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A Reformulation of Antitrust Policy

December 19, 2018
As Reuters reports, the volume of global mergers and acquisitions during the first quarter of 2018 reached a record-setting $1.2 trillion in value.[1] It’s clear, then, that firms are combining and consolidating market power in ways never seen before. What’s less clear is the proper way to regulate those mergers with an eye towards the public’s interest in competitive markets that facilitate a new entrant’s ability to innovate and grow. Enter the field of antitrust, the political and legal framework employed by regulators to block firms from accruing too much economic power in a particular industry.

Antitrust as a political issue has become more and more relevant against the backdrop of increasing wage stagnation, income inequality, and consolidation of firms within and across industries.[2] Both major political parties have articulated a position on antitrust policy and regulation––with the Democrats even identifying anti-monopoly policies in their “Better Deal” vision for economic fairness. U.S. Senators have joined the fray, too; Sen. Orrin Hatch (R-Utah) recently called attention to renewed interest in the field by referring to some liberals’ novel approaches as “hipster antitrust”.[3] And of course, a litany of advocacy organizations and trade groups have a stake in the matter–––from the Computer and Communications Industry Association, an information and communications technologies trade group skeptical of drastic shifts in standards for identifying anti-competitive activity, to the Open Markets Institute, a spin-off from the left-of-center New America Foundation which advocates for wholesale reform of antitrust standards and enforcement. In short, antitrust as an issue and rallying cry is as salient as ever.

However, in researching the fundamentals of antitrust, one thing quickly becomes clear: disagreements on the proper approach to antitrust standards, enforcement, and review are widely divergent.[4] Below are three approaches animating the antitrust debate to emphasize the diversity of thought contributing to these conversations and to underscore the need for measured, continued discussion.

Antitrust policy and enforcement’s heyday came during the mid-1900s.[5] As government-controlled economies became more and more common, the U.S.’s “competition ideal” grew more important to laypeople and regulators, alike. The thought was that by dispersing economic power across many actors (all of whom were empowered to innovate and grow) American capitalism would serve the country’s political goals by aligning with our core democratic commitments.

Later, in the late 1970s, this approach to antitrust faded, giving way to a new approach often identified with the Chicago School of Economics and epitomized in Robert Bork’s manifesto, The Antitrust Paradox. Instead of conceptualizing antitrust in inherently political terms, Bork and his colleagues saw the issue in purely economic terms.[6] They introduced the “consumer welfare standard” into the legal and political lexicon. For them, consumer welfare was synonymous with lower prices. Larger-order questions of political or social implications would be addressed by market actors in time, and consolidation need not be feared. Instead, mergers should be presumptively understood as improving the efficient ordering of the market and only interfered with selectively and infrequently. In many respects, this framework has become the mainstream of antitrust thought, at least until recently.

In the past few years, a variety of stakeholders have insinuated or outright declared that this price-oriented consumer welfare standard is no longer helpful. The DOJ’s top antitrust lawyer even said in a speech at Penn Law that price cannot be the only metric by which mergers are judged.[7]

One such alternate approach has become known as the Neo-Brandeis Antitrust Movement in an homage to the former Supreme Court Justice Louis Brandeis, who famously criticized “the curse of bigness.”[8][9] In Brandeis’s footsteps, these thinkers urge regulators and the public to abandon the consumer welfare standard of the Chicago School and reimagine the driving force of antitrust altogether. For them, the market shares of companies like Facebook, Google, and Amazon amount to more than just monopoly power; their market shares have cemented their standing as institutions that exercise a far greater influence on the public that can be measured through traditional pricing and economic analysis. Open Markets Institute’s Lina Khan, an emerging thought-leader in the movement, sees the primary issue with concentration from a wider-angle view.[10] “Monopoly doesn’t just exploit consumers and workers in their part of the economy. Even when they offer low prices to consumers, their influence propagates through the entire system,” she told The Atlantic.[11]

Others approach antitrust work from a distinctly technologist point of view; a recent essay in the Harvard Business Review detailed, for instance, the importance of an integrated antitrust and privacy regulatory apparatus.[12] They explain that “The coming battle in antitrust will not be about controlling markets in the traditional sense. It will be about the battle for control of consumers’ information.” As they tell it, the story of consolidation is also one of data isolation. In digital markets, anticompetitive behavior may not manifest solely in terms of price point (for instance, Google and Facebook are free services) but in the deliberate actions of major corporations to build digital identities for each of us which become essential to our online lives and which competitor firms are unable to access or interface with. As more and more technologies “speak” to one another (see, e.g., the Internet of Things (IoT)), concerns regarding data isolation and ownership become particularly important.[13]

While these approaches to conceptualizing antitrust injury may seem abstract, they are already playing out in real time. On the legislative front, the Senate Judiciary Committee’s antitrust subcommittee continues to hold hearings outlining major themes in antitrust reforms.[14] The subcommittee’s Ranking Member Sen. Amy Klobuchar (D-Minn.) has introduced several pieces of legislation aimed at reining in mega-deals.[15] On the legal front, the United States District Court for the District of Columbia recently permitted the merger of AT&T and Time Warner over the objections of DOJ’s antitrust division, signaling a window for other firms to pursue mergers. Perhaps due to this helpful precedent, T-Mobile and Sprint are taking a second bite at the apple: attempting to once again merge, despite their unsuccessful attempt in 2014.[16][17] These and other developments are under close observation, including by Capitol Hill.[18]

Implementing any of these reforms will pose administrative challenges––not to mention legal and political concerns. A former policy director at the Federal Trade Commission wrote in The Hill that discarding the price-based consumer welfare standard would result in “chaos” and “have the immediate effect of weakening enforcement through confusion.”[19] Moreover, he explained that new standards would remain hotly contested for some time before evolving into new social and legal norms. “U.S. litigators [in particular], would be stuck with the task of determining a new standard that can win at trial,” for instance. The question becomes, though, whether these administrative challenges could, in fact, be worth it.

A heartening example of an upstart politician in Virginia points to “maybe yes.” A long-form piece in HuffPo tells the story of a Sam Rasoul, a Virginia state legislator who campaigned on anti-monopoly policies and a quasi-grassroots revival of the Commonwealth.[20] Rasoul helped Virginians name the crisis of consolidation that they faced by speaking out against policies he saw as undermining the public interest and serving the bottom line of the Commonwealth’s public utility monopoly, Dominion Power. While Rasoul hasn’t ushered in a new “antitrust movement,” he’s lent a voice and a face to anti-monopoly politics and given his constituents a framework for rethinking the ways Virginia regulates a protected monopoly in a vital industry. In the weeks, months, and years to come, these conversations are certainly not going away.

Image: Depiction of increasing labor concentration nationwide, particularly outside of majo...Image: Depiction of increasing labor concentration nationwide, particularly outside of major metropolitan areas. Source: Penn Wharton PPI

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

References

   [1]https://www.reuters.com/article/us-deals-review/global-mergers-and-acquisitions-reach-record-high-in-first-quarter-idUSKBN1H60EC

   [2]https://hbr.org/2018/01/what-the-future-of-u-s-antitrust-should-look-like

   [3]https://www.hatch.senate.gov/public/index.cfm/2017/9/hatch-speaks-again-on-hipster-antitrust-delrahim-confirmation

   [4]https://scholarship.law.upenn.edu/faculty_scholarship/1985/

   [5]https://hbr.org/2017/12/the-rise-fall-and-rebirth-of-the-u-s-antitrust-movement

   [6]https://www.washingtonpost.com/news/wonk/wp/2012/12/20/antitrust-was-defined-by-robert-bork-i-cannot-overstate-his-influence/?utm_term=.5a00f8d27477

   [7]https://www.justice.gov/opa/speech/assistant-attorney-general-makan-delrahim-delivers-keynote-address-university

   [8]https://www.bostonglobe.com/ideas/2018/06/13/google-hugely-powerful-antitrust-law-job/E1eqrlQ01g11DRM8I9FxwO/story.html

   [9]https://www.weeklystandard.com/kyle-sammin/brandeiss-fight-against-the-curse-of-bigness

   [10]https://www.yalelawjournal.org/note/amazons-antitrust-paradox

   [11]https://www.theatlantic.com/magazine/archive/2018/07/lina-khan-antitrust/561743/

   [12]https://hbr.org/2017/07/the-next-battle-in-antitrust-will-be-about-whether-one-company-knows-everything-about-you

   [13]https://hbr.org/2017/07/the-next-battle-in-antitrust-will-be-about-whether-one-company-knows-everything-about-you

   [14]https://www.judiciary.senate.gov/meetings/the-consumer-welfare-standard-in-antitrust-outdated-or-a-harbor-in-a-sea-of-doubt

   [15]https://www.klobuchar.senate.gov/public/index.cfm/news-releases?ID=7F1EC9A3-5D28-4757-9F60-8CEAD9111971

   [16]https://www.nytimes.com/2018/06/12/business/dealbook/att-time-warner-ruling-antitrust-case.html

   [17]https://www.nytimes.com/2018/04/29/business/dealbook/sprint-tmobile-deal.html

   [18]https://www.judiciary.senate.gov/meetings/game-of-phones-examining-the-competitive-impact-of-the-t-mobile_sprint-transaction

   [19]http://thehill.com/opinion/judiciary/378788-hipster-antitrust-movement-is-all-action-no-plan

   [20]https://www.huffingtonpost.com/entry/dominion-virginia-monopoly-democrats_us_5a7de928e4b08dfc9303d14b

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  • <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>
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  • <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>
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