Missing the Forest for the Trees: A Reply to Hovenkamp and Shapiro

By: Hal Singer & Marshall Steinbaum (Pro Market)

As economists who filed separate comments opposing the 2020 Vertical Merger Guidelines (VMGs), we were befuddled by the hostile reaction in last week’s Herbert Hovenkamp and Carl Shapiro piece, admonishing the Federal Trade Commission (FTC) for retracting the VMGs. The VMGs were a hot mess, reflecting the pro-monopoly preconceptions of the antitrust defense bar and ignoring the popular antitrust zeitgeist to slow down the merger train. To wit, through August 2021, the number of mergers reported to the Department of Justice (DOJ) and FTC (2436) was more than in all of 2020 (2023) and more than twice as many as in 2010 (1166).

Although Hovenkamp has consistently supported the 2020 VMGs, Shapiro filed comments to the FTC in March 2020 pointing out the VMGs’ myriad flaws: 

  • “The Draft VMGs do not provide an economic basis for these market share thresholds, which appear to be arbitrary. … I am concerned that using market shares in this manner could well weaken vertical merger enforcement.”
  • “The fundamental problem with the way that the Draft VMGs use market shares is that they simply assume that harm to downstream customers is less likely if the merged firm controls a smaller share of the relevant downstream market.”
  • “First, the Agencies should clarify that evaluating the likely economic effects of a proposed vertical merger does not require defining a relevant market containing the ‘related product.’ Doing so often will be unnecessary and could well be misleading.”

Yet there is not a whiff of these concerns in their ProMarket piece, creating the false impression that the now-abandoned 2020 VMGs were some ideal economic document that the FTC foolishly disregarded. Having been on the losing side of the AT&T/Time Warner merger, and having seen his predictions at the time proven right by AT&T’s subsequent withholding of Time Warner’s content from paid-TV rivals, one would think that Shapiro would champion reform that created new pathways for antitrust enforcers against vertical mergers. By pushing back so hard on the FTC under Lina Khan’s stewardship, however, Shapiro has been driven into a reactionary position…