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The goal of US antitrust law is to ensure that competition continues to produce positive results for consumers and the economy in general. We published a letter co-signed by twenty three of the U.S.’s leading economists, legal scholars and practitioners, including one winner of the Nobel Prize in economics (full list of signatories here), to exactly that effect urging the House Judiciary Committee on the State of Antitrust Law to reject calls for radical upheaval of antitrust law that would, among other things, undermine the independence and neutrality of US antitrust law. 

A critical part of maintaining independence and neutrality in the administration of antitrust is ensuring that it is insulated from politics. Unfortunately, this view is under attack from all sides. The President sees widespread misconduct among US tech firms that he believes are controlled by the “radical left” and is, apparently, happy to use whatever tools are at hand to chasten them. 

Meanwhile, Senator Klobuchar has claimed, without any real evidence, that the mooted Uber/Grubhub merger is simply about monopolisation of the market, and not, for example, related to the huge changes that businesses like this are facing because of the Covid shutdown.

Both of these statements challenge the principle that the rule of law depends on being politically neutral, including in antitrust. 

Our letter, contrary to the claims made by President Trump, Sen. Klobuchar and some of the claims made to the Committee, asserts that the evidence and economic theory is clear: existing antitrust law is doing a good job of promoting competition and consumer welfare in digital markets and the economy more broadly, and concludes that the Committee should focus on reforms that improve antitrust at the margin, not changes that throw out decades of practice and precedent.

The letter argues that:

  1. The American economy—including the digital sector—is competitive, innovative, and serves consumers well, contrary to how it is sometimes portrayed in the public debate. 
  2. Structural changes in the economy have resulted from increased competition, and increases in national concentration have generally happened because competition at the local level has intensified and local concentration has fallen.
  3. Lax antitrust enforcement has not allowed systematic increases in market power, and the evidence simply does not support out the idea that antitrust enforcement has weakened in recent decades.
  4. Existing antitrust law is adequate for protecting competition in the modern economy, and built up through years of careful case-by-case scrutiny. Calls to throw out decades of precedent to achieve an antitrust “Year Zero” would throw away a huge body of learning and deliberation.
  5. History teaches that discarding the modern approach to antitrust would harm consumers, and return to a situation where per se rules prohibited the use of economic analysis and fact-based defences of business practices.
  6. Common sense reforms should be pursued to improve antitrust enforcement, and the reforms proposed in the letter could help to improve competition and consumer outcomes in the United States without overturning the whole system.

The reforms suggested include measures to increase transparency of the DoJ and FTC, greater scope for antitrust challenges against state-sponsored monopolies, stronger penalties for criminal cartel conduct, and more agency resources being made available to protect workers from anti-competitive wage-fixing agreements between businesses. These are suggestions for the House Committee to consider and are not supported by all the letter’s signatories.

Some of the arguments in the letter are set out in greater detail in the ICLE’s own submission to the Committee, which goes into detail about the nature of competition in modern digital markets and in traditional markets that have been changed because of the adoption of digital technologies. 

The full letter is here.

I will be testifying tomorrow before the House Judiciary Committee’s Subcommittee on Courts and Competition Policy on competition in the digital marketplace.  My testimony won’t be surprising to readers of this blog–in fact some of it was lifted directly from blog posts that have appeared here.  Also on the panel are Richard Feinstein from the FTC, Edward Black from CCIA, Morgan Reed from ACT, Scott Cleland from Precursor LLP and Mark Cooper from the Consumer Federation of America.

For some reason the links to written testimony on the House website don’t seem to be working, but my testimony is available here.

A taste for those who prefer not to devour the whole thing:

In brief, given the link between innovation and economic growth, the stakes of “getting it right” are high.  Caution and humility are warranted in light of both the historical hostility towards innovative business practices by competition policy as well as the large gaps of empirically-validated theory in the economic literature on competition and innovation.  The traditional problem of identifying and distinguishing pro-competitive from anticompetitive conduct faced by enforcers and courts in all antitrust cases is a difficult one.  But those difficulties are exacerbated in innovative industries.

Both product and business innovations involve novel practices, and such practices generally result in monopoly explanations from the economics profession followed by hostility from the courts (though sometimes in reverse order) and then a subsequent, more nuanced economic understanding of the business practice usually recognizing its pro-competitive virtues.  This sequence and outcome is exactly what one might expect in a world where economists’ career incentives skew in favor of generating models that demonstrate inefficiencies and debunk the economics status quo, while defendants engaged in business practices that have evolved over time through trial and error have a difficult time articulating a justification that fits one of a court’s checklist of acceptable answers.  In the words of Nobel economist Ronald Coase,

[i]f an economist finds something—a business practice of one sort or another—that he does not understand, he looks for a monopoly explanation.  And as in this field we are rather ignorant, the number of un-understandable practices tends to be rather large, and the reliance on monopoly explanations frequent.”

From an error-cost perspective, the critical point is that antitrust scrutiny of innovation and innovative business practices is likely to be biased in the direction of assigning higher likelihood that a given practice is anticompetitive than the subsequent literature and evidence will ultimately suggest is reasonable or accurate.

I look forward to mixing it up again with Scott Cleland.  Last time we met it was over similar issues (specifically revolving around Google), and the audio of that event is available here.