A PYMNTS Company

Antitrust Brainstorming Board with Spencer Weber Waller

 |  September 8, 2021

Spencer Weber Waller Academic Project

Below, we have provided the full transcript of the interview with Prof. Spencer Weber Waller, Professor and Director of the Institute for Consumer Antitrust Studies at Loyola University Chicago, recorded on August 27, 2021.

This interview was done as part of the Antitrust Brainstorming Board created by CPI with the support of the CCIA.

Thank you, Prof. Waller, for sharing your time for this interview with CPI.

A video of the complete interview is available HERE.

Do you think the current antitrust framework works for consumers?

Spencer Weber WALLER

Spencer Weber WALLER:

The short answer is it’s not working for consumers, the so-called consumer welfare framework has never been about the actual interests of consumers. It’s been about essentially wealth maximization. And the big lie of the last 40 years has been that we’re trying to serve the needs of consumers in any normal sense of the word. I think change is coming. I think more change is needed. Just to give you some perspective, our institute was founded to really push for the views and voices of actual consumers and the ongoing debate for both antitrust and consumer protection. We’re the only academic based Institute in the United States that does that. We don’t take positions on cases. We certainly take positions on issues.

I’m speaking on my own behalf and not on behalf of the university here, but there’s a lot of changes I’d like to see. One of them, and I’m happy to go into as much detail as you wish, one of them is I think the United States, and I’ve said this in various articles and speeches along the way. I think the United States because of this misguided view over the last 40 years, has become an outlier in the global conversation about what competition policy means and how that should be implemented.

One example is how impoverished our law and policy and enforcement is with respect to enforcement against single firms with power unilateral conduct. The rest of the world more or less follows a model established by the European Union that talks about the abuse of a dominant position. And in comparison, the toolkit the United States has, is very weak in comparison, and the courts have been more and more constricting that at a time when the rest of the world is trying to figure out the best set of tools to deal with durable market power, both in tech markets and others. And so that’s one area where I think we can learn a lot from the rest of the world, and rather than constantly shouting at them in different forum to say change and be more like us, I think we should be listening and adopt and incorporate into our law, make statutory changes when necessary to be more like them.

Do you believe the vertical merger guidelines need to be changed?


I do. I think even when the agencies, I commend the agencies for the cases that they’ve been bringing in and looking at, but vertical mergers are fairly rare. There’s a couple of important ones going on now. The Justice Department certainly tried in the AT&T Time Warner case, but I think the roadblock is in the judiciary more than anything I’d like to see the vertical guidelines issued at the end of the Trump administration, just chocked and started over. I’d also like to see the courts take series of foreclosure a little more seriously. I think in many cases we can profit from a closer look at the business school literature, the academic literature, what firms actually do. And if the evidence supports it, if a couple of businesses really believe that the vertical merger is going to help them entrench a dominant position at one or both of those markets, increase entry barriers, foreclose competitors at one level or another, or just empower the ability to discriminate against firms who were in one market, but not both.

I think we should take that seriously. I think those should be challenged. And I think the merger guidelines to the extent that the courts will construe that as an indication of law should be, should be revised. I also, as you know, published in Competition Policy International, a short piece with John Kwoka and where we talked about the agencies needing to be stronger about challenging deals in their entirety, less eager to take behavioral remedies under essentially any circumstances and even less eager to take structural remedies. We call the fix it or forget it. We’d like to see firms come in with solid proposals as part of their filings, or potentially with respect to a second request, to be the latest we would entertain it. We want the firm, or we want the agencies to focus on building strong litigated cases to challenge mergers as a whole, except in the most diminutus circumstances.

Do you approve of the shift from competition towards regulation?


I don’t think we have the time to get into the details of all of the different proposals I support many of them. And I would quibble with your question only because I think it’s not inconsistent with the goals of antitrust to treat them as public utilities in the sense of imposing requirements of non-discrimination akin to a common carrier. We’ve had since the dawn of antitrust doctrines of essential facilities, refusals to deal and other similar series that haven’t been applied to railroads. They’ve been applied to networks of other kinds, communication networks they… MCI versus AT&T the whole theory of the Bell System breakup was an antitrust response to a company that was blocking competition in certain competitive markets, relying on its sort of monopoly fortress that was still regulated at the time.

So I know the state of the law, I’m not a fan of the Trinko opinion. It leaves a small window for central facilities claims to proceed. I think most of Trinko was just wrong and misstates what our history has been. I know I’m not the only one, but I know the majority views think separately. I can also, again, point to the rest of the world that has embraced notions of exactly what you’re talking about. That dominant firms, particularly where they control a bottleneck need to be able to serve all commerce, whether they’re ordinary consumers or potentially a customer who’s also a competitor somewhere on the distribution chain in a fair and non-discriminatory manner. And if they don’t, under most systems, that’s an antitrust violation as an abuse of a dominant position. We’ve got a narrower view on that. I’m happy to see that expand via case law or statutory change.

How would you ensure antitrust is enforced vigorously if no changes are made to the current antitrust system?


I think there is a vibrant community of progressive antitrust scholars that has changed and challenged the discourse centered around the poor view of what’s important and what isn’t important. That view exists. It’s been extraordinarily influential. It probably dominates at the Supreme Court. I’m happy to have a conversation about the kind of people we should have at the Supreme Court at the lower court levels. I’d like to see judicial education changed.

I’d like to see that there are multiplicity of views that comport with the law and the evidence in a particular case that allow liability to be imposed when the facts and the evidence dictate them. I don’t think all plaintiffs should win all cases. I do think the law should be enforced vigorously. And I think right now the roadblock is in the federal judiciary. I’d like to see that change. I’d like to see a serious effort by this administration and other progressive administrations in the future to put smart, committed people who have progressive views on antitrust on the court, the same way that the law was changed in large part, because from Justice Powell in the seventies, on the Supreme Court and lower courts and academic institutions have forcefully advocated for different view of the world, and I think it’s caused great harm.

What are your thoughts regarding start-up acquisitions?


I think there’s an antitrust framework to challenge those when it’s an attempt to sideline a serious actual or potential competitor. I don’t think it should turn really on whether you call it a horizontal merger or vertical merger or potential competition merger. Obviously, it’s hard to challenge absolutely pure conglomerate merger under the existing case law, but I don’t think that’s what the killer acquisitions are about. I think there’s plenty of ways of creating incentives for firms to be innovative and startups, and it makes it pass for them other than just acquisitions by the dominant firms in their business.

I’m worried when a dominant firm acquires a likely or seriously promising a new entrant for the idea of shutting them down. That to me is a legit antitrust theory when the facts so indicate particularly again. Businesspeople talk at all levels of generality and with all levels of bragging and sometimes a little more macho sense where it comes out in the conversation. You know if that’s the expressed purpose of an acquisition by a dominant firm that has the requisite likely effect on competition, I’m willing to take their word for it. I’m not willing to look for excuses to explain something that was done for this purpose. And we have some reason to believe either that it will happen or that it has happened.

Is break-up the best solution for the digital economy and for consumers?


My view of the retrospective analysis of mergers, particularly the empirical work that John Kwoka and others have done leads me to think that a lot of the remedies that have been imposed that promise nondiscrimination, non-retaliation just don’t work very well. You can look at Live Nation Ticketmaster. You can look at some really complex behavioral remedies in the tech sector. We talk about it in our article for you, but it’s more than can be expected of people to ask them or condition to deal on not behaving in exactly the way that best suits their interest. It’s really hard to detect, enforce and stop. So I would rather create structural separation or other kinds of structural remedies. If you had a vibrant, essential facilities doctrine, it might be less important, but there’s a tradition. We don’t do a lot of breakups in this country when we do so, like the AT&T in the 80’s in particular, couple others in history, it’s to prevent these incentives from arising in the first place. I get that there’s costs, in my view, there’s some circumstances where the costs are, are worth it.

How do you see the role of the FTC and the DOJ in ensuring competition works for consumers?


I’m going to talk about one aspect of it that I can’t do all this, you know, we’ll be on the air for an hour and a half, and that would bore everybody to tears. I can talk about one aspect that I would guess your other guests have not talked about. I’m concerned that the agencies have said in public and in certain cases that, and the courts have sometimes agreed with them, that public enforcement is more important than private enforcement. That there’s somehow a hierarchy. And I understand that, you know, if you’re really talking about fundamental restructuring of an industry, it’s more likely to come from the DOJ and the FTC then states’ attorney generals or private plaintiffs. But I think in general, there’s a multiplicity of players. There’s a multiplicity of goals. There’s nothing in the antitrust laws that say treble damages are somehow less important, should take a back seat to what the government does.

The fact that we can’t impose fines for anything other than criminal conduct. It leads me to think that you need all the above. I’d like to see the federal government more creative and positive partner with states even more than they do, and with private plaintiffs. And there will be some times, limited number of times when an active grand jury investigation needs to be defended, you know, and maybe it’s time to wait a little bit on a private case, but I think it’s wrong when the agencies take positions in court, that they’re more important than a private firm or that the court should somehow change the law to disadvantage private firms in favor of government enforcement, there’s half a dozen Amicus briefs where the courts take this stuff very seriously. It’s very troubling.

How would you reconcile competition and competitiveness? Should antitrust reforms take into account the potential impact on proposed changes vis-à-vis China?


I’ve been around long enough, that to some extent, this is a repeat of conversations in the 70’s and the 90’s that focused on Japan more than China back then. And I’m not sure my views have changed a lot. I was, you know, coming out of law school or very junior attorney during most of that conversation, I don’t think antitrust should be sidelined in favor of… I don’t think the antitrust division should take those issues into account. I do think antitrust is important. I don’t think it’s the only value I view antitrust as part of a more democratic process that the antitrust division, the FTCs division of the FTC and the courts in the case, their job is to analyze who wins and loses under a legal framework. And the broader public policy should be set by the most democratic institutions in our government.

If competitiveness with China is a fundamental national policy, those goals should be set by Congress and/or the executive branch. And if the president or the cabinet or the attorney general, for some reason, believes that there’s some value other than antitrust that needs to Trump a likely antitrust investigation or case. I don’t think that’s the job of the line attorneys. I don’t think that’s even the job of the FTC commissioners or the head of the antitrust division, who was an assistant attorney general, that’s up the chain. And we can debate on any given situation, whether that’s good for our country or not. But I think the debate needs to take place in Congress to some extent the highest levels of the executive branch, because that’s who we vote for to set the fundamental public policies of our country. So I’m giving you a process answer rather than a substance answer, but, you know, in the past, for example, the antitrust division was prepared to indict several companies, U.S. And foreign in connection with the demise of Laker Airways in the 70’s.

I’m sorry, the early 80’s and Margaret Thatcher and the British government begged the Reagan administration not to do so. And for various reasons, including just the strength of the U.S. English Alliance. And so at some point, the president directed the attorney general as he has the power to do so, not to bring that indictment because of the greater national foreign policy interests, for example. We can debate whether that was the right call, but that was the right person to make that call whether or not we agreed with it or disagreed. So I’m uncomfortable sucking those industrial policy issues into the day-to-day work of the agencies, or I suppose let the courts trying to decide who wins and loses in a particular case. I think that needs to be bumped up the chain of command and really debated as a matter of fundamental national economic policy.

Any final comments you would like to make?


I appreciate the chance to chat, if folks are interested in exploring this with me or seeing my writing on this. Like most law professors, I post most of my stuff on ssrn.com and anybody who wants to know more about the antitrust in the institute that I work with. We’re at luc.edu/antitrust.

I appreciate the time to chat about these great questions.