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Microsoft, Google, and a New Era of Antitrust

• Blair Levin
• Larry Downes

How businesses can navigate the increasing uncertainty around where and how antitrust law is enforced.

The U.S. federal government has brought major antitrust cases against Microsoft and Google. Regulators likely don’t expect to win either case outright, but the government doesn’t need to win these cases for them to have an impact. For one, an aggressive litigation strategy can provide a potent disruption to companies deemed too powerful. But these cases also send a message to European regulators, who have stepped into a leading role on antitrust. To navigate increasing uncertainty around where and how antitrust law is enforced, companies need to understand the complex politics of competing efforts to craft a new paradigm for competition law, and have plans in place for threading the needle and getting deals done.

In the last few months, the U.S. federal government has brought two major antitrust cases: one to block Microsoft’s acquisition of game developer Activision , and another against Google aimed at forcing the company to divest some of its advertising businesses. Along with the Federal Trade Commission’s failed effort to stop Meta’s acquisition of a virtual reality startup, an earlier federal case against Google regarding search, multiple ongoing state-level cases against the company, and reports the FTC will soon bring an action against Amazon, it appears that hunting season for large technology companies is in full swing.

• BL Blair Levin led the team that produced the FCC’s 2010 National Broadband Plan. He later founded Gig.U, which encouraged gigabit internet deployments in cities with major research universities. He is currently a Nonresident Senior Fellow with the Brookings Institution and Policy Advisor with New Street Research.
• Larry Downes is a co-author of Pivot to the Future:  Discovering Value and Creating Growth in a Disrupted Worl d  (PublicAffairs 2019). His earlier books include Big Bang Disruption , The Laws of Disruption , and Unleashing the Killer App .

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So what exactly is google accused of.

Google’s Chief Economist Hal Varian leaves after the first day of Google’s antitrust trial in Washington.

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Christina Pazzanese

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Digital economy expert says much of antitrust case comes down to how much influence search giant wields on default setting on devices like phones, PCs

Federal prosecutors have accused Google of using its deep pockets and status as the dominant internet search engine to shut out rivals and stifle meaningful competition. That charge is now the focus of a trial that began Tuesday in U.S. District Court in Washington, D.C., a proceeding that could have a significant impact on the tech industry.

The Gazette spoke with economist  Shane Greenstein , Martin Marshall Professor of Business Administration at  Harvard Business School , about the complexities of the case. Greenstein has written about the commercial evolution of the internet and studies competition and economics in the digital economy. This interview has been edited for clarity and length.

Shane Greenstein

GAZETTE: What is Google accused of doing, and why is this case getting so much attention?

GREENSTEIN: This is the most significant antitrust case brought by the DOJ since the late ’90s. Second, it’s not illegal to make money in the United States, and they’re not being sued for that reason. Sometimes you hear commentators say that, and that’s just wrong. It’s OK to be successful; it is also OK to be innovative. This is another one people sometimes say. They’re not being accused of being too innovative.

Antitrust law is principally interested in two things in this case. Has a firm achieved a certain level of success that can be characterized as a monopoly? Has the monopoly used its leading position in ways that abused the competitive process?

That’s very subtle. Let’s break it down: First, the government prosecutors must meet a legal standard for showing the firm has achieved a leading position. It has to prove by a lot that it established and maintained a monopoly. And as obvious as that might sound to some, that’s often where a lot of the legal fight is. Because if Google can define the market in such a way that they convince the judge that they’re in a very competitive setting and could lose market share at any time, a judge could say, “Well then, they don’t have a monopoly.”

If, on the other hand, the prosecution can persuade the judge that Google is in such a position so as not to be seriously worried about losing much market share to a competitor, then the monopoly can be sustained. That’s going to be the very first thing that gets litigated.

“The most recent numbers — 80 to 90 percent of just about everything in the U.S. has as its default the Google search engine.”

GAZETTE: Why has DOJ set its sights on Google rather than some other dominant tech firm?

GREENSTEIN: I absolutely understand why this case was brought. Once they achieved a leading position, did they take action that damaged the competitive process? It’s the actions they’re accused of taking. Google signs contracts for default settings with the distributors of phones and computers. It’s not everyone, but it’s the vast majority of device makers and distributors. The concern is that these contracts make it impossible for new entrants or too difficult for new entrants who might compete with Google to get their new services in front of users. That’s the accusation.

GAZETTE: Contracts that are exclusive or allegedly anti-competitive?

GREENSTEIN: Yes, anti-competitive. It concerns the details about the default. These contracts determine the defaults on systems when you buy them, like when you buy a PC or a smartphone, and what those defaults look like in the contracts. The most recent numbers — 80 to 90 percent of just about everything in the U.S. has as its default the Google search engine. In my opinion, the most problematic contracts are the ones with Apple.

GAZETTE:  What are Google and DOJ likely to argue?

GREENSTEIN: Google will argue that these defaults make the user experience more seamless and less full of friction. A default has to be set. In almost all devices, search engines serve as a default for many applications. And so, if something has to be set and since they’re so popular, they’ll argue, “What’s wrong with having them as the default? People want that anyway. If they’re doing things to help users get what they want anyway, that’s not a violation of antitrust.” That’s more or less going to be their argument.

The Department of Justice is going to argue that the default contracts are too restrictive. They don’t give users options for choice. Users, when they’re making the decision for defaults, typically make them at the moment they acquire the device. And so, these contracts so discourage consideration for any other default that it makes it challenging, if not impossible, for an alternative to ever get a foothold and establish a market.

It’s a lot of contracts. There’s a contract with AT&T; there’s a contract with Verizon. There’s one with every Android user. The one with Apple is the one that has gotten the most publicity. I’ve got to agree — that’s the one that’s the most eyebrow-raising if you’re an antitrust enforcer.

The Apple iPhone in the United States — nobody is as dominant in the smartphone market. Its primary competitor is Android, which is sponsored by Alphabet, the parent company of Google. Apple has a contract with Alphabet to make its default search engine Google’s. This is the part that just worries most experts who look at this: Google pays Apple in proportion to the number of searches Google gets from those searches. The amount of money exchanging hands over time is huge.

It’s not only for smartphones; it’s also for the Apple PC. Last year, it’s something like $10 billion dollars, and most of that is for the iPhone.

GAZETTE: So, they’ve purportedly captured the smartphone market because they own Android operating system, and they’ve locked down iPhones via these contracts?

GREENSTEIN: Capture is too strong a word, to be fair. You can change the default on your smartphone. It’s not an easy thing to do. But think about it: Apple and Alphabet compete in the smartphone market and yet, here they are, exchanging money to change the design on a competitor’s product.

The most likely alternative to the Android design is Apple’s. That is very suspicious. Two competitors are exchanging and agreeing to have the same feature. That is not allowed in monopolized markets. This is the principle at stake here, and that’s why they’re being brought to court. Google’s response is that this helps users, and why shouldn’t we pay them, just like a product supplier pays a grocery store for placement of their products on shelves? And then they’ll have to show that it helps users. The DOJ is going to come back with “Had you not done this, Apple could have made their own search engine or entertained offers from others. The money changing hands is changing incentives.”

“Google will argue that these defaults make the user experience more seamless and less full of friction.”

GAZETTE: Some argue Microsoft never fully recovered its dominance or reputation after that court battle with DOJ. Could Google potentially face a similar fate?

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GREENSTEIN:   That is a valid concern among several risks. A couple of things Google should worry about — one is bad publicity. Brands are extraordinarily valuable, and cases like this tend to damage brands a lot. That’s why I’m surprised Google agreed to go to court. I expected them to settle out of court because they’re putting their brand at risk. So is Apple, to some extent, and they’re not even named in the suit.

No. 2, there’s the contracts themselves, and the way business is done. It’s in a huge number of things they do, so if the court rules that Google cannot use these kinds of contracts, that’s a big change.

No. 3, damages are a risk. If the court says not only is it Google can’t use these contracts, but it prevented all this entry over the last X number of years, and that entry could have made this much difference, the court could come up with an estimate of the damages that’s enormous. The amount of money at stake is potentially mind-boggling.

GAZETTE: What kind of changes might Google users see?

GREENSTEIN:  It might change the process the day you buy a smartphone; it might change the process every time you buy an Apple computer. That’s something you might see down the road. I don’t think you’re going to see anything like that in the next couple of months because this is going to take a long time.

GAZETTE:  Meaning Google might no longer be the default search engine on their smartphones and laptops or that it could be pulled off entirely?

GREENSTEIN: You’d have options. That would happen all over the United States but not necessarily worldwide. This is another reason I was a little surprised Google allowed this to go to court. It’s going to make public a bunch of details and arguments that will make it easy for the European Union to potentially pass the administrative rules that accomplish similar ends. So, there are some risks here for Alphabet that are fairly substantial. And yet, they think they’ve got a good case.

GAZETTE: Does this case have potential ramifications for the technology industry as a whole?

GREENSTEIN:   Yes. This issue about defaults has shown up in other cases where firms develop monopoly power. The Big Five, they all worry about the legality of their default settings. Among them, Amazon does a little bit; Facebook does a little bit. Apple certainly does. Apple has got to be watching this very closely in relation to apps. The investor community is watching to see if the leadership is distracted. That was allegedly true in the Microsoft case.

Also, these kinds of cases tend to bring to light many details about how business gets done. Some in the industry might have speculated about those details, but not had perfect information about them. So, the analyst and investor community are watching this closely just because they will learn important things. Certainly, I’m going to be reading about this every day. And, of course, investors care. Both Apple and Google are at risk here, directly and indirectly.

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Antitrust Supreme Court Cases

Sometimes known as the Gilded Age, the late 19th century saw the rise of big business in the United States. “Titans of industry” accumulated vast wealth as their companies threatened to monopolize key sectors of the economy. Responding to this concern, Congress enacted the Sherman Antitrust Act in 1890. The Sherman Act sought to preserve competition in the market by forbidding monopolies and other business practices that restrain trade. Some restraints are blatantly anti-competitive, such as price fixing and market allocation. These are considered “per se” violations of the Sherman Act. Other alleged restraints are analyzed under the “rule of reason” to determine whether they unreasonably restrict trade.

In 1914, Congress passed the Federal Trade Commission Act. This created the FTC, which is the main federal agency in this area. The law also generally banned unfair methods of competition and unfair or deceptive acts or practices. Any conduct that violates the Sherman Act violates the Federal Trade Commission Act as well. Thus, while the FTC enforces only the Federal Trade Commission Act, the agency secures the protections provided by both laws.

Another notable antitrust law, also passed in 1914, is the Clayton Antitrust Act. This built on the Sherman Act by prohibiting certain practices that were not clearly covered by the earlier law. For example, Section 7 of the Clayton Act forbids mergers and acquisitions that harm competition or create a monopoly. The law also provides a private right of action based on violations of the Sherman Act or the Clayton Act. Individuals and businesses affected by a violation can sue for triple damages and seek an order against the unlawful practice.

Below is a selection of Supreme Court cases involving antitrust law, arranged from newest to oldest.

Author: Neil Gorsuch

The NCAA is not immune from the Sherman Act because its restrictions happen to fall at the intersection of higher education, sports, and money.

Author: Clarence Thomas

Evidence of a price increase on one side of a two-sided transaction platform cannot by itself demonstrate an anti-competitive exercise of market power.

Author: Anthony Kennedy

A non-sovereign actor controlled by active market participants enjoys state action antitrust immunity only if the challenged restraint is clearly articulated and affirmatively expressed as state policy, and the policy is actively supervised by the state.

Author: Stephen Breyer

Reverse payment settlement agreements in the pharmaceutical industry are not per se illegal but should be analyzed according to the rule of reason.

Author: John Paul Stevens

Each NFL team is a substantial, independently owned, and independently managed business, and the teams' objectives are not common. When the teams formed an entity to develop, license, and market their intellectual property, that entity's decisions about licensing the teams' separately owned intellectual property were concerted activity and covered by Section 1 of the Sherman Act.

Author: John Roberts

When there is no duty to deal at the wholesale level and no predatory pricing at the retail level, a firm is not required to price both of these services in a manner that preserves its rivals' profit margins.

Author: David Souter

A plaintiff must plead enough facts to state a claim to relief that is plausible on its face. More specifically, stating a claim under Section 1 of the Sherman Act requires a complaint with enough factual matter (taken as true) to suggest that an agreement was made. Asking for plausible grounds to infer an agreement calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of an illegal agreement.

Vertical price restraints should be judged by the rule of reason.

A patent does not necessarily confer market power on the patentee. Therefore, in any case involving a tying arrangement, the plaintiff must prove that the defendant has market power in the tying product.

It is not per se illegal under Section 1 of the Sherman Act for a lawful, economically integrated joint venture to set the prices at which it sells its products.

Author: Antonin Scalia

There are few exceptions from the proposition that there is no duty to aid competitors.

An abbreviated or “quick look” analysis is appropriate when an observer with even a rudimentary understanding of economics could conclude that the arrangements in question have an anti-competitive effect on customers and markets.

When football team owners had bargained with the players' union over a wage issue until they reached an impasse, and the owners then agreed among themselves (but not with the union) to implement the terms of their own last best bargaining offer, federal labor laws shielded such an agreement from antitrust attack.

A claim of primary-line competitive injury under the Robinson-Patman Act has the same general character as a predatory pricing claim under Section 2 of the Sherman Act. In either case, a plaintiff must prove that the prices at issue are below an appropriate measure of its rival's costs, and the competitor had a reasonable prospect of recouping its investment in below-cost prices.

Author: Harry Blackmun

A defendant's lack of market power in the primary equipment market did not preclude, as a matter of law, the possibility of market power in derivative aftermarkets.

Author: Per Curiam

Agreements between competitors to allocate territories to minimize competition are illegal, regardless of whether the parties split a market within which they both do business or merely reserve one market for one and another for the other.

An agreement was not outside the coverage of the antitrust laws simply because its objective was the enactment of favorable legislation.

Author: Lewis Powell

To survive a motion for summary judgment, a plaintiff seeking damages for a violation of Section 1 of the Sherman Act must present evidence that tends to exclude the possibility that the alleged conspirators acted independently. Also, the absence of any plausible motive to engage in the conduct charged is highly relevant to whether a genuine issue for trial exists within the meaning of Rule 56(e) on summary judgment. Lack of motive bears on the range of permissible conclusions that might be drawn from ambiguous evidence.

Author: Byron White

Without a countervailing pro-competitive virtue, a horizontal agreement among members of a professional organization to withhold from their customers a particular service that they desire cannot be sustained under the rule of reason.

Author: William Brennan

A plaintiff seeking the application of the per se rule must present a threshold case that the challenged activity falls into a category likely to have predominantly anti-competitive effects.

Although even a firm with monopoly power has no general duty to engage in a joint marketing program with a competitor, the absence of an unqualified duty to cooperate does not mean that every time that a firm declines to participate in a particular cooperative venture, that decision may not have evidentiary significance or may not give rise to liability in certain circumstances.

A per se rule was not applied to an NCAA television plan that constituted horizontal price-fixing and output limitation, even though these restraints normally would be illegal per se, since this case involved an industry in which horizontal restraints on competition are essential if the product is to be available at all. (However, the plan still violated Section 1 of the Sherman Act under the rule of reason.)

Tying arrangements need only be condemned if they restrain competition on the merits by forcing purchases that would not otherwise be made. A lack of price or quality competition does not create this type of forcing.

Horizontal agreements to fix maximum prices are on the same legal footing as agreements to fix minimum or uniform prices. More specifically, maximum fee agreements between medical societies and member doctors are per se illegal as price-fixing agreements under Section 1 of the Sherman Act.

An agreement among competing wholesalers to refuse to sell unless the retailer makes payment in cash in advance or upon delivery is a form of price fixing and is plainly anti-competitive. Thus, it is conclusively presumed illegal without further examination under the rule of reason.

The issuance of blanket licenses by performance rights organizations does not constitute price fixing that is per se unlawful under the antitrust laws.

The rule of reason, under which the proper inquiry is whether the challenged agreement promotes or suppresses competition, does not support a defense based on the assumption that competition itself is unreasonable.

Author: Thurgood Marshall

For plaintiffs in an antitrust action to recover treble damages on account of violations of Section 7 of the Clayton Act, they must prove an injury of the type that the antitrust laws were intended to prevent and that flows from that which makes the defendants' acts unlawful. The injury must reflect the anti-competitive effect of either the violation or anti-competitive acts made possible by the violation.

When anti-competitive effects are shown to result from particular vertical restrictions, they can be adequately policed under the rule of reason. (This case concerned only non-price vertical restrictions.)

A scheme of allocating territories to minimize competition at the retail level was found to be a horizontal restraint constituting a per se violation.

The longstanding exemption of professional baseball from the antitrust laws is an established aberration in light of the Court's holding that other interstate professional sports are not similarly exempt. However, Congress has acquiesced in the exemption, and it is entitled to the benefit of stare decisis .

Author: Earl Warren

A merger must be functionally viewed in the context of its particular industry. Factors to consider include whether the consolidation will take place in an industry that is fragmented rather than concentrated, whether the industry has seen a recent trend toward domination by a few leaders or has remained consistent in its distribution of market shares, whether the industry has experienced easy access to markets by suppliers and easy access to suppliers by buyers or has witnessed foreclosure of business, and whether the industry has witnessed the ready entry of new competition or the erection of barriers to prospective entrants.

Author: Hugo Black

A group boycott is not to be tolerated merely because the victim is only one merchant, whose business is so small that their destruction makes little difference to the economy.

Author: Tom C. Clark

Championship boxing is the “cream” of the boxing business and is a sufficiently separate part of the trade or commerce to constitute the relevant market for Sherman Act purposes.

Author: Stanley Reed

The ultimate consideration in determining whether an alleged monopolist violates Section 2 of the Sherman Act is whether it controls prices and competition in the market for such part of trade or commerce as it is charged with monopolizing.

Author: Harold Hitz Burton

A single newspaper, already enjoying a substantial monopoly in its area, violates the “attempt to monopolize” clause of Section 2 of the Sherman Act when it uses its monopoly to destroy threatened competition.

Author: William O. Douglas

Vertical integration of producing, distributing, and exhibiting motion pictures is not illegal per se. Its legality depends on the purpose or intent with which it was conceived, or the power that it creates and the attendant purpose or intent.

A practice short of a complete monopoly that tends to create a monopoly and deprive the public of the advantages from free competition in interstate trade offends the policy of the Sherman Act.

Agreements to fix prices in interstate commerce are unlawful per se under the Sherman Act, and no showing of so-called competitive abuses or evils that the agreements were designed to eliminate or alleviate may be interposed as a defense.

Author: Harlan Fiske Stone

To establish an unlawful agreement to restrain commerce, the government can rely on inferences drawn from the course of conduct of the alleged conspirators.

Author: Oliver Wendell Holmes, Jr.

The business of providing public baseball games for profit between clubs of professional baseball players is not within the scope of the federal antitrust laws.

Author: Louis Brandeis

The true test of legality is whether a restraint merely regulates and perhaps thereby promotes competition, or whether it may suppress or even destroy competition. To determine that question, a court must consider the facts peculiar to the business, its condition before and after the restraint was imposed, the nature of the restraint, and its effect, actual or probable. The history of the restraint, the evil believed to exist, the reason for adopting the particular remedy, and the purpose or end sought to be attained are all relevant facts.

Author: William Rufus Day

When, in this case, by concerted action, the names of wholesalers who were reported as having made sales to consumers were periodically reported to the other members of the associations, the conspiracy to accomplish that which was the natural consequence of such action could be readily inferred.

Author: Edward Douglass White

The public policy manifested by the Sherman Antitrust Act is expressed in such general language that it embraces every conceivable act that can possibly come within the spirit of its prohibitions, and that policy cannot be frustrated by resort to disguise or subterfuge.

The Sherman Antitrust Act should be construed in the light of reason. As so construed, it prohibits all contracts and combinations that amount to an unreasonable or undue restraint of trade in interstate commerce.

Author: Melville Weston Fuller

A combination may be in restraint of interstate trade and within the meaning of the Sherman Antitrust Act even when the persons exercising the restraint are not engaged in interstate trade, and some of the means employed are acts within a state and individually beyond the scope of federal authority.

Even if the separate elements of a scheme are lawful, when they are bound together by a common intent as parts of an unlawful scheme to monopolize interstate commerce, the plan may make the parts unlawful.

The monopoly and restraint denounced by the Sherman Antitrust Act are a monopoly in interstate and international trade or commerce, but not a monopoly in the manufacture of a necessity of life.

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Understanding the state of antitrust enforcement in the United States

Ayesha Rascoe

NPR's Ayesha Rascoe talks with Rutgers University law professor Michael Carrier about the state of antitrust enforcement in the United States.

Copyright © 2023 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

NCAA v. Alston

Comment on: 141 S. Ct. 2141 (2021)

• November 2021
• See full issue

In January of 2021, as the coronavirus pandemic reached its peak in the United States, Alabama Crimson Tide football coach Nick Saban won his seventh national collegiate championship. 1 For his efforts over the season, Saban was awarded a salary of $9.3 million, 2 itself a fraction of the more than $4 billion in revenue that college football generates each year. 3 Saban’s players, meanwhile, were eligible to receive the cost of attendance at the University of Alabama as compensation, which included “tuition and fees, room and board, books and other expenses related to attendance . . . .” 4 Last Term, in NCAA v. Alston , 5 the Supreme Court upheld a district court ruling that the National Collegiate Athletic Association (NCAA) rules limiting education-related compensation violated section 1 of the Sherman Act. 6 Shortly after the Court’s decision, the NCAA voted of its own accord to allow a student athlete to receive compensation in exchange for use of their name, image, and likeness (NIL). 7 Even after this series of changes, the NCAA still restricts the compensation that schools can provide directly to their athletes unrelated to education. 8 Although the student athletes did not challenge the remaining rules in the Supreme Court, the Alston decision, combined with background principles of antitrust law that the Court did not consider, lays the groundwork for a successful future challenge to the NCAA’s restrictions on compensation unrelated to education.

Although the NCAA generates roughly $1 billion in revenues each year, NCAA rules restrict student-athlete compensation. 9 Prior to Alston , the rules limited compensation to the cost of attendance, 10 meaning they served to restrict not only benefits unrelated to education, but also benefits tied to education, such as postgraduate scholarships, vocational school scholarships, expenses related to study abroad, and posteligibility internships. 11 These rules had largely escaped direct legal challenge since 1984, when the Supreme Court stated in NCAA v. Board of Regents of the University of Oklahoma 12 :

[T]he NCAA seeks to market a particular brand of football — college football. The identification of this “product” with an academic tradition differentiates college football from and makes it more popular than professional sports to which it might otherwise be comparable, such as, for example, minor league baseball. In order to preserve the character and quality of the “product,” athletes must not be paid , must be required to attend class, and the like. 13

In that case, several colleges challenged NCAA rules limiting the total number of football games that could be televised nationally, as well as the number of televised games that any single team could participate in 14 — restraints that applied to the consumer-side output market rather than the labor-side input market. The Court made the statement while explaining why these horizontal restraints on trade, which would ordinarily be held per se unlawful under the Sherman Act, are instead subject to the “rule of reason” test, in which courts conduct fact-specific analyses of the relevant market to determine whether there has been an antitrust violation. 15 In the decades after its decision, a circuit split emerged over whether the Court’s statement was binding precedent on the labor-side input market 16 or mere dicta. 17 This paved the way for Alston , which began in 2014 and 2015 when current and former Division I football and basketball players filed new challenges to the rules imposed by the NCAA and eleven of its conferences limiting the compensation that athletes may receive for their services. 18

The United States District Court for the Northern District of California held that limitations on education-related student-athlete benefits constituted unlawful restraints on trade under section 1 of the Sherman Act. 19 Because the court determined that “‘a certain degree of cooperation’ is necessary to market athletics competition,” 20 it applied the rule of reason balancing test to determine whether the rules violated the Sherman Act. 21 The rule of reason test contains three steps: first, the plaintiff must prove that the challenged restraint has a substantial anticompetitive effect; then, if the plaintiff succeeds, the burden shifts to the defendant to demonstrate the restraint results in procompetitive effects; finally, if the court finds procompetitive effects, the plaintiff must show the procompetitive benefit could be achieved through less restrictive means. 22

Although the court concluded that the rules limiting compensation do have the procompetitive effect of distinguishing collegiate athletics from professional athletics, it found that the NCAA could accomplish this effect through less restrictive means. 23 In particular, the district court concluded that education-related benefits, unlike benefits unrelated to education, are easily distinguishable from compensation paid to professional athletes. 24 Accordingly, the court left restrictions on payments unrelated to education undisturbed, while striking down limitations on education-related benefits. 25 At the same time, the decision left in place several limits on the newly permissible benefits, including that individual conferences can restrict education-related benefits even if the NCAA cannot. 26 Both parties appealed the decision. 27

The Ninth Circuit affirmed. 28 The NCAA limited its challenge to a narrow set of issues, including the district court’s application of the rule of reason’s second step. 29 The NCAA argued that the compensation restrictions were necessary to maintain the distinction between college and professional sports, thereby increasing consumer choice and enhancing competition. 30 The Ninth Circuit agreed with the district court, however, that only some of the restrictions — those on payments unrelated to education — served to enhance the distinction between college and professional athletics. 31 The NCAA also challenged the district court’s injunction as impermissibly vague, arguing that the relief would “usurp[] the association’s role as the ‘superintend[ent]’ of college sports.” 32 The Ninth Circuit again agreed with the district court, concluding that the district court “struck the right balance in crafting a remedy that both prevents anticompetitive harm to Student-Athletes while serving the procompetitive purpose of preserving the popularity of college sports.” 33 While the NCAA again appealed, the athletes did not appeal the court’s decision to leave non-education-related compensation limits intact. 34

The Supreme Court affirmed. 35 Writing for a unanimous Court, 36 Justice Gorsuch first concluded that the district court properly applied the rule of reason test rather than performing the quick review sometimes given to joint ventures. 37 Next, Justice Gorsuch agreed with the district court, and therefore the Ninth Circuit in O’Bannon v. NCAA , 38 that the Supreme Court’s opinion in Board of Regents did not create a binding precedent “reflexively” supporting the compensation rules. 39 As a final step in confirming that the rule of reason test applied, Justice Gorsuch agreed with the district court that the NCAA and its member schools are commercial enterprises subject to the Sherman Act. 40 Justice Gorsuch then reviewed the district court’s application of the rule of reason test. 41 Despite “agree[ing] with the NCAA’s premise that antitrust law does not require businesses to use anything like the least restrictive means of achieving legitimate business purposes,” 42 Justice Gorsuch ultimately viewed the district court’s analysis as in harmony with antitrust law, finding that “the district court nowhere — expressly or effectively — required the NCAA to show that its rules constituted the least restrictive means of preserving consumer demand.” 43 Justice Gorsuch also rejected the NCAA’s arguments regarding step three of the test, holding that the district court found permissible alternative rules that could deliver the same procompetitive effects without such burdensome restraints. 44 After agreeing with the district court’s application of the rule of reason test, Justice Gorsuch held that the district court’s injunction did not invite future courts to “micromanage” the NCAA, 45 but rather constituted a permissible antitrust remedy. 46

Justice Kavanaugh concurred to note that the NCAA’s remaining rules restricting non-education-related compensation, challenged in the district court but not appealed in the Supreme Court, raised serious antitrust questions as well. 47 Justice Kavanaugh emphasized three points: that the Supreme Court’s decision did not consider the legality of the non-education-related compensation rules, that the Court’s decision established that these rules would be analyzed under the rule of reason test, and that the Court’s decision raised serious questions about the legality of the remaining restraints under the rule of reason test. 48 In challenging the NCAA’s argument that maintaining compensation restrictions is necessary to distinguish college athletics from professional athletics, Justice Kavanaugh stated: “Businesses like the NCAA cannot avoid the consequences of price-fixing labor by incorporating price-fixed labor into the definition of the product.” 49 Although Justice Kavanaugh did suggest that the NCAA could protect itself from future judicial scrutiny by engaging in collective bargaining with student athletes, 50 he also flatly concluded that “[n]owhere else in America can businesses get away with agreeing not to pay their workers a fair market rate on the theory that their product is defined by not paying their workers a fair market rate. . . . The NCAA is not above the law.” 51

Although the Supreme Court did not have occasion to review the NCAA’s rules regarding compensation unrelated to education, its decision laid the groundwork for the dismantling of those rules in future proceedings. Prior to Alston , the Supreme Court had not definitively stated whether the NCAA’s compensation rules were subject to the rule of reason test under the Sherman Act; 52 now that the Court has clarified that they are, the remaining restrictions on compensation cannot pass scrutiny. Justice Kavanaugh’s concurrence already raised serious concerns about the legality of the remaining rules by arguing that the NCAA cannot justify restricting compensation “by calling it product definition.” 53 But neither Justice Kavanaugh’s concurrence nor the majority opinion analyzed a separate doctrinal hurdle for the NCAA: multimarket balancing. The NCAA’s justification for its remaining rules — that they enhance collegiate athletics by distinguishing them from professional sports — impermissibly balances harm in the labor-side market against benefits in the consumer-side market, benefits that do not accrue to the parties harmed by the challenged restraints (the student athletes). The NCAA’s sole justification for its remaining rules is therefore not a valid procompetitive justification and accordingly does not satisfy the second prong of the rule of reason test. Alston ’s subjecting the NCAA’s compensation rules to the rule of reason test, combined with the established impermissibility of multimarket balancing, therefore opens the door to further changes in the future of United States amateur athletics.

The second step of the rule of reason test requires the defendant to show that a procompetitive rationale exists that justifies the challenged restraint. 54 Only one procompetitive justification offered by the NCAA for its compensation rules survived the district court’s scrutiny 55 and was considered by the Supreme Court: that the rules preserve amateurism, which provides consumers a unique product distinct from paid professional sports. 56 The district court relied on this justification to leave in place the NCAA’s limitations on non-education-related benefits, stating that “[r]ules that prevent unlimited payments such as those observed in professional sports leagues, therefore, are procompetitive when compared to having no such restrictions.” 57 The district court erred, however, in allowing the NCAA to balance the potential procompetitive impact of the rules on the consumer-side output market against the anticompetitive restraints on trade in the labor-side market. 58

First, existing case law prohibits the district court’s decision to balance harms in the labor market against benefits in the consumer market. Although not in the Sherman Act context, the Supreme Court held while reviewing a merger in United States v. Philadelphia National Bank 59 that weighing procompetitive effects in one market with anticompetitive effects in another violates antitrust law. 60 Justice Brennan reasoned that “[i]f anticompetitive effects in one market could be justified by procompetitive consequences in another, the logical upshot would be that every firm in an industry could, without violating § 7, embark on a series of mergers that would make it in the end as large as the industry leader.” 61 Not long after, the Court confirmed in United States v. Topco Associates, Inc. 62 that this principle also applies to antitrust challenges brought under the Sherman Act. 63 In that case, Justice Marshall rejected the defendant’s attempt to justify its anticompetitive rules, stating that competition “cannot be foreclosed with respect to one sector of the economy because certain private citizens or groups believe that such foreclosure might promote greater competition in a more important sector of the economy.” 64 The Court has therefore made clear that its typical antitrust review does not allow for multimarket balancing.

Some scholars suggest, however, that the atypical nature of sports requires atypical antitrust review, and that multimarket balancing is a component of the necessary horizontal cooperation that the Supreme Court has held valid in the context of sports. 65 To be sure, in Board of Regents and other cases, the Court has stated that sports leagues have “a perfectly sensible justification for making a host of collective decisions,” including that otherwise competing teams have a collective “interest in making the entire league successful and profitable.” 66 In particular, the Court held in Brown v. Pro Football, Inc. 67 that professional leagues may exert monopsonistic buying power in the labor context. 68

Supreme Court cases analyzing the legality of professional sports league rules governing the player market have, however, held that antitrust law does not even apply. 69 In one of the first Court cases to approach this issue, Federal Baseball Club of Baltimore, Inc. v. National League of Professional Baseball Clubs , 70 the Court determined that professional baseball was exempt from antitrust scrutiny because “in order to attain for these exhibitions the great popularity that they have achieved, competitions must be arranged between clubs from different cities and States.” 71 Together, these decisions might have implied that, because horizontal restraints on trade are necessary to operate sports leagues, and because professional sports leagues may impose restraints on trade in the labor market exempt from antitrust scrutiny, the NCAA may impose horizontal restraints in the market for college-athlete labor.

The Court’s opinion in NCAA v. Alston opens the door to a different approach in the collegiate sports context. 72 First, the Court’s opinion establishes that, unlike in professional sports contexts, antitrust rules do apply to labor market rules in collegiate athletics. 73 The principal contribution of the Court’s decision was to make clear that the NCAA’s compensation rules are subject to Sherman Act scrutiny. 74 Once the Court holds that the rule of reason test applies, the burden shifts to the NCAA to offer a valid procompetitive justification for its rules. 75 As a result, the Court’s willingness to uphold horizontal restraints in professional sports contexts when it did not apply antitrust law does not require the Court to allow multimarket balancing once it has determined that antitrust law applies in the collegiate sports context.

Additionally, the compensation rules at issue in the Alston case are distinct from the horizontal cooperation upheld by the Court in other sports contexts. In Brown v. Pro Football, Inc ., professional football players challenged National Football League (NFL) rules establishing a “developmental squad” of substitute players with a fixed compensation of $1,000 per week. 76 Although the players alleged that this compensation cap violated the Sherman Act, the Supreme Court instead held that because the NFL imposed the plan after a failed effort to bargain with the players’ union, federal labor law shielded the NFL from antitrust scrutiny. 77 The NCAA, meanwhile, does not collectively bargain with its players, and therefore cannot claim that any dispute should instead be governed by labor law. 78 The lack of collective bargaining in the collegiate context is particularly important because it means that those harmed by the anticompetitive rules cannot negotiate to receive a portion of the benefit purportedly secured in the consumer market.

To be sure, if the NCAA were to engage in collective bargaining with its players, it might be able to receive more lenient treatment under antitrust law because student athletes, like professional athletes, would be able to negotiate for their fair share of the benefits coming from those labor market restraints. 79 For example, in some professional leagues, star athletes clearly earn less than their market value because the players have collectively agreed with the team owners that there should be a salary cap to ensure competitive balance. 80 But collective bargaining creates an avenue through which players can share in the benefits associated with that competitive balance, such as enhanced ticket sales and larger TV deals. If the NCAA similarly allowed student athletes to negotiate for their share of any procompetitive benefits, then the NCAA would be able to point to a procompetitive benefit in the labor market. However, absent such a change — one that might necessarily include waiving some of the compensation restrictions unrelated to education (since players would likely try to negotiate for such compensation as part of their collective bargaining) — the NCAA’s proffered procompetitive justification poses serious multimarket balancing problems.

Further supporting this objection’s seriousness, the Court did allude to multimarket balancing as a potential concern but tabled that argument only because the plaintiffs waived it. 81 Justice Gorsuch stated:

[T]he student-athletes do not question that the NCAA may permissibly seek to justify its restraints in the labor market by pointing to procompetitive effects they produce in the consumer market. Some amici argue that . . .  review should instead be limited to the particular market in which antitrust plaintiffs have asserted their injury. But the parties before us do not pursue this line. 82

Elsewhere in the opinion, Justice Gorsuch commented on multimarket balancing with language suggesting that the objection is serious. Justice Gorsuch remarked that the asserted benefits of the rules “[a]dmittedly” accrue only to “consumers in the NCAA’s seller-side consumer market rather than to student-athletes whose compensation the NCAA fixes in its buyer-side labor market,” but that “the NCAA argued [that] the district court needed to assess its restraints in the labor market in light of their procompetitive benefits in the consumer market — and the district court agreed to do so.” 83 Finally, Justice Kavanaugh also alluded to the fact that the purported competitive benefits of the rules do not accrue to the student athletes, lamenting that the “enormous sums of money” that collegiate athletics generate “flow to seemingly everyone except the student athletes.” 84 The Court’s references to the fact that the NCAA’s multimarket balancing went unchallenged could suggest that it has reservations about such balancing; at the very least, the references suggest that the Court would invite a line of argument regarding the permissibility of multimarket balancing.

If student athletes do accept Justice Kavanaugh’s invitation to challenge the remaining rules, future courts need not worry that they must either allow for multimarket balancing or risk destroying college athletics. There are Sherman Act–compliant NCAA rules that distinguish collegiate athletes from their professional counterparts that do not rest on the fact that collegiate athletes are unpaid — most notably the requirement that collegiate athletes remain enrolled while they compete. 85 This rule better serves to distinguish collegiate athletes from professional athletes; while the casual observer may not be aware how much collegiate or professional athletes are compensated for their efforts on the field, college fans can, unlike professional fans, take pride in sitting next to the star player in English 101. In fact, the district court found that the NCAA did not “establish that the challenged compensation rules . . . have any direct connection to consumer demand.” 86

Justice Kavanaugh’s concurrence foreshadows that significant changes may still come to the NCAA’s compensation rules. Even the NCAA may agree; days after the Alston decision, the NCAA adopted its policy allowing student athletes to benefit from NIL opportunities, such as endorsement deals. 87 In just the first month after the policy was adopted, Coach Saban estimated that incoming star Alabama quarterback Bryce Young earned almost $1 million in endorsements. 88 Still, the NCAA seems intent on restricting non-education-related compensation, with Division II Presidents Council chair Sandra Jordan declaring: “The new policy preserves the fact college sports are not pay-for-play . . . .” 89 The Court’s decision in Alston , however, means that pay-for-play is likely on the NCAA’s one-yard line.

^ Alex Scarborough, Alabama Crimson Tide’s Nick Saban Claims Record Seventh National Championship , ESPN (Jan. 12, 2021), https://www.espn.com/college-football/story/_/id/30696121/alabama-crimson-tide-nick-saban-claims-record-seventh-national-championship [ https://perma.cc/M89F-ZX55 ].

^ Steve Berkowitz et al., NCAA Salaries , USA Today (Nov. 17, 2020), https://sports.usatoday.com/ncaa/salaries [ https://perma.cc/R39N-HN4M ].

^ See Rey Mashayekhi, The Financial Fallout of a Canceled College Football Season , Fortune (Aug. 10, 2020, 9:49 PM), https://fortune.com/2020/08/10/college-football-cancelled-2020-ncaa-financial-impact-revenue-schools-big-ten-sec-acc-big-12-pac-12 [ https://perma.cc/N82N-M68S ].

^ NCAA , Division I Manual 209 (2021), https://web3.ncaa.org/lsdbi/reports/getReport/90008 [ https://perma.cc/X3PS-K2JQ ]; see id . at 206–07.

^ 141 S. Ct. 2141 (2021).

^ See id . at 2151–52, 2166.

^ The Alston holding did not compel the NCAA’s NIL decision because the ruling left the NCAA’s rules limiting compensation unrelated to education undisturbed. See id . at 2165.

^ See O’Bannon v. NCAA, 802 F.3d 1049, 1052 (9th Cir. 2015).

^ See In re NCAA Athletic Grant-in-Aid Cap Antitrust Litig., 375 F. Supp. 3d 1058, 1071 (N.D. Cal. 2019).

^ Id . at 1088.

^ 468 U.S. 85 (1984).

^ Id . at 101–02 (emphasis added).

^ See id . at 94–96.

^ See id . at 101–03.

^ See McCormack v. NCAA, 845 F.2d 1338, 1345 (5th Cir. 1988) (holding that because the NCAA’s compensation rules did not violate antitrust laws, enforcement actions undertaken to uphold the rules were not an illegal group boycott). The Fifth Circuit relied on the Board of Regents decision to determine that the compensation rules were valid. Id . at 1344.

^ See O’Bannon v. NCAA, 802 F.3d 1049, 1075 (9th Cir. 2015) (holding that the NCAA’s rules limiting compensation below the full cost of attendance were more restrictive than necessary to serve the procompetitive goal of maintaining amateurism). The Ninth Circuit concluded that the Board of Regents discussion of amateurism was dicta. Id . at 1063.

^ See In re NCAA Athletic Grant-in-Aid Cap Antitrust Litig., 375 F. Supp. 3d 1058, 1061–62 (N.D. Cal. 2019). Cases brought by several plaintiffs were consolidated into a single case during pretrial proceedings. Id . at 1065 n.5.

^ 15 U.S.C. § 1; In re NCAA , 375 F. Supp. 3d at 1110.

^ In re NCAA , 375 F. Supp. 3d at 1066 (quoting O’Bannon , 802 F.3d. at 1069).

^ O’Bannon , 802 F.3d at 1070.

^ In re NCAA , 375 F. Supp. 3d at 1082–83.

^ Id . at 1083.

^ See id . at 1087–88.

^ Id . at 1090.

^ See In re NCAA Athletic Grant-in-Aid Cap Antitrust Litig., 958 F.3d 1239, 1243 (9th Cir. 2020).

^ Id . at 1244.

^ Id . at 1257.

^ Id . at 1263 (quoting O’Bannon v. NCAA, 802 F.3d 1049, 1074 (9th Cir. 2015)).

^ See Alston , 141 S. Ct. at 2154.

^ Id . at 2166.

^ Id . at 2147.

^ See id . at 2155. The Court assumed for the sake of its analysis that the NCAA correctly identified itself as a “joint venture.” Id . When the Court determines that the procompetitive effects flowing from restraints imposed by joint ventures are either nonexistent or necessary, or as the Court put it, “at opposite ends of the competitive spectrum,” the Court can determine the validity of the rules in the “twinkling of an eye.” Id . at 2155 (quoting NCAA v. Bd. of Regents of the Univ. of Okla., 468 U.S. 85, 109 n.39 (1984)); see id . at 2155–56.

^ 802 F.3d 1049, 1063 (9th Cir. 2015).

^ Alston , 141 S. Ct. at 2158.

^ Id . at 2158–59.

^ Id . at 2160.

^ Id . at 2161.

^ Id . at 2162; see id . at 2161–62.

^ See id . at 2164.

^ Id . at 2163 (quoting Brief for Petitioner at 50, Alston , 141 S. Ct. 2141 (No. 20-512)).

^ See id . at 2166.

^ See id . at 2166–67 (Kavanaugh, J., concurring).

^ See id . at 2166–68.

^ Id . at 2168.

^ Id . at 2169.

^ See id . at 2167.

^ See Ohio v. Am. Express Co., 138 S. Ct. 2274, 2284 (2018).

^ In re NCAA Athletic Grant-in-Aid Cap Antitrust Litig., 375 F. Supp. 3d 1058, 1062 (N.D. Cal. 2019).

^ Alston , 141 S. Ct. at 2152.

^ In re NCAA , 375 F. Supp. 3d at 1083.

^ See Alston , 141 S. Ct. at 2152.

^ 374 U.S. 321 (1963).

^ See id . at 370.

^ 405 U.S. 596 (1972).

^ See id . at 610. The defendant attempted to justify anticompetitive rules it had imposed in the buying market by pointing to its need to cooperate to compete in the consumer market. Id . at 598, 605.

^ Id . at 610.

^ See, e.g ., Gregory J. Werden, Cross-Market Balancing of Competitive Effects: What Is the Law, and What Should It Be? , 43 J. Corp. L . 119, 132 (2017).

^ Am. Needle, Inc. v. NFL, 560 U.S. 183, 202 (2010).

^ 518 U.S. 231 (1996).

^ See id . at 231.

^ See, e.g ., Fed. Baseball Club of Balt., Inc. v. Nat’l League of Pro. Baseball Clubs, 259 U.S. 200, 200 (1922) (holding that professional baseball is exempt from antitrust scrutiny).

^ 259 U.S. 200.

^ Id . at 208.

^ The Supreme Court has held that it will review different sports leagues in distinct manners. See Radovich v. NFL, 352 U.S. 445, 451 (1957) (“The Court was careful to restrict [ Toolson v. New York Yankees, Inc ., 346 U.S. 356 (1953)] to baseball . . . . ‘ Toolson is not authority for exempting other businesses merely because of the circumstance that they are also based on the performance of local exhibitions.’” (quoting United States v. Int’l Boxing Club of N.Y., Inc., 348 U.S. 236, 242 (1955))).

^ Prior to the Court’s decision, “legal analysis of the NCAA’s monopsony power remain[ed] underdeveloped due, in part, to [the] unfortunate dicta in Board of Regents .” Jeffrey L. Harrison & Casey C. Harrison, The Law and Economics of the NCAA’s Claim to Monopsony Rights , 54 Antitrust Bull . 923, 923–24 (2009).

^ See Alston , 141 S. Ct. at 2145.

^ Id . at 2160 (quoting Ohio v. Am. Express Co., 138 S. Ct. 2274, 2284 (2018)).

^ Brown v. Pro Football, Inc., 518 U.S. 231, 231 (1996).

^ See Alston , 141 S. Ct. at 2168 (Kavanaugh, J., concurring); Brown , 518 U.S. at 237.

^ Alston , 141 S. Ct. at 2168 (Kavanaugh, J., concurring).

^ See, e.g ., Brian Windhorst & Darren Rovell, How Much Would LeBron Make in an Open Market? Look to Ronaldo , ESPN (July 11, 2018), https://www.espn.com/nba/story/_/id/24062252/how-much-lebron-james-make-open-market-look-cristiano-ronaldo-nba [ https://perma.cc/YU8X-XJVE ].

^ See Alston , 141 S. Ct. at 2155.

^ Id . (citation omitted). The Court cited an amicus brief that argued courts should not engage in the policy-based exercise of “trad[ing]-off” competition in one market for competition in another. Brief for American Antitrust Institute as Amicus Curiae in Support of Respondents at 3, 11–12, Alston , 141 S. Ct. 2141 (Nos. 20-512, 20-520). This argument is made even stronger by the Court’s holding that the NCAA’s compensation rules are not exempt from antitrust scrutiny. Alston , 141 S. Ct. at 2145.

^ Id . at 2168 (Kavanaugh, J., concurring).

^ NCAA , supra note 4, at 165.

^ Michelle Brutlag Hosick, NCAA Adopts Interim Name, Image and Likeness Policy , NCAA (June 30, 2021), <a href="https://www.ncaa.org/about/resources/media-center/news/ncaa-adopts-interim-name-image-and-likeness-policy ">https://www.ncaa.org/about/resources/media-center/news/ncaa-adopts-interim-name-image-and-likeness-policy [ https://perma.cc/EMT3-3283 ].

^ Alex Scarborough, Alabama QB Bryce Young Approaching $1M in Endorsement Deals, Says Coach Nick Saban , ESPN (July 21, 2021, 11:45 AM), <a href="https://www.espn.com/college-football/story/_/id/31849917/alabama-qb-bryce-young-approaching-1m-endorsement-deals-says-head-coach-nick-saban ">https://www.espn.com/college-football/story/_/id/31849917/alabama-qb-bryce-young-approaching-1m-endorsement-deals-says-head-coach-nick-saban [ https://perma.cc/4688-R5QH ].

^ Hosick, supra note 87.

November 10, 2021

More from this Issue

Brnovich v. democratic national committee, the statistics.

• James Mulhern

Antitrust Law

The authors would like to thank Peter Carstensen, Bert Foer, Gene Kimmelman, Jack Kirkwood, Ganesh Sitaraman, Sandeep Vaheesan, Spencer Weber Waller, and participants in the April 2018 Roosevelt Institute Twenty-First Century Antitrust Conference for their helpful comments.

2 Article 87.2 What’s in Your Wallet (and What Should the Law Do About It?) Natasha Sarin Assistant Professor of Law, the University of Pennsylvania Carey Law School; Assistant Professor of Finance, the Wharton School of the University of Pennsylvania.

I thank participants at the Symposium and in the Work-in-Progress Workshop at the Law School for comments and the Jerome F. Kutak Faculty Fund for its generous research support

We thank William Blumenthal, C. Frederick Beckner III, and the participants in the Law Review’s May 2019 Symposium on Reassessing the Chicago School of Antitrust for their helpful comments, as well as Dylan Naegele for his able research assistance.

The author is grateful for comments from Andrew Gavil, participants at The University of Chicago Law Review’s annual symposium, and workshops at King’s College London and University College London. The author also thanks the staff of The University of Chicago Law Review for their excellent editorial guidance. The views expressed here are the author’s alone. Email: [email protected] . 

The Chicago School, said to have influenced antitrust analysis inescapably, is associated today with a set of ideas and arguments about the goal of antitrust law. In particular, the Chicago School is known for asserting that economic efficiency is and should be the only purpose of antitrust law and that the neoclassical price theory model offers the best policy tool for maximizing economic efficiency in the real world; that corporate actions, including various vertical restraints, are efficient and welfare-increasing; that markets are self-correcting and monopoly is merely an occasional, unstable, and transitory outcome of the competitive process; and that governmental cures for the rare cases where markets fail to self-correct tend to be “worse than the disease.”

I am deeply grateful to Eric Posner, Sanjukta Paul, Brian Callaci, and the participants of the Reassessing the Chicago School of Antitrust Law Symposium for their helpful comments and suggestions.

For thoughtful engagement and comments, we are grateful to Scott Hemphill, William Kovacic, Fiona Scott Morton, Nancy Rose, Jonathan Sallet, Carl Shapiro, Sandeep Vaheesan, and Joshua Wright, as well as staff at the FTC and participants in the Symposium on Reassessing the Chicago School of Antitrust Law at The University of Chicago Law School. We also thank the editors of The University of Chicago Law Review for careful editing.

Open, competitive markets are a foundation of economic liberty. A lack of competition, meanwhile, can enable dominant firms to exercise their market power in harmful ways.

High tech industries are not only lucrative, but also highly innovative and dynamic. Large firms are not their sole source of innovation, however.

This Essay was prepared for the symposium organized by The University of Chicago Law Review on Reassessing the Chicago School of Antitrust Law, held on May 10–11, 2019. We thank the participants of the symposium for helpful feedback. Special thanks also to Patrick Todd for illuminating conversations. We are indebted to the over one hundred research assistants at Columbia Law School and The University of Chicago Law School that helped us gather and code the antitrust data we employ in this Essay. Our thanks also to the antitrust enforcers in the 103 agencies that generously provided information for this study. We gratefully acknowledge the funding by the National Science Foundation that supported the early data gathering effort (see NSF-Law & Social Sciences grants 1228453 & 1228483, awarded in September 2012). The coding was subsequently expanded with the generous support of the Columbia Public Policy Grant: “Does Antitrust Policy Promote Market Performance and Competitiveness?,” awarded in June 2015, and additional financial support from Columbia Law School. We also thank the Baker Scholars fund at The University of Chicago Law School for financial support. Except as otherwise noted, all data is available at the Comparative Competition Law Project website, http://comparativecompetitionlaw.org .

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What Did Google Do?

What you need to know about the antitrust case against the tech giant.

By Andrew Ross Sorkin ,  Jason Karaian ,  Michael J. de la Merced ,  Lauren Hirsch and Ephrat Livni

This Nov. 17 and 18, DealBook opens its doors to our first Online Summit . Join us as we welcome the most consequential newsmakers in business, policy and culture to explore the pivotal questions of the moment — and the future. Watch from anywhere in the world, free of charge. Register now .

What you need to know about the Google case

The Department of Justice has filed its long-awaited antitrust lawsuit against Google, “the government’s most significant legal challenge to a tech company’s market power in a generation,” according to The New York Times’s David McCabe, Cecilia Kang and Dai Wakabayashi . It’s big, complicated and could take years to resolve — here’s the state of play:

The lawsuit targets the “cornerstones of Google’s empire,” its search tools. The Justice Department alleges that Google illegally protects a monopoly in search that harms competitors and consumers. Google pays companies like Apple billions of dollars to make its search engine the default option on their devices, shutting out rivals. Google then uses this grip to collect data from users that gives its search-based advertising business an unfair advantage, too.

More competition from other search engines, the Justice Department asserts, would force Google to compete on grounds that would promote better consumer protections in the digital age.

What the Justice Department said: Google “has maintained its monopoly power through exclusionary practices that are harmful to competition,” the deputy U.S. attorney general Jeffrey Rosen said at a news conference . You can read the government’s full case here .

How Google responded: “People use Google because they choose to, not because they’re forced to, or because they can’t find alternatives,” wrote Kent Walker, the company’s chief legal officer, in a lengthy blog post .

What others are thinking: “Some might try to characterize today’s filing as a partisan vendetta by the Trump administration. That is the false narrative Google wants you to hear,” said Luther Lowe , senior vice president of public policy at Yelp. “The case is clear — in fact, it could have gone further,” said Senator Elizabeth Warren . Many other business leaders, policymakers and antitrust experts have weighed in .

The questions that remain

A better question might be, “This again?” The F.T.C. conducted a two-year antitrust investigation into Google under President Barack Obama, which went nowhere. Bill Barr, the attorney general, pushed hard to bring this new case before the election, but even if Democrats take the White House, experts say that it is unlikely to be withdrawn — some staff attorneys at the Justice Department have taken issue with how quickly it was filed, but they still consider the evidence solid . Critics argue that antitrust regulators rely on an outdated legal framework unsuited to deal with tech giants, but as these companies’ power has grown, so too has bipartisan unease .

How long will it take?

“This legal case is going to be loud, confusing and will most likely drag on for years,” writes The Times’s Shira Ovide . And a bipartisan coalition of attorneys general from states including New York, Colorado and Iowa said yesterday that they would conclude their own probe into Google “in the coming weeks.” European antitrust regulators sued Google in 2015 based on similar facts, and settled in 2018. The U.S. Justice Department’s landmark antitrust case against Microsoft was filed in 1998 and settled in 2001.

Is this like the Microsoft case?

Yes, but not exactly. Google is charged with monopolizing search by using restrictive and exclusive deals, like Microsoft’s bundling of software programs with its operating system. Microsoft comes up a lot in the Google case, in fact: “Back then, Google claimed Microsoft’s practices were anticompetitive, and yet, now, Google deploys the same playbook to sustain its own monopolies,” the suit accuses.

Google says that other companies, including Microsoft, control prime mobile and desktop space, so it negotiates for “eye-level shelf space” to place its products like a cereal brand would with supermarkets.

Will Google get broken up?

“Nothing is off the table,” said the associate deputy attorney general Ryan Shores. A trial judge ordered a breakup in the Microsoft case, but an appeals court perceived bias in the decision and the Justice Department eventually settled the case. The E.U. has generally eschewed breakups as a remedy — it settled its antitrust case against Google for abusing its power in the mobile phone market with a fine and behavioral changes that critics say haven’t been effective . A recent House report accused Facebook, Google, Amazon and Apple of various monopoly strategies, but it didn’t call for breakups.

Whatever the outcome, investors don’t seem worried: Shares in Google’s parent, Alphabet, rose yesterday, and are also up in premarket trading today. BCA Research ran the numbers on past antitrust cases and found that companies forced to break up outperformed the market after the judgments:

Could Google just pay to make this go away?

With more than $120 billion in cash and an army of lawyers, it has the power to drag this out for a long time if it wants to. Or it could dip into the funds to settle the case with a fine and some promises to behave differently. State attorneys general fear this sort of anticlimactic ending, which is part of why they’re filing separate suits, giving them leverage to move independently if they think the Justice Department might settle too soon or too leniently.

Further reading:

The legal fight thrusts Sundar Pichai, Alphabet’s low-key C.E.O., into the line of fire

Google is up against laws that thwarted Microsoft — and others since 1890

“ It’s Google’s World. We Just Live in It .”

Today’s DealBook newsletter was written by Andrew Ross Sorkin and Lauren Hirsch in New York, Ephrat Livni in Washington, and Michael J. de la Merced and Jason Karaian in London.

HERE’S WHAT’S HAPPENING

The stimulus drama drags on. House Speaker Nancy Pelosi said she hoped to reach an agreement with the White House by the end of the week, and is expected to speak again with Treasury Secretary Steven Mnuchin today. But Senator Mitch McConnell, the majority leader, told colleagues he had advised the Trump administration not to strike a deal before the election. Separately: Why the Fed’s $4 trillion lifeline never materialized .

Revelations about President Trump’s business ties to China. A Trump-owned company controls a previously undisclosed Chinese bank account, according to a Times analysis of the president’s financial records. It highlights his family’s efforts to win business there, even after he took office.

British scientists plan to deliberately infect volunteers with the coronavirus. The testing strategy, known as a human challenge trial , is meant to speed up testing of vaccines. But using it in this context has spurred debate, given that Covid-19 has no cure and few widely used treatments. Also on vaccine development, here’s how the F.D.A. stood up to the White House on the approval timeline.

Leon Black asks Apollo’s board to examine his ties to Jeffrey Epstein. Mr. Black requested the review , which will be conducted by the law firm Dechert, after The Times reported on at least $50 million in payments he made to entities controlled by the financier and sex offender, who died last year. In other news, a federal judge said that the deposition transcripts of the Epstein associate Ghislaine Maxwell should be made public .

Chinese tech giants try to thwart Nvidia’s deal to buy ARM. Companies like Huawei have reportedly urged regulators in Beijing to block the $40 billion acquisition of the chip designer, Bloomberg reports . It’s the latest potential regulatory roadblock for the blockbuster transaction.

The latest on Goldman’s legal headaches

An Asian subsidiary of Goldman Sachs plans to plead guilty to settle a U.S. investigation into the company’s role in a corruption and bribery scandal involving 1MDB, a Malaysian investment fund, The Times’s Matt Goldstein reports .

It would be the first time Goldman had pleaded guilty in a federal investigation. The bank’s parent company would admit mistakes in its dealings with the fund, which has been accused of stealing money for powerful Malaysians, including a former prime minister. But it has avoided having to make a guilty plea at the parent-company level, which could have hurt its ability to work with clients like pension funds. Still, the facts of the case will challenge the firm’s contention that rogue employees participated in the 1MDB schemes without approval.

The firm will pay over $2 billion in penalties to the U.S. authorities, on top of the $2.5 billion that it agreed to settle an investigation by the Malaysian government a few months ago.

Goldman’s legal troubles aren’t over. A federal magistrate judge ruled yesterday that its former C.E.O. Lloyd Blankfein and former president Gary Cohn must testify in a gender-discrimination lawsuit filed by former employees, one of the biggest such cases in Wall Street history. Goldman’s current C.E.O., David Solomon, may also have to testify.

Netflix’s pandemic bump is over

Business is good, just not as good as investors thought. The streaming giant reported 2.2 million new memberships for the third quarter, about one million lower than expected, and said that subscriptions for the fourth quarter would be lower than analysts’ estimates, too. But thanks to its subscription surge earlier in the pandemic, Netflix expects to close the year with a record number of new members, about 34 million, giving it just over 200 million subscribers around the world.

Deal Professor: Waiting for the wave

Steven Davidoff Solomon , a.k.a. the Deal Professor, is a professor at the U.C. Berkeley School of Law and the faculty co-director at the Berkeley Center for Law, Business and the Economy.

The long-predicted tidal wave of coronavirus-driven corporate bankruptcies has yet to arrive.

To be sure, the pandemic has pushed some famous names into Chapter 11, including Chuck E. Cheese, J.C. Penney and Neiman Marcus. S&P Global Market Intelligence says that 527 companies with public debt have filed for bankruptcy so far this year, more — but not that much more — than the 477 that filed over the same period last year. It also notes that the weekly totals have been slowing recently.

What happened?

While the coronavirus recession has pushed many companies over the edge, many of these were already embattled, from oil and gas drillers like Chesapeake Energy to retailers like Neiman Marcus. And others forced into Chapter 11, including the rental-car company Hertz and the circus operator Cirque du Soleil, were struggling under big debt loads.

There are other factors:

Many parts of the U.S. remain open, keeping economic activity up.

Markets are still awash in liquidity, giving many companies access to sorely needed financing. And interest rates are so low that the risk of taking on too much debt is reduced.

The private sector has adapted remarkably well to the new normal. While many restaurants have been devastated, others are thriving on takeout. And even movie theaters, which are clearly on the brink, are at least beginning to rent out their venues for private screenings.

The pandemic will force more bankruptcy filings, particularly if a vaccine is delayed. And S&P does not track bankruptcies of smaller businesses, which have suffered more, particularly in states with tougher lockdowns.

But let’s be clear: That flood of huge bankruptcies? It’s probably never coming.

THE SPEED READ

The movie theater chain AMC plans to sell stock to raise money, while warning it may still be forced to file for bankruptcy protection. ( CNBC )

The French media conglomerate Vivendi plans to stage an I.P.O. for Universal Music Group, the label behind Taylor Swift and Lady Gaga, in 2022. ( Reuters )

Blank-check funds run by private equity firms have struggled to attract investor interest. ( Axios )

Politics and policy

Federal officials and tech giants are trying to send a message that Russian efforts to interfere in the 2020 elections are no hoax. ( NYT )

Elliott Broidy, a former top fund-raiser for President Trump, pleaded guilty to conspiring to violate foreign lobbying laws. ( NYT )

All the weak points of American health care are working against the rollout of antibody treatments for Covid-19. ( NYT )

At least 2,000 law enforcement agencies have tools to break into encrypted smartphones, a study found. ( NYT )

Uber said it might overhaul its business if voters rejected a California ballot initiative that would prevent gig-economy workers from being classified as employees. ( WSJ )

Best of the rest

Travis Kalanick, the Uber founder, is now a corporate real-estate mogul. ( WSJ )

Tom Friedman asks if the pandemic will transform American education, health care and attitudes toward switching professions. ( NYT Opinion )

The pandemic has produced a spike in applications to top business schools. ( Bloomberg )

We’d like your feedback! Please email thoughts and suggestions to [email protected] .

Andrew Ross Sorkin is a columnist and the founder and editor-at-large of DealBook. He is a co-anchor of CNBC’s Squawk Box and the author of “Too Big to Fail.” He is also the co-creator of the Showtime drama series Billions. More about Andrew Ross Sorkin

Jason Karaian is the editor of DealBook, based in London. He joined The Times in 2020 from Quartz, where he was senior Europe correspondent and later global finance and economics editor. More about Jason Karaian

Michael de la Merced joined The Times as a reporter in 2006, covering Wall Street and finance. Among his main coverage areas are mergers and acquisitions, bankruptcies and the private equity industry. More about Michael J. de la Merced

Lauren Hirsch joined the New York Times from CNBC in 2020, covering business, policy and mergers and acquisitions.  Ms. Hirsch studied comparative literature at Cornell University and has an M.B.A. from the Tuck School of Business at Dartmouth. More about Lauren Hirsch

Ephrat Livni reports from Washington on the intersection of business and policy for DealBook. Previously, she was a senior reporter at Quartz, covering law and politics, and has practiced law in the public and private sectors.   More about Ephrat Livni

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Article Contents

• I. INTRODUCTION
• II. SETTING THE SCENE
• III. Competition Concerns Raised by the App Store—the Case for Antitrust Enforcement
• IV. Conclusions

The Antitrust Case Against the Apple App Store

Damien Geradin is a Professor of Competition Law and Economics at Tilburg University and a visiting Professor at University College London and the University of East Anglia. He is also the founding partner of Geradin Partners. Dimitrios Katsifis is a Senior Associate at Geradin Partners. The authors advise a variety of app developers, some of which may be adverse to Apple. This paper has been written in full independence. It reflects the view of the authors only.

• Article contents
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Damien Geradin, Dimitrios Katsifis, The Antitrust Case Against the Apple App Store, Journal of Competition Law & Economics , Volume 17, Issue 3, September 2021, Pages 503–585, https://doi.org/10.1093/joclec/nhab003

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The Apple App Store is the only channel through which app developers may distribute their apps on iOS. First launched in 2008, the App Store has evolved into a highly profitable marketplace, with overall consumer spend exceeding $50 billion in 2019. However, concerns are being increasingly expressed on both sides of the Atlantic that various practices of Apple with regard to the App Store may breach competition law. The purpose of this paper is to examine whether this is indeed the case and, if so, how these concerns can be addressed. With these aims in mind, the paper first introduces the reader to the app ecosystem and the Apple App Store, with a focus on Apple’s in-app payment policies and the 30 percent commission charged for in-app purchases. After engaging critically with the distinction between apps selling “ digital ” and apps selling “ physical ” goods or services, we consider such distinction is unclear, artificial, and unprincipled.

The paper then critically reviews several practices of Apple that appear to be at odds with competition law and in particular Article 102 TFEU. We first analyze the issue of market definition and dominance with regard to the App Store. We find that Apple is a monopolist in the market for app distribution on iOS, as it is not subject to any meaningful competitive constraint from alternative distribution channels, such as Android app stores. The result is that Apple is the gateway through which app developers have to go to reach the valuable audience of iOS users. This bottleneck position affords Apple the power to engage in several prima facie anticompetitive practices. A first concern is that Apple may exploit app developers by charging excessive fees for the services it provides and by imposing unfair trading conditions. Second, based on four case studies, the paper illustrates how Apple may use its control of the App Store or iOS to engage in exclusionary behavior to the detriment of rival apps. These practices should be investigated by competition authorities, as they are likely to result in considerable consumer harm, be it in the form of higher app prices, worse user experience or reduced consumer choice. The paper finally proposes a combination of concrete remedies that would address the competition concerns identified.

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Antitrust: Balancing Competition and Innovation

The stated goal of antitrust laws is to make sure business are operating fairly, and to protect consumers by ensuring that a competitive marketplace gives them access to more choices, low prices, high-quality goods, and innovative products. In 2021, Congress proposed a number of new pieces of antitrust legislation and dozens of antitrust lawsuits are pending. This wave of antitrust actions will likely reshape the business and regulatory landscape impacting both businesses and consumers.

Introduction

View the executive summary for this brief..

Antitrust laws “are the broad group of state and federal laws that are designed to make sure businesses are competing fairly.” When a group of businesses team up or form a monopoly to control a particular market, the entity is called a trust , hence the term antitrust .

The stated goal of antitrust is to protect consumers by ensuring that a competitive marketplace gives customers access to more choices, low prices, high-quality goods, and innovative products.

In 2021, Congress proposed a number of new pieces of antitrust legislation and dozens of antitrust lawsuits are pending.  This wave of antitrust actions will likely reshape the business and regulatory landscape impacting both businesses and consumers.

In November 2021, the Department of Justice filed a civil antitrust lawsuit in  federal court to stop a merger between two companies that have the largest shares of an essential commodity in the U.S.: sugar.

The lawsuit aims to stop the United States Sugar Corporation from buying the Imperial Sugar Company. U.S. Sugar is a cooperative that sells sugar produced by itself and three other refiners. If U.S. Sugar were to acquire Imperial, Imperial’s production would be folded into that of U.S. Sugar, and then only two companies (the expanded U.S. Sugar and Domino) would control 75% of sugar sales in the southeast U.S.

The Justice Department argues that the “acquisition would erase competition and raise prices at a time when global supply chains are already under pressure.” U.S. Sugar and Imperial maintain that the merger “‘will improve supply chain logistics and will not result in higher prices or any harm to customers and consumers.’”

The sugar industry is just one of many seeing antitrust lawsuits. In November 2021, the Justice Department also sued to stop publishing company Penguin Random House from acquiring rival Simon & Schuster ; and in September, the Justice Department blocked a regional partnership between American Airlines and JetBlue Airways .

In all of these cases, the main question revolves around how consumers will be impacted: whether such alliances would reduce competition, lower the quality of goods and services, and drive up prices; or whether such combinations would increase efficiency and innovation without driving up prices, thus providing more choice for consumers and allowing companies to better manage supply chain issues.

Why it Matters

U.S. antitrust law has evolved since its inception at the end of the 19th century, which makes the general understanding of this section of U.S. law complicated. Even the late U.S. Supreme Court Justice Antonin Scalia admitted he never understood antitrust law in law school “because it did not make any sense then.”

Today, the objective of antitrust law is “to protect the process of competition for the benefit of consumers, making sure there are strong incentives for business to operate efficiently, keep prices down, and keep quality up.” This means that while antitrust litigation happens in courtrooms, often involving some of the largest and most well-known companies, as well as the Department of Justice or the Federal Trade Commission, the end results of these cases directly impact individual consumers.

Understanding the basics of antitrust – how it affects competition for goods and services, prices, and innovation – is key to understanding how antitrust affects us and our everyday purchases. It also helps us understand the decision-making processes of the Supreme Court and of our representatives in Congress. From a broader perspective, antitrust law also sets the stage for how businesses function and compete within the U.S. economy, which impacts U.S. businesses’ ability to be competitive in the global marketplace.

Putting it in Context

Competition is often seen “ as the driving force of the free-market system .” At the end of the 1800s, however, a few companies started to dominate the market in certain industries. By the 1880s, for example, John D. Rockefeller controlled roughly 90% of the U.S. oil business. In 1882 he created the Standard Oil Trust , with a single board of trustees to control all the stock of all the connected companies. Similarly, J.P. Morgan combined his railroad stocks with those of other captains of industry to create holding companies, seen as another type of trust. Reformers pushed back against “ robber barons ,” claiming they concentrated wealth and their monopolies dictated prices and wages.

As a response to these concerns, Congress passed the first federal antitrust law in 1890, the Sherman Antitrust Act , “‘aimed at preserving free and unfettered competition as the rule of trade’” and monopolization attempts. Despite the legislation, lack of enforcement resulted in an increased number of mergers and trusts in the last decade of the 19th century. The Supreme Court’s interpretation of the law resulted in rulings that favored business.

President Theodore Roosevelt acted on public demands for “‘ trustbusting ’” (breaking up monopolies), bringing suits against JP Morgan’s railroad monopoly (1902), Rockefeller’s Standard Oil (1906) and American Tobacco (1907), all of which were eventually broken up after Supreme Court decisions. President William Howard Taft’s Justice Department doubled the number of antitrust lawsuits, including suing Andrew Carnegie’s U.S. Steel, the world’s first billion-dollar corporation.

Around this time, the Supreme Court adopted the legal doctrine known as the “ rule of reason ,” meaning that instead of a literal interpretation of the Sherman Act, the Court evaluates how a business’s practices are likely to affect competition.

After taking office in 1913, President Woodrow Wilson turned to Congress to deal with monopolies. In 1914, Congress passed:

• The Clayton Act to address practices the Sherman Act did not clearly prohibit, such as price discrimination, as well as  mergers and acquisitions where the effect “may be substantially to lessen competition, or to tend to create a monopoly.”
• The Federal Trade Commission Act , which established the FTC and bans “‘unfair methods of competition’” and “‘unfair or deceptive acts or practices’”.

With a few revisions and amendments for more specificity, the Sherman, Clayton, and FTC Acts are still the three core federal antitrust laws in effect. Over time, however, the Supreme Court’s interpretation has changed significantly, particularly during the 1970s when the Court moved away from focusing on market concentration and agreed that consumer welfare was the core goal of the Sherman Act. See this timeline from NetChoice for a full list of landmark antitrust court cases and this backgrounder from Mercatus for a more detailed history.

CNBC takes a deeper dive into the history of antitrust, featured  in this short film (11 min):

Basics of Antitrust

The purpose of antitrust laws is to “protect and promote competition to ensure consumers get the lowest prices and the best quality possible.” Antitrust laws are enforced when legal cases are brought in federal court against certain businesses, by enforcement agencies (the Department Of Justice and Federal Trade Commission), state attorneys general, and private plaintiffs. The ultimate decision is up to the courts.

Competition

A key component of antitrust law is to “ ensure that private market actors compete and that they do not gain or maintain market power other than by competition on the merits.” Competitors in the marketplace interact frequently through trade associations or joint ventures, for example, but sometimes collaborating can give these competitors the ability to wield market power via:

• Price fixing : when competitors agree “to take actions that have the effect of raising, lowering or stabilizing the price of any product or service without any legitimate justification.” For example, sixteen elite universities have been accused of conspiring to reduce financial aid they awarded through price fixing. 
• Bid rigging : when competitors agree in advance which firm will win a bid.
• Market division : when competitors agree to divide sales territories, and essentially agree not to compete.

Supply Chain

Vertical relationships are the relationships that involve firms at different levels of the supply chain, such as relationships between a manufacturer and dealer, or a supplier and a manufacturer. If a vertical arrangement “reduces competition among firms at the same level… or prevents new firms from entering the market,” it may violate antitrust laws. For example:

• Manufacturer-imposed requirements can be an issue if multiple manufacturers agree to impose price or other restraints up the supply chain, causing price increases ; for example, in recent months there has been concern this is happening in food supply chains.
• Exclusive dealing or contracts can be an issue if manufacturers with market power use unfair deals to exclude smaller competitors and prevent them from succeeding in the marketplace;
• Refusal to supply can be an issue if there is an anticompetitive agreement or exclusionary strategy employed for business partners to maintain or acquire a monopoly.

Monopolization

Technically, “it is not illegal for a company to have a monopoly, to charge ‘high prices,’ or to try to achieve a monopoly position by what might be viewed by some as particularly aggressive methods.” Based on the Sherman Act, it is only illegal if the monopoly is achieved by unreasonable methods .

If a case considering whether or not monopolization exists is brought before the FTC or DOJ, investigators must answer the following questions.

• Does the firm have monopoly power in the market? If yes,
• Was that position gained or maintained through improper conduct?

In regards to the first, many courts have found that there is no monopolization if the firm (or group of firms) has less than 50% of sales of a particular product or service within a certain geographic area (although some courts have required even higher percentages). Courts can also consider whether the entry of new firms could affect overall market share.

In regards to the second, investigators must determine whether the monopoly position was through superior products, innovation, and business acumen, or if it was due to means such as exclusive contracts or price fixing.

One high-profile example of an alleged illegal monopoly is the FTC’s ongoing case against Facebook. In 2021, the Federal Trade Commission renewed its bid to break up Facebook and voted 3-2 to sue Facebook, alleging that the company is maintaining an illegal monopoly through anticompetitive conduct by stamping out competitors, including its 2012 acquisition of up-and-coming rival Instagram and 2014 acquisition of up-and-coming rival WhatsApp.

The FTC “ alleges that after repeated failed attempts to develop innovative mobile features for its network, Facebook instead resorted to an illegal buy-or-bury scheme to maintain its dominance. It unlawfully acquired innovative competitors with popular mobile features that succeeded where Facebook’s own offerings fell flat or fell apart. And to further moat its monopoly, Facebook lured app developers to the platform, surveilled them for signs of success, and then buried them when they became competitive threats. Lacking serious competition, Facebook has been able to hone a surveillance-based advertising model and impose ever-increasing burdens on its users.”

In response, Facebook said the FTC was attempting to revive a previously dismissed lawsuit, “rewrite antitrust laws and upend settled expectations of merger review, declaring to the business community that no sale is ever final… There was no valid claim that Facebook was a monopolist — and that has not changed. Our acquisitions of Instagram and WhatsApp were reviewed and cleared many years ago, and our platform policies were lawful.”

Mergers and acquisitions is a general term that refers to “the consolidation of companies or assets,” although each has a specific definition. In an acquisition, one company purchases another. A merger is the combination of two firms, “which subsequently form a new legal entity under the banner of one corporate name.”

Of particular concern are horizontal mergers, proposed between direct competitors. By combining two or more companies that were previously owned and operated by separate entities, mergers have the potential to negatively impact competition , and “change market dynamics in ways that can lead to higher prices, fewer or lower-quality goods or services, or less innovation.” If firms are of a certain size, or the merger deal is of a certain value, the firms are required by law to file notice of plans for a merger so the FTC or DOJ can undertake the merger review process and determine the effects the merger may have on the market. The FTC and DOJ have indicated they will update their guidelines to evaluate horizontal and vertical mergers , which many believe is a more aggressive stance.

Vertical mergers occur along the supply chain, such as when a manufacturer merges with a supplier or distributor. Vertical mergers can result in significant cost savings and improve manufacturing and distribution coordination and efficiency for customers. On the other hand, such mergers could “make it difficult for competitors to gain access to an important component product or to an important channel of distribution.”

The Role of Government

The House and Senate Committees on the Judiciary have jurisdiction over antitrust matters. In particular, the House’s Subcommittee on Antitrust, Commercial, and Administrative Law and the Senate’s Subcommittee on Competition Policy, Antitrust, and Consumer Rights have oversight of antitrust laws and enforcement policy, particularly at the DOJ. The House Committee on Energy and Commerce Subcommittee on Consumer Protection , and the Senate Committee on Commerce, Science, and Transportation Subcommittee on Consumer Protection, Product Safety, and Data Security also have oversight of the FTC.

The Federal Trade Commission (FTC) and the Department of Justice (DOJ) Antitrust Division enforce federal antitrust laws . In particular, the DOJ handles criminal and civil enforcement, as well as cases involving certain industries such as airlines, banking, railroads, and telecommunications. The FTC handles civil cases relating to certain segments of the economy, especially where consumer spending is highest, such as health care, pharmaceuticals, professional services, food, energy, computer technology, and internet services.

These two entities conduct the investigations that arise from premerger notification filings, correspondence from consumers or businesses, and congressional inquiries. This often includes conducting market research. If the investigation finds evidence of potential negative impact on the marketplace, investigators ask the firm(s) to agree to resolve the anti-competitive aspects or stop the disputed practices. If the firm(s) do not agree, the investigating agency can take the firm(s) to court for civil penalties, consumer redress, or to block the proposed merger.

The DOJ can sue in federal court to stop anti-competitive conduct or obtain criminal convictions. The FTC can file an administrative complaint, which is similar to a federal court trial but before an administrative law judge at the FTC. The FTC can also file an injunction in federal court.

See the list of antitrust case filings, from the DOJ’s Antitrust Division, here .

Most states have antitrust laws that are similar to federal laws. State laws apply to antitrust violations that occur within the state, and are enforced through offices of the state attorneys general. State attorneys general may also file civil antitrust suits in federal court under the Clayton Act on behalf of individuals residing within their state, or on behalf of their state as a purchaser.

The Private Sector

Antitrust law is thoroughly intertwined with the private sector. First, the main purpose of antitrust law is to protect consumers, or private citizens. Most antitrust cases are brought by businesses and individuals seeking damages for violations of the Sherman or Clayton Acts.

Second, antitrust laws do impact private business and the marketplace, as they are meant to support a vibrant entrepreneurial and innovative ecosystem in all industries. On one side of antitrust law is the idea that markets are easily distorted by private firms, and this distortion needs to be corrected with public intervention. Opponents of this thinking doubt public intervention could cure economic defects, and argue the self-correcting ability of markets is reliable enough in its own right.

For more on the functioning of U.S. economic markets, see The Policy Circle’s Free Enterprise Brief .

Challenges & Areas for Reform

Supply chains are just one of the many aspects of commerce disrupted by the coronavirus pandemic. In November 2021, the Federal Trade Commission (FTC) began a supply chain study to collect information from large companies, including Walmart, Amazon, Kroger, Procter & Gamble, and Kraft Heinz Co. The study is seeking details on:

• “The primary factors disrupting their ability to obtain, transport, and distribute their products;”
• “The impact these disruptions are having in terms of delayed and canceled orders, increased costs and prices;”
• “The producers, suppliers, and inputs most affected;”
• “And steps the companies are taking to alleviate disruptions.”

The order will not solve any bottlenecks, but some experts say it is meant to investigate price increases that stem from improper business practices. According to Diana Moss , president of the American Antitrust Institute , there has been “‘an incredible amount of consolidation in the supply chain ’” after “‘40 years of unbridled consolidation and lax merger enforcement.’” Others argue the order is an overreach, and that price increases reflect the workings of supply and demand.

The order reflects the FTC’s priorities in determining supply chain health. Historically, as pointed out by Diana Moss, vertical mergers have not been as strictly scrutinized as horizontal mergers. The pandemic-induced supply chain disruptions have prompted new concerns about supply chain health, suggesting that consolidation within supply chains will be investigated. As the FTC handles mostly consumer affairs, the industries that will see the most scrutiny are those that directly impact consumers and their daily lives, including agriculture, digital technology, health care and pharmaceuticals, telecommunications, and transportation.

Baby Formula

The resiliency of supply chains is weakened when there is market concentration, or few companies to choose from to supply a certain item. The baby formula shortage that parents across the U.S. have been facing in 2022 is one example. The U.S. normally produces 98% of the baby formula consumed in the U.S. is produced domestically, and only four companies – Abbott, Reckitt, Nestlé, and Perrigo – control about 90% of the U.S. market for baby formula . This left consumers vulnerable to supply shocks when Abbott – which produces 40% of America’s baby formula – needed to shut down one of its three production facilities after an FDA inspection. In May, the FTC launched an inquiry into the ongoing shortage to better understand current concentration and investigate any potential unfair business practices.

Government contracting has added to the market concentration. Just over half of baby formula purchased in the U.S. is purchased through Women, Infants, and Children (WIC), a federal nutrition assistance program for pregnant women and children under age five. In each state, one formula company is contracted as a supplier; about 90% of the formula available through WIC is provided by only 2 companies.

CNBC breaks down what’s behind America’s baby formula shortage (11 min):

Over the past several years, particularly since 2018, major technology companies from Amazon and Apple to Google and Facebook have testified before U.S. lawmakers , answering questions on competition and privacy practices.

This is not limited to the U.S.; in November 2021, the U.K.’s competition watchdog, the Competition and Markets Authority (CMA), ordered Facebook to sell Giphy , its GIF-sharing platform. The CMA cited concern over “so-called ‘killer acquisitions’ – the ability of tech giants to flex their financial muscle to protect market power by buying budding competition to defuse the risk posed by startups and new services (sometimes literally by closing them down post-purchase).” The European Commission has also filed antitrust suits against Google , claiming the search engine’s price comparison service allowed it to gain an unfair advantage over smaller rivals in Europe. In November 2021, Google lost its appeal of a 2017 $2.8 billion EU antitrust decision – the first of three EU antitrust penalties totaling more than $8 billion levied against  Google in recent years.

One of the reasons why there’s an antitrust spotlight on the big tech industry is due to the fact that these companies interact with consumers’ daily lives more than the average company. In this podcast, AEI’s Mark Jamison explains the viewpoints driving the complaints against – and legislation aimed at breaking up – big tech. Privacy is one concern, as these companies are inextricably linked to individuals based on the way they collect and use data, which sets them apart from other industries. A second concern is driven by the idea that large businesses are inherently bad, as their size could give them the power to limit entry to competitors, fix prices to maximize profit, and ignore consumer concerns because there are few or no other industry competitors. By this logic, the government needs to break them up to reduce market concentration and foster competition (a remedy that the courts have not imposed for many decades).

Many large tech companies have made their fortunes through targeted advertising, made possible by their access to user data. Essentially, the argument is that this access to data has contributed to the growth and power of big tech. But whether this is an area of reform for antitrust law to address is up for debate, as is whether many current proposals would do more harm than good in addressing privacy and security.

Nancy L. Rose , Professor of Applied Economics at MIT, explains that privacy and antitrust laws tend to be at odds. For example, protecting consumers’ privacy might restrict who gets access to certain data, which could also be important for potential competitors to be viable in the marketplace. Maureen Ohlhausen , a Global Antitrust and Competition lawyer with Baker Botts LLP and former acting Chairman and Commissioner of the FTC, adds that passing a federal privacy law based on data concerns would better address privacy concerns, rather than broadening the scope of antitrust laws to pull other issues in. For more on privacy issues, see The Policy Circle’s deep dive on Data Privacy and Cybersecurity .

Market Concentration

Some studies indicate that competition in the U.S. marketplace is in decline. In July 2021, the White House issued an executive order on promoting competition in the U.S. economy, citing statistics that illustrate corporate consolidation in over 75% of U.S. industries over the past two decades, including healthcare, financial services, and agriculture. Another study adds that this consolidation is contributing to rising prices, explaining that “[t]he rise in the average markup is driven by a few firms in the top of the distribution.”

On an international level, according to the World Competitiveness Rankings from the International Institute for Management Development, the U.S. ranked first worldwide in overall marketplace competitiveness in 2018; third in 2019; and tenth in 2020 and 2021. In terms of economic performance, the U.S. ranked first in 2018 and 2019; second in 2020; and fifth in 2021.

Scott Wallsten of the Technology Policy Institute argues that competition analysis is not that straightforward; looking at how competitive the overall economy is tends to be too difficult, so most research – including the cited studies from the White House executive order – focuses on market concentration and implicitly links concentration with competition .

Peter Thiel and Blake Masters argue in their book Zero to One that some of this concentration is due to people not innovating as much as in the past. More entrepreneurs and start-ups are taking on existing innovations rather than seeking industry areas where they can carve out something new. Thus, their argument is that putting restrictions on companies like Google so that more people can build more Googles to increase competition is not the kind of innovation that will make technological progress.

Others make the case that, despite their size, Amazon, Apple, Facebook, and Google are not monopolies to begin with. A September 2020 report from NetChoice notes that no company has monopoly power in the digital market, defined by the DOJ as a 66% threshold. Based on NetChoice’s data, Amazon’s share of the e-commerce market in the U.S. is 38%. Additionally, in terms of digital competitiveness, the World Competitiveness Rankings have ranked the U.S. in first every year since 2018.

Different stakeholders tend to have different viewpoints when it comes to the power of big tech. For example, more than 200 newspapers have filed suit against Google and Facebook, arguing “that the tech giants colluded to rig ad markets so that they could misappropriate ad revenues that were properly owed to the publishers.” On the other hand, many small- and medium-sized businesses and entrepreneurs have expressed concerns about legislation that would prohibit platforms like Amazon from favoring their own products. Amazon reports this could limit its ability to offer its platform to sellers. NetChoice’s Trace Mitchell adds that when the government argues that “Google is harming Americans because its products are preinstalled…the government forgets that American consumers don’t think this is a problem” in terms of convenience.

Instagram provides an example of market power/convenience trade-offs. Prior to Facebook’s acquisition, Instagram had no revenue streams, no plans for earning revenue, 20 million users, and a spam problem. Since Facebook’s acquisition, Instagram makes over $20 billion in ad revenue, has over 1 billion users, has spam blockers, and connects millions of small businesses on its platform. Essentially, while this makes Facebook more integrated into the daily lives of anyone on social media, it has also expanded opportunities and connections for its users.

In Congress, there seems to be a bipartisan dislike of big tech , resulting in numerous Congressional hearings and even proposed legislation. Where policymakers differ , according to AEI’s James Pethokoukis and Mark Jamison, is why big tech should be broken up (or subject to other constraints), and how to do so. These different diagnoses may make it difficult for legislative efforts to come to fruition. For example, the American Innovation and Choice Online Act , which would block big tech platforms from giving preferential treatment to their own products, advanced from the Senate Judiciary Committee to the full Senate floor. However, even supporters “ expressed reservations about its current composition,” and policymakers from both sides of the aisle withdrew amendments during the committee markup “with the caveat that they wanted opportunities to address their issues with the bill before a floor vote.”

An even broader debate is whether antitrust legislation is even the best avenue to pursue. The Federalist Society takes a deep dive into the debate surrounding antitrust and big tech in this short video (13 min):

Free Speech

When considering market concentration and competition, another area of concern is that big tech companies “have become indispensable for the speech of billions: and as such have extensive power in their “ability to deny access to the platforms that shape our public discourse,” explains ACLU Lawyer Kate Ruane . Lawmakers are considering antitrust legislation for this reason as well, which would likely impact Section 230.

Section 230 is a component of the 1996 Communications Decency Act that protects internet service providers and online platforms “from liability for decisions they make about the content they host,” meaning they cannot be held liable (in most cases) for what third parties (ie: users)  post. Section 230 was originally meant to enable innovation, protect the then-nascent industry, and encourage platforms to remove harmful content. Technology has changed substantially since the 1996 Act; platforms use algorithms to promote their content and connect users, and also offer users an array of services including communications, access to media, and engagement in commerce.

If and how such concerns fall within the purview of antitrust laws remains to be seen. For more on the Section 230 debate and big tech, see The Policy Circle’s Free Speech Brief .

Enforcement

Antitrust has long been an area where stakeholders talk openly about market power , “the balance of power between consumers and enterprises, big and small businesses, and government and private businesses.” But when it comes to what antitrust laws should do, the balance of power lies among lawmakers, enforcing agencies, and the courts.

As discussed in the History section above, the last forty years of antitrust policy has focused on economic efficiency and consumer welfare. Today, there are calls that competition and antitrust laws should advance societal goals. Policymakers and enforcement agencies are looking at using antitrust to address “ a variety of social, economic, and political friction points , including employment, wealth inequality, data privacy and security, and democratic values.” Others argue that using antitrust law to address other social goals or policy priorities “ undermines what antitrust regulators do best: conduct empirical analysis of specific business practices to protect consumers from competitive harm.”

The July 2021 Executive Order on Promoting Competition in the American Economy is one example. According to an analysis by Buchanan Ingersoll & Rooney , the executive order encourages the FTC to “expand its enforcement and focus on certain industries vulnerable to competitive restraint because of consolidation and concentration.”

Another example is the FTC’s efforts to broaden its scope. In 2021, the FTC revoked a 2015 statement that limited the agency’s enforcement and prevented it from addressing “potential anticompetitive practices.” Many believe this shift is a way for the FTC to broaden its enforcement to big tech entities , which had previously been out of reach of the FTC’s enforcement power. Lawmakers’ endeavors to draft new antitrust legislation to address big tech’s market power has the potential to take these shifts one step further.

University of Michigan Law School professor Daniel Crane explains, “It is hard to judge at any given moment how much political support for antitrust intervention is motivated by genuine concern over monopoly and competition, and how much of it derives from the fact that, in the face of popular demand for a governmental cure to a perceived evil, it is often easier to delegate the solution to antitrust than to propose a regulatory solution.”

Concerns about shifts in the focus of antitrust lie in the debate between whether antitrust should address the welfare of consumers or the power of competitors. Concerns about the enforcement of antitrust lie in the suggested role of government. Some propose the government should regulate – or at least have more control over – markets, while others trust markets and want the government to act as no more than a referee.

Knowledge of antitrust law and the current debates can help us understand the subtle differences between these two viewpoints. This foundational background provides a basis for determining the best path forward for the role of antitrust law in today’s society.

Ways to Get Involved/What You Can Do

Measure : Find out what your state and district are doing about antitrust.

• Do you know the state of market competition or concentration in your state?
• What are your state’s antitrust laws?
• What antitrust litigation has occurred in your state?
• Does your state have an office or division of consumer affairs?

Identify: Who are the influencers in your state, county, or community? Learn about their priorities and consider how to contact them, including elected officials , attorneys general, law enforcement, boards of education, city councils, journalists, media outlets, community organizations, and local businesses.

• Who is your state’s attorney general ?
• Who is in charge of consumer affairs in your state?
• What steps have  your state’s or community’s elected and appointed officials taken?

Reach out: You are a catalyst. Finding a common cause is a great opportunity to develop relationships with people who may be outside of your immediate network. All it takes is a small team of two or three people to set a path for real improvement. The Policy Circle is your platform to convene with experts you want to hear from.

• Find allies in your community or in nearby towns and elsewhere in the state.
• Foster collaborative relationships with local businesses by reaching out and discussing how business owners feel about competition policy.

Plan: Set some milestones based on your state’s legislative calendar .

• Don’t hesitate to contact The Policy Circle team, [email protected] , for connections to the broader network, advice, insights on how to build rapport with policy makers and establish yourself as a civic leader.
• The Policy Circle’s Civic Leadership Engagement Roadmap (CLER) is an innovative, action-oriented program designed to educate and prepare impact-driven professionals dedicated to making a change through civic action. One-on-one coaching, peer discussions, and networking opportunities help build participants’ confidence to engage with leaders and build local connections in their communities.

Execute: Give it your best shot. You can:

• Discuss the the role of small and large businesses on the economy with family, friends, and neighbors
• Talk to small business owners and entrepreneurs in your community to understand their perspectives on antitrust rules, regulations, and the power of larger firms.
• Visit the FTC’s website to stay up to date on the most recent policy
• Pay attention to open comment periods that allow individual citizens to comment on proposed regulations
• Keep track of potential antitrust legislation .

Working with others, you may create something great for your community. Here are some tools to learn how to contact your representatives and write an op-ed .

Additional Resources

Stanford Cyber Policy Center: Antitrust and the Big Tech Platforms

AEI: How Can Congress Act More Constructively on Antitrust?

AEI: Mark Jamison on Antitrust Laws and Big Tech

The Alliance on Antitrust

The American Antitrust Institute

Cato Institute: Baby Formula and Beyond: The Impact of Consolidation on Families and Consumers

The Case against Antitrust Law

Ten areas where antitrust policy can move on from the smokestack era.

• Clyde Wayne Crews • Ryan Young • 04/16/2019

View Full Document as PDF

Executive Summary

Politicians and pundits across the ideological spectrum often call for greater competition in the marketplace. While their favored means vary widely, the view that current antitrust law is necessary to ensure competition, and should be applied more vigorously than it has in recent history, is common across the American political landscape. As this paper demonstrates, a rethink of the existing antitrust paradigm is long overdue.

Antitrust regulation harms both consumers, competition, and innovation and therefore should be repealed. From a legislative standpoint, this would involve repealing the Sherman Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914, as amended, including the Celler-Kafauver Act of 1950 and the Hart-Scott-Rodino Act of 1976. In addition, the executive branch should decline to prosecute weak or spurious antitrust cases, and courts should reverse bad precedents. A market-based approach to competition would reduce the regulatory uncertainty and chilling of innovation that results from government antitrust regulation. It would also reduce opportunities for rent-seeking.

The issue has taken on greater urgency, as populist politicians from both left and right push for more aggressive antitrust enforcement. Regulators in the United States and the European Union have expressed an interest in pursuing antitrust actions against tech giants known as the FAANG companies— Facebook, Apple, Amazon, Netflix, and Google. President Trump has specifically singled out Facebook, Google, and Amazon as antitrust targets. Entire business models, such as franchising, are at risk from potential antitrust regulation.

The mere threat of legal penalties—and the environment of over-caution it engenders—also has a chilling effect on entrepreneurs who want to try new business practices and innovate. Such opportunity costs are impossible to measure.

Few large antitrust cases have been brought in the United States recently, and overall enforcement activity has been slower than in previous eras, but there is a large pool of potential cases that populist politicians are interested in pursuing.

U.S. antitrust regulators are not the only threat to American innovation. Many U.S. companies that do business in Europe often face scrutiny from the European Union, under what it calls “competition policy.” For example, the European Union fined Google $5 billion in 2018, a significant amount of lost capital that could have created consumer value instead. Google’s parent company, Alphabet, spent $16.6 billion on research and development in 2017. If Google did not fear losing revenue to competitors, it would feel no need to spend such resources to improve its offerings.

This paper shows that the approach to antitrust law now prevalent in both the United States and the European Union is misguided and can lead to considerable economic harm. It starts with the big picture, describing the different sides of the antitrust debate, from the early interventionist approach that arose during the Progressive Era to the Chicago school-influenced consumer welfare standard that gained popularity in the late 20th century, up to the current populist revival. It then points out the shortcomings of both the interventionist and Chicago approaches and argues for a market-based approach. With the analytical framework and political context established, the paper goes through a “Terrible Ten” list of specific antitrust policies in need of repeal, while explaining the common themes and arguments that appear in case after case.

1: Restraint of Trade and Monopolization. The Sherman Act of 1890 makes illegal “every contract, combination, or conspiracy in restraint of trade,” and declares that, “every person who shall monopolize, or attempt to monopolize, or conspire to monopolize shall be deemed guilty of a felony.” Nearly 130 years later, the phrases “restraint of trade” and “monopolize” remain key terms in antitrust regulation. Yet, monopolies cannot last without government assistance (barring some very narrow limited circumstances, such as near-total control of a natural resource). If a dominant company is making extra-normal monopoly profits, the only way for it to keep out competitors is to use government on its behalf. The solution to this problem is not antitrust enforcement, but taking away the government’s power to grant favors to rent-seekers.

2: Horizontal Mergers. Horizontal mergers are between companies competing in the same market. Vertical mergers are between companies up and down the supply chain. Horizontal mergers reduce the number of competitors in a market and increase their average size. Both of these raise red flags for regulators searching for possible restraints of trade or attempts at monopolization. Antitrust law treats a company differently based on whether it reaches a certain size through growth or through merger. If size or market concentration is the offense, that is what the law should be concerned with, not how a company got its dominant position.

3: Collusion: Cartels, Price Fixing, and Market Division. There are two problems with cartels, price fixing, market division, and other forms of collusion. The first is where to draw the line. Every corporation in existence engages in some form of collusion. A classic example is a law firm. When two or more lawyers join together in a law firm, they agree in advance to charge certain rates and not to compete with each other for clients, yet no antitrust regulator would file a case against such a firm. The second problem is that cartels do not last, at least without government help. Its members have strong incentives to defect and charge lower prices or increase output. The instability of inefficient cartel arrangements serves as a built-in insurance policy for consumers.

4: Predatory Pricing. Antitrust regulators can penalize a company for predatory pricing if it charges lower prices than its competitors. The thinking goes that a company can sell goods at a loss to gain market share, causing competitors to exit the market or even go bankrupt. Then the predator can raise its prices and enjoy monopoly profits. The problem here is one of simple arithmetic. Predators nearly always have a larger market share than the prey. This means the larger company must sell more product at a loss than the smaller prey companies, and thus incur a larger loss. The only way for the predator to keep a permanent monopoly is to permanently sell at a loss.

5: Price Discrimination. Price discrimination involves selling the same good to different people at different prices. The Robinson-Patman Act is the primary statute regulating the practice. Examples of price discrimina- tion include quantity discounts for buying in bulk, putting products temporarily on sale, membership programs, or store-specific credit cards offering discounts or benefits such as points programs or frequent flier miles. As with other items on this list, there is considerable uncertainty as to which forms of price discrimination are punishable and which are not. Regulators may draw the line wherever they choose at any time. Fortunately, policy makers have mostly realized that Robinson-Patman is unworkable, and it is mostly unenforced. Consumers and businesses would gain peace of mind from its repeal.

6. Manufacturer Price Restraints on Retailers. Resale price maintenance agreements require retailers to sell a product at or above some minimum price set by the manufacturer. They have proven to be a valuable pro-consumer tool. Retailers who are unable to compete on money prices compete instead on other factors. Manufacturers who require retailers to sell at a minimum markup may have a reason for requiring a certain minimum price. Some of that extra margin might be spent on marketing, certification programs for repair technicians, or to cover warranty costs.

7: Exclusive Dealing. Exclusive dealing involves a seller agreeing to sell products exclusively from a certain supplier. Examples include car dealerships and restaurants that serve Coca-Cola but not Pepsi. An exclusive arrangement can provide important benefits to manufacturers, retailers, and consumers. A manufacturer gains some ability to make long-term decisions regarding how much product to supply. Retailers gain specialized knowledge of the product. Consumers benefit from this added sales expertise when making purchasing decisions. Exclusive dealing has been prosecuted under Section 3 of the Clayton Act, Section 1 of the Sherman Act, and Section 5 of the Federal Trade Commission Act. Exclusive dealing still exists because regulators wisely decline to enforce the letter of the law. Repealing those provisions would remove uncertainty surrounding potentially pro-consumer business practices.

8: Tying or Bundling. Tying or bundling is selling two or more products together, but not separately. Determining which products are fit to be tied and which are not is more a matter of metaphysics than sound policy analysis. Left and right shoes are always sold as a pair. A car’s tires and sound system are almost always included in the sale. Transactions like these are allowed by regulators without controversy, though technically prosecutable—another instance of discretion by regulators creating uncertainty.

9: Strategic Predatory Behavior. This is often used as a catchall term for competitive behavior that antitrust regulators dislike. Trying to undercut rivals’ profitability is the very essence of business competition, but recently, the ordinary competitive market behavior of causing one’s rivals to face higher costs has spawned a veritable academic industry devoted to identifying competitive strategies as means of monopolization.

10: Exploiting Technological Lock-In. Companies can use technological lock-in to keep customers from fleeing to better alternatives. The famous example of technological lock-in is the QWERTY keyboard. As it turns out, QWERTY keyboards are just as efficient as Dvorak and other alternatives. Nowadays Internet browsers are often cited as an example of technological lock-in. Life is much easier when all of your website passwords and other information are stored in your browser and entered automatically when needed. In theory, this convenience also makes consumers reluctant to switch to a competing browser, even if it offers a better user experience. This reticence can lock consumers into an inferior technology, reducing competition and the incentive to innovate, but that is a problem grounded in consumer behavior that government is ill equipped to address. Even so, the title of most popular browser has shifted at least three times over the past 20 years. Netscape gave way to Internet Explorer, then Firefox, and now Chrome, which could be eclipsed at any time.

Consumers and competition would both best be served by repealing antitrust regulations regarding restraint of trade and monopolization, horizontal and vertical mergers, collusion such as price fixing and market division, predatory pricing, price discrimination, minimum resale prices, exclusive dealing, tying and bundling, strategic predatory behavior, and technological lock-in. As the economy becomes more high-tech, specialized, and global, antitrust policies formed in the smokestack era are becoming progressively less relevant. Aggressive antitrust enforcement can create considerable economic uncertainty, which can have a chilling effect on long-term investment and innovation in both products and in business practices that benefit consumers.

Introduction

Politicians and pundits across the ideological spectrum often call for greater competition in the market- place. While their favored means vary widely, the view that current antitrust law is necessary to ensure competition, and should be applied more vigorously than it has been in recent history, is common across the American political landscape. As this paper demonstrates, a rethink of the existing antitrust paradigm is long overdue.

Antitrust regulation harms consumers, competition, and innovation, and therefore should be repealed. From a legislative standpoint, this would involve repealing the Sherman Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914, as amended, including the Celler-Kafauver Act of 1950 and the Hart-Scott-Rodino Act of 1976. In addition, the executive branch should decline to prosecute weak or spurious antitrust cases, and courts should reverse bad precedents. A market- based approach to competition would reduce the regulatory uncertainty and chilling of innovation that results from government antitrust regulation. It would also reduce opportunities for rent-seeking.

The issue has taken on greater urgency, as populist politicians from both left and right push for more aggressive antitrust enforcement. Regulators in the United States and the European Union have expressed an interest in pursuing antitrust actions against tech giants known as the FAANG companies— Facebook, Apple, Amazon, Netflix, and Google.1 President Trump has specifically singled out Facebook, Google, and Amazon as antitrust targets.2 The Trump administration tried to block a merger between AT&T and Time Warner, only dropping the suit after losing in court.3 Telecoms, large food and drug companies, Ticketmaster, airlines, and hospitals are on some analysts’ prosecution wish lists.4 Uber, Airbnb, and other sharing economy companies are also under threat.5 Entire business models, such as franchising, are at risk from potential antitrust regulation.6

The mere threat of legal penalties— and the environment of over-caution it engenders—also has a chilling effect on entrepreneurs who want to try new business practices and innovate. Such opportunity costs are impossible to measure.

U.S. antitrust regulators are not the only threat to American innovation. Many U.S. companies that do business in Europe often face scrutiny from the European Union (EU), under what it calls “competition policy.” For example, EU antitrust authorities fined Google $5 billion in 2018, a significant amount of lost capital that could have created consumer value instead.7 Google’s parent company, Alphabet, spent $16.6 billion on research and development in 2017.8 If Google did not fear losing revenue to competitors, it would feel no need to spend such resources to improve its offerings.

This paper shows that the approach to antitrust law now prevalent in both  the United States and the European Union is misguided and can lead to considerable economic harm. It starts with the big picture, describing the different sides of the antitrust debate, from the early interventionist approach that arose in the Progressive Era to the Chicago school-influenced consumer welfare standard that gained popularity in the late 20th century, up to the current populist revival.9 It goes on to point out the shortcomings of both the interventionist and Chicago approaches and argue for a market- based approach.10 With the analytical framework and political context established, the paper goes through a “Terrible Ten” list of specific antitrust policies in need of repeal, while explaining the common themes and arguments that appear in case after case.

The Current State of Debate and the Brandeis Revival

Early populism. Antitrust regulation as we know it began in the late 19th century as part of a larger populist movement against big business and concentrated power. It resulted first in the Sherman Act of 1890, which made illegal restraints of trade or attempts to monopolize an industry. It was refined and strengthened by the Clayton Act of 1914 and the Federal Trade Commission (FTC) Act of 1914, both signed into law by President Woodrow Wilson. The Clayton Act provided guidelines for merger policy, among other things, while the FTC Act created a new agency to share antitrust jurisdiction with the Justice Department. Section 5 of the FTC Act also amended the Sherman Act’s vague “restraint of trade” standard by adding language on “unfair or deceptive acts or practices,” though it still left it largely up to agencies and courts to define those terms.

Justice Louis Brandeis, one of the early antitrust movement’s most prominent champions, viewed large business size as inherently bad. In 1911, during testimony before the Senate Committee on Interstate Commerce, Brandeis said, “I have considered and do consider, that the proposition that mere bigness can not be an offense against society is false, because I believe that our society, which rests upon democracy, cannot endure under such conditions.”11 This led Brandeis to favor using government to give artificial competitive advantages to smaller firms, regardless of whether they created more consumer value than larger firms.

Brandeis’s theme of size as a punishable offense persisted as antitrust case law built up over the next several decades. Many economists were skeptical of antitrust enforcement as an effective means toward those ends. The traditional view, held by most classical economists from Adam Smith onward, was that monopolies were unsustainable without state assistance.12 Real-life examples of monopolies were limited to state-supported enterprises such as the Dutch East India Company.13 All were legally granted privileges by their governments, and were backed at times by courts and even armed force. Even after private businesses grew large and antitrust legislation was passed to combat them, many economists remained skeptical that such regulation was necessary to combat monopolies. The list of such skeptics active at this time includes notable figures such as Joseph Schumpeter, Ronald Coase, Ludwig von Mises, and Aaron Director.14 Even today, many economists view protection from competition as a factor in the European Union’s competition policy, according to a University of

Chicago Booth School poll of economic experts.15 Perhaps in part because of this skepticism, most economists did not pursue careers in the new antitrust enforcement agencies. Instead, the agencies were staffed mostly by lawyers who often did not welcome economic analysis or its conclusions.

During the Great Depression, President Franklin D. Roosevelt rolled back antitrust enforcement. But he did not take a market-based approach to competition policy. Instead of using government to oppose cartels, his National Recovery Act used govern- ment to create and maintain cartels. The Agricultural Adjustment Act even deliberately raised food prices and restricted output—precisely the indicators of monopoly power that antitrust policy was supposed to prevent. The 1936 Robinson-Patman Act, which is now mostly unenforced, also banned numerous competitive pricing practices.

While New Deal-style managed cartels did not rejuvenate the economy, postwar antitrust policy ramped up to record levels. It was given additional strength by the 1950 Celler-Kefauver Act, which instituted stricter merger policies, and the 1976 Hart-Scott- Rodino Act, which requires companies above a certain size to gain regulatory approval before merging. This stronger legislation was accompanied by record numbers of court cases, fines, and even jail sentences, including some questionable decisions that today’s antitrust revivalists disavow.16

The Consumer Welfare Standard. From the late 1960s to the 1980s, judges and regulators slowly shifted to a consumer welfare standard. By this time, an entire movement had taken off, especially at the University of Chicago. Under the consumer welfare standard, companies are free to grow big, so long as they act in ways that maximize consumer welfare. This remains the mainstream practice today. Figures such as Coase, Director, and Frank Knight influenced a new generation of competition scholars, including Richard Posner, George Stigler, Yale Brozen, Robert Bork, Harold Demsetz, Sam Peltzman, and others.17

The most famous defense of the consumer welfare standard remains Robert Bork’s 1978 book The Antitrust Paradox , which was one of the first major law books to heavily incorporate economic analysis. This coincided with the rise of a hybrid academic discipline of law and economics— which is now a recognized discipline at many major universities.18 The influence of law and economics has extended beyond the academy, as the Department of Justice and the Federal Trade Commission began to employ economists around this time, and still do today. This has led to a more restrained overall approach to antitrust enforcement, with progressively fewer big cases, and none since the late-1990s Microsoft case. The Justice Department attempted to block a proposed merger between AT&T and Time Warner, but dropped the case after a loss in the D.C. Circuit Court in February 2019.19

The Brandeis revival. Unfortunately, a new era of antitrust might now be in its infancy—basically a return to Brandeis’s anti-bigness ethos with a few nods to modernity. Some analysts call this movement “hipster antitrust,” usually derisively.20 This paper will instead use terms the movement’s members use, such as “Neo-Brandeisian.”21  Some populists on the right, such as President Trump and some of his political allies, including political commentators such as Steve Hilton, Tucker Carlson, and Ned Ryun, also favor an antitrust revival.22 Neo-Brandeisians and many populists reject the consumer welfare standard, proclaiming to use antitrust regulation to promote broader values such as decreasing income inequality, opposing concentrated power, favoring democracy, the public good (however defined), and bringing elites down a notch.

Under a Neo-Brandeisian standard, a company’s size could once again become a per se offense, even if a breakup would make consumers worse off (in legalese, this means something is automatically illegal, even if it has good intentions or beneficial consequences).23 Columbia University law professor Tim Wu, in his 2018 book The Curse of Bigness (titled for a famous Brandeis expression), advocates returning to an anti-bigness standard. His arguments are a good summation of the general Neo-Brandeisian world- view, and are worth examining further. The first antitrust legislation, Wu writes, “was clearly understood as a reaction to the rising power of the monopoly trusts, such as the Standard Oil Company.”24 Seeing large business size as a persistent problem, Wu points to Louis Brandeis, “whose voice is needed for what we confront today.”25

In his concluding chapter, “A Neo- Brandeisian Agenda,” Wu argues that, “Some effort to revive the antitrust laws may be an inevitability in a nation founded on principles of anti-monopoly, equality, and decentralized power.”26 However, a federal government that can break up any company for a wide variety of reasons is far from decentralized.

Wu favors rejecting a consumer welfare standard in favor of a protection of competition standard, a new term for the rule of reason standard that was used in Brandeis’s era. This standard relies heavily on a judge’s discretion in deciding a company’s guilt in an antitrust case, and therefore is less well defined than both the preponderance of evidence standard used in most civil cases and the reasonable doubt standard used in criminal cases. Wu argues that it is practically impossible to measure consumer welfare or allocative efficiency. This is a problem for the consumer welfare standard, under which “courts and enforcers rely too heavily on price effects, since they are the easiest to measure—yielding underenforcement of law.”27 Underenforced by what criteria, Wu does not say.

However, the protection of competition/ rule of reason standard has even larger measurement problems, and, as Wu acknowledges, “inevitably demands some exercise in social planning, and ascertaining values that can be difficult, if not impossible, to measure.”28 In practice, returning to the old ways would give judges and regulators vast power they do not have today. It would also violate a cardinal rule of sound policy—do not give allies powers you would not want your enemies to have. Remember President Trump’s threats against Amazon in the early days of his administration. Given how heated judicial confirmations have become in recent years, Neo- Brandeisians should be especially sensitive to this argument.

Wu also commits what economist Harold Demsetz popularized as the Nirvana fallacy.29 In the perfect competition model, consumers are assumed to have perfect information, prices instantly move so that supply and demand never depart from the exact equilibrium point where all goods sell and markets clear, and all this happens with zero transaction costs. This model is useful for isolating variables and for classroom teaching, but not so much for judging real-world market performance. Wu is correct in that markets nearly always fall short of the perfect competition model. Yet his advocacy of government action comes very close to assuming that real- world governments can create their own version of a perfect competition model. Wu compares real-word market outcomes to an idealized vision of government regulation, not the real- world kind.

Neo-Brandeisians and other progres- sives rightfully oppose rent-seeking, but their proposed antitrust policies would make the problem worse. Antitrust regulation creates opportunities for rent-seeking by politically connected interests. Wu consistently ignores this throughout his book. He correctly points out how numerous companies game government policies to reduce competition, but then goes on to advocate for more government power, which can also be gamed, as the solution. Even now, in a relatively restrained antitrust environment, roughly 95 percent of antitrust lawsuits are brought privately by competitors, not by the Justice Department or Federal Trade Commission.30 Repealing antitrust regulation would not eliminate rent-seeking—there are many other avenues rent-seekers can take—but it would reduce it.

Such is the current state of the debate. The consumer welfare and Neo- Brandeisian populism standards are more similar than advocates of either side would like to admit, but there are more than two possible approaches to antitrust policy. The next section shows how a market-based approach to competition policy would yield better results than what pro-antitrust politicians on both the left and right are currently offering.

Major Antitrust Themes and Arguments

Antitrust enforcement policies have ebbed and flowed over the last 130 years, and will no doubt continue to do so, but the major themes and arguments persist. This section lists some of those major themes, and shows why market competition outperforms both Neo-Brandeisian activism and Chicago-style moderation.

Competition is a spectrum, not an on/off switch. How much market concentration is too much? At what point does it become anti-competitive? Is it even possible to measure? If so, should it be measured by market share, how many firms are in the market, or how high are the barriers to entry? This is a significant knowledge problem scholars and regulators are still trying to overcome. The Herfindahl- Hirschman Index (HHI) attempts to provide an objective numerical score for market concentration.31 But even this device has its limitations—the people plugging the numbers into the HHI formula can define the relevant market any way they choose, and thus can come up with almost any HHI score they wish. They can even change the parameters if their first attempt’s results do not help the case they are trying to make.

The Justice Department and Federal Trade Commission’s Horizontal Merger Guidelines state that mergers raising an HHI score by more than 200 points are “presumed to be likely to enhance market power.”32 Score changes under 100 are generally not a concern. While the scores do not decide a case by themselves, they do factor into agency decisions about whether to pursue a case and how strongly to place the burden of proof on the accused. That is an enormous amount of power for regulators to have.

Moreover, a given level of market concentration is not on its own evidence of consumer harm, but businesses face enormous uncertainty in this area. The Sherman Act is very short, and makes monopoly or attempted monopoly the crime. Moreover, courts have never settled on a consistent definition of permissible concentration. Different decisions have used different bench- marks for what levels of concentration threaten competition, for no clear reason. The Supreme Court, in its 1962 Brown Shoe decision, ruled against a merged company with a combined market share of 2.3 percent of the nation’s shoe retail market and about 4.5 percent of its shoe production.33 Then in the 1966 Von’s Grocery case, the Supreme Court ruled against a merged company with a combined 7.5 percent market share in the city of Los Angeles.34 Meanwhile, the federal government gave AT&T a legally protected monopoly for decades until reversing course and breaking it up in the 1980s.35

Many regulators have a binary view of competition—a market is either competitive or it is not. Most markets are somewhere in between and constantly move around along that spectrum as circumstances change. This makes regulators’ task nearly impossible, given how difficult it can be for them to determine if a problem even exists, or how long it will last.

The relevant market fallacy. This is one of the easiest mistakes to make in all of antitrust analysis. It is also one of the easiest to avoid. Thinking along the different parts of a spectrum illustrates why. At one end of the spectrum, every individual product can be seen as its own relevant market. A sandwich at one restaurant is different than an identical sandwich sold at another restaurant next door, even if they are the same price. One restaurant might offer better service, better ambience, or some other non- price characteristic that differentiates it from its competitor. In that sense, there are two different products operating in different markets appeal- ing to different sets of consumer preferences.

At the other end of the spectrum, the only relevant market is as big as the entire global economy. That sandwich also competes against other types of food in a global supply chain. Whichever point on the spectrum an analyst decides is right for a given case is an arbitrary decision. It is largely a matter of semantics, and often analytically useless in determining consumer welfare.

Uncertainty. Antitrust regulation creates an enormous amount of economic uncertainty. Nobody knows how it will be used at a given time. If antitrust statutes are interpreted literally, potentially any firm, no matter how small, can be charged with an antitrust violation—or for dominating its relevant market, however defined. If a business sells goods at a lower price than its competitors, it can be charged with predatory pricing. If it sells goods at the same price as its competitors, it can be charged with collusion. And if it sells goods at a higher price than its competitors, it can be charged with abusing market power.

A century of case law has evolved some guidelines, but judicial precedents can be overturned any time a new case is brought. There are few bright-line legislative or judicial standards for antitrust enforcement. It is mostly guided by a mix of inconsistently enforced judicial precedents, regulators’ personal discretion, and political factors unrelated to market competition. Even the mere threat of antitrust enforcement can have a preemptive chilling effect on innovation, business strategies, and potential efficiency-enhancing arrangements.

Rent-seeking. Neo-Brandeisians rightly want to reduce rent-seeking, but they routinely propose policies that will backfire because of a common misunderstanding of how governments work in practice. Government employees do not operate with only the public interest in mind. They are human beings, with the same incentives and flaws as other human beings. They want to increase their budgets and power and enjoy the publicity that accompanies big cases. It also makes regulators especially vulnerable to what is known as a Baptist-and-boot- legger dynamic. In Clemson University economist Bruce Yandle’s classic example, a moralizing Baptist and a profit-seeking bootlegger will both favor a law requiring liquor stores to close on Sundays, though for different reasons. A true-believing “Baptist” in Congress or at the Justice Department or the FTC would be inclined to listen seriously to the entreaties of corporate “bootleggers” who can come up with virtuous-sounding reasons for why regulators should give their businesses special favorable treatment.36

Oracle, one of Microsoft’s rivals, ran its own independent Microsoft investigation during that company’s antitrust case, for what it alleged were Baptist-style reasons. “All we did is try to take information that was hidden and bring it to light,” said Oracle CEO Larry Ellison. “I don’t think that was arrogance. I think it was a public service.”37 Former Sen. Orrin Hatch (R-UT), who counted Oracle among his constituents, was one of the loudest anti-Microsoft voices in Congress. Around that time, he also received $17,500 donations from executives at Netscape, AOL, and Sun Microsystems. Perhaps heeding Hatch’s admonition that, “If you want to get involved in business, you should get involved in politics,” Microsoft expanded its presence in Washington from a small outpost at a Bethesda, Maryland, sales office to a large downtown Washington office with a full-time staff plus multiple outside lobbyists.38 Microsoft quickly went from a virtual non-entity in Washington to the 10th-largest corporate soft money campaign donor by the 1997-1998 election cycle. Sen. Hatch’s campaign was among the beneficiaries.39

The lines between Baptist and boot- legger can be blurry, and some actors play both parts. But such ethical dynamics are an integral part of antitrust regulation in practice.

Government usually stifles competition. If antitrust regulation is to be retained, it should not be a first-resort policy. If a company has an overwhelming competitive advantage, it is important to first ask what is causing it. If the advantage is due to superior performance, then consumers are not being harmed.

In most cases, dominance does not last long, as evidenced by how quickly any list of America’s largest companies changes from year to year. If a company does remain dominant for a long period of time, one of two possibilities must be true. The first option is that it continues to be consumers’ preferred option. The second is that it is engaging in rent- seeking behavior. In the first case, there is no need for an antitrust intervention. In the second case, the solution is not antitrust regulation, but to take away the government’s power to tilt the scales in rent-seekers’ favor.

Think long term. Robert Bork, though famous for his antitrust skepticism, still favors some antitrust regulation. He merely favors a more restrained usage than the Brandeis school. As he writes in The Antitrust Paradox , “Antitrust is valuable because in some cases it can achieve results more rapidly than can market forces. We need not suffer losses while waiting for the market to erode cartels and monopolistic mergers.”40

Bork’s statement is problematic for several reasons. How do regulators and judges know which cases are causing consumer harm and which are not? How do they decide which cases to pursue? Cases also often take years to resolve. Assuming regulators identify a valid case, how would they, and the judges who hear the case, know if market activity could address the problem by the time the case is decided? Do the benefits of regulatory action exceed the court and enforcement costs? Are the affected companies in a position to capture the regulators?

More to the point, does the short-term benefit come at a greater long-term cost? An enforcement action now could have a deterrent effect on future mergers, contracts, and innovations, including in unrelated industries. The consumer harm from these could well exceed the short-term benefits of a short-term improvement on market outcomes—assuming that regulators are consistently capable of such a feat.

For example, the IBM v. United States antitrust case filed in 1969 lasted for 13 years until the Justice Department decided to drop the case in 1982. By then, the computer market had changed so completely that IBM’s competitors had long since surpassed it. In this case, regulators eventually gave up, however belatedly, but this is not guaranteed to happen in every case. And who knows what consumer- benefiting innovations IBM could have developed with the time and resources it ended up devoting to defending itself in this case? Neo-Brandeisians could argue that it was the antitrust process itself that empowered IBM’s competitors to overtake it, but there is no way of knowing that.

With these themes in mind, here is a “Terrible Ten” list of antitrust policies that should be repealed.

1: Restraint of Trade and Monopolization

The Sherman Act of 1890 is two pages long.41 Section 1 makes illegal “every contract, combination, or conspiracy in restraint of trade.”42 Section 2 declares that “every person who shall monopolize, or attempt to monopolize, or conspire to monopolize shall be deemed guilty of a felony.”43 Nearly 130 years later, the phrases “restraint of trade” and “monopolize” remain key terms in antitrust regulation.

From the earliest cases to the present, antitrust enforcers have chosen odd targets. In fact, there is substantial evidence that prosecutors select cases based on political considerations rather than on the merits.44

The working economic definition of a monopoly is a firm dominant enough to simultaneously raise prices and reduce supply.45 By this standard the first major antitrust target, Standard Oil, did not act as a monopoly. It had overwhelming market share, but its behavior did not fit the pattern of a monopolist, as it continually increased supply and cut prices.46 Over the period 1879-1895, Standard Oil’s market share went from 88 percent to 82 percent. Over a similar period, 1880-1897, the price of refined oil per gallon in barrels declined from 9.33 cents to 5.91 cents.47 Despite falling prices, over the period 1890- 1897 Standard increased its kerosene production by 74 percent, lubricating oil by 82 percent, and wax by 84 percent. Falling prices and rising output are the opposite of monopoly behavior.

More importantly, it was not immune from competition. In the following years, the market changed. Electricity and natural gas displaced kerosene, which Standard Oil dominated. The company had to adapt to customers’ preferences instead of the other way around. It did so successfully, as the growth of automobiles and increasing industrialization opened a large market for gasoline and other oil products such as lubricants. Rather than restricting supply, its crude oil production went from 39 million barrels in 1892 to 99 million barrels in 1911, the year of the Supreme Court’s momentous Standard Oil decision (there were several antitrust cases against Standard; the 1911 Standard Oil Co. of New Jersey v. United States decision is the one most commonly cited).48 Despite increasing supply, Standard’s market share of all petroleum products had declined from 88 percent in 1890 to 64 percent in 1911.49 In addition to falling prices and rising output, Standard also had to contend with declining market share.

Based on the data, it is difficult to argue that Standard was engaging in monopoly behavior or harming consumers. This may be why the 1911 Standard Oil decision relied on a “rule of reason” standard, which has no set criteria or thresholds for determining what is and is not a monopoly. Judges and regulators simply decide what they think is reasonable, which varies over time and from case to case.50 From Standard until now, there has never been a bright-line rule for determining monopoly status.

The most recent major case was the Justice Department’s case against Microsoft. It involved a personal computer market that Microsoft played a large part in popularizing in the first place.51 The Justice Department began the first of multiple investigations Microsoft in 1992 and extracted a settlement in 1994. Under that settlement, Microsoft agreed not to tie outside programs into Windows, but remained free to add features.

This semantic distinction became the crux of a lawsuit that began in 1998 and continued into 2002. Microsoft required computer manufacturers to include Internet Explorer in their Windows 95-based machines. The Justice Department argued that this violated the 1994 settlement’s tying ban, while Microsoft argued that Internet Explorer was a feature of Windows, not a separate program.

An initial 2000 decision would have broken up Microsoft into two separate companies. One would have been in charge of operating systems such as Windows, and the other firm would take up Microsoft’s other software programs. This decision was overturned on appeal, leading to a settlement agreement in 2001 that was finalized in 2002.

Microsoft was allowed to continue tying Internet Explorer and other products into Windows. But by that time, a rival browser called Firefox was gaining popularity, and Microsoft’s browser monopoly was dying of natural causes. Despite being tied into every Windows machine, Internet Explorer would lose market share every year and eventually be discontinued. As of 2019, it survives as a little-used program re-named Edge. Firefox would in turn be unseated by Google’s Chrome browser, and even Apple’s stock Safari browser for Mac and iOS has long had a larger market share than Internet Explorer.

Today, antitrust regulators in both the U.S. and Europe are focused on the FAANG companies—Facebook, Amazon, Apple, Netflix, and Google— for their dominance of their respective sectors. Some of them invented the very markets they dominate, such as Apple with the iPhone, the first widely adopted touchscreen smartphone. Others superseded prior incarnations by offering consumers a better product, as Facebook did over MySpace or Netflix over Blockbuster. Amazon competes with brick-and-mortar retailers such as Walmart and Target, which are improving their online shopping as a direct competitive response.

None of these developments have reduced supply so far. Many online offerings, from Google searches to Facebook accounts to many apps in Apple’s App Store, are zero-price. This price point, common in the tech sector, encourages trade rather than restrains it. Netflix raises its prices every so often, but for families who collectively watch at least a movie a week, membership is still cheaper than competing options such as purchasing DVDs, on-demand cable TV, or going out to a movie theater. This should be their decision to make, not the Justice Department’s or the FTC’s. (Hulu, Amazon Prime Video, and various niche services also offer competing exclusive original content.)

Monopolies cannot last without government assistance (barring some very narrow limited circumstances, such as near-total control of a natural resource). Facebook is currently over- whelmingly dominant, but is worried about its aging user base. Younger users generally prefer to interact with each other out of sight of parents, teachers, or bossess, and are increasingly choosing other social networks, such as SnapChat. As Georgetown University computer scientist Cal Newport remarked in a January 2019 Wall Street Journal interview, Facebook, in his view, seems to have “a very weak connection to their user base. It’s a much more fickle user base than they probably want to admit.”52 And on March 6, 2019, in response to growing privacy concerns among the public, Facebook CEO Mark Zuckerberg announced plans to shift the company’s focus toward encrypted and ephemeral communications, acknowledging that, “frankly we don’t currently have a strong reputation for building privacy protective services.”53

Privacy concerns are also providing opportunities for competitors to provide a different balance of privacy protection and data collection for targeted advertising that consumers and advertisers might prefer over Facebook’s. The only way for Facebook to keep its dominance is to offer a better product that appeals to its customers—which is why the company is continuously changing its design, features, and privacy practices. It also spent $7.8 billion on research and development in 2017, which is not a business decision a company would make if it felt safe and secure.54

The quality of the user experience is another issue. Remember the relevant market fallacy. Social media competes with other forms of leisure time and some people are souring on social media and doing other things with their time instead. Facebook and Twitter political discussions are often rather less than edifying, to put it politely. They are difficult to keep out of one’s newsfeed. And time spent scrolling through feeds is time not spent with family, friends, hobbies, books, movies, and more.

Antitrust regulators are in no better position than anyone else to foresee the future of social media. Market dominance is not automatically a bad thing. Size in itself is neither good nor bad. What matters is maximizing consumer benefit. Given the ease of exit, which in this case is as simple as not visiting certain websites, it is easy for consumers to do what they want, rather than what Facebook wants.

Neither Microsoft nor Facebook nor Standard Oil ever held 100 percent market share. But if having a single firm in a given sector does turn out to maximize consumer welfare, antitrust regulators would hurt people by breaking it up. If a dominant company is making extra-normal monopoly profits, the only way for it to keep competitors out is to use government on its behalf. The solution to this problem is not antitrust enforcement, but taking away the government’s power to grant favors to rent-seekers.

2: Horizontal Mergers

Horizontal mergers are between companies competing in the same market. Vertical mergers are between companies up and down the supply chain. General Motors and Ford merging with each other would be a horizontal merger, while one of them merging with one of its suppliers would be a vertical deal. Horizontal mergers reduce the number of competitors in a market, and increase their average size. Both of these are red flags for regulators searching for possible restraints of trade or attempts at monopolization.

Antitrust law treats a company differently based on whether it reaches a certain size through growth or through merger. If size or market concentration is the offense, that is what the law should be concerned with, not how a company got its dominant position.

As University of California, Berkeley economist Oliver Williamson has demonstrated, the real proof of a merger leading to market power has two components: 1) reduced output, which leads to societal deadweight losses; and 2) the cost savings from efficiencies that may outweigh those deadweight losses—in other words, increased profits55

Horizontal merger arguments are prone to the relevant market fallacy. The mergers between Coca-Cola and Dr. Pepper and between PepsiCo and Seven Up were attacked during the 1980s under the arbitrary premise that one need distinguish between “carbonated soft drinks” and “soft drinks” for the purpose of determining whether monopoly power exists.56 Many beverage companies own multiple brands, not all of them carbonated, hence the distinction. Coca-Cola also owns Dasani bottled water, for example, and Dr. Pepper and Snapple have had the same parent company through several rounds of mergers and acquisitions. The trouble is that these are not necessarily separate markets. Many of these brands compete against each other, for example, with bottled water and iced tea marketing campaigns aimed at persuading consumers to drink those products instead of soda that in some cases might be bottled at the same plant. This is competitive behavior, regardless of who owns which brands.

In 1997 the Federal Trade Commission blocked the merger of Staples and Office Depot on the basis of a static perception that prices would rise or competitive entry might not happen overnight.57 In 2016, U.S. District Judge Emmet G. Sullivan ruled against a second merger attempt.58 The unintended result has been to deprive underserved localities of superstores that the merger’s potential profitability might have made feasible.59

In 2008, Sirius and XM, two satellite radio companies, merged. The Justice Department nearly blocked the merger due to the relevant market fallacy. Yes, the merged company would have a monopoly over satellite-based radio, but that is not the relevant market. Satellite radio competes for listeners’ attention with terrestrial radio, podcasts, audio books, streaming radio, streaming on-demand music services such as Spotify, and depending on the age of one’s car, compact discs. Recognizing its true relevant market, SiriusXM has expanded beyond satellites and also offers subscribers its full channel lineup over the Internet, and acquired Internet radio company Pandora in 2019 in an attempt to improve its Internet offerings.60

A similar argument applies to the Whole Foods-Wild Oats merger between two high-end grocery store chains.61 These compete with other grocery stores such as Trader Joe’s, Wegman’s, Kroger, Piggly Wiggly, and many others, including small, locally owned stores that are especially attuned to a community’s tastes and preferences. The relevant market is much larger than Whole Foods’ organic and health-conscious niche. After being bought out by Amazon, Whole Foods also entered the online ordering grocery delivery market, where it now competes with Peapod and other delivery services. Traditional grocery stores are responding by increasing their offerings for online ordering, curbside pickup, and delivery. Amazon is further upping the ante by announcing, in March 2019, its own brick-and-mortar stores separate from the Whole Foods brand.62 Time will tell what the market’s next competitive response will be.

3: Collusion: Cartels, Price Fixing, and Market Division

Adam Smith famously observed that, “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”63 He was right. This is one reason why, historically, price fixing is by far the most common cause for antitrust lawsuits.64 This is usually done by means of formal and informal cartels and agreed-upon market divisions. But this does not mean such arrangements are effective; companies that collude tend to be less profitable than companies that do not.65

There are two problems with cartels, price fixing, market division, and other forms of collusion.

The first—a common one with antitrust issues—is where to draw the line. Every corporation in existence engages in some form of what could be considered collusion. A classic example is a law firm. When two or more lawyers join together in a law firm, they agree in advance to charge certain rates and not to compete with each other for clients. They set market divisions, say, with one attorney specializing in contract law and another in patent law. These are all examples of collusion, yet no antitrust regulator would file a case against such a firm. If collusive behavior is acceptable inside a single firm, why is identical behavior unacceptable between separate firms? No compelling argument for this legal and logical oddity exists.

The second problem with attempting to regulate collusion is that cartels do not last, at least without government help. Its members have strong incentives to defect and charge lower prices or increase output. Even if price fixing and other collusion were the result of deliberate anti-consumer mischief, we would be better off allowing markets, rather than regulators, to take their course. The instability of inefficient cartel arrangements serves as a built-in insurance policy for consumers.

Moreover, if cartel members stop competing on money prices, they can compete on other features such as quality, shorter wait times, warranties, or other add-ons. Consumer welfare depends on more than just money prices. The tendency to undermine agreements, and seek a bit of competitive advantage, renders inefficient cartel arrangements unstable and sets in motion their destruction— unless government enforces the cartel. The more inefficient a cartel becomes— prices are too high or some territories are underserved—the stronger the incentive for new competitors to enter the market.

A prominent example of collusion in U.S. history is the pre-deregulation airline industry.66 Before the Carter administration and the economist Alfred E. Kahn’s deregulatory efforts, airlines were unable to compete freely on interstate flights. The Civil Aeronautics Board (CAB) ran a cartel arrangement in all but name. If an airline wanted to add, say, a New York to Los Angeles flight, it first had to apply to the CAB. If the agency thought the route was already sufficiently served, it could deny the application. The CAB also set fares, so airlines were unable to compete on price. Instead, airlines competed on non-price features such as in-flight service and other perks, but air travel remained out of reach of many people’s budgets. When the CAB was abolished, prices went down and supply went up almost immediately. The cartel, just as economists predicted, was unsustainable without government regulation.

The Civil Aeronautics Board did not have jurisdiction over intrastate flights, and the vibrancy of those markets compared to the CAB-regulated interstate market was striking. Southwest Airlines began flying only inside the state of Texas. It found high demand for inexpensive, low-frills flights. Deregulation allowed Southwest to take this business model national, and it is now the fourth-largest airline in the United States.67 Airlines such as Pan American and Braniff were unable to keep up and went out of business. Surviving airlines had to cut costs to remain competitive, and new airlines such as JetBlue and Spirit emerged with their own takes on cost-cutting and unbundling of various amenities and services.68

Because cartels and other forms of collusion are inherently unstable, many such cases involve rent-seeking. The remedy for such cases is not antitrust enforcement. It is making rent-seeking more difficult, such as by reforming tax and regulatory codes to inoculate them against special interest lobbying.

4: Predatory Pricing

Antitrust regulators can penalize a company for predatory pricing if it charges lower prices than its competitors. The thinking goes that a company can sell goods at a loss to gain market share, causing competitors to exit the market or even go bankrupt. Then the predator can raise its prices and enjoy monopoly profits.

The problem here is one of simple arithmetic. Predators nearly always have a larger market share than the prey. This means the larger company must sell more product at a loss than the smaller prey companies, and thus incur a larger loss. The only way for the predator to keep a permanent monopoly is to permanently sell at a loss, which results in bankruptcy, not monopoly.

Monopolies are also temporary— again, unless government assists—so the predator’s monopoly would disap- pear as other companies saw an oppor- tunity to undercut a high monopoly price and still make a profit.69

A successful example of predatory pricing has never been proven, as the Supreme Court acknowledged in the 1986 Matsushita Electric Industrial Corp. v. Zenith Radio Corp . decision.70 Zenith, an American television set producer, argued that 21 of its Japanese competitors, including Matsushita, colluded to earn monopoly profits in Japan to subsidize predatory pricing in the U.S. market in order to drive American companies out of business. A skeptical Supreme Court noted that “predatory pricing schemes are rarely tried, and even more rarely successful.” Though the Court declined to repeal the Robinson-Patman Act outright, it noted that a “predatory pricing conspiracy is by nature speculative.”71

It is possible that a company with some outside revenue from another line of business could subsidize its predation enough to succeed, but monopolizing one market in this fashion comes at the cost of becoming less competitive in another market. Such a company would not benefit on net, as its profits in one market are negated by losses in another.

As Nobel Prize-winning economist George Stigler argued in a lecture five years before Matsushita , economists are far more knowledgeable about how competition works than they were when the Sherman Act passed in 1890:

The content and power of competition have become much better understood after several generations of far-ranging debate about monopolistic and imperfect competition and oligopoly—a word unknown to the profession in 1890. Consider one small example: The earlier literature of predatory competition had the predator cut prices in the vicinity of the prey and raise prices elsewhere to recoup the loss. Today it would be embarrassing to encounter this argument [that predatory pricing is a monopolizing device] in professional discourse.72

Predatory pricing is especially difficult to achieve in the tech sector. Many apps and games, social media, and cloud storage services are available free of charge—a difficult price to undercut. They are supported instead by advertising or other revenue sources. This opens up additional competitive opportunities. If companies cannot compete on money prices, they can compete on other features, such as offering fewer or less intrusive advertisements for a small fee. This type of undercutting is pure consumer benefit.

Even operating systems, which used to cost hundreds of dollars for updates back in the days of Windows 95, are now typically updated for free. Android, the most popular mobile operating system as of this writing, is available for free to phone and tablet manufacturers, who are also free to customize it for their devices.

Not only do attempts at predatory pricing usually fail, antitrust remedies can harm consumers.

5: Price Discrimination

Price discrimination involves selling the same good to different people at different prices. The Robinson-Patman Act is the primary statute regulating the practice. As Robert Bork put it, “One often hears of the baseball player who, although a weak hitter, was also a poor fielder. Robinson- Patman is a little like that. Although it does not prevent much price discrimination, at least it has stifled a great deal of competition.”73

In a colorful example of price discrimination, Burger King ran a temporary promotion in December 2018 to sell Whoppers for a penny— but only to customers who used its smartphone app to order while within 600 feet of a McDonald’s location.74 Burger King’s goal was to encourage customers to download its relaunched app and order online—and yes, to troll its competitor for a laugh. The penny Whopper promotion was a way for Burger King to persuade customers not just to download the app, but to associate Burger King with online ordering. Down the road, this price discriminating provision can save Burger King future labor costs and staff time in taking orders, while reducing error rates.

Other examples of price discrimination include quantity discounts for buying in bulk, putting products temporarily on sale, membership programs, or store-specific credit cards offering discounts or benefits such as points programs or frequent flier miles. Some clubs, restaurants, or theaters will charge different prices to members and non-members, or sell season tickets at a special rate.

In 1998, the American Booksellers Association and a number of other independent booksellers filed antitrust lawsuits against the superstores Borders and Barnes & Noble for receiving not just volume discounts, but other favorable terms, such as special promotional treatment from publishers—non-money price discrimination.75 Borders is now bankrupt and Barnes & Noble is struggling to remain competitive despite such favorable treatment, so it is unlikely the antitrust case would have helped competition had it succeeded. However, it would have given special government treatment to individual competitors. This is often the result of antitrust regulation, if not its intention.

In a twist of fate no regulator predicted, independent booksellers are enjoying something of a renaissance without any antitrust assistance.76 Many stores are even benefiting from Amazon’s dominance. Amazon allows independent booksellers to use Amazon’s website to list and sell books (and nearly any other product), and can even handle order fulfillment.77 The stores benefit from gaining access to a global customer base, and Amazon benefits from both a cut of the sales and enhancing its desired reputation as a place to buy just about anything. Even individuals who do not own a physical store or do not want to go through the regulatory hurdles of establishing one can take advantage of this policy, enabling even the smallest of competitors to enter the market and benefit consumers. Many of those customers will take advantage of Amazon’s Prime program, a form of price discrimination for shipping costs.

As with other items in this Terrible Ten list, there is considerable uncertainty as to which forms of price discrimination are punishable and which are not. Regulators may draw the line wherever they choose at any time. Fortunately, policy makers have mostly realized that Robinson-Patman is unworkable, and it is unenforced. Consumers and businesses would gain peace of mind from its repeal.

6. Manufacturer Price Restraints on Retailers

Resale price maintenance agreements require retailers to sell a product at or above some minimum price set by the manufacturer. They were made illegal on a per se basis by the Supreme Court’s 1911 Dr.  Miles decision.78 The Supreme Court expressed squeamishness about such a severe prohibition, but upheld it for more than five decades, most famously in the 1967 Schwinn decision.79 In this case, the Court ruled against Schwinn for putting territorial restrictions on where its distributors could sell its bicycles to retailers, thus limiting competition in a given area. The decision notes that Schwinn’s market share had declined from 22 percent in 1951 to 12.8 percent in 1961. A decade later the Court reversed Schwinn in the Sylvania case between Sylvania, a television manufacturer, and Continental Television, a California retailer that took issue with Sylvania’s sales policies. Continental, which already sold Sylvania televisions in San Francisco, wanted to expand its sales to Sacramento. Sylvania already had deals with Sacramento stores, and refused to allow Continental to sell its televisions there. The Court ruled in Sylvania’s favor.80

Price maintenance agreements have since proven to be a valuable pro- consumer tool, and regulators have mostly left them alone since Sylvania . Retailers who are unable to compete on money prices compete instead on non-money price factors such as quality of service. Manufacturers who require retailers to sell at a minimum markup may have a reason for requiring a certain minimum price. Some of that extra margin might be spent on marketing or displays, certification programs for repair technicians, or to cover warranty costs. A retailer that is able to maintain an extranormal profit margin has an incentive to display the high-margin product more prominently than lower-margin competitors or otherwise give it favorable treatment. This gives those disadvantaged competitors an incentive to become more competitive on some mix of money prices and non-money features, all to consumers’ benefit.

The retailer also avoids a potential free-rider problem. With a resale price agreement, consumers could go to one store that offers non-price benefits such as knowledgeable sales staff and hands-on product demonstrations, then leave and buy the same product for less from a no-frills competitor. This type of short-term gain results in long- term consumer harm. Firms quickly wise up to what is happening, and gain an incentive to do away with non- price benefits. Consumers would then have less information available and fewer shopping choices.

Online shopping makes it easier than ever for consumers to free-ride on brick-and-mortar stores’ non-price benefits while buying online instead. For products requiring online sellers to preserve some minimum resale price, they must offer similar non-price benefits as brick-and-mortar retailers. Amazon, where possible, allows customers to peek inside books the same as they would at a bookstore, without charge. It also relies on customer reviews to give credible assurances of product quality, free of charge. Google and services such as Consumer Reports and Yelp also offer reviews for products, stores, restaurants, hotels, and more. If this independent model becomes the dominant model for informing consumers, it may even spell a market-derived end for retail price maintenance.81

Traditional retailers are also beefing up their online operations as a competitive response—another consumer benefit partly attributable to resale price maintenance agreements.

Returning to a pre- Sylvania approach to resale price agreements could make almost all marketing advertising activities by retailers technically illegal. Advertising costs money and eats into profit margins. Even low- margin retailers, such as grocers, engage in extensive advertising, such as in weekly circulars and local television commercials. Retailers often pay for this pro-competitive behavior by charging higher prices.

The Schwinn decision has been roundly criticized by Bork, Richard Posner, Dominick Armentano, and other antitrust scholars, and generally enjoys a poor reputation in the legal community.82 It is unlikely any judge would reinstate it. But the extent of regulatory restrictions of some non- price competition would be a matter of discretion. This would cause uncertainty among affected businesses and have a chilling effect on competition and innovation.

7: Exclusive Dealing

Exclusive dealing involves a seller agreeing to sell products exclusively from a certain supplier. Examples include car dealerships, restaurants that serve Coca-Cola but not Pepsi, or musicians who exclusively use a certain brand of instrument on stage. An exclusive arrangement can provide important benefits to manufacturers, retailers, and consumers. A manufacturer gains some ability to make long-term decisions regarding how much product to make. Retailers gain specialized knowledge of the product, making them more knowledgeable and effective sellers. Consumers benefit from this added sales expertise when making purchasing decisions.

Exclusive dealing has been prosecuted at various points under Section 3 of the Clayton Act, Section 1 of the Sherman Act, and Section 5 of the Federal Trade Commission Act.83 Exclusive dealing still exists in the economy because regulators wisely decline to enforce the letter of the law. Repealing those provisions would remove uncertainty surrounding potentially pro-consumer business practices.

A classic exclusive dealing case is the 1922 Standard Fashion Co. v. Magrane-Houston Co . decision. Standard Fashion was a clothing manufacturer that required some of its retailers to sell its designs exclusively. Magrane-Houston was one of those retailers, and Standard Fashion sued it when Magrane-Houston violated their agreement. The Court sided with Magrane-Houston, and declared the exclusive contract invalid under Section 3 of the Clayton Act.84

There are several issues in play here. As Bork points out, Magrane-Houston’s exclusive contract was a two-year deal that left the retailer free to pursue a different option upon its expiration. That is not much of a restraint.85

In 2010, there was a court case over the National Football League (NFL) giving Reebok exclusive rights to sell licensed team jerseys (the league has since moved to an exclusive deal with Nike). It ended in a settlement with the NFL paying American Needle, an apparel manufacturer disadvantaged by the exclusive Reebok deal, so it remains an open legal question of whether, for antitrust purposes, a sports league is a single business entity or whether each team in the league is a separate entity.86

Franchising is another example of exclusive dealing promoting competition. Opening a restaurant and keeping it afloat is difficult. A small entrepreneur can benefit by being able to put a nationally known brand on the sign outside, backed by national marketing, with the menu and ingredients already taken care of and already popular. Other facets of running a business, such as payroll and bookkeeping, are often standardized or outsourced altogether, saving further hassle and expense. Thousands of small entrepreneurs are able to make a living and thrive thanks to this franchising model. Meanwhile, the parent company benefits from the franchising fees, and from selling ingredients and supplies to its franchisees. And many of the efficiency gains from marketing to food costs mean lower prices for consumers.

At the same time, companies should be free to embrace or reject franchising as they see fit. Many American state governments all but forbid car manufacturers from selling directly to consumers, for purely political rea- sons. Car dealer franchisees have cap- tured regulators, who protect incumbent dealerships by requiring carmakers to use their services.87 Tesla, an electric car manufacturer, has decided to sell direct-to-consumer in some places anyway, and has angered incumbent car dealers.88 In March 2019, Tesla announced it would be closing many of its self-owned dealerships, but would keep some locations open to serve as showrooms or promotional centers. Rather than embrace the traditional franchise model, it would transition to online sales.89

One business model is not inherently better than the other. That is for businesses and consumers to find out over time.90 Antitrust regulators do not have their own money at stake over such decisions; they neither profit from making the right decision nor lose by making the wrong one. There- fore, they have little incentive to make a decision based on economic effi- ciency and are vulnerable to political pressure, including from rent-seeking parties.

8: Tying or Bundling

Tying or bundling is selling two or more products together, but not separately. Courts have frowned upon the practice since the Supreme Court’s 1912 A.B. Dick decision, which involved a maker of shoe-buttoning machines that required its customers to also use its shoe-buttoning wire.91 More famously, the 1917 Motion Picture Patents decision found against a film projector company that required that only movies authorized by the projector company be screened on its projectors.92 A 1936 Supreme Court case involved IBM requiring customers to exclusively use its punch cards with its machines. The Court decided that while IBM could impose standard specifications for compatible punch cards, it could not prevent other companies from making the cards or prevent customers from using them.93 Tying was also at the heart of the Microsoft case, the last major case regulators have brought.

Determining which products are fit to be tied and which are not is more a matter of metaphysics than sound policy analysis. Left and right shoes are always sold as a pair. A car’s tires and sound system are almost always included in the sale. Transactions like these are allowed by regulators without controversy, though technically prosecutable—another instance of discretion by regulators creating un- certainty.

In the 1990s, the Justice Department tried to prosecute Microsoft for tying its Internet Explorer Web browser, free of charge, to its Windows operating system, while not selling a different version of Windows without the browser. The European Union’s case against Google similarly involves tying its apps to the company’s Android operating system—that is, including it at no additional cost (Android is available for free to developers).94

Another problem is ease of exit. Internet Explorer could easily be used to download its direct competitors. This is exactly what happened; Internet Explorer was overtaken in the marketplace by Firefox and Google’s Chrome browser. Apple’s Safari browser is also popular with Macintosh and iOS users. Microsoft tried replacing Internet Explorer with Microsoft Edge but has now conceded defeat and will use Google’s free Chromium software as a basis for future Edge browsers.95 Edge remains tied to Windows and little used, hardly the threat antitrust regulators made Internet Explorer out to be.

9: Strategic Predatory Behavior

This is often used simply a catchall term for competitive behavior that antitrust regulators dislike. Every business, big or small, tries to grow and gain or preserve market share. Naturally, this would come at competitors’ expense.

Trying to undercut rivals’ profitability is the very essence of business competition. But recently, the ordinary competitive market behavior of causing one’s rivals to face higher costs has spawned a veritable academic industry devoted to identifying competitive strategies as means of monopolization.

For example, in her 2012 book Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age , Harvard law professor Susan Crawford argues:

The absence of any effective regulatory regime or oversight over the cable giant makes it unlikely that Netflix will ever be able to challenge Comcast. Comcast has a number of options that will make it extremely difficult for independently provided, directly competitive professional online video to challenge its dominance.96

Yet, within a year of the publication of Crawford’s book, Netflix began producing original content, an innovation she did not foresee.97 As of 2019, Netflix is alive and well, and Comcast is the one shifting its business model to match changing consumer tastes. A June 2018 cover story in The Economist sums up the matter:

This year [Netflix’s] entertainment output will far exceed that of any TV network; its production of over 80 feature films is far larger than any Hollywood studio’s. Netflix will spend $12bn-13bn on content this year, $3bn-4bn more than last year. That extra spending alone would be enough to pay for all of HBO’s programming—or the BBC’s.98

There is a case of strategic behavior that appears similar to predatory pricing. Rather than a firm lowering its prices, this involves a firm seeking to raise its rivals’ costs. As George Mason University economist Donald Boudreaux points out:

All methods of raising rivals’ costs depend on the ability of a predator to secure contracts that exclude its rivals. Such a result requires that the predator’s rivals and its suppliers remain ignorant about its intentions.99

This is a difficult task. Employees often move from firm to firm in an industry, whether horizontally to a rival or vertically through the supply chain, taking knowledge of predatory plans with them. A disgruntled employee might leak damaging information to the press or a competitor. Trade shows, publicity events, or even informal socializing provide regular opportunities for loose lips to accidentally sink a company’s ships.

10: Exploiting Technological Lock-In

Companies can use technological lock-in to keep customers from fleeing to better alternatives. The famous example of technological lock-in is the QWERTY keyboard. As it turns out, QWERTY keyboards are just as efficient as Dvorak and other alternatives.100 The handwringing over the VHS-Betamax wars went away when DVDs became popular, which have since been superseded by streaming video. Same with the progression of music being played on 78 RPM, then 45 RPM, and then 33 RPM records, 8-tracks, cassettes, CDs, MP3 players, and now streaming services such as Spotify. A lock-in example currently in antitrust crosshairs is the Internet browser market. This is in addition to the tying allegations brought by European Union regulators addressed earlier in this paper.

Here is where the lock-in issue comes in for browsers: Life is much easier when all of your passwords and other information are stored in your browser and entered automatically when needed. Logging into a website or buying something online can be almost seamless. But in theory, this convenience also makes consumers reluctant to switch to a competing browser, even if it offers a better user experience. This reticence can lock consumers into an inferior technology, reducing competition and the incentive to innovate, but that is a problem grounded in consumer behavior that government is ill equipped to address.

Even so, the title of most popular browser has shifted at least three times over the past 20 years. Netscape gave way to Internet Explorer, then Firefox, and now Chrome, which could be eclipsed at any time. The older browsers remain freely available for anyone who wants to use them; apparently few people do. Apple’s Safari browser is also in the mix, along with numerous independent and open source browsers, such as Opera. There are also stand- alone programs such as LastPass that can store passwords, credit card numbers, and other information and work with multiple browsers and other applications. A product called a YubiKey reduces the need for passwords altogether while serving as an additional security layer.101 Facial recognition is another option for replacing passwords. If there is a threat of lock-in, it is via regulation, not markets.

Antitrust regulation began as a populist reaction against big business and industrial concentration. Yet, it has proven ineffective at countering the perceive threat of bigness in business, while causing considerable harm to consumers, competition, and innovation. Moreover, many antitrust policies are based on faulty arguments that bear little relation to how real-world markets work. And throughout its history, U.S. antitrust law has created considerable uncertainty for businesses, as federal antitrust enforcers have tried different regulatory approaches over the last 130 years.

The “rule of reason” standard, which had no set criteria, became the standard for enforcing actions from fines to jail terms to firm breakups. During the New Deal, government policy turned in the opposite direction and actively encouraged cartel behavior. After a postwar change of heart, antitrust enforcement reached its peak in the 1950s and early 1960s. Around this time, economists’ arguments slowly earned mainstream acceptance in the legal profession. By the 1980s, a Chicago-style consumer welfare had become the dominant enforcement standard, and has remained so up to the present day. However, the combination of a populist presidential administration with a growing Neo-Brandeisian antitrust movement on the progressive side threaten to revert antitrust policy to something closer to an arbitrary rule of reason standard, which creates the potential for a sharp upswing in enforcement actions against large or politically disfavored firms.

While the Chicago school and the Neo-Brandeisians prefer different levels of antitrust enforcement, both believe that antitrust regulation is an effective tool for managing competitive market processes. In this, both are in error, for a number of reasons.

First, competition is a spectrum, not an on/off switch. That makes it difficult to set predictable standards that companies can work to avoid violating and plan around.

Second, regulators are prone to fall for the relevant market fallacy, in which a company appears to dominate a narrowly defined market but has little power in the larger market in which it actually competes.

Third, antitrust enforcement standards are so broad that they are useless as a guide to permissible behavior. Allowable behavior changes with the political winds. Cases, especially major ones, are sometimes prosecuted for publicity rather than merit.

Fourth, antitrust regulation creates rent- seeking opportunities for companies seeking favors from government to harm competitors. As a result, antitrust regulation, as actually practiced, has done far more to stifle competition than to protect it or promote it.

Finally, antitrust regulation takes a short-term approach to a long-term competitive process. The IBM case was in play for a dozen years before the government dropped the case. By that time, the technology at the heart of the case had changed and IBM’s competitive position had declined. A case against one of the FAANG companies would likely have similar competitive relevance by the time a major trial would be decided.

As noted, antitrust regulation harms competition, consumers, and innovation, and therefore should be repealed. Congress should repeal the Sherman Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914, as amended, including the Celler-Kefauver Act of 1950 and the Hart-Scott-Rodino Act of 1976. A market-based approach to competition would enable more powerful market regulation to replace flawed government regulation. This would reduce regulatory uncertainty and its chilling effects on innovation, reduce rent-seeking, and do away with the need for intellectual rabbit holes such as defining relevant markets or permissible levels of firm size or market share.

Aggressive antitrust enforcement can create considerable economic uncertainty, which can have a chilling effect on long term investment and innovation in both products and in business practices that could benefit consumers. Consumers and competition would greatly benefit from the repeal of antitrust regulations regarding restraint of trade and monopolization, horizontal and vertical mergers, collusion such as price fixing and market division, predatory pricing, price discrimination, minimum resale prices, exclusive dealing, tying and bundling, strategic predatory behavior, and technological lock-in. As the economy becomes more high-tech, specialized, and global, antitrust policies formed in the smokestack era are becoming progressively less relevant.

•  Irwin M. Stelzer, “The FAANGs (Facebook, Apple, Amazon, Netflix, and Alphabet) have real problems,” Weekly Standard , November 24, 2018, https ://www.weeklystandard.com/irwin-m-stelzer/facebook-apple-amazon-netflix-and-google-may-get-government-regulation.

Facebook news feeds and Google search results often contain news stories critical of the president. Amazon founder Jeff Bezos owns The Washington Post , which President Trump has often criticized for covering him unfavorably. Amazon is a separate entity from the Post . Brian Fung, “Facebook, Google and Amazon are all being looked at for antitrust violations, Trump says,” San Jose Mercury News , November 5, 2018, https:// www.mercurynews.com/2018/11/05/amazon-facebook-and-google-are-all-being-looked-at-for-antitrust-violations-trump-says/.

Diane Bartz and David Shepardson, “U.S. Justice Department will not appeal AT&T, Time Warner merger after court loss,” Reuters, February 27\6, 2019, https ://www.reuters.com/article/us-timewarner-m-a-at-t/us-justice-department-will-not-appeal-att- time-warner-merger-after-court-loss-idUSKCN1QF1XB.

Tim Wu, “Antitrust’s Most Wanted: The 10 cases the government should be investigating—but isn’t,” Medium, December 6, 2018, https://medium.com/s/story/antitrusts-most-wanted-6c05388bdfb7.

Carolyn Said, “Uber Hit with Antitrust Suit 3 years after Former Competitor Sidecar Went Bust,” San Francisco Chronicle , December 11, 2018, https ://www.sfchronicle.com/business/article/Uber-hit-with-antitrust-suit-3-years-after-former-13458383.php.

Jennifer Armstrong, “Drafting Franchise Agreements to Avoid Antitrust “Lock-In” Tying Lawsuits,” McDonald Hopkins Insights, October 31, 2017, https://mcdonaldhopkins.com/Insights/Blog/Industry-Insights/2017/10/31/Drafting-franchise-agreements-to-avoid-antitrust-lock- in-tying-lawsuits.

Foo Yun Chee, “Europe Hits Google with Record $5 Billion Antitrust Fine, Appeal Ahead,” Reuters, July 18, 2018, https ://www.reuters.com/article/us-eu-google-antitrust/europe-hits-google-with-record-5-billion-antitrust-fine-appeal-ahead- idUSKBN1K80U8.

Nat Levy, “Amazon spent close to $23B on R&D in 2017, outpacing fellow tech giants,” Geekwire, April 9, 2018, https ://www.geekwire.com/2018/amazon-spent-close-23b-rd-2017-outpacing-fellow-tech-giants/.

Joshua Wright, “Requiem for a Paradox: The Dubious Rise and Inevitable Fall of Hipster Antitrust,” working paper, September 19, 2018, forthcoming in the Arizona State Journal of Law , 2019, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3309735&download=yes.

Iain Murray, “How Antitrust Regulation Hinders Innovation and Competition Framing a Broken Debate,” WebMemo No. 46, Competitive Enterprise Institute, November 14, 2018, https://cei.org/content/how-antitrust-regulation-hinders-innovation-and-competition.

Thomas K. McCraw, Prophets of Regulation , (Cambridge, Massachusetts: Belknap Press of Harvard University Press, 1984), p. 109.

For more on this early and enduring consensus, see George J. Stigler, “Monopolies,” in David R. Henderson, ed., Concise Encyclopedia of Economics, (Indianapolis: Liberty Fund, 2008 [1993]), pp. 363-366, online at https ://www.econlib.org/library/Enc/Monopoly.html.

For examples of such monopolies, including a particularly brutal state-supported Portuguese spice monopoly, see William J. Bernstein, A Splendid Exchange: How Trade Shaped the World , (New York: Atlantic Monthly Press, 2008), pp. 168-216.

Joseph Schumpeter, Capitalism, Socialism, and Democracy , (New York: HarperPerennial Classics, 2008 [1942]). Ronald H. Coase, “Durability and Monopoly,” Journal of Law and Economics , Vol. 15, No. 1, April 1972, pp. 143, 149. Ludwig von Mises, Human Action: A Treatise on Economics, Fourth Revised Edition , (Irvington-on-Hudson, New York: Foundation for Economic Education, 1996 [1949]). Aaron Director published little. Instead he put his energy into teaching and mentorship. He also played a large role in building the University of Chicago’s law and economics departments. His name remains well known among antitrust scholars. Sam Peltzman, “Aaron Director’s Influence on Antitrust Policy,” The Journal of Law and Economics , Vol. 48, No. 2, October 2005, pp. 313-330.

University of Chicago Booth School of Business IGM Forum, “Antitrust and International Competition,” June 13, 2018, http://www.igmchicago.org/surveys/antitrust-and-international-competition-2.

James Pethokoukis, “‘The Curse of Bigness’: A long-read Q&A with Tim Wu,” AEIdeas, American Enterprise Institute, February 14, 2019, https ://www.aei.org/publication/the-curse-of-bigness-a-long-read-q-and-a-with-tim-wu/.

Richard A. Posner, Antitrust Law, Second Edition , (Chicago: University of Chicago Press, 2001). George J. Stigler, The Citizen and the State: Essays on Regulation , (Chicago: University of Chicago Press, 1975). Yale Brozen (David R. Henderson, foreword), “Is Government the Source of Monopoly? and Other Essays,” Paper No. 9, Cato Institute, 1980. Harold Demsetz, The Economics of the Business Firm: Seven Critical Commentaries (Cambridge: Cambridge University Press, 1996). Sam Peltzman, Political Participation and Government Regulation , (Chicago: University of Chicago Press, 1998).

Robert Cooter and Thomas Ulen, Law and Economics, 6th Edition , (Berkeley, California: Berkeley Law Books, 2016), https://scholarship.law.berkeley.edu/books/2/.

Bartz and Shepardson. See also Jessica Melugin, “Court Rejects Antitrust Lawsuit against AT&T/TimeWarner Deal: CEI Comment,” news release, Competitive Enterprise Institute, February 26, 2019, https://cei.org/content/court-rejects-antitrust-lawsuit-against-atttimewarner-deal-cei-comment.

The term “hipster antitrust” may have originated with former Senator Orrin Hatch (R-UT). Robinson Meyer, “How to Fight Amazon (Before You Turn 29),” The Atlantic , July/August 2018, https ://www.theatlantic.com/magazine/archive/2018/07/lina-khan-antitrust/561743/.

One can make a similar argument about the term “neoliberal,” which is also nearly always pejorative, and almost never used as a self-description. Phillip W. Magness, “What Does ‘Neoliberalism’ Really Mean?” Reason , January 2019, pp. 64-65, https://reason.com/archives/2018/12/30/what-does-neoliberalism-really.

• Eric Johnson, “We have to rewrite antitrust law to deal with tech monopolies, says ‘Positive Populism’ author Steve Hilton,” Recode.net, October 24, 2018, https ://www.recode.net/2018/10/24/18016832/steve-hilton-positive-populism-book-fox-news-monopoly-antitrust-kara-swisher- recode-decode-podcast.John Hawkins, “The Conservative Case for Breaking Up Monopolies Such as Google and Facebook,” National Review , https ://www.nationalreview.com/2018/05/breaking-up-tech-giants-conservative-case/. May 16, 2018. Ned Ryun, “Break Up Google for the Public Good,” American Greatness, December 17, 2018, https://amgreatness.com/2018/12/17/break-up-google/.  
• Amy Hackney Blackwell, The Essential Dictionary of Law , (New York: Barnes and Noble books, 2004), p. 223.          

Ibid. p. 32.

Tim Wu, The Curse of Bigness: Antitrust in the New Gilded Age , (New York: Columbia Global Reports, 2018), p. 127. 27          

• Ibid. p. 136.  
• Ibid. p. 136.

Harold Demsetz, “Information and Efficiency: Another Viewpoint,” The Journal of Law and Economics , Vol. 12, No. 1 (April 1969), pp. 1-22, https ://www.jstor.org/stable/724977?seq=1#page_scan_tab_contents.

Paul E. Godek, “Does the Tail Wag the Dog? Sixty Years of Government and Private Antitrust In the Federal Court,” The Antitrust Source , December 2009, p. 2, https ://www.americanbar.org/content/dam/aba/publishing/antitrust_source/Dec09_Godek12_17f.authcheckdam.pdf.

The Justice Department provides a quick explanation of the Herfindahl-Hirschman Index at https ://www.justice.gov/atr/herfindahl-hirschman-index.

U.S. Department of Justice and Federal Trade Commission, Horizontal Merger Guidelines, updated August 19, 2010, p. 19, https ://www.justice.gov/sites/default/files/atr/legacy/2010/08/19/hmg-2010.pdf.

Brown Shoe Co., Inc. v. United States , 370 U.S. 294 (1962), https://supreme.justia.com/cases/federal/us/370/294/. For market share data, see Robert H. Bork, The Antitrust Paradox: A Policy at War with Itself , (New York: Basic Books, 1978), p. 211.

United States v. Von’s Grocery Co ., 384 U.S. 270 (1966), https://supreme.justia.com/cases/federal/us/384/270/.

Bret Swanson, “Lessons from the AT&T break up, 30 years later,” AEIdeas, American Enterprise Institute, January 3, 2014, http://www.aei.org/publication/lessons-att-break-30-years-later/.

Bruce Yandle, “Bootleggers and Baptists: The Education of a Regulatory Economist,” Regulation , Vol. 7, No. 3 (May/June 1983) American Enterprise Institute, republished by the Cato Institute, pp. 12-16, http://object.cato.org/sites/cato.org/files/serials/files/regulation/1983/5/v7n3-3.pdf. Adam C. Smith and Bruce Yandle, Bootleggers and Baptists: How Economic Forces and Moral Persuasion Interact to Shape Regulatory Politics (Washington: Cato Institute, 2014).

Greg Miller, Ashley Dunn, and Jube Shiver, Jr., “Oracle Defends Its Spying on Microsoft as ‘Public Service,’” Los Angeles Times , J une 29, 2000, http://articles.latimes.com/2000/jun/29/business/fi-45932.

Timothy P. Carney, “How Hatch forced Microsoft to play K Street’s game,” Washington Examiner , June 24, 2012, https ://www.washingtonexaminer.com/carney-how-hatch-forced-microsoft-to-play-k-streets-game.

Rajiv Chandrasekaran and John Mintz, “Microsoft’s Window of Influence,” Washington Post , May 7, 1999, https ://www.washingtonpost.com/archive/politics/1999/05/07/microsofts-window-of-influence/424f0b28-e86c-42cf-a4c8- cb2db173715d/?utm_term=.5501604f9863.

• Bork, p. 311.

A PDF scan of the original handwritten Sherman Act is online at https ://www.ourdocuments.gov/doc_large_image.php?flash=false&doc=51. A more legible version is available at http://www.stern.nyu.edu/networks/ShermanClaytonFTC_Acts.pdf. https:// www.ourdocuments.gov/print_friendly.php?flash=false&page=&doc=51&title=Sherman+Anti-Trust+Act+%281890%29.

Sherman Act, 15 U.S.C., Section 1.

Sherman Act, Section 2.

Some of the relevant literature is collected in McChesney and Shughart, The Causes and Consequences of Antitrust .

W. Kip Viscusi, John M. Vernon, and Joseph E. Harrington, Jr., Economics of Regulation and Antitrust, Third Edition , (Cambridge, Massachusetts: MIT Press, 2000), pp. 258-262.

As Isabel Paterson wrote in The God of the Machine , “Standard Oil did not restrain trade; it went out to the ends of the earth to make a market. Can the corporations be said to have ‘restrained trade’ when the trade they cater to had no existence until they produced and sold the goods?” Isabel Paterson, The God of the Machine (New Brunswick: Transaction Publishers, 1943; reprinted, 1999), p. 172.

Ida Tarbell, The History of the Standard Oil Company , (New York: Peter Smith, 1950), p. 385.

Standard Oil Co. of New Jersey v. United States , 221 U.S. 1 (1911), https://supreme.justia.com/cases/federal/us/221/1/.

Ralph and Muriel Hidy, Pioneering in Big Business, 1882-1911: History of the Standard oil Company (New Jersey) (New York: Harper and Row, 1955), p. 289.

Rule of reason standards are not unique in their arbitrary nature. For more on the subjectivity of much legal reasoning, see Edward H. Levi, An Introduction to Legal Reasoning , (Chicago: University of Chicago Press, 1946).

For an in-depth account and analysis of the Microsoft case, see Robert A. Levy, Shakedown: How Corporations, Government, and Lawyers Abuse the Judicial Process , (Washington: Cato Institute, 2004), pp. 161-286.

Kate Bachelder Odell, “It’s Not Too Late to Quit Social Media,” Wall Street Journal , January 25, 2019, https ://www.wsj.com/articles/its-not-too-late-to-quit-social-media-11548457601.

Jacob Kastrenakes, “Facebook knows Facebook isn’t the future,” The Verge, March 7, 2019, https ://www.theverge.com/2019/3/7/18253547/facebook-zuckerberg-future-blog-post-redefining-reputation.

Rani Molla, “Amazon spent nearly $23 billion on R&D last year—more than any other U.S. company,” Recode, April 9, 2018, https ://www.recode.net/2018/4/9/17204004/amazon-research-development-rd.

Oliver E. Williamson, “Economics as an Antitrust Defense: The Welfare Tradeoffs,” American Economic Review, Vol. 58 (March 1968), pp. 18–36. See also Robert H. Bork, “The Consumer Welfare Model,” chap. 5 in The Antitrust Paradox , pp. 107-115.

Dominick T. Armentano, “Drawing the Line on Mergers: An Action Bordering on the Incoherent,” New York Times , July 27, 1986, p. C2.

Federal Trade Commission, “Staples, Inc. and Office Depot, Inc.,” Cases and Proceedings, April 10, 1997, https ://www.ftc.gov/enforcement/cases-proceedings/9710008/staples-inc-office-depot-inc.

Renae Merle, “Federal judge blocks Staples’ $6.3 billion acquisition of Office Depot,” The Washington Post , May 10, 2016, https ://www.washingtonpost.com/news/business/wp/2016/05/10/federal-judge-blocks-staples-merger-with-office- depot/?utm_term=.40d89b6ec379.

Fred L. Smith Jr., “The Case for Reforming the Antitrust Regulations (If Repeal Is Not an Option),” Harvard Journal of Law and Public Policy , Vol. 23, No. 1 (2000), pp. 101–136.

Marc Schneider, “SiriusXM Finalizes $3.5 Billion Purchase of Pandora,” Billboard , February 1, 2019, https ://www.billboard.com/articles/business/8496108/siriusxm-finalizes-pandora-acquisition.

Diane Bartz, “Whole Foods, FTC settle on Wild Oats merger,” Reuters, March 6, 2009,

https ://www.reuters.com/article/us-wholefoods-ftc/whole-foods-ftc-settle-on-wild-oats-merger-idUSTRE5253AL20090306.

Nathaniel Meyersohn, “Amazon’s grocery plans go way beyond Whole Foods,” CNN, March 4, 2019, https ://www.cnn.com/2019/03/04/business/amazon-groceries-whole-foods/index.html.

Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations , (New York: Modern Library, 1994 [1776]),

p. 148. Immediately after, Smith cautions that, “though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies, much less to render them necessary.”

Richard A. Posner, Antitrust Law, Second Edition , (Chicago: University of Chicago Press, 2001), pp. 36-37.

Peter Asch and Joseph J. Seneca, “Is Collusion Profitable?” Review of Economics and Statistics , Vol. 58, No. 1 (February 1976), pp. 1-12, https:// www.jstor.org/stable/pdf/1936003.pdf?seq=1#page_scan_tab_contents.

For a history of airline deregulation, see Martha Derthick and Paul J. Quick, The Politics of Deregulation , (Washington: Brookings Institution Press, 1985), pp. 147-206 and Thomas K. McCraw, Prophets of Regulation , (Cambridge, Massachusetts: Belknap Press of Harvard University Press, 1984), pp. 222-299.

Ajay Kumar Reddy Jammula, “The world’s biggest airlines in 2018,” Airport Technology, June 22, 2018, https ://www.airport-technology.com/features/worlds-biggest-airlines-2018/.

Ryan Young, “Are Text Messages an Antitrust Issue?,” The American Spectator , March 7, 2011, https://cei.org/content/are-text-messages-antitrust-issue-0.

Donald J. Boudreaux and Andrew N. Kleit, “Cleaning Hands in Predation Cases: A Modest Proposal to Improve Predatory- Pricing Suits,” Antitrust Reform Project, Competitive Enterprise Institute, October 1996, http://www.cei.org/pdf/1614.pdf.

Matsushita v. Zenith Radio Corp ., 475 U.S. 574 (1986), https://supreme.justia.com/cases/federal/us/475/574/.

Ernest Gellhorn, William E. Kovacic, and Stephen Calkins, Antitrust Law and Economics in a Nutshell, Fifth Edition , (St. Paul, Minnesota: West, 2004), pp. 167-169.

George J. Stigler, The Economist as Preacher and Other Essays (Chicago: University of Chicago Press, 1982), p. 52.

• Bork, p. 382.

Amelia Lucas, “Burger King sells Whoppers for a penny at McDonald’s locations to promote its app,” CNBC.com, December 4, 2018, https ://www.cnbc.com/2018/12/04/burger-king-sells-whoppers-for-a-penny-at-mcdonalds-locations.html.

American Booksellers Association v. Barnes & Noble, Inc ., 135 F. Supp. 2d 1031 (N.D. Cal. 2001), https://law.justia.com/cases/federal/district-courts/FSupp2/135/1031/2503184/.

Jake Blumgart, “Independent bookstores are coming back in Philly, across the U.S.,” Plan Philly, January 22, 2019, http://planphilly.com/articles/2019/01/22/independent-bookstores-are-coming-back-in-philly-across-the-u-s.

Jennifer Rankin, “Third-party sellers and Amazon—a double-edged sword in e-commerce,” The Guardian , June 23, 2015, https ://www.theguardian.com/technology/2015/jun/23/amazon-marketplace-third-party-seller-faustian-pact.

Dr. Miles Medical Co. v. John D. Park & Sons Co ., 220 U.S. 373 (1911), https://supreme.justia.com/cases/federal/us/220/373/.

United States v. Arnold, Schwinn & Co ., 388 U.S. 365 (1967), https://supreme.justia.com/cases/federal/us/388/365/.

• Continental Television v. GTE Sylvania , 433 U.S. 36 (1977), https://supreme.justia.com/cases/federal/us/433/36/.

Tim Wu argues that Google has stolen a significant number of reviews from Yelp, as Yelp has long argued. If true, Yelp may well deserve compensation, but such a case would be an intellectual property issue, not an antitrust issue. Wu, pp. 125-126.

In The Antitrust Paradox , Bork argues that “Neither here nor in any vertical restraint case did the Court ever explain why such restraints are destructive of competition.” (p. 284). Posner notes that, “The government’s victory in Schwinn was Pyrrhic. Schwinn responded by terminating its independent distributors and opening its own distribution outlets, in other words, by integrating forward into retailing.” ( Antitrust Law, Second Edition , p. 188) Armentano writes, “The problem with Schwinn is that there had been no explicit recognition that territorial agreements that might decrease intrabrand competition, might also lead to an increase in interbrand competition.” ( Antitrust and Monopoly , p. 224) Justice Lewis F. Powell, in the Sylvania decision, writes of Schwinn, “The great weight of scholarly opinion has been against the decision.” (pp. 47-48)

• Bork, pp. 302-303.  
• Standard Fashion Co. v. Magrane-Houston Co ., 258 U.S. 346 (42 S.Ct. 360, 66 L.Ed. 653), https ://www.law.cornell.edu/supremecourt/text/258/346.  
• Bork, pp. 305-307.

American Needle, Inc. v. National Football League , 560 U.S. 183 (2010), https://supreme.justia.com/cases/federal/us/560/183/.

Ryan Bourne, “Government and the Cost of Living: Income-Based vs. Cost-Based Approaches to Alleviating Poverty,” Policy Analysis No. 847, Cato Institute, September 4, 2018, p. 14,

https ://www.cato.org/publications/policy-analysis/government-cost-living-income-based-vs-cost-based-approaches.

Steve Blank, “Strangling Innovation: Tesla vs. ‘Rent Seekers,’” Forbes.com, June 24, 2013, https ://www.forbes.com/sites/steveblank/2013/06/24/strangling-innovation-tesla-vs-rent-seekers/#7c0f6b863981.

Alexis Keenan, “Tesla’s move to close stores puts dealer franchise debate into spotlight,” Yahoo Finance, March 1, 2019, https://finance.yahoo.com/news/teslas-move-to-close-stores-puts-dealer-franchise-debate-into-spotlight-214547665.html.

Israel Kirzner, “Entrepreneurial Discovery and the Competitive Market Process: An Austrian Approach,” Journal of Economic Literature , Vol. 35, Issue 1, (March 1997), pp. 60-85, http://econfaculty.gmu.edu/pboettke/summer/summer%20docs/kirzner1997.pdf.

Henry v. A. B. Dick Co ., 224 U.S. 1 (1912), https://supreme.justia.com/cases/federal/us/224/1/.

Motion Picture Patents Co. v. Universal Film Co ., 243 U.S. 502 (1917), https://supreme.justia.com/cases/federal/us/243/502/.

International Business Machines Corp. v. United States , 298 U.S. 131 (1936), https://supreme.justia.com/cases/federal/us/298/131/.

Verge staff, “Google is unbundling Android apps: all the news about the EU’s antitrust ruling,” The Verge, October 18, 2018, https ://www.theverge.com/2018/10/18/17996640/google-eu-android-antitrust-ruling-app-unbundling-european-commission- chrome-search.

Chris Merriman, “Microsoft Edge is moving to Chromium because Google ‘sabotaged browser’” The Inquirer, December 18, 2018, https ://www.theinquirer.net/inquirer/news/3068413/google-sabotage-microsoft-edge.

Susan Crawford, Captive Audience: The Telecom Industry and Monopoly Power in the New Gilded Age , (New Haven, Connecticut: Yale University Press, 2012), p. 112.

Ryan Young, “A Quick Lesson in Antitrust: Netflix and Comcast,” OpenMarket, Competitive Enterprise Institute, July 8, 2018, https://cei.org/blog/quick-lesson-antitrust-netflix-and-comcast.

“The Tech Giant Everyone is Watching” (titled “Can Netflix Please Investors and Still Avoid the Techlash?” in the online edition),  The Economist , June 28, 2018, https ://www.economist.com/leaders/2018/06/28/can-netflix-please-investors-and-still-avoid-the-techlash.

Donald J. Boudreaux, “Turning Back the Antitrust Clock: Nonprice Predation in Theory and Practice,” Regulation , Vol. 13, No. 3 (Fall 1990), pp. 45-52, https://object.cato.org/sites/cato.org/files/serials/files/regulation/1990/12/v13n3-5.pdf.

Stan J. Liebowitz and Stephen E. Margolis, “The Fable of the Keys,” Journal of Law and Economics , Vol. 30, No. 1 (April 1990), pp. 1-26, https://ssrn.com/abstract=1069950.

Brian Barrett, “A YubiKey for iOS Will Soon Free Your iPhone from Passwords,” Wired , January 8, 2019, https ://www.wired.com/story/yubikey-lightning-ios-authentication-passwords/ .

Google's lawsuit history: The biggest legal cases against the search giant, including antitrust and class-action suits

• Google has faced numerous lawsuits over privacy, intellectual property, monopoly tactics, and more.
• Google is currently battling two key antitrust cases over its search engine and advertising tactics.
• Google also recently settled two class-action lawsuits concerning privacy and antitrust violations.

Google is one of the world's largest and most influential companies, and the most popular search engine by far. So it's no surprise that the search giant's rapidly evolving and boundary-pushing technology would attract litigation over the course of its 25-year history.

Google has been sued in dozens, if not hundreds of high-profile controversies over privacy, intellectual property, discrimination, advertising, and even defamation, and has racked up both wins and losses over the years.

Some of Google's most consequential legal cases have occurred in 2023 and 2024, including two major antitrust cases and several class-action lawsuits. Here's what you need to know about the biggest recent cases to land on Google's docket.

Why did the US government sue Google over antitrust violations?

The US government's battle against Google has resulted in two major antitrust cases that are both still ongoing. 

One case culminated in a landmark monopoly trial in the fall of 2023, which is still awaiting a verdict. The dispute centered on whether Google has illegally abused its monopoly over the search engine industry, spending billions of dollars each year to suppress competition. The US government argued that Google's business dealings have blocked innovation in the search business to the detriment of internet users. 

Google CEO Sundar Pichai testified in the antitrust trial in October 2023, and defended instances in which Google pushed companies like Apple and other smartphone makers into revenue-sharing agreements that would make Google the default search engine on phones and computers.

The Google CEO even acknowledged on the stand that company executives knew that becoming the default search engine on smartphones "would lead to increased usage of our products and services."

The second major antitrust case against Google concerns its online advertising strategies, and is set to go to trial in September 2024. The US government has alleged that Google illegally abused its monopoly over the digital advertising market by acquiring its competitors and forcing website publishers to adopt Google's tools, such as Google Ads , thereby suppressing the rise of rival technologies.

Google has denied any wrongdoing in both cases. The search giant argued during its 2023 trial that Google dominates the search business because it's superior to its rivals, not because of its business dealings. Google has similarly denied the claims in the advertising-related monopoly case, saying its acquisitions were legal and actually enable innovative new advertising technologies, and that the federal government's lawsuit could undo years of industry progress.

What happens if Google loses its antitrust cases?

It's unclear who will win the antitrust case on Google's search engine. Judge Amit Mehta will be the one to decide the outcome, rather than a jury, and Mehta vigorously questioned both sides during closing arguments in May 2024.

Related stories

If Google loses the lawsuit , Mehta is expected to take some sort of action that would boost competition in the search-engine business. Google could face consequences like orders to adjust its business practices, or even a total ban on its contracts to make Google the default search engine.

Both antitrust cases carry potentially massive implications for internet users — Google could face sanctions that alter its operations so dramatically that it loses its ubiquity in the search and advertising industries, paving the way for new companies and technologies to flourish.

Google's antitrust cases will also likely influence the outcomes of other antitrust lawsuits the US government has filed against major tech companies. Currently, Amazon , Apple, and Meta all face similar antitrust lawsuits against their business practices that could threaten their market dominance.

What to know about Google's class-action settlements and who can claim money

Google has been the subject of two major class-action lawsuits that were resolved or nearing resolution in late 2023 and 2024.

One of the most hotly anticipated resolutions was that of a class-action case involving personal data collected from 136 million Google Chrome users. The lawsuit accused Google of tracking the internet activity of users who had switched to Google's "incognito" setting.

As part of a settlement agreement, Google said it would delete the search data collected from those 136 million users, which Google said was merely "old personal technical data that was never associated with an individual and was never used for any form of personalization."

Lawyers initially sought a $5 billion payout for consumers, but anyone expecting to receive a chunk of that money will need to sue Google individually to receive any damages. The settlement agreement for the class-action case did not include any monetary damages to be paid out by Google.

Google does, however, have to pay out roughly $700 million as part of a separate class-action case involving the Google Play Store. Attorneys general from five states accused Google of using monopoly tactics to box out competitors to the Google Play Store and limited users' ability to download Android apps from other app stores.

An estimated 102 million consumers were affected between August 16, 2016, and September 30, 2023, and are entitled to compensation of at least $2, the settlement agreement stipulated. Consumers who are eligible for the Google settlement don't need to submit any sort of claim to get that money, however. Consumers will receive automatic payments through PayPal or Venmo.

Google's battle over Europe's "right to be forgotten" laws

One of Google's biggest legal battles in the 2010s concerned the European Court of Justice's "right to be forgotten" ruling and whether Google was responsible for personal data that appears in its search results. Google lost its case in 2014, and the EU court ruled that individuals have the right to remove information about themselves from search engine results.

Under the ruling, Google must respond to legitimate requests from individuals to delist webpages from its search results. Larry Page , one of Google's founders and a former CEO, spoke out vehemently against the EU court's "right to be forgotten" ruling at the time, warning that repressive foreign governments could abuse the ruling.

However, in 2019, Google won a "right to be forgotten" victory in a subsequent EU court ruling, which stipulated that Google only has to delist content from search results in Europe, and the "right to be forgotten" does not apply globally.

Recent research has suggested that Google and Microsoft together have received some 150,000 "right to be forgotten" requests to delist search results each year since the EU court's ruling in 2014. The vast majority of the links targeted for delisting were from Facebook , X, and YouTube .

On February 28, Axel Springer, Business Insider's parent company, joined 31 other media groups and filed a $2.3 billion suit against Google in Dutch court, alleging losses suffered due to the company's advertising practices.

Watch: Apple's antitrust lawsuit is just one of its major battles

• Main content

Appeals court rules in favor of Meta in antitrust case from state AGs

Meta has won an antitrust lawsuit, under appeal, that pitted the tech giant against dozens of state attorneys general, led by New York. The states alleged Meta had illegally maintained monopoly power in the social networking market through its acquisitions of photo-sharing app Instagram in 2012 and WhatsApp in 2014, and that it gained further power through data policies that harmed app developers.

“As the Court of Appeals rightly recognized, this case fundamentally mischaracterized the vibrant competitive ecosystem in which we operate,” a Meta spokesperson said, in a statement on the ruling. “In affirming the dismissal of this case, the court noted that this enforcement action was ‘odd’ because we compete in an industry that is experiencing ‘rapid growth and innovation with no end in sight.’ Moving forward, Meta will defend itself vigorously against the FTC’s distortion of antitrust laws and attacks on an American success story that are contrary to the interests of people and businesses who value our services,” they added.

The plaintiffs, which included the attorneys general from 48 U.S. states and territories, had first sued Meta in December 2020, but a federal court dismissed their case in 2021 , as well as a parallel case by the Federal Trade Commission, which could have ultimately resulted in Meta being required to divest of Instagram and WhatsApp. The states appealed the ruling in January 2022, arguing that the district court judge had wrongly terminated their case.

U.S. District Court Judge James Boasberg had ruled that states had waited too long to challenge Meta’s acquisitions and that the policies they had cited were not illegal under antitrust law. The states, however, believed that their unprecedented delay to file “does not apply against sovereign states suing to protect the public interest, like the states here.”

The states also believed the policies could violate antitrust law, so they appealed the case.

The lower court had additionally granted the FTC leave to amend its complaint, allowing its case to proceed , as was reported last year.

In terms of the states’ case, however, the U.S. Court of Appeals for the District of Columbia Circuit has now upheld the district court’s ruling, calling the states’ lawsuit “not only odd, but old.”

The court’s opinion further explains that the suit “concerns an industry that, even on the States’ allegations, has had rapid growth and innovation with no end in sight.”

It then explains that as “sovereigns,” the states aren’t able to argue for an injunction under antitrust laws, because to be entitled to do so, they must be a “person, firm, corporation or association,” which they are not.

The court also agreed with Judge Boasberg’s, decision that the States “unduly delayed” to file their suit. Facebook, (now Meta), had first acquired Instagram and WhatsApp in 2012 and 2014, respectively, but the lawsuit wasn’t filed until December 2020.

The district court had ruled that the long delays were “unreasonable and unjustified as a matter of law,” citing a four-year statute of limitations from other antitrust cases on other circuits as a guideline. The court also pointed out the acquisitions were well-publicized and went through lengthy, publicly reported FTC investigations to determine if they violated antitrust laws at the time.

The appeals court also agreed with Judge Boasberg’s opinion regarding Facebook’s Platform and its practices and policies. The States had cited snippets of Facebook policies from 2011 and 2013, which the court said were “accurate, but the messages they seek to convey are not” — meaning, they didn’t make a case for antitrust law violations.

“…we agree again with Judge Boasberg’s comprehensive and well-reasoned opinion determining that the States’ Platform-based allegations failed to state a cause of action,” the new opinion issued today states.

It also agreed that the district court was correct that the States’ “exclusive dealing” theory fails as a matter of law, as it only limited apps on Facebook but left app developers free to develop applications for Facebook competitors.

On other matters, the lateness of the lawsuit impacted the States’ ability to make its case, as it wanted injunctive relief for a policy that ended in 2018, giving Facebook platform access to companies that have long since shut down or pivoted their business.

“Injunctive relief would be unwarranted even if the States could prove their allegations,” the court noted.

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Google on Thursday asked that a judge, rather than a jury, decide whether it violated U.S. antitrust laws by building a monopoly on the technology that powers online advertising.

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Both sides in the D.C. case  have presented evidence and made closing arguments . A judge there will decide whether Google violated the law.

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Case Western Reserve Law Review

Home > Student Journals > LawReview > Vol. 52 > Iss. 1 (2001)

Antitrust as a Public-Private Partnership: A Case Study of the NASDAQ Litigation

Arthur M. Kaplan

Recommended Citation

Arthur M. Kaplan, Antitrust as a Public-Private Partnership: A Case Study of the NASDAQ Litigation , 52 Case W. Rsrv. L. Rev. 111 (2001) Available at: https://scholarlycommons.law.case.edu/caselrev/vol52/iss1/8

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Labor’s Antitrust Problem: A Case for Worker Welfare

abstract . The common-law definition of “employee” has been subject to increased scrutiny after accusations that companies, notably Uber and Lyft, deprive workers of benefits by classifying them as independent contractors. States have responded by broadening the definition of “employee,” but these workers remain subject to antitrust liability for organizing. This Note demonstrates that such worker liability is economically suboptimal and inconsistent with legislative history, and that antitrust law must preserve worker welfare. Returning to the liability currently faced by independent contractors, this Note proposes a two-pronged approach, based in federal agency guidance and state legislation, for importing a broader definition of “employee” into the antitrust context.

author. Yale Law School, J.D. 2020; Yale College, B.A. 2016. I am deeply grateful to Professor Zachary Liscow for his guidance and encouragement, as well as my peers in his Spring 2019 class, “Inequality: Economic and Tax Policy,” and Fall 2019 workshop for their feedback on earlier drafts. I would also like to thank Professors Max Huffman, Christine Jolls, George Priest, and Fiona Scott Morton for their helpful comments. Finally, I am indebted to Adam Kinkley and the staff of the Yale Law Journal for their careful edits and thoughtful suggestions.

Introduction

In 2016, an Ethiopian immigrant Uber driver filed for bankruptcy after Uber decided that his Lincoln Town Car no longer qualified for its premium Uber Black service. 1 Despite driving sixteen hours per day for Uber’s standard service, he was unable to make payments on his Uber-provided car and phone. In an interview, he explained:

The thing is, we don’t have [a] union, and nobody [is] going to listen to us, and we just accept[] whatever they say. So we don’t have any choice to fight with these people. They’re millionaires, they have the money, so they can do what they want, and there’s no competition. 2

According to an estimate by McKinsey, up to twenty to thirty percent of the working-age population in Europe and the United States engage in “independent work” of the sort engaged in by Uber drivers. 3 While many forms of independent work pay well, anecdotes from for-hire drivers reveal that many independent contractors fear for their personal safety and work long hours for little pay, while having limited leverage to demand better. 4

The same year, Seattle tested the boundaries of antitrust law by passing Ordinance 124968, which allows for-hire vehicle drivers to bargain collectively with their managers. 5 Many for-hire drivers, like Uber and Lyft drivers, are not formally employed by their managers and do not fall under the collective bargaining protections of the National Labor Relations Act (NLRA), which applies only to employees. 6 By granting independent contractors the right to bargain collectively, Seattle’s ordinance sits at the boundary of antitrust law’s labor exemption. While unions of employees are exempt from antitrust liability under express provisions in the antitrust statutes, 7 courts have long held that associations of independent contractors are not exempt. 8 Therefore, contractor organizations enabled by the Seattle ordinance may violate the antitrust laws. 9

The ordinance is one response to growing concern over the rights of independent contractors in the gig economy, where workers have autonomy over some aspects of their work (e.g., hours) but also often lack control over their wages and are subject to stringent conditions regulating use of the gig platform. 10 States have passed legislation to expand the legal definition of employment used in minimum-wage orders, benefits requirements, and unemployment insurance statutes 11 —but what remains notably absent from the discussion, and this resulting legislation, is whether independent contractors should be protected from antitrust scrutiny. The Seattle ordinance brings this question to the fore and poses a larger question about the broader goals of antitrust: how should the law balance its concern for deconcentrating power against the recognized right of labor to organize, and under what guiding principle?

To maximize social welfare and give force to the original purpose of the federal antitrust laws, antitrust law must preserve worker welfare. This Note develops and applies a worker welfare standard to the specific case of independent contractors to show that such contractors should be allowed to organize under certain conditions. While the question of independent-contractor organizing is not new 12 —nor is the notion that antitrust law should protect laborers 13 —this Note contributes to the literature by (1) outlining a worker welfare standard for antitrust law, drawn from legislative history and welfare economics and (2) proposing that agency guidance and state action are two potential mechanisms for promoting independent-contractor welfare.

As a policy matter, the objectives of antitrust law in the United States remain hotly contested. 14 While the proximate goals of antitrust are generally clear—to prevent the accumulation and exercise of market power—case-by-case analysis reveals subtleties and competing concerns that can only be resolved by appealing to some larger guiding principle. Perhaps the most familiar guiding principle is consumer welfare: one understanding of consumer welfare, pioneered by economists of the Chicago School, suggests that antitrust enforcers should be primarily concerned with maximizing output and minimizing price, because both are good for consumers. 15 Under this view of consumer welfare, a merger between two large companies is viewed as generally harmless from an antitrust perspective if it results in lower prices. But many have critiqued this formulation for excluding important factors like quality and innovation. 16 And more recently, scholars in the neo-Brandeisian tradition argue that antitrust enforcers should prioritize competition—that is, they should ensure that companies must fight for business to prevent the undue concentration of economic and political power in any single entity. 17 Following this latter approach, a large company that reduces prices may still be harmful if it excludes competitors.

But these principles alone cannot justify antitrust law’s labor exception. From the consumer welfare perspective, labor organizing may be detrimental because it can lead to increased consumer good prices and restricted output. Likewise, if the goal of antitrust is to better society by limiting consolidation among economic actors, one would expect antitrust law to limit union activity. 18 But the antitrust statutes do the opposite: labor organizations are exempted from antitrust liability under section 6 of the Clayton Act, 19 and federal courts no longer have jurisdiction to enjoin lawful labor actions, even for antitrust reasons, under the Norris-LaGuardia Act. 20 To an observer who believes antitrust exists to reduce consumer prices and increase output, these provisions may seem like anomalies. But we can resolve these anomalies in at least a couple of ways—modify our normative assumption about the aims of antitrust law or regard the union exemption as the product of interest-group politics. Even if we take the latter path, interest-group politics can reflect the democratic will and provide important insights into the purpose of antitrust.

In this Note, I show that the union exemption should be read to encompass a broader concern for the welfare of workers. In other words, antitrust law should be seen not merely as protecting consumers from producers, but also labor from capital. My primary justification is drawn from welfare economics and the “theory of the second best,” which suggests that when a certain market distortion cannot be removed, it may be economically optimal (i.e., the next best option) to introduce a countervailing distortion. 21 An ideal competitive labor market would have no market power on either the supply side or demand side, but some degree of rent-extracting market power on the demand side (i.e., firms) is inevitable due to the limited resources of enforcement agencies and labor-market frictions. If concentration is inevitable among employers, permitting concentration among workers is the next best way to (1) counteract abuse and rent-extractive behavior from employers and (2) move income from capitalists to workers, who by virtue of their relatively low income may receive higher marginal utility from income. 22 Further justification can be found in the legislative history of the major antitrust statutes. During congressional debate over the antitrust laws, key legislators expressed their intent not only to preserve the organizing power of labor, but also to support affirmatively the accumulation of labor power to contest concentrations of capital. 23 Thus, legislative intent provides justification for worker welfare beyond a strictly economic reading of the antitrust laws. Even when labor organizing may not be the most “efficient” economic choice, 24 it may still comport with the drafters’ goal of protecting individuals from the economic power of corporations.

Worker rights under the antitrust laws have received more attention recently, 25 particularly within the context of labor monopsony, or concentration in labor demand; 26 but there is no judicial, political, or scholarly consensus around how or whether regulators should consider the welfare of workers when conducting antitrust analysis. 27 This Note proposes a conceptual framework of worker welfare and then applies it to the case study of independent contractors’ organizations—an issue of concentration in labor supply. While independent-contractor liability under antitrust law for organizing has been well documented and criticized, 28 this Note contributes to the literature by assessing that liability under a broader worker welfare standard and setting forth a policy proposal to remedy that liability.

In Part I of this Note, I present a normative framework, drawing on welfare economics and legislative history, to demonstrate that the goals of unions and workers are generally consistent with antitrust law. In Part II, I propose a doctrinal definition of worker welfare, drawing from the existing consumer welfare standard and labor economics. In Part III, I apply the standard to the case study of independent-contractor organizations, and present a two-pronged proposal for promoting worker welfare through those organizations, focusing on agency guidance and state action. Part IV concludes.

Volume 133’s Emerging Scholar of the Year: Robyn Powell

Announcing the eighth annual student essay competition, announcing the ylj academic summer grants program.

Kalmanovitz Initiative for Labor & the Working Poor, The Uber Workplace in D.C. , Geo. U. 7 (2020), https://lwp.georgetown.edu/wp-content/uploads/sites/319/uploads/Uber-Workplace.pdf [https://perma.cc/V8WS-F825].

McKinsey Glob. Inst., Independent Work: Choice, Necessity, and the Gig Economy , McKinsey & Company 26, 31-32 (Oct. 2016), https://www.mckinsey.com/featured-insights/employment-and-growth/independent-work-choice-necessity-and-the-gig-economy [https://perma.cc/GXY9-N2YP].

See Kalmanovitz Initiative for Labor & the Working Poor, supra note 1, at 7, 14-15; Lawrence Mishel, Uber and the Labor Market , Econ. Pol’y Inst . 2 (May 15, 2018), https://www.epi.org/publication/uber-and-the-labor-market-uber-drivers-compensation-wages-and-the-scale-of-uber-and-the-gig-economy [https://perma.cc/L7FH-NLBR] (computing average Uber driver’s wage to be $9.21/hour); Michael Sainato, ‘I Made $3.75 an Hour’: Lyft and Uber Drivers Push to Unionize for Better Pay , Guardian (Mar. 22, 2019, 2:00 PM EDT), https://www.theguardian.com/us-news/2019/mar/22/uber-lyft-ipo-drivers-unionize-low-pay-expenses [https://perma.cc/MXM3-CAVT].

Seattle, Wash., Ordinance 124968 (Dec. 14, 2015) (codified at Seattle, Wash., Mun. Code § 6.310.735 (2020)). For an example of labor activism within the gig economy, see Hannah Jones, Minneapolis Uber Drivers Are Striking May 8 over Sub-Minimum Wages , City Pages (May 1, 2019), http://www.citypages.com/news/minneapolis-uber-drivers-are-striking-may-8-over-sub-minimum-wages/509223101 [https://perma.cc/T7SK-FKUP].

29 U.S.C. § 157 (2018).

15 U.S.C. § 17 (2018); see also United States v. Hutcheson, 312 U.S. 219, 232 (1941) (discussing the “explicit command” of the antitrust statutes exempting “trade union conduct directed against an employer”); Taylor v. Local No. 7, Int’l Union of Journeymen Horseshoers, 353 F.2d 593, 605 (4th Cir. 1965) (noting that “boycotting and price-fixing activities” by employees against their employers are exempt under antitrust laws).

See infra note 94 and accompanying text.

See Chamber of Commerce v. City of Seattle, 890 F.3d 769, 776 (9th Cir. 2018).

See generally David Weil, The Fissured Workplace: Why Work Became So Bad for So Many and What Can Be Done to Improve It (2017) (describing the broader phenomenon of “fissuring,” in which companies contract out work rather than hire employees, and its negative effects on workers); Valerio De Stefano, The Rise of the “Just-in-Time” Workforce: On-Demand Work, Crowdwork, and Labor Protection in the “Gig-Economy , ” 37 Comp. Lab. L. & Pol’y J. 471 (2016) (discussing misclassification in the gig economy and the importance of recognizing an intermediate category of workers between employees and independent contractors).

See, e.g. , 2019 Cal. Stat. 2888. See generally Anna Deknatel & Lauren Hoff-Downing, ABC on the Books and in the Courts: An Analysis of Recent Independent Contractor and Misclassification Statutes , 18 U. Pa. J.L. & Soc. Change 53, 55 n.11 (2015) (collecting examples of such legislation).

See Marina Lao, Workers in the “Gig” Economy: The Case for Extending the Antitrust Labor Exemption , 51 U .C. Davis L. Rev . 1543 (2018); Sanjukta M. Paul, The Enduring Ambiguities of Antitrust Liability for Worker Collective Action , 47 Loy. U. Chi. L.J. 969 (2016); see also Jeffrey M. Hirsch & Joseph A. Seiner, A Modern Union for the Modern Economy , 86 F ordham L. Rev. 1727 (2018) (discussing nontraditional modes of worker organization within the technology sector).

See, e.g. , Sandeep Vaheesan, Accommodating Capital and Policing Labor: Antitrust in the Two Gilded Ages , 78 Md. L. Rev. 766 (2019) ; see also Becky Chao, At the Intersection of Labor, Employment, and Antitrust Law , New Am. Blog (Mar. 13, 2018), https://www.newamerica.org/millennials/dm/intersection-labor-employment-and-antitrust-law [https://perma.cc/H52S-PB3N].

See, e.g. , Joseph F. Brodley, The Economic Goals of Antitrust: Efficiency, Consumer Welfare, and Technological Progress , 62 N.Y.U. L. Rev . 1020 (1987); Kenneth G. Elzinga, The Goals of Antitrust: Other than Competition and Efficiency, What Else Counts? , 125 U . Pa. L. Rev . 1191 (1977); Joshua D. Wright & Douglas H. Ginsburg, The Goals of Antitrust: Welfare Trumps Choice , 81 Fordham L. Rev . 2405 (2013).

See, e.g. , Robert H. Bork, The Antitrust Paradox 107-10 (1978).

See, e.g. , Capitalisn’t: The Populists , Chi. Booth Rev . (Aug. 8, 2018), https://review.chicagobooth.edu/public-policy/2018/article/capitalisn-t-populists [https://perma.cc/WW9V-FUU2].

See, e.g. , Harry First & Spencer Weber Waller, Antitrust’s Democracy Deficit , 81 Fordham L. Rev . 2543 (2013); Sanjukta Paul & Sandeep Vaheesan, Make Antitrust Democratic Again! , N ation (Nov. 12, 2019), https://www.thenation.com/article/economy/antitrust-monopoly-economy [https://perma.cc/7ZN8-NMWX] (explaining that uncritical emphasis on competition without a focus on fostering “cooperation among consumers and small players” would be insufficient for a successful, progressive antitrust regime).

Sanjukta Paul argues that the role of antitrust law is not merely to promote competition but to “allocate economic coordination rights,” and highlights how firms themselves are quintessential examples of economic coordination that have largely been exempted. Sanjukta Paul, Antitrust as Allocator of Coordination Rights , 67 UCLA L. Rev . 378, 380 (2020). Paul ultimately suggests there would be nothing anomalous about granting workers more leeway to organize and argues that distribution of coordination rights would be no more or less preferable than the one in the status quo. Id. at 382.

15 U.S.C. § 17 (2018). For labor practices that are specifically protected, see also section 20 of the Clayton Act, 29 U.S.C. § 52 (2018).

29 U.S.C. § 105 (2018).

R.G. Lipsey & Kelvin Lancaster, The General Theory of Second Best , 24 Rev. Econ. Stud . 11 (1956). For another application, see Paul Krugman, Opinion, The Big Green Test , N.Y. Times (June 22, 2014), https://www.nytimes.com/2014/06/23/opinion/paul-krugman-conservatives-and-climate-change.html [https://perma.cc/65SX-4T4T].

See infra Section I.A.

See infra Section I.B.

For approaches to describing economic efficiency, see infra note 36 and accompanying text.

See generally Lao, supra note 12 (critiquing the antitrust liability faced by gig-economy workers who attempt to organize); Paul, supra note 12 (tracking the history of independent contractor antitrust liability and suggesting legal approaches to reconsider that liability).

See, e.g. , Suresh Naidu, Eric A. Posner & Glen Weyl, Antitrust Remedies for Labor Market Power , 132 Harv. L. Rev. 536 (2018); Alan B. Krueger & Eric A. Posner, A Proposal for Protecting Low-Income Workers from Monopsony and Collusion , Hamilton Project (Feb. 2018), https://www.hamiltonproject.org/assets/files/protecting_low_income_workers_from_monopsony_collusion_krueger_posner_pp.pdf [https://perma.cc/LV3H-FG4U]; Ioana Marinescu & Eric A. Posner, A Proposal to Enhance Antitrust Protection Against Labor Market Monopsony (Dec. 21, 2018) (unpublished manuscript), https://rooseveltinstitute.org/publications/a-proposal-to-enhance-antitrust-protection-against-labor-market-monopsony [https://perma.cc/FN2Y-EUXQ].

In 1973, Sar Levitan and Robert Taggart proposed an index of worker welfare based on “[e]mployment and earnings [i]nadequacy,” which was to describe the fraction of the nation’s labor force that was “subemployed” with below-average incomes. While that proposal is similar in spirit to the one made by this Note, it differs distinctly in purpose because it is macroeconomic and analyzes the nation as opposed to transactions. Workers are treated as binary outcomes based only on employment and wage (a reasonable and essential simplification for a macroeconomic index), and other characteristics, such as working conditions and training, are ignored. Sar A. Levitan & Robert Taggart, Employment and Earnings Inadequacy: A Measure of Worker Welfare , 96 M onthly Lab. Rev . 19, 21 (1973).

See Lao, supra note 12; Paul, supra note 12; see also Hirsch & Seiner, supra note 12 .

Google V. Competition Commission Of India – A Case Review

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The Competition Commission of India (" CCI ") had on October 20, 2022, passed an order against Google LLC and Google India Private Limited (" Google ") directing Google to refrain from indulging in anti-competitive practices that were found to be in contravention of the provisions of the Competition Act, 2002 (" Competition Act ") and also imposed on Google a penalty to the tune of INR 1337.76 Crores.

Google filed an appeal with the National Company Law Appellate Tribunal (" NCLAT ") against CCI's order.

Google contended that CCI's order suffered from confirmation bias and that agreements executed with equipment manufacturers did not prevent them from pre-installing competing apps with similar functionality. Google further argued that its popularity was due to its effectiveness and that dominance in the market did not necessarily constitute abuse of dominance.

CCI, on the other hand, contended that Google controlled nearly 98% of the market in India for smartphone apps and was found to be violating competition laws to maintain its dominance in the market. CCI accused Google of unfair trade practices by restricting the entry of other applications in the Google Play Store. CCI summed up Google's policies in India in 5 phrases, namely "digital feudalism," "digital slavery," "technological captivity," "chokepoint capitalism," and "consumer exploitation."

CCI observed that by using its dominant position in the online search market, Google was denying access to competing search engines. It also noted that by making pre-installations of Google's proprietary apps mandatory in an android phone, the incentive and ability of device manufacturers to develop and sell devices operating on alternate versions of android was considerably reduced. Therefore, CCI directed Google to not force Original Equipment Manufacturers (" OEMs ") to pre-install a bouquet of applications, not offer any monetary or other incentives to OEMs for ensuring exclusivity for its search services, and not restrict the uninstallation of its pre-installed apps by the users.

After hearing arguments from both sides, the NCLAT, on March 29, 2023, upheld 1 CCI's decision and ruled that Google had perpetuated its dominant position in the online search market, resulting in the denial of market access to other competing search apps. The NCLAT, however, deleted certain directions of the CCI in paragraph nos. 617.3, 617.9, 617.10, and 617.7 of CCI's order. NCLAT upheld other directions given by CCI, including the imposition of a fine on Google to the tune of INR 1337.76 Crores.

This NCLAT ruling highlights the ongoing debate surrounding anti-competitive practices and market dominance in the technology industry. Google's dominance in the smartphone apps market in India and its control over the online search market were key factors in this case. The ruling serves as a reminder to tech giants that market dominance comes with a responsibility to operate fairly and to avoid engaging in anti-competitive practices that restrict competition and harm consumers. As the technology industry continues to evolve, it will be essential for companies to operate in a manner that fosters fair competition, innovation, and consumer protection.

1. Google LLC and Another v. Competition Commission of India Through its Secretary and Others , 2023 SCC OnLine NCLAT 147.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Antitrust/Competition Law

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Organizing Principles: Samuel Estreicher and Jack Samuel ’23 argue that century-old federal labor laws give gig workers the right to engage in collective action, including union campaigns, without fear of antitrust liability

After the city of Seattle, Washington, passed a law in 2015 giving rideshare drivers the right to unionize, the US Chamber of Commerce and an Uber subsidiary sued to block the law on antitrust grounds. The case attracted the attention of Samuel Estreicher , Dwight D. Opperman Professor of Public Law and director of the NYU Center for Labor and Employment Law, who appeared amicus curiae in a brief stating his views in 2017 when the case was before the US Court of Appeals for the Ninth Circuit. His brief, arguing against the antitrust challenge to the Seattle law, eventually led to a law review article, which Estreicher co-authored with Dr. Jack Samuel ’23 and which is slated for publication next year in the Wake Forest Law Review .

Labor unions’ exemption from antitrust laws is derived from the Clayton Act of 1914 and the Norris-LaGuardia Act of 1932. Before the Clayton Act’s passage, the Sherman Antitrust Act of 1890, largely ineffective at bringing down industrial monopolies, was used more successfully against unions. But the Clayton Act established that human labor was not “a commodity or article of commerce”; thus, unions were not monopolies or trusts. Later, the Norris-LaGuardia Act banned employment contracts barring workers from joining unions, and specified that employers could not prevent employees from becoming union members.

Estreicher has long been interested in the labor exemption to antitrust laws, going at least as far back as his representation of the Actors’ Equity Association in H.A. Artists & Associates v. Actors’ Equity Association (1981). In that case, the US Supreme Court agreed with Estreicher’s argument that Actors’ Equity was exempt from antitrust laws. In the Seattle case, on the other hand, the Ninth Circuit overturned the Seattle ordinance allowing for rideshare driver unionization, because, the court asserted, the law neither followed from clearly expressed state policy nor received active state supervision.

Estreicher’s reasoning in the amicus brief was based on a section of the Clayton Act that, he explains, granted labor statutory immunity from federal antitrust laws when read in tandem with the Norris-LaGuardia Act. A common argument is that workers classified as independent contractors rather than as traditional employees do not enjoy the same level of rights, including the right to organize. But Estreicher disagrees.

“It’s been my contention in that brief, which led to this later article, that classification by employers or even by state governments…[as to] whether they’re independent contractors or employees, applies to employment law—but it does not define the scope of the labor exemption to the antitrust laws,” Estreicher says. Thus, he argues, federal antitrust laws from a century ago already permit independent contractors, including gig workers, to unionize.

Estreicher’s brief in the Seattle case took on a new life when Jack Samuel, now a tax associate at Cleary Gottlieb Steen & Hamilton, enrolled in Estreicher’s Employment Discrimination and Employment Law course. Samuel had recently taken Regulating Work Beyond Employment Seminar, taught by Crystal Eastman Professor of Law Cynthia Estlund , which was focused on non-employee workers and their legal status within employment law. Estlund’s assigned reading included Estreicher’s brief in the Seattle case—which Samuel calls “sort of a cult classic for the fans of this niche intersection of labor and antitrust.” With Estreicher’s blessing, Samuel wrote a term paper that picked up where the amicus brief had left off, fleshing out the legal analysis and providing historical context. Eventually, the project evolved into a full-fledged, co-authored article.

In “Labor’s Antitrust Immunity for Independent-Contractor Workers,” Estreicher and Samuel argue that independent-contractor workers—workers who provide primarily their own labor without significant capital investment—have the right to unionize and engage in collective bargaining with companies that utilize their services free of antitrust damage suits and injunctions, irrespective of how they are classified by their employers. “Employer classification of these workers as ‘independent contractors,’ whether well-founded or not, is irrelevant to whether they are protected by labor’s longstanding antitrust exemption inquiry, as long as the workers in question provide only their personal services without significant, non-fungible (with personal uses) capital investment,” they write. Traditionally, workers have brought their own tools or drive their cars to work without being treated as businesses who cannot combine legally.

Estreicher and Samuel target the common assumption that workers who are not statutory employees (independent contractors who are considered employees of a company for payroll tax purposes) as defined by the National Labor Relations Act will violate antitrust laws if they engage in collective action. They point out that nothing in the language of “either the Clayton or Norris-LaGuardia Acts conditions the labor immunity from the antitrust laws on the labor group comprising solely common-law or statutory employees, and the Supreme Court has never held that all independent contractors are categorically excluded from the labor exemption’s protection.” Further, they assert, since gig workers are not categorized as statutory employees under federal labor law, they are not preempted from seeking protection at the state and local levels against termination for union involvement, as illustrated by the Seattle ordinance.

Samuel’s interest in the topic stemmed in part from his own background. His grandfather, Howard Samuel, was deputy undersecretary of labor in the Carter administration (and spoke in the 1980s at an NYU-Columbia conference, led by Estreicher, on the Japanese labor model), and later president of the AFL-CIO’s Industrial Union Department. Samuel’s father, William Samuel, served in the Clinton administration as associate deputy secretary of labor; he recently retired from his latest role as the AFL-CIO’s director of government affairs.

Estreicher underscores the idea that longstanding federal labor laws can be applied in novel ways to cutting-edge issues arising from new forms of employment. “We think this can have a revivifying effect on labor law,” he says, “because here we have a group of people that can engage in joint action to improve their welfare, and they’re not subject to the National Labor Relations Act’s preemption rules.” That means state and local governments could potentially pass laws protecting collective action by independent contractors without being preempted by federal labor laws.

Posted May 21, 2024

Information on the NYU Center for Labor and Employment Law’s 76th annual Conference on Labor & Employment Law on May 22 and 23, 2024

“Retooled Economies: Cynthia Estlund’s most recent book proposes strategies for a world in which automation could dramatically reduce employment” NYU Law website, 11/12/21

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Attorney says settlement being considered in NCAA antitrust case could withstand future challenges

FILE - NCAA signage outside the headquarters in Indianapolis, Thursday, March 12, 2020. A settlement being discussed in an antitrust lawsuit against the NCAA and major college conferences could cost billions and pave the way for a new compensation model for college athletes. (AP Photo/Michael Conroy, File)

FILE - Referees try to break up an altercation between Alabama and Auburn during the second half of an NCAA college football game, Saturday, Nov. 25, 2023, in Auburn, Ala. A settlement being discussed in an antitrust lawsuit against the NCAA and major college conferences could cost billions and pave the way for a new compensation model for college athletes. (AP Photo/Vasha Hunt, File)

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One of the lead attorneys in a class-action antitrust lawsuit against the NCAA said Monday that settlement talks are progressing as a deadline looms next week for the organization and major conferences to agree to a deal that would cost billions in damages and set up a groundbreaking revenue-sharing system with college athletes.

“I’m hearing that things are going well in terms of both sides getting ready to approve this,” Steve Berman, a Seattle-based attorney for the plaintiffs, told The Associated Press.

Berman would not confirm details of the possible agreement, but said a settlement would create a new framework for paying college athletes that he believes could withstand future antitrust challenges.

“The rules prohibiting outright restrictions on (name, image and likeness) and other compensation payments will be greatly modified such that they probably can satisfy a pro-competitive justification,” said Berman, who has won several other cases against the NCAA, including the Alston case that went before the Supreme Court.

College sports leaders have been pleading for help from Congress to regulate NIL compensation since even before the NCAA lifted its ban on athletes being permitted to earn money for sponsorship and endorsement deals in 2021.

NCAA President Charlie Baker, who was at the ACC spring meetings in Amelia Island, Florida, on Monday, said a settlement could change the conversation with federal lawmakers about athlete compensation.

“The other thing it does is create predictability and stability for schools,” Baker told reporters. “But it also creates a tremendous opportunity for student-athletes, especially with the schools that are most heavily resourced.”

The settlement being considered would have the NCAA paying about $2.9 billion in damages. Schools in the Atlantic Coast Conference, Big Ten, Big 12 and Southeastern Conference would agree to commit about $300 million each over 10 years, most of which would be redirected to current athletes.

The settlement would create a revenue-sharing system that would allow — but not require — each school to share about 22% of athletics revenue per year with all athletes, with a possible cap of about $25 million — though that number would rise as revenue increased. The plan is similar to revenue sharing in professional sports leagues, though those athletes collectively bargain through a union.

“There is a set amount that goes to the players from the broadcast revenues, it’s capped,” Berman said. “This is really going to be no different.”

The plaintiffs gave the NCAA and conferences until May 23 to agree to a deal, according to a person familiar with the negotiations who spoke to the AP on condition of anonymity because details of the talks were not being made public.

The NCAA needs approval from its board of governors and each conference needs its presidential board to sign off on a deal. Baker would not commit to a deadline.

Berman is leading House vs. the NCAA, but the settlement could cover three other antitrust claims against the association and major college conferences as well. Hubbard vs. the NCAA, Carter vs. the NCAA and Fontenot vs. the NCAA all challenge rules regarding compensation of college athletes.

House is set to go to trial in the Northern District of California in January in front of Judge Claudia Wilken, who ruled on Alston and the O’Bannon name, image and likeness case.

If the parties agree to settle, it would still need preliminary approval from Wilken. Then athletes who are part of the class would be notified of the terms of the deal and given the right to challenge it.

House, brought by former Arizona State swimmer Graham House, is asking for athletes who were denied the ability to earn money off NIL deals to be awarded damages, dating to 2016. The suit also makes the case that revenue earned by conferences and the NCAA through television contracts should be deemed NIL compensation and shared with athletes.

Berman said the settlement would allow future college athlete to challenge it.

“The way we’re going to set this up is that every new NCAA athlete will get a copy of the class notice, in terms of the settlement, and there will be a yearly hearing set where anybody who wants to object can come forward and object,” Berman said.

The settlement will not resolve whether college athletes should be deemed employees and allowed to unionize. There is a separate antitrust lawsuit in Pennsylvania dealing with that. Plus, a recent ruling by a regional National Labor Relations Board director paved the way for members of the Dartmouth men’s basketball team to vote to join a union while a similar effort is being heard involving athletes at Southern California.

“This settlement doesn’t touch that,” Berman said. “But in terms of changing the rules to make it fair for student-athletes to share in the compensation, I think if this goes forward it settles that.”

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