Baker on the Dueling Bush Administration Antitrust Agencies

Josh Wright —  15 September 2008

Jonathan Baker (American) has a column at The New Republic focusing on a different aspect of the FTC vs. DOJ scuffles over antitrust policy. Baker claims that the DOJ is engaging in what he describes as “deregulatory radicalism that allows monopolies to spin out of control,” while he is largely supportive of FTC policies. Baker sees the growing rift between the agencies as one of ideologies — one mainstream and one radical:

This anti-enforcement stance has no recent precedent, except perhaps at the same agency during Reagan’s second term. In fact, the other U.S. antitrust agency, the Federal Trade Commission (FTC), has been noticeably at odds with Justice–even though both are run by Bush appointees. This interagency clash pits mainstream conservative defenders of traditional competition against radical non-interventionist advocates of broad marketplace rights for big business–and it proves that in competition policy, as elsewhere, the Bush administration has gone sadly astray.

Contrary to my recent post taking the FTC to task for appearing to abandon the economic roots of modern antitrust analysis in the recent Section 2 Report Statement from Commissioners Rosch, Harbour & Leibowitz (but not the Chairman), Baker says its the FTC who has got it right and the DOJ who consistently pushes misguided non-interventionist policies. The evidence? Baker lists the Microsoft settlement, the DOJ’s decision not to challenge Whirlpool/Maytag, more lenient merger enforcement, Justice advocating that the Supreme Court adopt legal rules that favor defendants in monopoly cases, and of course, the spat over the recent Section 2 Report.

This sounds like a long list of things DOJ gotten wrong. But one should be careful in antitrust analysis not to conflate activity level with quality of enforcement in terms of consume welfare or some other quality metric. Let’s look at the evidence a bit more carefully with an eye toward distinguishing between claims that the DOJ is a less “active” agency from claims that they less vigorously pursue consumer interests.

  • The Whirlpool/Maytag merger. Baker claims DOJ should have challenged and the failure to do so harms consumers. This claim seems directly relevant to the claim that DOJ’s approach to antitrust has harmed consumers, though it is disputed (see, e.g., here and here).
  • The Microsoft settlement. The claim is that is that the settlement was weaker than necessary to solve the competitive problem. I’m not sure if there is any evidence that the consent decree helped consumers or if the alternative offered at the district court level (splitting the company) would have done any better. Reasonable minds can differ about the strength of the Microsoft settlement, and for that matter, whether liability was appropriate. I don’t give the settlement much weight in terms of whether DOJ policies have harmed consumers.
  • More lenient merger policy. There may be arguments that commentators do not like some decisions not to enforce here and there (see Whirlpool above). But this is true of all agencies in all administrations. I’m quite sure Baker and others could find mergers during the Clinton administration that he didn’t think should be challenged, but were. But anecdotal evidence about specific mergers aside, I’m not sure there is much in the way of compelling evidence that an the “marginal” merger is anticompetitive such that we can make statements about systematic underdeterrence in merger policy.
  • I’ve covered the Section 2 Report scuffle elsewhere. Needless to say, Baker and I see the Report a bit differently and I take quite the opposite view of the Report.  I think the Report espouses generally sensible antitrust policy on monopolization.  I have some areas of disagreement, but it is generally sensitive to what I perceive to be the weight and balance of economic theory and evidence.  I believe the FTC Statement by the three Commissioners belies a desire to move antitrust policy to its pre-economic era.
  • Lastly, the amicus briefs in Supreme Court cases.  This puzzles me as evidence in favor of a lax DOJ that favors monopolist interests over consumers.  Which of the Supreme Court cases does Baker think the DOJ got wrong on behalf of consumers?  LeeginWeyerhaeuserTwombly?  The assumption that favoring the defendant’s position is anti-consumer defies much of modern economic learning so I presume that Baker means that the DOJ actually had some of these positions wrong.  But the Supreme Court agreed with all of them and by a good margin (except for Leegin, though most economists thought the per se rule was inappropriate for min RPM).  So, I’m left curious as to what Baker had in mind here.

In any event, read Baker’s article.  While I disagree on the characterization of the DOJ as “deregulatory radicals” and on the description of the quality of evidence supporting that description, it is a thought provoking and important column.