Essays

The Common Ownership Trilemma
José Azar Assistant Professor, University of Navarra, IESE Business School, Av Pearson, 21, 08034 Barcelona, Spain, jazar@iese.edu

This Essay argues that it is impossible to achieve the following objectives simultaneously: (i) portfolio diversification, (ii) shareholder representation, and (iii) competition. In an economy in which everyone holds the market portfolio, all companies have the same shareholders. If, in addition, firms act in the interest of their shareholders (in other words, if the agency problem is solved), the equilibrium outcome is equivalent to an economy-wide monopoly. When managers are entrenched, however, the anticompetitive effects of common ownership are mitigated, yet they only disappear completely in the extreme case that managers are fully insulated from shareholder dissent. The trilemma highlights a fundamental systemic problem in stock market economies: their inherent tendency toward common ownership, and therefore away from market competition.

The Chicago School’s Limited Influence on International Antitrust
Anu Bradford  - Henry L. Moses Professor of Law and International Organization, Columbia Law School, abradf@law.columbia.edu.
Adam S. Chilton - Professor of Law, Walter Mander Research Scholar, The University of Chicago Law School, adamchilton@uchicago.edu.
Filippo Maria Lancieri - JSD Candidate, The University of Chicago Law School, filippolancieri@uchicago.edu.

Beginning in the 1950s, a group of scholars primarily associated with the University of Chicago began to challenge many of the fundamental tenants of antitrust law. This movement, which became known as the Chicago School of Antitrust Analysis, profoundly altered the course of American antitrust scholarship, regulation, and enforcement. What is not known, however, is the degree to which Chicago School ideas influenced the antitrust regimes of other countries. By leveraging new datasets on antitrust laws and enforcement around the world, we empirically explore whether ideas embraced by the Chicago School diffused internationally. Our analysis illustrates that many ideas explicitly rejected by the Chicago School—such as using antitrust law to promote goals beyond efficiency or regulate unilateral conduct—are common features of antitrust regimes in other countries. We also provide suggestive evidence that the influence of the antitrust revolution launched by the Chicago School has been more limited outside of the United States.

Startup Acquisitions, Error Costs, and Antitrust Policy 
Kevin A. Bryan - Assistant Professor, University of Toronto Rotman School of Management.
Erik Hovenkamp - Assistant Professor, University of Southern California Gould School of Law.

Startup acquisitions by dominant incumbents, especially in high tech, have recently attracted significant attention. Many researchers and practitioners worry about harms to competition or innovation. However, there has been very little antitrust enforcement in this area. This is emblematic of a prominent feature of modern antitrust law: a strong preference for erring on the side of nonenforcement. A leading rationale for this preference is the claim that market power self-corrects by attracting new entrants who discipline incumbents.

As a result, plaintiffs generally face very demanding evidentiary requirements, which are particularly hard to satisfy in the case of startup acquisitions. A typical startup is both new and small, providing little data for estimating competitive effects. Despite this uncertainty, it is unlikely that society is best served by a policy of near-universal inaction. Recent work in economics, both empirical and theoretical, identifies various harms to competition and innovation as a result of startup acquisitions in concentrated markets. Further, the traditional error cost argument is particularly inapposite in this context, as startup acquisitions may be undertaken precisely because they forestall competitive entry. We therefore argue for expanded antitrust intervention (that is, more than zero) in startup acquisitions by dominant incumbents. In practice, the acquirer’s market power and the transaction value may be useful signals of the risk of harm.

The Case for “Unfair Methods of Competition” Rulemaking
Rohit Chopra
- Commissioner, Federal Trade Commission.
Lina M. Khan - Academic Fellow, Columbia Law School; Counsel, Subcommittee on Antitrust, Commercial, and Administrative Law, US House Committee on the Judiciary; former Legal Fellow, Federal Trade Commission.

A key feature of antitrust today is that the law is developed entirely through adjudication. Evidence suggests that this exclusive reliance on adjudication has failed to deliver a predictable, efficient, or participatory antitrust regime. Antitrust litigation and enforcement are protracted and expensive, requiring extensive discovery and costly expert analysis. In theory, this approach facilitates nuanced and fact-specific analysis of liability and well-tailored remedies. But in practice, the exclusive reliance on case-by-case adjudication has yielded a system of enforcement that generates ambiguity, drains resources, privileges incumbents, and deprives individuals and firms of any real opportunity to participate in the process of creating substantive antitrust rules. It is difficult to quantify this harm.

This Essay argues that rulemaking under § 5 of the Federal Trade Commission Act should supplement antitrust adjudication, and that this institutional shift would lower enforcement costs, reduce ambiguity, and facilitate greater democratic participation. We build on existing scholarship to debunk the view that the Federal Trade Commission (FTC) does not have competition rulemaking authority pursuant to the Administrative Procedure Act conferring Chevron deference, and trace legislative history to underscore how Congress designed the FTC to play a unique institutional role.

We close by outlining an initial set of factors that should weigh in favor of rulemaking: when there is significant learning from past enforcement and when private litigation would be unlikely. Finally, we pose questions in the context of the FTC’s recent hearings to prompt further discussion on where this unused tool would be most useful.

Labor Antitrust’s Paradox
Hiba Hafiz - Assistant Professor of Law, Boston College Law School.

Growing inequality, the decline in labor’s share of national income, and increasing evidence of labor-market concentration and employer buyer power are all subjects of national attention, eliciting wide-ranging proposals for legal reform. Many proposals hinge on labor-market fixes and empowering workers within and beyond existing work law or through tax-and-transfer schemes. But a recent surge of interest focuses on applying antitrust law in labor markets, or “labor antitrust.” These proposals call for more aggressive enforcement by the Department of Justice (DOJ) and Federal Trade Commission (FTC) as well as stronger legal remedies for employer collusion and unlawful monopsony that suppresses workers’ wages.

The turn to labor antitrust is driven in part by congressional gridlock and the collapse of labor law as a dominant source of labor market regulation, inviting regulation through other means. Labor antitrust promises an effective attack because agency discretion and judicial enforcement can police labor markets without substantial amendments to existing law, bypassing the current impasse in Congress. Further, unlike labor and employment law, labor antitrust is uniquely positioned to challenge industry-wide wage suppression: suing multiple employers is increasingly challenging in work law as a statutory, doctrinal, and procedural matter.

But current labor-antitrust proposals, while fruitful, are fundamentally limited in two ways. First, echoing a broader antitrust policy crisis, they inherit and reinvigorate debates about the current consumer welfare goal of antitrust. The proposals ignore that, as a theoretical and practical matter, employers’ anticompetitive conduct in labor markets does not necessarily harm consumers. As a result, workers’ labor-antitrust challenges will face an uphill battle under current law: when consumers are not harmed, labor antitrust can neither effectively police employer buyer power nor fill gaps in labor market regulation left by a retreating labor law. Second, the proposals ignore real synergies between antitrust enforcement and labor regulation that could preempt the rise of employer buyer power and contain its exercise.

This Essay analyzes the limitations of current labor-antitrust proposals and argues for “regulatory sharing” between antitrust and labor law to combat the adverse effects of employer buyer power. It makes three key contributions. First, it frames the new labor antitrust as disrupting a grand regulatory bargain, reinforced by the Chicago School, that separated labor and antitrust regulation to resolve a perceived paradox in serving two masters: workers and consumers. The dominance of the consumer welfare standard resolved that paradox. Second, it explains how scholarly attempts to invigorate labor antitrust fail to overcome this paradox and ignore theoretical and doctrinal roadblocks to maximizing both worker and consumer welfare, leaving worker-plaintiffs vulnerable to failure. Third, it proposes a novel restructuring of labor market regulation that integrates antitrust and labor law enforcement to achieve coherent and effective regulation of employer buyer power. It refocuses labor-antitrust claims on consumer welfare ends. In doing so, it also relegates worker welfare considerations to a labor law supplemented and fortified by the creation of substantive presumptions and defenses triggered by labor-antitrust findings as well as labor agency involvement in merger review.

The Chicago School and the Forgotten Political Dimension of Antitrust Law
Ariel Katz - Associate Professor, University of Toronto, Faculty of Law.

An economically oriented and technocratic view of antitrust has dominated the discipline’s practice and scholarship for the last four decades. Under this view, attributed in large part to the rise of the Chicago School, questions of legality ought to be decided exclusively on the basis of supposedly objective economic analysis, which does not admit any consideration or insight other than those that economists and other experts trained in the field can analyze. Lately, prominent voices from both the political left and right have begun attacking this mainstream view and calling for an enhanced role for antitrust law in mediating a variety of social, economic, and political issues.

This Essay discusses the political dimension of antitrust. It shows that antitrust law (and its common-law predecessors) was always concerned not only with narrowly defined economic aspects of competition, but also with the connection between market competition and a set of classic liberal political values. The common law’s aversion to monopoly, restraints of trade, and restraints on alienation, while involving economic considerations, were primarily concerned with constraining private actors’ ability to exercise power and limit the rights of others without a clear legal mandate to do so. It recognized that unchecked private economic power may be as injurious to individual freedom and other liberal values as unchecked political power and that the two may be mutually constitutive.

The passage of antitrust law starting in the late nineteenth century both reflected and rekindled interest in these political ideas, many of which continued to inform courts’ antitrust decisions until the rise of the Chicago School and its insistence that antitrust law could only be legitimately concerned with maximizing economic efficiency. But as I show in this Essay, that view not only departed from antitrust law’s historical roots and doctrinal development, but also presented a radical, unexplained, and unacknowledged shift from the views of some of the early founders of the Chicago School.

In addition to bringing to light the Chicago School’s shifting views on antitrust’s political dimension, this Essay also addresses the possibility of reintegrating this dimension. It discusses the legitimacy of integrating political considerations into existing law, the desirability of such integration, and the feasibility of integrating such considerations in a coherent, intelligible, and predictable fashion. It shows that such reintegration is legitimate, feasible, and may even be desirable.

The Chicago Obsession in the Interpretation of US Antitrust History
William E. Kovacic - Global Competition Professor of Law and Policy, George Washington University Law School; Visiting Professor, King’s College London; and Non-Executive Director, United Kingdom Competition and Markets Authority.

Chicago and Its Discontents
Timothy J. Muris
- Foundation Professor of Law, Antonin Scalia Law School at George Mason University; Senior Counsel at Sidley Austin LLP.
Jonathan E. Nuechterlein - Partner, Sidley Austin LLP. Mr. Nuechterlein previously served as General Counsel of the FTC (2013–16).

This symposium began with a call for papers “reassessing the validity of the Chicago School’s assumptions about competition and considering whether a more aggressive approach to antitrust enforcement is now warranted.” That framing uncritically accepts the premises of antitrust’s new populist movement: first, that “the Chicago School” marked an abrupt break from prior academic analysis of antitrust law, and second, that its adherents shared a common positive agenda fundamentally at odds with robust antitrust enforcement. Both of those premises are false. The Chicago School represented a logical continuation of the antitrust analysis developed over the preceding decades, and its members shared no positive doctrinal agenda. Instead, they shared a commitment only to promoting consumer interests by means of rigorous economics. Of course, that commitment influenced how the economics profession and antitrust policymakers thought, and progressive “post-Chicago” scholarship today shares the same commitment to consumer welfare and economic rigor. Such scholarship thus has far more in common with Chicago School scholarship of the 1960s and 1970s than with today’s populist movement, which abandons any coherent framework altogether.

The Arc of Monopoly: A Case Study in Computing
Randal C. Picker - James Parker Hall Distinguished Service Professor of Law, The University of Chicago Law School.

The world we live in today is defined by three great arcs. The first is the world of semiconductors and the innovation characterized by Moore’s law, the second is the creation of ubiquitous wireless access, and the third is the emergence of the internet platform. In that context, this Essay looks at government claims of monopolization in telecommunications and computing by considering past antitrust actions against AT&T, IBM, and Microsoft. Early antitrust actions against AT&T and IBM of course long predated the rise of the Chicago School, but later actions against AT&T and IBM overlapped that rise as did the antitrust actions against Microsoft. These antitrust actions intersected with and influenced these three arcs, though teasing out the precise nature of that influence is ultimately quite tricky.

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.

In traditional markets, firms can charge prices that are significantly elevated relative to their costs only if there is a market failure. However, this is not true in a two-sided market (like Amazon, Uber, and Mastercard), in which firms often subsidize one side of the market and generate revenue from the other. This means consideration of one side of the market in isolation is problematic. The Court embraced this view in Ohio v American Express, requiring that anticompetitive harm on one side of a two-sided market be weighed against benefits on the other side.

Legal scholars denounce this decision, which, practically, will make it much more difficult to wield antitrust as a tool to rein in two-sided markets. This inability is concerning as two-sided markets are growing in importance. Furthermore, the pricing structures used by platforms can be regressive, with those least well-off subsidizing their affluent and financially sophisticated counterparts.

In this Essay, I argue that consumer protection, rather than antitrust, is best suited to tame two-sided markets. Consumer protection authority allows for intervention on the grounds that platform users create unavoidable externalities for all consumers. The Consumer Financial Protection Bureau (CFPB) has broad power to curtail “unfair, abusive, and deceptive practices.” This authority can be used to restrict practices that decrease consumer welfare, like the antisteering rules at issue in Ohio v American Express.

The Effective Competition Standard: A New Standard for Antitrust
Marshall Steinbaum -Assistant Professor of Economics, University of Utah.
Maurice E. Stucke - Douglas A. Blaze Distinguished Professor of Law, University of Tennessee College of Law.

America’s failing antitrust system is, in large part, to blame for today’s market power problem. Lax antitrust law and enforcement have allowed troubling trends like corporate consolidation to remain unchallenged, further embedding our skewed economy. In highly concentrated markets, individuals have limited choice and little power to pick their price, quality, or provider for the goods and services they need; workers are met with powerful employers and have little agency to shop around or bargain for competitive wages and benefits; and suppliers can’t reach the market without paying powerful intermediaries or succumbing to acquisition.

Our Essay offers an alternative to the courts’ consumer welfare standard. Ambiguous and inadequate, the consumer welfare standard identifies threats to competition only by the potential consequences for consumers and ignores adverse effects on workers, suppliers, product quality, and innovation.

Our effective competition standard would restore the primary aim of antitrust laws—namely, to promote competition wherever in the economy it has been compromised, including throughout supply chains and in the labor market. These changes are essential to protect competitive markets in the United States, as well as individuals and the economy at large, by deconcentrating private power.