.gov/enforcement/merger-review

  [7] https://www.ftc.gov/sites/default/files/attachments/merger-review/100819hmg.pdf

  [8]https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/enforcers

  [9] https://www.ftc.gov/about-ftc/bureaus-offices/bureau-economics/about-bureau-economics

  [10] https://www.lexology.com/library/detail.aspx?g=69199b36-2ddd-49ad-a002-9422ff93b9b1

  [11] https://money.cnn.com/2018/05/11/media/rudy-giuliani-trump-att-time-warner/index.html

  [12] https://money.cnn.com/2018/06/12/media/att-time-warner-ruling/index.html

  [13]https://money.cnn.com/2018/06/12/media/att-time-warner-ruling/index.html

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RESOURCE SPOTLIGHT:

  • <h3>National Bureau of Economic Research (Public Use Data Archive)</h3><p><img width="180" height="43" alt="" src="/live/image/gid/4/width/180/height/43/478_nber.rev.1407530465.jpg" class="lw_image lw_image478 lw_align_right" data-max-w="329" data-max-h="79"/>Founded in 1920, the <strong>National Bureau of Economic Research</strong> is a private, nonprofit, nonpartisan research organization dedicated to promoting a greater understanding of how the economy works. The NBER is committed to undertaking and disseminating unbiased economic research among public policymakers, business professionals, and the academic community.</p><p> Quick Link to <strong>Public Use Data Archive</strong>: <a href="http://www.nber.org/data/" target="_blank">http://www.nber.org/data/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>USDA Nutrition Assistance Data</h3><p><img width="180" height="124" alt="" src="/live/image/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg" class="lw_image lw_image485 lw_align_right" srcset="/live/image/scale/2x/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg 2x, /live/image/scale/3x/gid/4/width/180/height/124/485_usda_logo.rev.1407789238.jpg 3x" data-max-w="1233" data-max-h="850"/>Data and research regarding the following <strong>USDA Nutrition Assistance</strong> programs are available through this site:</p><ul><li>Supplemental Nutrition Assistance Program (SNAP) </li><li>Food Distribution Programs </li><li>School Meals </li><li>Women, Infants and Children </li></ul><p> Quick link: <a href="http://www.fns.usda.gov/data-and-statistics" target="_blank">http://www.fns.usda.gov/data-and-statistics</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>The World Bank Data (U.S.)</h3><p><img width="130" height="118" alt="" src="/live/image/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg" class="lw_image lw_image484 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg 2x, /live/image/scale/3x/gid/4/width/130/height/118/484_world-bank-logo.rev.1407788945.jpg 3x" data-max-w="1406" data-max-h="1275"/>The <strong>World Bank</strong> provides World Development Indicators, Surveys, and data on Finances and Climate Change.</p><p> Quick link: <a href="http://data.worldbank.org/country/united-states" target="_blank">http://data.worldbank.org/country/united-states</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>NOAA National Climatic Data Center</h3><p><img width="200" height="198" alt="" src="/live/image/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg" class="lw_image lw_image483 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg 2x, /live/image/scale/3x/gid/4/width/200/height/198/483_noaa_logo.rev.1407788692.jpg 3x" data-max-w="954" data-max-h="945"/>NOAA’s National Climatic Data Center (NCDC) is responsible for preserving, monitoring, assessing, and providing public access to the Nation’s treasure of <strong>climate and historical weather data and information</strong>.</p><p> Quick link to home page: <a href="http://www.ncdc.noaa.gov/" target="_blank">http://www.ncdc.noaa.gov/</a></p><p> Quick link to NCDC’s climate and weather datasets, products, and various web pages and resources: <a href="http://www.ncdc.noaa.gov/data-access/quick-links" target="_blank">http://www.ncdc.noaa.gov/data-access/quick-links</a></p><p> Quick link to Text & Map Search: <a href="http://www.ncdc.noaa.gov/cdo-web/" target="_blank">http://www.ncdc.noaa.gov/cdo-web/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Internal Revenue Service: Tax Statistics</h3><p><img width="155" height="200" alt="" src="/live/image/gid/4/width/155/height/200/486_irs_logo.rev.1407789424.jpg" class="lw_image lw_image486 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/155/height/200/486_irs_logo.rev.1407789424.jpg 2x" data-max-w="463" data-max-h="596"/>Find statistics on business tax, individual tax, charitable and exempt organizations, IRS operations and budget, and income (SOI), as well as statistics by form, products, publications, papers, and other IRS data.</p><p> Quick link to <strong>Tax Statistics, where you will find a wide range of tables, articles, and data</strong> that describe and measure elements of the U.S. tax system: <a href="http://www.irs.gov/uac/Tax-Stats-2" target="_blank">http://www.irs.gov/uac/Tax-Stats-2</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Congressional Budget Office</h3><p><img width="180" height="180" alt="" src="/live/image/gid/4/width/180/height/180/380_cbo-logo.rev.1406822035.jpg" class="lw_image lw_image380 lw_align_right" data-max-w="180" data-max-h="180"/>Since its founding in 1974, the Congressional Budget Office (CBO) has produced independent analyses of budgetary and economic issues to support the Congressional budget process.</p><p> The agency is strictly nonpartisan and conducts objective, impartial analysis, which is evident in each of the dozens of reports and hundreds of cost estimates that its economists and policy analysts produce each year. CBO does not make policy recommendations, and each report and cost estimate discloses the agency’s assumptions and methodologies. <strong>CBO provides budgetary and economic information in a variety of ways and at various points in the legislative process.</strong> Products include baseline budget projections and economic forecasts, analysis of the President’s budget, cost estimates, analysis of federal mandates, working papers, and more.</p><p> Quick link to Products page: <a href="http://www.cbo.gov/about/our-products" target="_blank">http://www.cbo.gov/about/our-products</a></p><p> Quick link to Topics: <a href="http://www.cbo.gov/topics" target="_blank">http://www.cbo.gov/topics</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>National Center for Education Statistics</h3><p><strong><img width="400" height="80" alt="" src="/live/image/gid/4/width/400/height/80/479_nces.rev.1407787656.jpg" class="lw_image lw_image479 lw_align_right" data-max-w="400" data-max-h="80"/>The National Center for Education Statistics (NCES) is the primary federal entity for collecting and analyzing data related to education in the U.S. and other nations.</strong> NCES is located within the U.S. Department of Education and the Institute of Education Sciences. NCES has an extensive Statistical Standards Program that consults and advises on methodological and statistical aspects involved in the design, collection, and analysis of data collections in the Center. To learn more about the NCES, <a href="http://nces.ed.gov/about/" target="_blank">click here</a>.</p><p> Quick link to NCES Data Tools: <a href="http://nces.ed.gov/datatools/index.asp?DataToolSectionID=4" target="_blank">http://nces.ed.gov/datatools/index.asp?DataToolSectionID=4</a></p><p> Quick link to Quick Tables and Figures: <a href="http://nces.ed.gov/quicktables/" target="_blank">http://nces.ed.gov/quicktables/</a></p><p> Quick link to NCES Fast Facts (Note: The primary purpose of the Fast Facts website is to provide users with concise information on a range of educational issues, from early childhood to adult learning.): <a href="http://nces.ed.gov/fastfacts/" target="_blank">http://nces.ed.gov/fastfacts/#</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>HUD State of the Cities Data Systems</h3><p><strong><img width="200" height="200" alt="" src="/live/image/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg" class="lw_image lw_image482 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg 2x, /live/image/scale/3x/gid/4/width/200/height/200/482_hud_logo.rev.1407788472.jpg 3x" data-max-w="612" data-max-h="613"/>The SOCDS provides data for individual Metropolitan Areas, Central Cities, and Suburbs.</strong> It is a portal for non-national data made available through a number of outside institutions (e.g. Census, BLS, FBI and others).</p><p> Quick link: <a href="http://www.huduser.org/portal/datasets/socds.html" target="_blank">http://www.huduser.org/portal/datasets/socds.html</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Federal Reserve Economic Data (FRED®)</h3><p><strong><img width="180" height="79" alt="" src="/live/image/gid/4/width/180/height/79/481_fred-logo.rev.1407788243.jpg" class="lw_image lw_image481 lw_align_right" data-max-w="222" data-max-h="97"/>An online database consisting of more than 72,000 economic data time series from 54 national, international, public, and private sources.</strong> FRED®, created and maintained by Research Department at the Federal Reserve Bank of St. Louis, goes far beyond simply providing data: It combines data with a powerful mix of tools that help the user understand, interact with, display, and disseminate the data.</p><p> Quick link to data page: <a href="http://research.stlouisfed.org/fred2/tags/series" target="_blank">http://research.stlouisfed.org/fred2/tags/series</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>MapStats</h3><p> A feature of FedStats, MapStats allows users to search for <strong>state, county, city, congressional district, or Federal judicial district data</strong> (demographic, economic, and geographic).</p><p> Quick link: <a href="http://www.fedstats.gov/mapstats/" target="_blank">http://www.fedstats.gov/mapstats/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>Federal Aviation Administration: Accident & Incident Data</h3><p><img width="100" height="100" alt="" src="/live/image/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg" class="lw_image lw_image80 lw_align_left" srcset="/live/image/scale/2x/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg 2x, /live/image/scale/3x/gid/4/width/100/height/100/80_faa-logo.rev.1402681347.jpg 3x" data-max-w="550" data-max-h="550"/>The NTSB issues an accident report following each investigation. These reports are available online for reports issued since 1996, with older reports coming online soon. The reports listing is sortable by the event date, report date, city, and state.</p><p> Quick link: <a href="http://www.faa.gov/data_research/accident_incident/" target="_blank">http://www.faa.gov/data_research/accident_incident/</a></p><p>See all <a href="/data-resources/">data and resources</a> »</p>
  • <h3>The Penn World Table</h3><p> The Penn World Table provides purchasing power parity and national income accounts converted to international prices for 189 countries/territories for some or all of the years 1950-2010.</p><p><a href="https://pwt.sas.upenn.edu/php_site/pwt71/pwt71_form.php" target="_blank">Quick link.</a> </p><p>See all <a href="/data-resources/">data and resources</a> »</p>