Category: Competitive Edge

Antitrust and competition issues are receiving renewed interest, and for good reason. So far, the discussion has occurred at a high level of generality. To address important specific antitrust enforcement and competition issues, the Washington Center for Equitable Growth has launched this blog, which we call “Competitive Edge.” This series features leading experts in antitrust enforcement on a broad range of topics: potential areas for antitrust enforcement, concerns about existing doctrine, practical realities enforcers face, proposals for reform, and broader policies to promote competition. Jonathan Sallet has authored this month’s contribution.

The octopus image, above, updates an iconic editorial cartoon first published in 1904 in the magazine Puck to portray the Standard Oil monopoly. Please note the harpoon. Our goal for Competitive Edge is to promote the development of sharp and effective tools to increase competition in the United States economy.

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Between September 2018 and June 2019, the Federal Trade Commission conducted a series of public hearings to study the landscape of competition and consumer protection. The next step—and the crucial one—is for the FTC to integrate the lessons learned from those proceedings into its day-to-day work.

Here are five building blocks for successful antitrust enforcement that the FTC should embrace in order to, as its Chairman Joseph Simons said (quoting his predecessor Bob Pitofsky), “restore the tradition of linking law enforcement with a continuing review of economic conditions to ensure that the laws make sense in light of contemporary competitive conditions.”¹

Antitrust enforcers should pay attention to growing market concentration

On the first day of the hearings, Jonathan Baker, a law professor at American University’s Washington School of Law and author of the new, indispensable book The Antitrust Paradigm, laid out nine reasons to conclude that “market power is substantial and has been growing.”² Baker emphasized that the growth of oligopolies in markets that include airlines, brewing, and hospitals are all outcomes that he said cannot be explained simply by growth in scale economies.³

Economists Joshua Wright at George Mason University’s Antonin Scalia School of Law and Steven Berry at Yale University took different views. Wright said that his review of the evidence of market concentration led to the conclusion that “we do not know much that is relevant to formation of antitrust policy” and emphasized that he would not equate market concentration with the presence or absence of competition.⁴ Berry cautioned against overreliance on market concentration as the explanation of the increase in corporate profits.⁵

But Berry also emphasized that in light of the evidence of higher markups, “[w]e cannot just wave our hands and say it is all fine.”⁶ Rather, he said that “sophisticated context-sensitive antitrust policy is clearly important.”

What to do in the face of these competing viewpoints? In her testimony that same day, economist Fiona Scott Morton at the Yale University School of Management emphasized that uncertainty does not justify antitrust inaction. Rather, she said that the evidence of growing market power suggests that underenforcement is today a greater risk than overenforcement.⁷

Underenforcement can lead, of course, to familiar kinds of competitive harm, such as higher prices and reduced innovation. But there is more. The United States is in its fifth decade of increasing income inequality—on September 26, 2019, the U.S. Census Bureau released figures showing that income inequality had reached its highest level in more than 50 years of measurement. Baker and Steven Salop at Georgetown Law opined that “[m]arket power contributes to growing inequality.”

Scott Morton’s point is fundamental. Antitrust is law enforcement, and law enforcement rests on case-specific evidence. But larger trends should surely impact the prioritization of antitrust resources and the questions that antitrust enforcers ask. Indeed, if the right investigations are not opened and the right questions are not asked, then we may never know whether a problem ever existed.

Vertical merger transactions are a good example. As Salop explained at the hearings, vertical mergers may look benign in a world of unconcentrated upstream and downstream markets, where customers at both levels face a plethora of competitive alternatives, but such transactions require much greater scrutiny when a new vertical relationship is created in a world of oligopolies. ⁸ That’s because the existence of oligopolies make it more likely that an input supplier can harm some of its customers in order to aid its downstream affiliate and harm consumers as a result. Salop argued that anticompetitive presumptions should apply to vertical mergers in some circumstances.

Daniel O’Brien, former deputy director of the FTC’s Bureau of Economics and now executive vice president at the consultancy firm Compass Lexecon, didn’t see it the same way. He told the commission that he did not contend there could never be input foreclosure, but contended that mergers of companies offering complementary products would normally be procompetitive.⁹ An example of complementary products would be razors and razor blades—if you use one, you’re more likely to use the other. O’Brien also said that procompetitive presumptions should apply to some vertical mergers.

In my view, the discussion of vertical mergers illuminates why antitrust enforcement should recognize the changing nature of markets and, in particular, the manner in which the existence of oligopolies increases the need to consider theories of harm when considering vertical arrangements. Understanding broad changes in the U.S. economy helps antitrust agencies formulate theories of harm, focus their economic analysis, and consider, early on in an investigation, what facts will likely be most important. The forthcoming FTC competition report should consider how best to recognize the implications of these broad economic trends.

Business models are evolving, which can change the terms of competition

Two-sided business models aren’t new. Think of the coffee house in London in the early 1700s that, profiting from the aggregation of ship owners and the insurance brokers, morphed into Lloyd’s of London. But today, multisided business models intersect with other economic trends that include network effects, the aggregation of data, and vertical integration. That’s a reason why merger enforcement should look more closely at the acquisition of potential or nascent competitors.

If Microsoft Corp. in the early 1990s had tried to buy the then-independent web browser company Netscape in order to protect its monopoly in personal computer operating systems, would enforcers have then understood the competitive implications of blunting the ability of new browser rivals to attack the market for PC operating systems? Such potential or nascent competition is particularly important in winner-take-all markets that often (and without any necessary trace of anticompetitive conduct) tip toward single-firm dominance—an outcome that emphasizes competition for the market, not just competition for greater share within a market. When dominance becomes embedded, markets are much less likely to self-correct.

Also, antitrust enforcement should fight any extension of the U.S. Supreme Court opinion in Ohio vs American Express Co. (wrongly decided in my view) to multisided business models generally. Any expansion of American Express would leave consumers and competitors vulnerable to a range of anticompetitive actions that are justified by a company sharing its increased profits with one out-of-market group of users at the expense of others.

The American Express decision paired this error with another one—the suggestion that direct evidence of harm to competition isn’t enough in an vertical case without the separate presentation of a properly defined antitrust market. The forthcoming FTC competition report could usefully untangle these knots by explaining how to identify the narrow slice of multisided markets actually at issue in American Express, and then offering thoughts on how to identify competitive harm in vertical cases generally.

Antitrust enforcement protects competition, not just consumers who buy things

Multiple speakers explained that antitrust protects the competitive process, not just direct purchasers or final consumers. Carl Shapiro, an economist at the University of California, Berkeley, proposed in the hearings that a business practice be judged to be anticompetitive if it harms trading parties on the other side of the market as a result of disrupting the competitive process.¹⁰ For Shapiro, this approach would give structure to antitrust law and economics in a world in which the dangers of horizontal agreements, exclusionary conduct, and anticompetitive horizontal and vertical mergers have all grown.¹¹

Think about the potential impact on workers from the market power of employers. University of Pennsylvania economist Ioana Marinescu proposed in her work, including with UPenn Law School professor Herbert Hovenkamp, that when merging employers in the same place hire workers with the same kinds of qualifications to do the same kind of job, traditional antitrust principles appropriately ask whether the workers would be harmed by a labor monopsony.

The extent to which labor monopsonies are generally the cause of lower wages for workers was hotly debated. Massachusetts Institute of Technology economist Nancy Rose, for example, questioned whether market concentration is generally the cause of low wages. At the same time, she recommended the study by Elena Prager at Northwestern University and Matt Schmitt at the University of California, Los Angles of hospital merger effects on labor as the type of study that can shed light on this question. And enforcement activity has recognized circumstances, concerning nurses and Silicon Valley workers for example, in which antitrust injury has been inflicted upon employees.

That recognition is the basis, for example, for the joint 2016 Department of Justice and Federal Trade Commission policy treating as illegal “no poach” agreements among companies not to hire each other’s workers. Similarly, in United States v. Anthem, Inc., the Department of Justice challenged a healthcare merger asserting, in part, that the increased buyer power of the new firm would “enhance Anthem’s leverage,” which would likely reduce the rates that hospitals and physicians would be able to earn.

So, there appears to be a broad consensus that merging employers could hold market power over labor and that where that would occur, the transaction should be examined using well-established antitrust principles.

Indeed, monopsony, as a concept generally, deserves more attention. Monopsony is monopoly turned upside down—with market power being directed by a buyer at a seller to force input prices artificially lower than they would be in a competitive market. As the Supreme Court said a long time ago, antitrust enforcement is not just about protecting consumers from rising prices but also about guarding more broadly against anticompetitive disruption of competitive pricing (and nonpricing terms).¹² That understanding reaches monopsonies, too.

Another example of antitrust enforcement ensuring competition arises when harm is to a business, not directly to a consumer. For example, the FTC successfully blocked the proposed Staples-Office Depot merger that would have harmed business customers. The FTC should not narrow its search for competitive harm to consumers only.

Modern economic analysis is up to the challenge

Of course, knowing more is always better than knowing less. But law enforcement agencies need to make the best judgements they can because justice delayed is justice denied. So, it’s important to recognize that modern economics offers analysis fit for these times. As Scott Morton said at the FTC hearings, “I think we have the tools. I do not think we need to spend ten years developing the tools.”¹³

Indeed, in 2018, Scott Morton wrote, along with Jonathan Baker and me in the Yale Law Journal, that in the aftermath of the Chicago School critique of antitrust enforcement, the economics profession has developed “many tools that identify and measure anticompetitive conduct.” Economics can now explain why it does not make sense to presume that markets will self-correct from monopoly or collusion, exclusionary vertical conduct cannot be anticompetitive because there is only a single monopoly profit, or most mergers in concentrated markets are efficient and therefore procompetitive. The FTC hearings featured important perspectives on the best way that antitrust agencies can apply today’s economic learnings in a manner that ensures that antitrust fully recognizes today’s competitive conditions.

Congress gave the FTC broader enforcement tools than just the Sherman and Clayton Acts

An important aspect of Federal Trade Commission authority is the scope of Section 5 of the Federal Trade Commission Act of 1914, which establishes the agency’s power to halt “unfair methods of competition.” I suggested at one hearing that Section 5 should be re-examined and applied to reach anticompetitive harms beyond the reach of the Sherman Act. This might include unilateral conduct that, as Steven Salop has written, “leads to achievement, maintenance, or enhancement of market power that likely harms consumers on balance.”

In its administrative complaint filed against Intel Corp., for example, the FTC alleged that Intel’s conduct constituted a “stand-alone” violation of Section 5 (that is, without reference to the Sherman Act). UPenn’s Hovenkamp has suggested that the FTC consider the use of Section 5 to attack monopoly in its incipiency, reach collusion-like activity (including through the use of certain most-favored nation clauses), and halt anticompetitive behavior outside a firm’s primary market, where these is no actionable threat of achieving market power in that other market.

So, for example, the FTC commissioners could consider whether input foreclosure is harmful to competition when conducted by an integrated firm with market power in a concentrated market for the production of a critical input where its upstream affiliate (the supplier of that input) is a substantial supplier of that input to downstream rivals.

After all, the FTC was given its authority in 1914 under the Federal Trade Commission Act precisely because Congress decided that the Sherman Act didn’t go far enough. Similarly, although the FTC’s Section 5 prohibition of “unfair and deceptive acts and practices” has traditionally been applied to consumer protection issues that are separate from competition questions, the agency should be alert to circumstances in which anticompetitive conduct is also unfair and deceptive. Imagine false statements by a seller to consumers that effectively prevent rivals from competing effectively to the detriment of those consumers.

Conclusion

These five lessons should inform the full spectrum of the FTC’s competition work, from framing the issues to be examined in a merger or conduct investigation to creation of remedies, the use of rulemaking authority, and competition advocacy. These five lessons also should apply to litigation, the ultimate test for antitrust enforcement. And they should also help generalist judges understand what antitrust law and economics have already established.

As the Washington Center for Equitable Growth’s Director of Markets and Competition Policy Michael Kades explains, government antitrust enforcement is hampered when courts require antitrust enforcers to spend their time and resources proving water makes things wet rather than bringing cases on behalf of consumers.

This is the moment when the FTC can again demonstrate the intellectual curiosity that was the basis for its creation—as an expert agency that rigorously analyzes markets and competition. The FTC’s competition hearings provide both a map for antitrust enforcement and a benchmark against which to measure future administrative and judicial decisions. Publication of a strong, pro-enforcement report and the integration of its learnings into the day-to-day work of the FTC will be an important and necessary step in the right direction.

—Jonathan Sallet is a senior fellow at the Benton Institute for Broadband & Society. I am appreciative to Jonathan Baker, Michael Kades, Steven Salop, Carl Shapiro, and Fiona Scott Morton for their review of this essay in draft form.

Antitrust and competition issues are receiving renewed interest, and for good reason. So far, the discussion has occurred at a high level of generality. To address important specific antitrust enforcement and competition issues, the Washington Center for Equitable Growth has launched this blog, which we call “Competitive Edge.” This series features leading experts in antitrust enforcement on a broad range of topics: potential areas for antitrust enforcement, concerns about existing doctrine, practical realities enforcers face, proposals for reform, and broader policies to promote competition. Howard Shelanski and Michael Kades have authored our second entry.

The octopus image, above, updates an iconic editorial cartoon first published in 1904 in the magazine Puck to portray the Standard Oil monopoly. Please note the harpoon. Our goal for Competitive Edge is to promote the development of sharp and effective tools to increase competition in the United States economy.

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For the first time in decades, antitrust policy is part of the national political debate. Widespread concerns about the conduct of digital platforms, arguments over whether a narrow focus on prices is missing larger competitive harms, and studies showing trends toward increased market concentration and higher profit margins have all motivated calls from diverse quarters for stronger U.S. antitrust enforcement. The data and concerns underlying this public discussion are rightly subject to serious debate, yet the pro-enforcement motivation evident in the current policy debate differs starkly in direction from the U.S. Supreme Court’s recent antitrust jurisprudence.

Over the past decade, the Supreme Court has, with one exception that we discuss below, followed a path of reduced enforcement, reflected in decisions weakening prohibitions against vertical restraints (Leegin Creative Leather Products Inc. v. PSKS Inc.), limiting the role for antitrust in regulated industries (Credit Suisse Securities (USA) LLC v. Billing), and increasing burdens on plaintiffs challenging conduct by “multisided platforms” (Ohio v. American Express Co.). Senator Amy Klobuchar (D-MN) underscored this divergence when questioning Judge Brett Kavanaugh in his recent Supreme Court confirmation hearings about how he might further limit antitrust doctrine. Although antitrust issues are not a central issue in his confirmation, the evidence is strong that Judge Kavanaugh would cement a five-judge conservative majority that would likely raise, not lower, barriers to antitrust enforcement.

The delicate balance on the Supreme Court, in which Kavanaugh would become a factor, is evident in the last two substantive antitrust cases the Supreme Court decided. In FTC v. Actavis, Inc., which is the exception we refer to in the paragraph above, a 5-to-3 majority (Justice Samuel Alito was recused) found that patent settlements can violate the antitrust laws in a decision that favored enforcers. In Ohio v. American Express Co., a 5-to-4 majority ruled that the plaintiffs had failed to establish anticompetitive effects, increasing the burden of proof at least in cases involving so called two-sided transaction markets. In each case, Justice Anthony Kennedy, whom Kavanaugh would replace, was the deciding vote. The available evidence suggests that Kavanaugh would side with the more conservative Justices in similar cases down the road.

Although Kavanaugh has penned only a few substantive antitrust decisions, those decisions reflect the conservative economic approach of the so-called Chicago School, which refers to a group of academics who began criticizing antitrust enforcement in the 1960s from an efficiency-oriented, neo-classical economic perspective, some of whom went on to become judges, such as Robert Bork, Frank Easterbrook, and Richard Posner. Through their lens, the Chicago School argued that many previously prohibited commercial activities were more likely to reduce prices for consumers than to harm competition and ushered in more lenient legal rules and policies.

More recently, those legal rules have been criticized for going too far and allowing businesses to get away with too much anticompetitive activity. Whether one agrees with that criticism, it is an important question whether a new Supreme Court Justice makes it more or less likely that the federal courts will shift to a more enforcement-oriented antitrust jurisprudence.

In the case of Judge Kavanaugh, the answer seems clearly to be no. In recent decisions, he has taken a strongly Chicago-School approach, invoking Judge Bork’s Antitrust Paradox in dissents that, if they were to become law, would weaken antitrust law’s limitations on horizontal mergers (mergers between competing firms) in two important ways. ¹⁴ First, he would weaken the presumption of illegality that arises when the government makes its initial case for harm. Second, he has articulated a narrow view of what evidence an enforcement agency or plaintiff can use to define a market. Let’s look at each of these issues in turn.

Weakening the presumption

Under current merger doctrine, the government must establish a prima facie case that a merger is anticompetitive, usually by showing it will substantially increase concentration in a relevant market. The defendants may then argue that the merger would create efficiencies that will outweigh the harm. Typically, courts are skeptical of efficiencies and require strong evidence that they will in fact materialize and offset any harm to competition.

Judge Kavanaugh’s dissent in the Anthem case reflects an assumption that efficiencies are likely and large. The case arose out of the U.S. Department of Justice’s challenge to Anthem Inc.’s proposed acquisition of Cigna Corp. The district court found that the health insurance market for large employers was presumptively anticompetitive, but then it rejected the merging parties’ defense—that the merger would create efficiencies and those procompetitive benefits would outweigh any harms. The district court rejected the defense expert’s opinion and found that both internal documentary evidence from Anthem and testimony from Cigna contradicted the efficiency defense. On appeal, the majority of the D.C. Circuit Court of Appeals agreed with the district court, stressing that the efficiency defense was a factual issue and could be reversed only if there were clear errors. The majority explained in detail why the efficiencies evidence was limited and failed to meet the requirements for rebutting the presumption of harm. ¹⁵

In dissent, Judge Kavanaugh agreed that the merger was presumptively anticompetitive, but he believed the defendants had met their burden in providing a procompetitive justification for the deal: the combined company would negotiate lower prices from health providers that would be passed along to its customers. Relying on the defendants’ expert and a consultant report, Judge Kavanaugh concludes, “In short, the record overwhelmingly establishes that the merger would generate significant medical cost savings for employers in all of the geographic markets at issue here … and employers would therefore spend significantly less on healthcare costs.” ¹⁶

In Judge Kavanaugh’s assessment, the district court should have flipped the burden back to the federal government, which had failed to return the volley. He wrote: “By contrast, the Government’s expert, Dr. Dranove, never did a merger simulation that calculated the amount of the savings that would result from the lower provider rates and be passed through to employers. … So we are left with Anthem-Cigna’s evidence showing $1.7 to $3.3 billion annually in passed-through savings for employers.” ¹⁷

On the one hand, the dispute between the majority and Judge Kavanaugh may be over the application of the standard of review, or how much evidence is required for an appellate court to overturn a district’s factual finding. But it is well established that where the evidence admits two different inferences, the trial court’s conclusion stands, even if the reviewing court would have chosen differently. On the other hand, the dispute may be over substantive antitrust law. Judge Kavanaugh’s dissent could reflect a view that, once defendants provide an estimate of savings that offset the potential harm, the government must offer a contrary estimate; it is not enough for the district court itself to reject the defendants’ efficiencies evidence.

Market definition

While Judge Kavanaugh’s dissent in the Anthem case suggests lowering the burden on defendants to establish an efficiency defense, his dissent in Federal Trade Comm’n v. Whole Foods suggests he would require a higher burden on the government to establish a presumption of illegality in a merger case. In that case, the district court had denied the Federal Trade Commission a preliminary injunction against Whole Foods’ acquisition of Wild Oats on grounds that the Commission failed to prove its definition of the relevant market as consisting of “premium natural organic supermarkets” rather than all supermarkets. On appeal, the majority reversed that decision, finding that the district court abused its discretion in denying the injunction. Judge Kavanaugh would have affirmed the district court’s ruling.

The dispositive issue in the case was showing what the Federal Trade Commission needed to make to obtain a preliminary injunction and whether the evidence satisfied that standard. That issue was, and continues to be, highly contentious, and Judge Kavanaugh’s dissent again indicated a view that the government should bear a relatively high burden of proof.

Importantly, Judge Kavanaugh appears to find that the government must have pricing evidence to prove a relevant market, arguing that: “In the absence of any evidence in the record that Whole Foods was able to (or did) set higher prices when Wild Oats exited or was absent, the District Court correctly concluded that Whole Foods competes in a market composed of all supermarkets.” ¹⁸ While courts often do rely on pricing evidence to define markets, such evidence is not always available and is not always required.

Indeed, the government’s economic expert (Kevin Murphy, from the University of Chicago) presented sophisticated economic analysis and the Federal Trade Commission presented significant documentary evidence in support of the Commission’s narrower market definition. If Judge Kavanaugh believes that such evidence is insufficient to meet the government’s burden—at least in the absence of quantitative price effects—then the Supreme Court, with Judge Kavanaugh’s membership, could change merger jurisprudence, making it less hospitable to stronger enforcement.

One might agree or disagree with Judge Kavanaugh’s positions in the above dissents, just as one might agree or disagree with recent calls for stronger antitrust enforcement. Our purpose here is to demonstrate why Judge Kavanaugh’s presence on the Supreme Court would likely widen rather than narrow the divergence between the direction of the Supreme Court and the direction of the public debate with respect to antitrust enforcement.

—Howard Shelanski is a professor of law at Georgetown University and a partner at the law firm Davis Polk & Wardwell LLP. Previously, he served as the Administrator of the Office of Information and Regulatory Affairs at the Office of Management and Budget in President Barack Obama’s White House. Michael Kades is the director for Markets and Competition Policy at the Washington Center for Equitable Growth. Prior to joining Equitable Growth, he worked as antitrust counsel for Sen. Amy Klobuchar (D-MN), the ranking member on the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights

Antitrust and competition issues are receiving renewed interest, and for good reason. So far, the discussion has occurred at a high level of generality. To address important specific antitrust enforcement and competition issues, the Washington Center for Equitable Growth is launching a new blog entitled “Competitive Edge.” This series will feature leading experts in antitrust enforcement on a broad range of topics: potential areas for antitrust enforcement, concerns about existing doctrine, practical realities enforcers face, proposals for reform, and broader policies to promote competition. We are honored that Fiona Scott Morton, has authored our inaugural entry.

The octopus image, above, updates an iconic editorial cartoon first published in 1904 in the magazine Puck to portray the Standard Oil monopoly. Please note the harpoon. Our goal for Competitive Edge is to promote the development of sharp and effective tools to increase competition in the United States economy.

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Last month’s court decision allowing AT&T Inc. to acquire Time Warner Inc. is an example of the inability of our current system of courts and enforcement to prevent the decline in competition in the modern U.S. economy. In the case of that merger, the Antitrust Division of the U.S. Department of Justice gets credit for making an attempt to block what it viewed as an anti-competitive transaction. What’s more, that view proved prescient after the now-merged firm almost immediately raised prices after executives testified that the synergies from the deal would immediately cause lower prices.

The court decision of U.S. District Judge Richard Leon demonstrated a lack of understanding of the markets, the concept of vertical integration, corporate incentives, and the intellectual exercise of forecasting what the unified firm would do. And so, not surprisingly, it produced a poor decision. The Supreme Court decision in Ohio v. American Express Company further weakens antitrust enforcement by complicating the analysis and raising the standard of proof for platform business cases.

There are many other settings where consumers deserve similar efforts to protect competition and where the two federal antitrust agencies have yet to take enforcement steps. This spring, both Bruce Hoffman, director of the Bureau of Competition in the Federal Trade Commission, and Makan Delrahim, assistant attorney general at the Department of Justice’s Antitrust Division, have publicly called for assistance in both finding new cases to bring and developing theories of harm. Fortunately, a new volume of The Yale Law Journal—bringing together top antirust scholars and papers presented at a conference last fall that was co-hosted by the American University Washington College of Law and the Washington Center for Equitable Growth—has just come out to meet this pressing need.

The recommendations in the issue do not require novel applications of antitrust law or innovative interpretations of antitrust law. They are low-risk and high-return cases for U.S. antitrust agencies to bring. But enforcement in these areas will require the agencies to look beyond old markets with lots of precedent, and instead analyze the products that consumers are now buying such as online hotel bookings, credit cards, technology standards, and mutual funds, or markets where consumers are selling such as labor markets. These are markets that do not have established jurisprudence or a recent history of enforcement, with the notable exception of American Express. More novel cases are harder to bring because an existing draft complaint is not already sitting in the files of the enforcement agencies.

The papers in the issue of The Yale Law Journal identify the types of cases the agencies should be pursuing such as anti-competitive most-favored-nation clauses. Consumers are buying ever-more goods and services online, and yet the contracts governing those prices have been subjected to no scrutiny in the United States. In Europe, an online travel agent such as Expedia Group Inc. may not require a hotel to keep its price equal or higher at all travel agencies that compete with Expedia; hotels are expressly allowed to give whatever discounts they prefer to different travel sites. In contrast, this price-increasing behavior remains effectively legal in the United States.

The Yale Law Journal issue also lays out the rationale for the agencies’ bringing cases involving harm to sellers, including employees, as this is a source of anti-competitive harm as much as higher prices. With some exceptions, antitrust enforcement has typically stayed away from these kinds of cases. Whether due to fear, doctrinal uncertainty, or misperceptions, this disclination should change.

Then there is the argument for using antitrust enforcement to end abuse by standard-setting organizations. New technologies are a key area where enforcement must keep up with consumers’ purchasing habits. Communication standards (such as those found in cellular technology—for example the so-called Long-Term Evolution standard), which are set by a standard-setting organization, often define the boundaries of competition. By a variety of conduct, some patent holders have exploited this standard-setting process across many technologies to undermine competition and harm consumers. Absent antitrust enforcement, this abusive conduct could delay the roll-out of the Internet of Things or increase its cost. The Yale Law Journal articles make a compelling case that economic theory and empirical evidence strongly support such actions. Although under Assistant Attorney General Delrahim—an acknowledged patent hawk—DOJ action protecting consumers in this area is unlikely, but at the FTC, Chairman Joe Simons was active in this area in his previous role as the FTC’s director of the Bureau of Competition, bringing the Rambus and Unocal cases.

Second, there are areas where the agencies may need to defend current doctrine or push back against mistaken doctrine. This category includes reaffirming the presumption in horizontal merger cases, redoubling efforts on vertical mergers after the AT&T-Time Warner decision (with full credit to the DOJ for bringing the case), and pushing back on doctrines that appear to limit the role of antitrust in pursuing predation cases. Further, in times of deregulation, active and vigorous antitrust enforcement is even more critical.

Multisided platforms such as credit cards, news sites, and auctions present old economic theories in a new setting, which courts find confusing. Although the Supreme Court’s recent decision in the American Express case limits the government’s ability to enforce the antitrust laws, the agencies must continue to be aggressive in their defense of competitive markets. Many platform cases will need to be brought promptly in order to clarify just how much protection from the antitrust laws the American Express decision will give these businesses.

Finally, there are important new areas for enforcement that require study of the kind only the agencies can do. Mutual funds that hold significant stakes in competing firms, such as the largest four domestic airlines, have the potential to lessen competition. The agencies have the power to examine communications between mutual funds and the companies they hold. Without such study, policymakers cannot learn the true impact on markets of many large, common owners. If that impact turns out to be significant and enforcers have done nothing to learn about it, then they will contribute to exposing U.S. consumers to more anti-competitive harm.

In its entirety, The Yale Law Journal issue lays out an initial roadmap of cases that are well-grounded in economic analysis and legal precedent. Enforcement in these areas would make U.S. markets more competitive. I have mailed a copy of this issue to both Chairman Simons and AAG Delrahim in the hopes that they find the content responsive to their call for enforcement assistance from the academic community. Each author has kindly agreed to answer any questions the agencies might have about their articles. I look forward to seeing the enforcement choices of these agencies in the year ahead.

I will close by, noting that this recent issue does not even analyze the conduct of the large technology companies that we often hear concerns about today. In the legislative realm, the U.S. Congress needs to increase the staff (with a larger budget) at both agencies to allow them to match their enforcement efforts to Gross Domestic Product. Competitive problems grow with the economy, but we have let our enforcement efforts stagnate. There is much still to do in this area to protect competition in the United States and the American consumer.

—Fiona M. Scott Morton is the Theodore Nierenberg Professor of Economics at the Yale University School of Management.

Letters

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