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Antitrust in an Election Year – Back to the Future: In Need of a New Antitrust Framework

 |  October 22, 2020

Below, we have provided the full transcript of the panel discussion, Back to the Future: In Need of a New Antitrust Framework from the first episode of our series, Antitrust In an Election Year: Challenges Ahead.

Howard SHELANSKI Speaker


Okay. Good afternoon, everybody. I’m Howard Shelanski, and I want to welcome you to the first of these CPI antitrust in an election year sessions. We’ve just heard from Commissioner Phillips. We’re going to follow up today with a really distinguished set of panelists who are going to talk about whether antitrust is in need of a new framework, and put that in the context of some of the proposals and some of the changes that might be coming as we move through this election cycle and into a new Congress and into a new presidential cycle.

Very pleased to have with us today folks that probably all of you know. We have Koren Wong-Ervin, a partner at Axinn. We have Bill Baer, a former assistant attorney general, currently at The Brookings Institution. Bill, of course, also former bureau director at the FTC and former associate attorney general. I put that below his antitrust posts. We also have Geoffrey Manne, the president and founder of The International Center for Law and Economics. And Professor Tim Wu from Columbia University Law School, and of course, a well-known commentator on these issues who also has had valuable experience contributing at the Federal Trade Commission and at OMB in the executive branch. So I look forward to a really terrific panel, I think some very interesting views.

I’d like to start the panel off by asking each of you, just very briefly, to address first whether you think antitrust needs rethinking. And if so, what is the single biggest problem with current antitrust enforcement that a new framework needs to address? And if not, what is the single biggest risk to antitrust enforcement from some of the proposals that are out there, or from engaging in a reopening of the framework? And to start us off, I’d like to start with Tim.

Tim WU Speaker

Tim WU:

Let me unmute myself. Thanks, Howard. Great to see you. Hi, everybody. As Howard noted, I’m wearing a tie for some reason today for I think the first time in seven months. It’s an interesting feeling.

Yeah, let me answer the question. Howard, I’m going to cheat and say two things. The two things I think have to happen is we need a rethinking of enforcement policy and how the agencies go around enforcing cases. There’s very talented staff and leadership at both these places, and they generally do a decent job.

But I think we need to move away from the model where the agencies sort of sit back. And this is a little stereotype, but they wait to see if any good cases roll in. And if not, they don’t do anything. And if so, then they bring kind of piecemeal litigation. Win one here, win one there, and don’t really achieve much in the way of deterrence, much in the way of a policy, much in the way of giving industry a sense of what there are concerns in. It’s more just like a poker player who goes in on the good hands.

I don’t think that’s good for industry. I don’t think it’s good for the agencies. And I think it has hurt antitrust enforcement. I don’t think all of it’s been like that. I think sometimes if you think about campaigns like pay for delay, or the state action cases early 2000s, the hospital merger cases, these are things where the agency, that happened to be the FTC in those three cases, had this thing it thought was a problem and they just kept going at it. And eventually, even though they would lose cases, they eventually won the whole thing. And I think … obviously not as much as they would like, but eventually they got a president that favored the agencies’ view. And I think that that kind of viewpoint of making it clear what its concern is and convincing enough for a full-fledged campaign is what the agencies need to do in the future.

The other big thing I think that we need to reboot antitrust is I think there is a need for legislative change. I think there are too many Supreme Court precedents that have gone wrong and have stripped the antitrust law of any strength in certain areas. I think the most easy legislative effort would just be to overrule a bunch of Supreme Court precedent which has sort of enfeebled the antitrust laws and made the staff nervous that even when they think they’ve got a clear harm right in front of them, they can see it all, they’re going to have something like the AmEx case, where you spend years on it only to have the Supreme Court come up with a cockamamie theory at the last minute that dooms the case. So, I think that legislation to overrule precedent is the other priority for antitrust enforcement.


Thanks very much, Tim. I really appreciate that. I want to turn next to Geoff. Do you agree with Tim that there are these fundamental problems with the way antitrust has evolved, such that there are critical problems that need addressing? If so, what would those be? And to the extent that you don’t agree, what do you see in the risks of the kind of thing that Tim is talking about? I mean, who can agree with overruling cockamamie precedent?

Geoffrey MANNE Speaker

Geoffrey MANNE:

It’s funny that you should say that, because my answer was going to be we need more cases … To the extent that AmEx is not where the current framework is, what’s lacking from the current framework is we need to move more in the direction of AmEx. So, good thinking pointing to me right after Tim.

I’ll explain what I mean that is, to the extent current framework needs thinking, it is perhaps a bit too static for today’s markets. We have a bunch of procedural constraints we place on antitrust, despite what Tim said, with regards to the Supreme Court cases. They do, of course, impose some constraints but they’re not all in one direction. And importantly, I think our conception of market definition and a lot of our conceptions around how competition works in dynamic markets are too constrained, not not constrained enough by the current antitrust framework.

I don’t think this requires legislation. This is part of the valuable evolution that we’ve had in antitrust law since the beginning. And I think it’s evolving more and more in that direction. I think AmEx is an indication of that. And I think that’s going to be really important going forward. I think we’re going to get cases wrong more often than right if we limit ourselves very clearly to in-market efficiencies and narrowly defined markets and some of the other constraints.

By the way, the complaint that dropped this morning from the DOJ against Google is a great representation of this. The complaint there is a complaint about search. It defines search markets. But the whole description, the whole problem laid out in that complaint relates to the distribution of search. Under an AmEx kind of analysis, we should indeed be looking at the effects on these channels of distribution, which means browsers, mobile devices, it means desktop devices, it means IoT devices. If that effects on that market were excluded from consideration, I think we would invariably get the case wrong. And in reality, we need to look at how the minimal constraints on search seem to be benefiting those markets. And that seems to me like an AmEx kind of take.

In terms of the costs, I think Noah was absolutely right that the House report portends not just a takeover of tech, but a takeover of the entire economy in many respects. It reminds me of the days of the Industrial Reorganization Act proposals in the ’60s and ’70s from Senator Hart. This is sort of an indirect way of getting at the same thing. You can’t accomplish, I believe, the things that the House report most wants without a pretty invasive regulatory regime and price controls to regulate access and the terms of access and the regulation of essential … treating various aspects of the economy as essential facilities. I don’t think that’s beneficial for anyone and is a real risk.


Thanks very much, Geoffrey. Koren, you’ve thought a lot about the House report that Geoff just referenced. Do you see the House report as addressing particularly pressing problems that are in need of addressing? If so, which ones? And looking at the House report, what do you see as good and bad in the proposals that the committee has put forward?

Koren WONG-ERVIN Speaker


Sure. Thanks, Howard, and thanks to CPI for having me. I think the report, anyone who knows me, I’m very troubled by it and not surprised. I think it’s commendable in its support for greater funding for the agencies and for the agencies to do additional studies to look at the effectiveness of their past actions.

But as Geoff mentioned and Commissioner Phillips mentioned, there’s a number of proposals, at least 10 that I count, that apply across industries, not specific to digital platforms. And I find these very dangerous. I think that they risk harming consumers and innovation, that they would introduce significant uncertainty, which can serve as a tax on transactions.

And just to give you a couple of the ones that I’m most concerned about. So definitely I’m concerned about changing the consumer welfare standard, interjecting vague and subjective notions such as democratic ideas. I’m concerned about banning mergers that result in 30% or more market share unless the company proves a negative, that the merger won’t harm competition. I’m worried about banning product improvements, including for lifesaving drugs if they make it harder for rivals to compete regardless of the benefits to consumers.

And I’m also very worried about imposing an EU-like abuse of dominance standard with a presumption of 30% for dominance, which is significantly lower than the EU even uses. This would allow the government to regulate price through antitrust, and punish other mere exercises of lawfully obtained monopoly power.

So, I’m not in favor of legislative changes. I think Geoff made good points, and case law can come more in line with modern economic thinking in a lot of ways. But I would not throw out the antitrust laws on the books. I think Barry Nigro said this recently at a Fordham panel, he’s not ready to give up on the antitrust laws without evidence that there’s a systemic problem in need of fixing.


Thanks very much. I do have some follow ups to that, that I think will apply to all of you. But I want to turn next to Bill and get your perspective on what you’ve heard, and where you would see a problem for any framework to address, and how you might go about that if you do.

Bill BAER Speaker

Bill BAER:

Thanks, Howard. Pleasure to be with this extraordinarily talented group. I testified October 1 before the Cicilline subcommittee, and elaborated a bit on what I had submitted in writing. To me, credit to Tim, there is an under-enforcement issue. There is a legitimate concern with that. But it is under-enforcement that is dictated to by the courts. And we have courts that have gotten increasingly cautious about when to find an antitrust violation, whether it be an acquisition or conduct. That is leaving a lot of bad conduct on the table. I’d describe it as pretty much of a one-way ratchet that gets turned in the direction that imposes a higher and higher burden of proof.

So the question is, and this judiciary is not going to get any less conservative in the next few years, but I honestly believe there are smart people who will apply the law as written. So my sense is you do need some modest changes, both to Section 2 and the Section 7 of the Clayton Act, in order to instruct the courts to be more assertive, to err on the side of enforcing the antitrust laws, and not be so afraid that over-enforcement will destroy our market-based economy. That’s my focus.


Thanks very much, Bill. I want to come back with a couple of different questions that build on this. Tim made the point that there is some doctrine that is embedded in the case law. There’s some precedent that at this point might be contrary to what we have learned and understood about how economics work in practice, and that may be leaving a lot of harms in the marketplace.

So on the other hand, we hear from Geoffrey and Koren that we actually have a system where legislation and changing some of the doctrine and some of the presumptions could be quite risky. I worry a little bit that if we rely on the traditional adjudicative model for antitrust, we wind up with a situation where some of the doctrine most in need of revisiting never gets revisited by the courts and loses the ability to evolve through the common law process that antitrust typically changes through because plaintiffs just don’t bring the cases.

And so, I think about, just to take an example, predatory pricing. Where since 1992, there has not been an environment in which plaintiffs can bring successful federal cases. There’s a lot of economic learning that says that aspects of that test that came out in the Brooke Group case actually leave a lot of predatory conduct unreachable by the antitrust laws. Now one could agree or disagree, but I use it as an example of where there’s quite arguably precedent that deters plaintiffs from bringing the cases in the first place that would get courts to revisit the doctrine and evolve it through their common law process.

To the extent that we have that kind of embedding of deterring doctrine, that could leave harmful conduct in the marketplace, doesn’t it seem a good idea periodically for Congress to come in, revisit those kinds of precedents, and do the reset that the federal courts are never driven to do? Is that kind of legislative change that might be more modest than some of the things in the HDC report, something that you would see as a valuable exercise for Congress to go through?

And then, the question that I have for Tim and for Bill is, some of the proposals about flipping presumptions and about low thresholds, for example for dominance, and in particular the idea of a 30% or a less than 50%. How do we deal with the fact that there is any deterrent at some level for companies to really charge ahead and try to do things that would greatly expand their output, greatly expand their presence in the marketplace, and indeed, sometimes there are consumer side benefits to having large networks and large market shares. To the extent that that could trigger a presumption of dominance and greater regulation, do you see a problem there for the kinds of dynamic competition that Geoffrey mentioned in his initial remarks? So first, periodic legislative review of doctrine. I’ll start with Koren then go to Geoffrey. And then, concerns about deterrent effects of flipping presumptions and lowering thresholds to Tim and to Bill.


So Howard, it’s a good question. I guess I immediately think I want to ask you a question. What would your legislative change be? I mean, to me, just eliminating the recoupment requirements seems very dangerous. I agree with the Supreme Court that low prices in general are a boon to consumers. And so, what change would you make? I think when we talk about alternatives, are they realistic and do they not have more costs than benefits?


So, I actually do have some substantive ideas on how I would change that. But I think really what I want … because that could rabbit hole us for the rest of the time here, and I’m sure we all have views on it. What I would say is, isn’t that precisely the kind of question in cost/benefit trade off we want the legislature to make based on the evidence of what has actually happened in the economy, and based on whether there is evidence that the Brooke Group precedent has excused certain kinds of conduct like predatory capacity additions, limit pricing, various things that might be exclusionary, notwithstanding lack of recoupment.

And isn’t the focus of recoupment a little too narrowly on price, and that we could actually lose other consumer benefits that might come through innovation, product variety, other kinds of things? Putting aside what the specific rule would be, isn’t it healthy, given that we have had nine justices make those trade offs and make a decision. There are potentially significant impacts on an economy that affect people quite broadly.

Isn’t this exactly the kind of thing that we would want Congress periodically to come in? They might say it’s the right precedent. But is it really that threatening to have legislative review periodically of these kinds of antitrust super precedents that might be deterring cases?


Yeah. I’m not scared of the review and having an open, vigorous debate, and not a process where it’s result oriented, having it open to public comment, and really being based on the economics. Do we really have a systemic problem here, and doing the vigorous cost/benefit analysis. I think one of my problems with the House report is that it’s very one-sided. It’s based on a lot of anecdotal evidence of complaints. From cherry-picked facts saying that entrepreneurship is down looking at the period from the dotcom boom through the Great Recession, relying on the Kwoka study for the merger presumptions without even mentioning much less grappling with the widespread criticism of that study, including by FTC Chairman Joe Simons and FTC economists.

So, I’m all for the discussion. I applaud the FTC for having these hearings. And I do agree with you that there are some precedents that are just not going to get there because plaintiffs are not bringing the cases.


Howard, can I jump in here for a second?


I would expect nothing less.


Yeah. I just want to point out an alternative to what you’re talking about. If we sort of take it as a given that Congress … What you’ve described is a very idealistic version of what Congress does, but the general tendency is it produces nothing. The other alternative … That could change. That could change, but it tackled antitrust substantively since I guess ’70s or ’50s.

The FTC could also, with something like predatory pricing, these problems, could use more of its administrative function, could use its rulemaking powers. It could be the expert agency that tries to take something like predatory pricing, deeply sift through and try to figure out what its own ideas are for what counts as the right, and it is extremely complicated, but what is below-cost pricing. I think Jonathan Baker had that proposal, that he thought the FTC should have followed up American Airlines basically with its own kind of action. So, that’s an alternative I just want to put out there. Maybe FTC is under-doing its job.


Yeah, and I think I want to come back to that institutional alternative. Look, obviously none of us can, just to speak very plainly, can be terribly idealistic about how Congress functions these days. But at the same time, if we are looking at the body we have to revisit how its statutes are implemented. I have to have faith that folks like all of us, and many of thousands of people who are stakeholders in a process like this, would bring to bear is there a possibility of getting bad legislation? Of course there is. Is there a possibility of getting nothing? Of course there is. But a lot could be aired through that process. And as flawed as the House report and process might have been, taking Koren’s remarks, to air these ideas and make them subjects of public debate is quite valuable.

What we need to do is distill, as experts in the field, what are the takeaways from that? What are things to do and not do? I think that’s what we’re trying to get at here. And it would seem that one of the things we would at least want to do is have Congress look at some of the precedents that might not be ones we want to keep. Geoffrey?


Howard, I think the problem, there’s a real problem, there is a really institutional problem. You can’t just gloss over the fact that when Congress does this, it tends to look like the House report, not like an expert group grappling with very complicated and conflicting economics, and changing technology, and changing circumstances. There’s a reason that we have an agency model. I’m sure in a very different forum we could argue that we may be overdoing that.

But, you’ll be surprised to hear in part I agree with Tim that the FTC seems like the right locus for this kind of analysis. And even more so, the FTC can and should act as a convener. And by the way, all of these things the agencies already do. We run the risk a little bit of falling into the trap of suggesting that they’re not doing any of the things that we might like them to do. That’s, of course, not the case. And it’s still an open question how much of this should be done.

But convening economists and other scholars to assess the economic consequences of existing legal rules seems like exactly the sort of thing that the FTC should undertake. If ultimately they think there’s a need for legislative reform, and essentially lobby Congress to do so, I would think that much preferable to a politically motivated process. I just don’t think there’s any reason to think they would get the economics even close to right. And, of course, there’s the problem that legislation isn’t really easily changeable.

Really what we want is not even for the FTC to be making these determinations. It’s to be bringing edge cases. And there’s nothing about Brooke Group that would prevent the agencies from bringing cases that they think are stretches. Again, they do this. This is not to say they don’t do this. Brooke Group does not preclude making arguments about what constitutes below cost pricing, the possibility of non-price recoupment. The things that you mentioned are not foreclosed by Brooke Group. They might be harder to succeed on, but I don’t think you’re going to get tossed out on a motion to dismiss.

And why not use the dynamic that we have, the sort of common law evolutionary dynamic, to try to push the edges of these cases? That seems like something, again, the agencies do do, but they could do more of and would be a lot less damaging or potentially damaging than a legislative fix.


That’s very helpful, Geoffrey. I want to come back on exactly these points about the FTC taking possibly more administrative approach and the DOJ also pushing these edge cases. But before I do, I want to go to Bill, and then I want to come back for some follow-ups on this.


Thanks, Howard. Look, it’s a little anti-democratic to say that Congress is political. And if Congress concludes there is a problem, it should not tap the law to address a problem. Two quick points on that. The focus of the Cicilline subcommittee report, the buzz, has been about some of the more extreme remedies proposed in the majority report, Glass-Steagall, lots of prospect of rules. That misses, to me, what is perhaps an unusual bipartisan consensus.

If you read the minority report authored by Congressman Buck from Colorado, he and his fellow members of that subcommittee are very concerned about the current state of antitrust jurisprudence in this country. They are worried about dominant firms, and they came out in support of a number of modest modifications to the antitrust laws in addition to appropriation. And frankly, focusing on that area of consensus in moving forward with some legislative proposals is going to be the quickest way to address the problems, if you agree there are problems out there.

I was involved in the early days of the pay for delay cases. That was 1997. And what was it, 2013 when we got guidance from the court. Think about the consumer injury left on the table while the FTC valiantly pursued that goal. Hospital mergers, the government lost every hospital challenge it brought between about 1990 and the early 2000s. It took that great work that Tim Uris supervised at the FTC to show that there were actually price effects. And it took another couple of years for the court to slowly begin to enjoin contemplative or proposed mergers. In the meantime, we had two decades of consolidation, much of which actually resulted in reduced consumer choice and higher prices.

So, we need to look at what’s the best strategy or set of strategies to address what I think are some serious shortcomings in the current state of antitrust enforcement and jurisprudence. But just bringing a case, taking on Brooke Group and getting to a good place 10 or 12 years from now is not the only strategy upon which I would rely.


Isn’t the problem that we don’t know what the good place is? I mean, that’s what really worries me is that you may be right, let’s say, about the hospital mergers, for example. But it also may be the case that the more restrained approach allowed a lot of value-increasing mergers to happen that might otherwise have been erroneously precluded.

But this is a bigger issue when it comes to the predatory pricing questions, which are far more difficult, I think. We’re talking about applying a sort of cutting edge economics to complicated facts where we don’t really understand. I don’t think we could easily say we should reach a point where X number of predatory pricing cases are successful, the way you might be able to do when it comes to mergers. It’s not that binary.

In that sense, it taking a long time and working its way through the courts might actually be the optimal. Even if a shift turns out to have been what we needed and it takes 10 years to get there, the optimal process might be one that is much more iterative. If you have Congress making a decision on this today on the basis of what we know now in a way that invariably will apply more broadly than whatever it narrowly intends, that may be really problematic.


That argument, and then I’ll turn it back to Howard, basically would suggest we should not have passed … we should’ve not had the Sherman Act, we should not have passed the Clayton Act, we should’ve not passed the FTC Act, we should’ve not in the 1950s amended the Clayton Act to make it more effective. I just don’t buy the argument.


Yeah. Can I just butt in a little bit? Howard, this is also in answering your second question. There is an historic, and an historic view is also worth looking at when … And to make it clear, I’m in favor of congressional action to reboot the antitrust laws. One vision of it is just to clarify to the courts that they mean what they said they did in the Clayton Act and the Anti-merger Act and other parts of it. They weren’t kidding so much.

And as Bill just alluded to, there’s a long cycle of passing legislation, the courts kind of whittling it down, weakening it, and then Congress says, “No, we meant that.” That was the Clayton Act. Then it’s whittled down again. “Oh, no. We meant the anti-merger, the Anti-merger Act of 1950.” So there is this cycle. It hasn’t happened in a long time, and it does seem to me to support action.

This is, I think, part of an answer towards your question, Howard. Is there a concern about if you pass or amend the antitrust laws that you might deter, go too far, deter certain dynamic consequences of let’s say big competition. Well, I wrote a book called The Curse of Bigness, dealing with Louis Brandeis’s title. So, I feel like I sort of have to deliver that. But I also think if anything, we are way over on the other side. We’re so far on the under-enforcement side, on the over-concern about false negatives. Yeah, those concerns that you’re talking about get a huge hearing right now, and are over-considered, I believe. And I think it’s time for a reset for other forms of competition to be taken seriously and not just the kinds that you’re alluding to. That’s a brief answer. Maybe Bill wants to say more.


That’s helpful. I want to come back on that. I want to turn to Koren and see if you have some thoughts you want to add following along with what you’ve just heard. And then I’ll come back with another question, Tim.




Well, I think I know the answer, but Tim, I’d like to hear what kind of changes do you want? You’re saying that it’s gone a little too far one way, and you’re talking about big companies. The presumption would be a company that’s 30%. It would make companies, it would ban mergers unless you can prove a negative, that your deal would not harm competition.

We’re not just talking about the biggest companies. We’re talking about deals that the FTC has found to be beneficial in their merger retrospectives, with lower prices, greater output. Those would likely to be banned under these proposals. So when you talk about some modest on the edges, I’d love to hear a little bit about what those are.


I guess I’ll take questions from Howard.


And I’ll answer Koren’s question. I do want to say, Koren, I do just want to point out that the idea for certain transactions or transactions of a certain size, or beyond a certain share, flipping the presumption, it’s not unknown in American merger policy. If you look at telecommunications mergers by the terms of the Communications Act, it is a public interest standard that requires the commission to find not that the merger wouldn’t do harm, but that the merger would have affirmative benefits.

Now, the history of how that’s been applied I will admit is a very choppy and dicey one, but it’s certainly not unknown to have that kind of standard. Certainly given where the locus of information is, one could imagine a story that says, “Look, you companies know best where the efficiencies lie, where the benefits lie. You’re in the best position to make the case for benefits.” At a certain point, maybe that’s where the burden should lie.

Now, I don’t think that will in fact make a big practical difference. Because when companies merge, they bring that case to bear. You never go into an agency in a large merger without front and center bringing with you how does this benefit the world. So I feel like the burden shifting is already something of a scrum, where everybody’s doing everything all the time. And it’s only in a tie that there’s really an issue that the legislation would address.

But I guess what I want to come back to is the question of three institutional alternatives. Legislation, there’s some things it can do quickly. It can avoid the long-term concerns of common law evolution. The concern, however, is it might draw the line incorrectly. But there might be things that the legislation can prune back on that are really some quite clear problems. So maybe legislation, the legislative approach, if it were sufficiently prudent and limited, could actually be a great solution. I hear concerns that it won’t be so limited. The HJC report certainly indicates broad ambitions. Concerns about the process there.

Okay. Another alternative, Geoffrey, which I think you’ve forcefully advocated, made a strong case for, is common law evolution. Yes, some time might go by, but it really gives some chance for this to be thought through and worked out. I have some concerns just because of the ratchet effect that Bill has talked about, and by the fact that the issues that over time might need to most attention, and evolution might be the ones that are most deterred and least likely to come in. So, the market for common law evolution, if you will, is one that I’m not sure functions very well.

And Tim, you’ve raised the prospect, okay, let’s go to the FTC. The FTC is an expert agency. Geoffrey, you seem to have some sympathy for that. Why not go to the FTC and have them either bring old cases with the knowledge that they may get rebuffed but it’s a way to push up against the line, and/or, put in place regulatory guidelines that may even go beyond simply guidance and say, “Look. Here are the areas where we won’t challenge you, but if you do certain things, this is a challenge.”

And Tim, I think my question for you would be, I don’t want to get into the type of rulemaking the FTC has to do, and the complexity of what their administrative authority is on the antitrust side as opposed to the consumer protection side. The question is, how limited would the FTC be in its rulemaking by the established body of precedent? Do they have to work within that, or does Section 5 or their inherent authority give them an ability to go beyond that and to put in place rules that cut through some of the doctrinal accumulations, some of the presumption problems, many of the things that the HJC report addresses without being rejected in court for those efforts?


Yes. I believe they do have that authority. By the way, I don’t want to get in the … getting in a discussion with you about rulemaking is a recipe for disaster given your expertise in this area. You’re one of the world’s experts on rulemaking. I do think they do have authority under Section 5. And I do think that is contemplated as part of the original goal of the FTC.

Some of what I think, in other words, the authority, not exactly just to erase some precedent they don’t like, let’s say because they don’t feel like it, but some it’s clear, and everyone knows they have some authority that goes beyond Section 2 and Section 1 of the Sherman Act and the Clayton Act that’s given to them by Congress. And part of that I think adheres in the rulemaking function.

I think the FTC to be successful would really have to focus on doing a good job. It might take an area where there’s already been a lot of cases, and in some ways codify what it thinks is going on here as an initial, maybe pay for delay is already done and gone. But something where it does think that some of the cases it’s done supports what it does. Maybe building on some of its settlements in standard setting or something like that. The case has to be clear that you need rulemaking in this area, and that it would benefit from rulemaking that’s sort of repeat nature as much better than a piecemeal approach.

The last thing I want to say is that most of the regulatory agencies, as you know Howard, perceived by rulemaking. It is a few exceptions. But antitrust is a pretty significant part of the American economic landscape, regulatory landscape. And it is unusual to have it all done by adjudication. There are some advantages to adjudication. We could talk about that later. I sometimes like the posture it puts the attorneys and the economists, a little more adversarial, less about … We also are familiar with how the FTC sometimes conducts its rulemaking. But, I think the right answer is no rulemaking can’t be right given the nature of the complexity and the repeat nature of the problems that the agency faces.


Very helpful. Bill, do you want to comment on that, having had to think hard about the extent to which rulemaking should actually be done by the FTC on the competition side?


Yeah. I have thought hard and my head is still hurting from that kind of thinking. Look, I think if there’s going to be a legislative package, and as I said earlier, I think there is some hope for something to be done early in the next Congress, that one of the things that ought to be done is to explicitly confirm the competition rulemaking authority of the FTC.

I think that issue, even though I think the residual authority exists, it’s going to be litigated to death. And it would be helpful to have a congressional confirmation that’s in place. I do think targeted prospective rulemaking channels competition in appropriate ways. I think back to 2004 when the FCC promulgated a rule that said our phone number is actually our phone number and we can port it. Now, portability and other things with regard to tech platforms, interoperability, are much more complicated than what the FCC did in 2004. I grant that. But, you can, I think, thoughtfully in targeted ways come up with rules that will basically channel competition in a constructive way and not basically prove a drag on our fast-paced economy.


I’d like to go into the last minutes that we have, next 10 minutes or so, on a question that picks up on something Koren noted. Which was that the consumer welfare standard, as it has come to be understood over the past decades, has been put in play by a lot of the proposals that one sees today. The way I think about the consumer welfare debate is this, have we become to narrowly price focused such that higher output and lower price is a defense to virtually anything?

And in fact, one could even say higher price, lower output, a broader portfolio of product variety, and greater resources to innovate, let’s put all of those together as things to bring more and better and cheaper products to consumers. It seems like a noble objective in a consumer society. It’s certainly what motivated the Chicago School critique and the backlash in the wake of Alcoa and several other cases.

But I wonder if something hasn’t been lost. And I wonder if a lot of the debate today, in fact I don’t wonder, it’s clear that a lot of the debate today says that we’ve made that trade off to such a great extent that we’ve lost something. And what it is that we have lost is market access. We have lost the ability for individuals, for small businesses to gain access to, to gain traction in, and to retain viability in many markets.

Why has that occurred? It’s occurred because of concentration, which is often brought to scale. And even thought we’ve seen margins go up in many markets, we’ve also seen costs come down and prices come down such that even these prices that might build in a significant margin are a lot lower than they might be in a much more atomized, much less dynamic economy.

The flip side is, what I think a lot of people are thinking about connected to antitrust today. And as Noah Phillips said, these are issues that are traditionally outside of antitrust. But I think they are a lot of what’s motivating the debate. The weakened power of workers. When you go from being an owner to a worker, to being one of many workers for a big owner, the power dynamic shifts. And along with that, the income distribution and inequality dynamics change.

So, all of this gets wrapped into the antitrust debate with the idea that less bigness equals more market access, equals a greater balance of power between workers and owners, and a greater distribution of, a better and more equitable distribution of wealth. And you hear this from state attorneys generals, from federal officials, from thoughtful commentators across the spectrum.

And my question is, to the extent antitrust can address these problems, it seems to me that the consumer welfare standard is the fulcrum, and the thing that we would want to do, if we thought antitrust was appropriate for addressing these issues, is to do away with the mantra, or to reduce the strength of the mantra that we care about competition not competitors. And to care a little bit more about market access and the viability of competitors in the way that Judge Hand did in the Alcoa case, in the way that the Supreme Court did in Von’s Grocery, in the way that occurred in Brown Shoe.

So I guess my question is, do we need to right the standard a little bit to build market accessibility and competitors a little bit more back into the antitrust picture, and alter the consumer welfare standard in that way? Or is that too dangerous and something we should avoid? I’m going to start with Koren on that since you raised the consumer welfare standard, and then we’ll go from there.


I think it’s too dangerous to do. In terms of these other values that you mentioned, workers or the fair competition, I’m never sure what fair means. When I used to work at George Mason, if I said fair, Bruce Kobayashi would throw a book at me and say, “I don’t know what you’re talking about. Fair is not an economic concept.” Anyway.

So, incorporating these other ones, I think a lot of people, including Edith Ramirez when she was chairwoman gave a great speech in 2014 or ’15 in China explaining about the dangers of incorporating these other factors, and particularly how it’s just not administrable. It’s hard enough to weigh and balance competition concerns within a relatively narrowly defined antitrust market, but how do you weigh long-term, dynamic, static, employment versus price, and that the agencies are just really not equipped to do this.




Well, I disagree. Actually, I thought you put the case pretty strongly, Howard. I think we’ve been in a sort of 40-year experiment, since the ’80s with the fixation or obsession with consumer, with consumer pricing, sort of a price fixation and that consumer welfare standard. I think in some ways, and I’ve heard the idea was try to introduce more rigor into the law and so forth, but I don’t think it’s been successful and has gone far too far.

So, we’re judging the last 40 years of antitrust against the first I guess 80 years of antitrust. And I think it was more successful the first 80 years. And I also think that antitrust traditionally and originally was concerned with many aspects of the economy, not just prices. It was originally concerned with the conditions of competition, smaller producers, workers. This was the point of the law. So, we’re not exactly deviating. In fact, we’re getting closer to congressional intent with some of these ideas. I don’t know if people really care about that.

I just think the results, some of them that Howard put out there well, is we have a crisis, a sense that the economy is rigged. A real sense that it’s hard for smaller producers, entrepreneurs to get a start. Most of the markets are locked up. I think the key does lie to some extent in softening consumer welfare, that fixation, as the focal point, as the one guide stone to everything in this area. I think it’s just gone too far.

To get back to something that’s happening today, the Justice case filed against Google is kind of a bellwether of this. It is not a consumer harm focused case. It is a competition focused case. It suggests that by sealing all the entrances, by sealing off any way to get into the market and compete with Google, that the harm done was harm to competition. And maybe we’ll just see courts going in that direction without explicitly overruling the consumer welfare standard. Instead, what they’ll do is get rid of this thing you see show up sometimes, which is essentially a burden on the plaintiff to demonstrate a price related harm in any case.

There’s nothing in the statute, and it’s not clearly compelled by the case law, but sometimes people seem to think that’s what you need to do. But I think that’s going to shift, and I think it’s both popular demand and some sense that the law is failing in its fundamental mission of keeping the economy competitive. And as Howard put it, having that sense of opportunity that anyone, it’s a fair game to get in there and try it, and it’s not all logged up by the big guys. I think we’ve lost that, and I think that the structural problems in the economy reflect that. So, sorry for that speech, but I strongly believe that is the path forward.


That’s helpful. Let me make a comment and then go to Geoffrey, and Bill’s going to have the last word. It’s very helpful. And Tim, you raised the issue of process and the conditions of competition. And Koren, I was thinking about your comment about fairness, and Bruce telling you he didn’t know what it meant.

But you know, the Supreme Court itself said they didn’t know what fairness meant. They said it in Trenton Potteries in 1927. The Supreme Court said, “You’re defending your prices as fair. We don’t know what that means.” The only way we know a price is fair is if the push and pull of buyers and sellers, unfettered by collusion and agreement, are producing the prices in the marketplace. That’s a fair price.

And connecting that to what Tim said, it would seem that a marketplace that pays more attention to access and the conditions of competition would actually free us from having to implicitly assume that a certain outcome is fair, and know that we have a process in place that would be more likely to create fair outcomes. So, the conditions of competition, the accessibility of the market to entrepreneurs and to new firms, something that really has not been front and center as a consideration if you can show low price, high output. Which certainly has its merits, and there are important distributional consequences there.

So Geoffrey, to tweak the question a little bit, but to take it to you, has the consumer welfare standard maybe missed some valuable aspects of competitive process that it would be good to restore through greater attention to barriers to entry, that even certain at least temporally efficient outcomes in the marketplace might create?


I think if your case turns on Von’s Grocery, you have lost and you have not made the cut. I think it’s an important example to raise here, to address exactly your question. What was going on in Von’s Grocery was an exogenous change, a change in the structure of cities, the automobile, the nature of grocery stores shifting to supermarkets. The decision in that case took no notice of any of that, and would have impeded a merger pretty clearly. I mean, not clearly, of course, we don’t know for sure, but pretty clearly in that trying to compete in a changing market it would have actually precluded access on the basis of an effort to protect the small competitor. Whatever the dimension is that you think is relevant here. It would arguably have had exactly the opposite effect.

And I think that you cannot escape the reality that it’s not nearly as simple as Trenton Pottery, we’ll put it. Identifying where the constraints come from and what would maximize, even if you’re trying to maximize the ability of small competitors to compete, in today’s market trying to identify what would actually accomplish that is far, far from obvious. And it correlates with the consumer welfare standard, not perfectly, but at least to a sufficient extent that tossing it out, I think, would do far more damage than benefit.

Today’s case is a great example of that, as I raised before. I don’t see how you could take this position and also excoriate AmEx. It seems to me that if you are going to try to take a position that says we should intervene when necessary in the economy to protect, to preserve entry and the competitive process, and again, there are various ways you could characterize it, I don’t see how you could do that without taking account of the kind of analysis that AmEx does.

Likened to today’s case that was filed, I don’t see how you can bring that case without assessing the consequences for Android, let’s say, by constraining Google acting as the default search. I think everyone understands that the alternative is not free Android and Google not the default. The alternative is no Android or expensive Android. And that, of course, has a substantial effect, that is a primary channel of distribution for the competitors that are arguably trying to be protected by this action. If you don’t take account of that, you will absolutely get it wrong.

So, I guess you have a choice. You can get rid of the consumer welfare standard and adopt AmEx wholesale, or you can stick with the consumer welfare standard, and you should still adopt AmEx.


Now, very interesting argument, and making the point that what process fixes on the entry side necessarily require breaks on other kinds of processes. And one is one that would be set by government. The other is one that you see is driven by the exogenous changes in the market and technology, and that’s where you’re going to place your bet. That’s a strong argument. Bill, last word.


Okay. The consumer welfare standard. It’s a frigging Rorschach ink blot test. It means very different things to different people. And in its narrowest application, it is the plaintiff has to prove pretty much beyond a reasonable doubt that there will be price effects. That’s the extreme view. But it’s pretty close to being a gospel in the courts.

If we leave that term aside and talk about risks, telling a story as we look at a behavior pattern or a proposed acquisition, of risks, of long-term harm to consumers and harm to competition, if we use that frame of reference, I think we could be more expansive in what we go after and do it in a way that doesn’t ignore a current economic thinking and the advances we’ve made in that social science. I think there’s a way to do more, when they require legislation, but to do more in a way that will foster a more competitive economy.

And final point is, we are going to see dramatic increases in concentration in this economy as we come out of COVID-19. The impact is disproportionate on small and medium size business. And so, now is probably the time to direct the courts and the law enforcement agencies to step up their vigilance when it comes to anti-competitive behavior in acquisitions.


Thanks so much, Bill. Really appreciate those remarks. Koren, you look like you’re about to jump in on something. No?


No, I’m fine.


Okay. Great. Well, look, I want to thank all of you. This has been a terrific discussion and a great way to start this series. And it comes at a really important moment. The debate that’s been going on in the public sphere through hearings, through a lot of academic writing and commentary, and activism, that will keep going. It’s been enormously valuable. I actually think it’s been a great thing, and will be a great thing for antitrust.

As we move now to what I hope will be a next phase of trying to implement a lot of what’s coming out of these debates, I think what’s clear is that there are really hard questions to be answered. There are going to be tough decisions and trade offs to be made and a lot to consider. I think this panel has done a terrific job of airing those for us, and you just want to thank you all.


Thank you.


Thanks, Howard. It was great.


Thank you.


Thanks, everyone.


Bye everyone. Thanks.