Showing 9 of 127 Publications in Antitrust & Consumer ProtectionScholarship

A Transactions Cost Analysis of the Welfare and Output Effects of Rebates and Non-Linear Pricing

Scholarship Abstract Ronald Coase famously exposed the limitations of economic analyses that rely upon assumptions of frictionless markets. He highlighted the importance of including transaction costs . . .


Ronald Coase famously exposed the limitations of economic analyses that rely upon assumptions of frictionless markets. He highlighted the importance of including transaction costs in economic analyses and issued a challenge to economists to think seriously about how transaction costs impact economic systems. Harold Demsetz, extended Coase’s analysis to show how these costs alter the way firms price and market their products. Demsetz’ analysis underscored that the costs of providing a market sometimes exceed the benefits of creating one in the first place and examined conditions where transaction costs imply that zero amounts of explicit market pricing will be efficient.

This article focuses upon extending Demsetz’s insights concerning non-linear pricing contracts that seem not to “price” key side effects of the economic exchange. In particular, we analyze the welfare and output effects of two examples of such contracts commonly used by firms that are frequently subject to antitrust scrutiny: metered pricing and loyalty discounts. The analysis demonstrates how a firm’s choice to set prices for its products are influenced by transaction and information costs and examines whether changes in output caused by the use of these non-linear pricing schemes are positively correlated with changes in total and consumer welfare. The article then discusses conditions under which measuring output effects can reliably differentiate between welfare-increasing and welfare-reducing uses of non-linear pricing.

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Antitrust & Consumer Protection

Ads Aren’t Stocks, or How Bad Analogies Make Bad Law

ICLE White Paper Abstract A bill recently introduced in the U.S. Senate would fundamentally remake the online digital-display advertising market by forcing the physical separation of a vertically . . .


A bill recently introduced in the U.S. Senate would fundamentally remake the online digital-display advertising market by forcing the physical separation of a vertically integrated market, and by imposing fiduciary-like duties on those buying and selling online ads for others. Proponents of this legislation—previously called the Competition and Transparency in Digital Advertising Act (CTDA), although the current version is known as the Advertising Middlemen Endangering Rigorous Internet Competition Accountability (AMERICA) Act—have pointed to rules allegedly used in the regulation of securities markets as the basis for the legislation. According to the academic and political proponents of the legislation, these two principles—physical separation and a best-interests rule—are effectively used in stock-market regulation. This article demonstrates that these claims are false. Stock markets are not physically separate from brokers, either in law or fact, as the backers of the AMERICA Act claim. Moreover, rules about best-price execution are (1) utilized only because vertical integration is permitted and common, (2) are nevertheless not a significant limitation on trading behavior, and (3) yet require a massive federal and private apparatus to support them. But more importantly, this article shows that, whatever the facts on the ground in stock markets, any analogy to them is misplaced, because it fails to appreciate the purpose of stock-market regulation. The sale of stocks is regulated in the way that it is because of the centrality of stocks to the savings and investments of everyday Americans, as well as the various vital roles stocks and stock markets play in the capitalist economy. Stock-market regulation protects the nerve center of the economy. Ads are not stocks, and any claim that they should be regulated as stocks is deeply misleading.

I. Introduction

On May 19, 2022, “the most significant change to antitrust law in a generation” dropped on Capitol Hill.[1] Bipartisan groups of lawmakers in both houses of Congress introduced companion bills to regulate online or digital advertising.[2] The “Competition and Transparency in Digital Advertising Act” (CTDA) would amend the Clayton Act as it applies to online advertising. In March 2023, several of the CTDA’s U.S. Senate sponsors reintroduced the legislation in the 118th Congress under a new name: the “Advertising Middlemen Endangering Rigorous Internet Competition Accountability Act” (AMERICA Act).[3]

Both bills include two major reforms that would completely remake the way online advertising is bought and sold. These reforms are premised on an analogy between online advertising and stock markets. As Matt Stoller of the American Economic Liberties Project put it in a press release announcing the introduction of the AMERICA Act:

No one would accept Goldman Sachs running the New York Stock Exchange, representing buyers of stock, and sellers of stock at the same time, just as no one would accept a lawyer representing both sides in a trial. Neither should Congress let corporations run all sides of a transaction in online ad markets.[4]

This article argues that this analogy is false and does not justify the proposed reforms.

The legislation has two major pieces. First, companies with more than $20 billion in digital-ad revenue (that is, Google) cannot own an “exchange,” a place where online ads are bought and sold, if it also provides services to buyers and sellers of ads, or it sells advertising space itself.[5] As discussed below, Google (and other “adtech” companies) vertically integrate across the adtech stack, providing tools to buyers and sellers (known as demand-side or sell-side platforms), as well as operating the market in which these buyers and sellers come together. Google also buys and sells its own advertising for its properties, like YouTube. There are, as set out below, good, socially regarding reasons for adtech companies to provide all these functions under one roof. But AMERICA Act would ban them from doing so. As discussed below, it is based on a misunderstanding of and deeply misleading analogy to financial-market regulation.

Second, companies with more than $5 billion in digital-advertising revenue (such as Google, Facebook, Amazon, Verizon, Comcast, Microsoft, Yahoo, and others) that provide services to buyers and sellers of digital advertising would have a legal duty to act in a customer’s “best interest” and would have to comply with various transparency requirements, among other things.[6] This reform is also based on a misplaced analogy to financial-market regulation. A best-interests rule would add significant costs to the system and require a massive bureaucracy to enforce, despite there being little to no evidence that it would do any good.

The ideas of physical separation (reform #1) and of imposing fiduciary duties on ad brokers (reform #2) are inspired by financial regulation. In a fact sheet accompanying the original CTDA, primary Senate sponsor Mike Lee (R-Utah) stated: “These restrictions and requirements mirror those imposed on electronic trading in the financial sector— an industry to which Google itself has compared its technology.”[7] In related antitrust litigation against Google brought by the State of Texas,[8] this inspiration was made explicit: an analogy was made between Google’s vertical integration in the adtech stack and a hypothetical vertical integration on Wall Street—it is as “if Goldman Sachs . . . owns the NYSE.”[9] As Sen. Lee noted in the Wall Street Journal the day the CTDA was introduced: “When you have Google simultaneously serving as a seller and a buyer and running an exchange, that gives them an unfair, undue advantage in the marketplace, one that doesn’t necessarily reflect the value they are providing.”[10] In the stock market, the argument goes, brokers (who provide services to buyers and sellers of stocks) are legally separate from owners of exchanges (who provide the venue where trades happen), and strict duties police the boundaries, as well as the behavior of participants to ensure deals are fair.

As this article shows, this is mostly myth. It is founded on a deep misunderstanding of the way that stock markets work and, more importantly, on the purpose of securities regulation. If one understands the mechanics of stock markets and the reasons they are regulated as they are, the analogy completely falls apart.

Defenders of the new regulations argue that brokers like Goldman Sachs are prohibited from owning the exchange on which stocks are traded. While it is true that Goldman Sachs (a broker) does not own the NYSE (an exchange), it does own a different stock exchange, called SigmaX2, where the same stocks sold on the NYSE are bought and sold.[11] In fact, about half of all stock trades occur on trading venues (i.e., exchanges by a different name) owned by brokers.[12] If an investor hires Goldman Sachs to buy a share of stock of Google, Goldman can execute this transaction on the NYSE (or other public exchanges), on its own exchange (SigmaX2), or, remarkably, from shares of Google stock that it owns, through a process called “internalization.”[13] In this last case, there is not a potential conflict of interest, as if Goldman did the transaction on an exchange it owned, but a direct one.

The AMERICA Act would ban Google from acting as a broker on its own ad exchange, but securities law, on which the law is purportedly founded, permits exactly this same conduct. Moreover, the NYSE is a publicly traded company (owned by many investors, including, likely, Goldman Sachs) and offers many services for buyers and sellers of stocks. Banning Google from owning an exchange because it could not do so if it were in the stock-brokerage business makes no sense, because it could. The bill’s insistence on the centrality of physical separation is not supported by the facts of how markets work.

To put a nail in this particular coffin, here is how the current state of stock-market regulation on this point is described in a new book-length treatment:

In some cases, the same institution can potentially advise an individual on which stock to buy and then either arrange execution of the order on that person’s behalf on a trading venue or act as counterparty on the other side of the order. Moreover, in the case where it arranges execution, the trading venue can be one owned by the broker dealer.[14]

There is simply no support for the claim that stock markets must be physically separated in the way proposed by the AMERICA Act.

The second part of the bill—creating a legal duty to act in a client’s best interest when helping them buy or sell ads—is (more or less) part of the stock-market world. It is important to note, however, that one of the reasons there are duties like this in the securities world is precisely because there is not a general obligation of physical separation in the securities world. The “best interests” rule in securities regulation exists precisely because brokers may own exchanges and otherwise act on behalf of clients when there are real or potential conflicts of interest. In short, the AMERICA Act takes a belt-and-suspenders approach that offers more supposed protection for advertisers and ad buyers than stock traders, even though the potential mischief and consequences are greater in the securities world. Ordinary Americans have their savings and their futures bet in the stock markets, not in ad markets, which are merely places where commodities are bought and sold. There is no investment or speculation in ad markets.

Even more fundamentally, the “best interests” obligations in the securities world have much less bite than the proposed rules under the AMERICA Act. To be sure, when Goldman executes a transaction for a client (on its exchange or elsewhere), it is required by a complex set of regulations to execute the trade at the best available price. This is the inspiration for the fiduciary duty part of the AMERICA Act.

But even this is not exactly as it seems. As discussed in detail below, there are several reasons why the best-price obligation nevertheless permits most trades to happen at something other than the best available price. While everyone in the chain for a particular transaction (retail broker, wholesale broker, exchange) is required to execute trades at the best price (called the “national best bid offer” or NBBO price), there is some discretion baked into the system, especially since price is not the only factor customers care about. Moreover, even U.S. Securities and Exchange Commission (SEC) rules permit trades to be made at inferior prices, so long as some of the trade is made at the NBBO.[15] A recent empirical study found that only about 43% of trades were made at the NBBO price, because of the impact of various discounts and other factors paid by exchanges.[16]

To sum up, neither of the two proposed reforms is supported by the analogies that their proponents have made to financial regulation. Brokers and exchanges are not physically separated, and best-interests rules (which are premised on them not being physically separated) are effective less than half the time, due to the complexities of stock markets. On this last point, ad markets are many times more complicated than stock markets, meaning the vast regulatory bureaucracy necessary to support such rules in stock markets will have to be many times larger for ad markets.

Although the way in which the stock market works and is regulated does not provide any support for the proposed reforms to ad markets, there is a much more fundamental problem with the analogy. The biggest difference between the example of Goldman buying a share of stock on various exchanges for its customers and Google buying advertising on various exchanges for its customers is founded in the purpose of stock-market regulation. The stock market is regulated as it is because of the profound social importance of accurate stock prices, not because of overriding concerns about conflicts of interests in general. Stocks are regulated as they are because they are stocks. Ads are not stocks, and thus, regulating them like stocks makes no sense.

Plenty of markets involve vertical integration with conflicts of interest, but do not require physical separation or impose fiduciary duties. Auction houses provide a venue where buyers and sellers come together to bid on art and antiquities, while also providing services and advice to buyers and sellers, as well as sometimes bidding on items themselves. Or consider the local drug store. One can think of CVS or Walgreens as a place where buyers and sellers of various products come together, and where the owner of the market offers various services to buyers and sellers (e.g., placement, data, and inventory management for sellers; discounts, loyalty programs, information, and credit for buyers), as well as offering its own goods (that is, generic brands) for sale. Or, moving online, think about eBay or Amazon, or frankly any platform. eBay runs auctions for buyers and sellers; it also provides ancillary services. Amazon runs an “exchange,” provides numerous services for buyers and sellers, and sells its own products on its website. Potential conflicts of interest abound. We do not look to financial regulation for how to think about resolving these potential conflicts, because stocks are fundamentally different for the reasons set out below.

The analogy between online-advertising markets and the stock market originated in a law review article—“Why Google Dominates Advertising Markets: Competition Policy Should Lean on the Principles of Financial Market Regulation”—published in 2020.[17] The subtitle plainly reveals the analogy. In the article, Dina Srinivasan explains how Google “engag[es] in conduct that lawmakers prohibit in other electronic trading markets,” namely, stock markets. The article identifies several practices that are allegedly banned in financial markets but permitted in the advertising market. In all of these cases, the prohibited activity can be described as a party acting as an agent for another party while serving their own selfish interests. For example, somewhat imprecise analogies are made to “front running” (the practice of a stockbroker receiving an order from a customer and buying or selling ahead of it to earn a profit at the expense of the customer), to “insider trading,” and to other nefarious practices.[18]

More compelling points are made where the article compares various common features of online auctions for ads and stocks, such as the advantages of speed and the potential for steering transactions in selfish ways. At the end of the day, Srinivasan recommends that regulators use the “toolbox” of securities regulation to “provide[] a framework for understanding and addressing competition problems in advertising.”[19]

Srinivasan’s article, which appears to be the wellspring of the Lee bill, alleges that Google’s exchange gives speed and information advantages to Google ad tools; that Google favors its own properties (YouTube and Search) for placement of ads (and, by implication, that advertising on other sites would be better in some unexplained way); and that (vaguely) “Google abuses its access to inside information.”[20] Whether or not these things are true is a factual question, of course, and one beyond the scope of this article. The point here is not to challenge the allegations or to defend Google or any other business. Rather, the point is to assert that, even if true, the AMERICA Act does not necessarily follow as a logical response. There is a large leap made from the facts to the law.

Srinivasan points to “the market for electronically traded equities,” which she asserts bans these practices, as the proper analogy. The rhetorical move is powerful: society has banned these practices in one area of the economy, and so it is illogical that we would allow them in another, similar area of the economy. The problem with this is two-fold: first, the claims about how equity markets are regulated are somewhere between naïve and untrue; and second, the reason we regulate securities markets as we do is because they involve the socially vital trading of securities, not because of the problems she identifies. Srinivasan asks whether “[b]ecause ads now trade on electronic trading venues too, should we borrow these three competition principles to protect the integrity of advertising?”[21] Although the question of whether to regulate online ad sales is beyond the scope of this article, the upshot of is that regulating based on analogy to securities regulation is deeply flawed, both in theory and in fact.

II. Some Adtech Basics

The Internet changed everything, including how advertisers reach potential customers. Before the world went online, advertisers used radio, television, magazines, and billboards to convey information about their products to the public. There were two significant characteristics of this pre-Internet market that are germane to the current regulatory push. First, these advertisements were bought and sold using ad agencies and other brokers through person-to-person direct sales. Second, advertising was largely depersonalized. To be sure, when Gatorade implored you to “Be Like Mike,” (as in, Michael Jordan) it did so in Sports Illustrated, not Barron’s. But by and large, ads were not tailored to individual people based on their prior actions, but rather to the preferences of groups using, at best, rough proxies. Thus, Gatorade targeted readers of Sports Illustrated but not, as it does today, Joe who just searched the Internet for “best electrolyte replacement.”

The movement of media online changed advertising radically along both these dimensions. As to the way in which advertising is sold, computers permitted publishers (those with advertising space to sell) and advertisers (those looking to raise awareness of their products) to find each other and do deals in much more efficient ways. Third parties developed computerized tools to help buyers and sellers of advertising to optimize their online spending. These tools—and thus, this industry—is known as “adtech.” If you are a publisher, like the Wall Street Journal, you might build or buy a software package that helps list your virtual real estate for sale to the highest bidder. Such bids may also be subject to any restrictions you want, such as banning certain ads, whether they be lewd or from a competitor. If you are an advertiser—again, like the Wall Street Journal—you might build or buy a software package that helps you target the best audience for your product. This relates to the second dimension of change. As an advertiser, the Wall Street Journal may be interested in sending ads to people who live in financial centers, who search for stock tips online, or who read other business publications. The Internet permits tailoring ads to individual consumers in ways unimaginable just decades ago.

The early 2000s saw a proliferation of new companies offering ad-optimization and placement services. Existing ad agencies developed and bought some of these new services, or built their own. New entrants, such as DoubleClick, developed standalone services for managing online advertising. A publisher or advertiser could purchase a software tool that would help buy or sell online advertising in a way that efficiently met the buyer’s or seller’s objectives. A familiar diagram used in this literature is shown below in Figure I.

SOURCE: Bitton & Lewis

This diagram shows the several ways in which buyers and sellers of online advertising come together. The largest by volume and revenue is through direct sales or programmatic direct deals.[22] According to an investigation by the UK Competition and Markets Authority (CMA), more than 80% of online display ads were direct sales in which the publisher and advertiser have a pre-existing relationship.[23] These transactions mimic ad sales of the pre-Internet days, with deals done between ad agencies and sales teams at major online sites, and computers used merely to make the process more efficient. This means the use of various “sell-side tools” and “buy-side tools,” such as an ad server that optimizes inventory management and price for sellers, and allocation and cost per impression for advertisers. This type of online advertising is not the object of the AMERICA Act or antitrust litigation efforts by the states.

Another way in which buyers and sellers of online ads come together is through auctions on ad exchanges, a process known as real-time bidding or indirect programmatic sales. An ad exchange is simply a marketplace in which publishers offer their online inventory, and advertisers can bid for that inventory in “real time.” This means that, when an individual person opens a web page, the ad exchange lists this event—the right to display one’s ad in a particular location on a web page to a particular visitor to that site—for sale to the highest bidder. Remarkably, the auction happens while the web page loads.

Importantly for purposes of this article, these auctions are highly individualized, finding a market-clearing price to place a particular message in a particular location in view of a particular person at a particular time. Compare this with a billboard. The owner of the billboard charges one price—say, a monthly fee—for the billboard, with that price depending on the number of cars likely to see it during that period. For online advertising sold through auction, it is as if the price for showing an ad on the billboard were different for every car that passes. This has significant ramifications for the fitness of any analogy to securities markets. At any moment, the value of a share of stock in, say, Google represents the market’s best guess at the value of Google in all future periods, divided by the number of shares outstanding, and discounted back to the present. Although individuals may have different estimates of this value, the price of Google sold at auction is the same (more or less) for everyone. The securities market is not individualized, but generalized. It is more like billboards, not online auctions.

But there is another way in which securities also differ from even billboards. As discussed below, there is an intrinsic value for a stock that represents the cash the stock will generate over time in present value. By contrast, a billboard advertisement or online auction is worth only what someone will pay for it. Ad prices are set by the forces of supply and demand, whereas stock prices reflect the actual value in terms of the cash flows of owning a security.

The online-auction process for advertisements can be simple or complex. In the simple version, publishers add a few lines of code to their website and set up an account with one of dozens of companies (like Google’s AdSense or Amazon’s Native Shopping Ads) that provide various tools to help the publisher achieve their goals.[24] This approach is generally used by less-sophisticated advertisers. It is a service, like any other.

In more complex versions, publishers and advertisers use a variety of tools—known as demand-side platforms (DSPs) and sell-side platforms (SSPs)—to process bids from multiple parties on a single ad-display option for a particular user. In its simple form, the process works something like this. First, when someone opens a webpage (either through a browser or an application), the publisher’s ad-server tool sends a request to an SSP for advertising options available on a particular webpage for that particular user. Second, the SSP sends requests to DSPs for advertising. Third, the DSPs then determine whether and how much to bid for the particular online real estate, based on their advertisers’ campaign objectives and information about the particular viewer of the webpage. Fourth, the SSP determines the winner of the auction, based on the price or other factors programmed by the publisher. Fifth, the SSP sends the winning bids to the publisher. Finally, the publisher’s ad server compares the winning bids from the SSP (and potentially multiple SSPs) with any direct deals that may exist, and ultimately decides what ad to serve at the particular location for the particular user.

An alternative to the auction method run by Google and others for this narrow segment of the market debuted in about 2015. Known as “header bidding,” it was developed as a mechanism to increase price competition across multiple SSPs, leading to higher prices for publishers. Header bidding is an “alternative to the Google ‘waterfall’ method” that “offers publishers a way to simultaneously offer ad space out to numerous SSPs or Ad Exchanges at once.”[25] Here is how one service provider describes the advantage of header biding:

[W]hen a publisher is trying to sell advertising space on its site, the process for filling inventory goes something like this: First, your site reaches out to your ad server. In general, direct-sold inventory takes precedence over any programmatically sold options. Next, available inventory is served through the site’s ad server, such as Google DoubleClick in a waterfall sequence, meaning unsold inventory is offered first to the top-ranked ad exchange, and then whatever is still unsold is passed along to the second ad exchange, and so on. These rankings are usually determined by size, but the biggest ones aren’t necessarily the ones willing to pay the highest price. (For publishers, this means lower overall revenue if the inventory isn’t automatically going to the highest bidder.) To further complicate the process, sites using Google’s DFP for Publishers has a setting that enables them to outbid the highest bidder by a penny using Google Ad Exchange (AdX). And since AdX gets the last bid, they are generally in a position to win most of these auctions. Publishers end up feeling like they aren’t making quite as much money as they would without Google meddling in the bids.[26]

Header bidding permits simultaneous auctions managed by the publisher: “By placing some JavaScript on their website, when a particular page is loaded, it reaches out to all supported SSPs or ad exchanges for bids before its ad server’s own direct-sold inventory is called. Publishers can even choose to allow the winning bid to compete with pricing from the direct sales.”[27] According to proponents, header bidding allows for increased control, increased revenue, improved yield, and reduced reporting discrepancies, when compared to the Google alternative.[28] Header bidding proved a popular alternative to the Google approach, with about 80% of large websites using it within a few years.[29]

III. Analogies and the Role of Purpose

Lawyers reason by analogy.[30] New cases are compared with old ones, and where there is a fit, decided by reference to the way things have been done in other instances. As Edward Levi noted in his canonical text, “An Introduction to Legal Reasoning,” “[t]he finding of similarity or difference is the key step in the legal process.”[31] Analogies are appealing because they build on what has worked, permitting accretive (but not revolutionary) change. It forces decision makers, be they judges or legislators, to offer some proof that their proposal is likely to work. And it can help convince outsiders that the result is justified. What worked over there might work over here, as long as here and there are similar problems.

Ad tech is a new case; financial regulation is an old one, and thus it serves as a potential analogy. The main body of securities regulation dates to the New Deal,[32] and its several statutes and vast body of rules and regulations has helped to create the most liquid capital markets in history. Although there are many critics and criticisms of the efficacy of securities regulation,[33] its widely perceived success makes it a fertile ground for analogy to adtech markets. After all, both involve “exchanges,” brokers, auctions, and concerns about speed, misuse of information, and conflicts of interest.

The surficial similarity between stock markets and ad markets is not just made by critics of the big players. Google itself describes ad exchanges by reference to stock exchanges. In describing its buy-side services to potential customers, Google stated: “imagine the Ad Exchange as a stock exchange.”[34] Google’s competitors have made the analogy, too. One rival described itself as “the eTrade to Google’s NYSE.”[35] As noted above, academics first pressed this analogy,[36] while lawmakers and regulators subsequently seized upon it.[37]

But is the analogy on point? The question matters a lot. If the analogy sticks, the online-advertising world may come to look more like the securities world, which is one of the most heavily regulated industries on earth. Thousands and thousands of regulators—public, private, and internal—walk the beat of securities markets. Billions are spent to comply with securities laws. These include the public enforcement costs (e.g., the SEC, the Financial Industry Regulatory Authority); private compliance costs (internal to firms, including issuers, brokers, investment funds, and banks); and the social impact of regulatory costs (e.g., how regulation benefits large firms compared with smaller ones).

The AMERICA Act’s direct and indirect costs will be large enough to matter, but it is the camel’s nose under the tent. As discussed below, something like the “best interests” standard that the AMERICA Act would impose simply cannot be meaningful without something akin to the massive regulatory apparatus that exists in securities regulation. It takes many thousands of people and many millions of dollars in compliance and lawyers and regulators to try to enforce the best-interests standard in securities law. If anything, as discussed below, many times this amount would be required to enforce it in ad markets—which, along this dimension, are far more complex. There is one single price for a stock, and it reflects an intrinsic value, while online display ads are particular to individuals, times, and places, and represent merely the interplay of supply and demand. These differences will make determining and enforcing a best-interests rule orders of magnitude more costly.

In light of the significant consequences that flow from analogizing ad markets to securities markets, such analogies needs to be ironclad. The similarities between markets, to use Levi’s language, must be fundamental and vastly outweigh the differences. But a problem with basing a massive governmental intervention into the economy and private ordering on an analogy like this is that there are innumerable similarities and differences between any set of extremely complex industries. The online advertising and securities markets are easily two of the most complex industries in history. There is the risk that there are too many variables that cut in different directions, which could therefore give government too much wiggle room to make its case.

In making any analogy, there are several important questions.

First, there is the choice of which market to compare the ad market to. As noted below, instead of comparing the ad market to the stock market, academics could have analogized it to the market for corporate bonds or the foreign-exchange market, both of which are as similar, if not more so, and yet are regulated nothing like the stock market, or the ad market as imagined under the AMERICA Act. The market for auctioning off valuable art or antiquities shares many of the same characteristics, as well, but is regulated largely by common-law fraud. Why didn’t critics use these analogies instead? The choice of market is likely not random or based on which of all possible markets is most related or most logical from a regulatory purpose perspective. Rather, the choice of market was influenced by the end goal. If one wants to regulate, choose a regulated market as an analogy.

Second, there is the question of what level of abstraction is appropriate for making the analogy. Any complex industry can be viewed at numerous levels of detail, revealing different complexities in each. Things that appear similar at one magnification may be vastly different when magnifications are increased. The analogy that has been made to financial markets is made at the highest, most generic level, referencing popular works of general interest, such as Michael Lewis’s book “Flash Boys,” which has been widely criticized by securities-law scholars.[38] As discussed in the next section, the actual workings of the stock market bear little resemblance to the description in “Flash Boys” or in Srinivasan’s article. The complexity of the stock market frustrates any attempt to draw direct lines from it, and its regulatory structure, to the ad market. It is simply too easy to cherry-pick examples or similarities along a few dimensions, while ignoring the underlying the stock market’s complexity or other aspects that point in different directions, regulatorily speaking.

It is for this reason that analogies here, and in general, must be founded not on surficial similarities between the markets, but first and foremost on the reason that stock markets are regulated as they are. Analogies are fundamentally founded on purpose. One cannot compare the regulation of A to the potential regulation of B, unless one knows why A is regulated the way that it is. What is the point of the regulation? This is where every analogy must begin. Only from purpose can one find an answer to the question of whether to apply A’s regulation to B. After all, law is about achieving public purpose, not simply increasing the power of government.

For stock markets, the why of regulation can be stated simply: because stock markets involve stocks. After all, there are many types of markets (or, even, markets involving “exchanges”), but they are not all regulated with the same methods or intensity as the stock market. The reason that there are several comprehensive federal statutes; hundreds of rules promulgated by multiple federal, state, and private regulatory bodies; and thousands of pages of detailed regulations covering every aspect of buying and selling securities is because of the central importance of stocks to our society. If one is selling fish or antique furniture, even on an online exchange, the stakes are completely different, and the justification for regulation different, as well.

Drilling down, there are two purposes of stock-market regulation that must be the basis on which any analogies to securities laws are grounded. First, stocks and stock markets are regulated as they are because they largely involve investments of savings and retirement money by individuals. The stock market is the primary means of wealth creation in the United States and, as such, is the place where every-day Americans safeguard their income and hope to grow familial wealth. These investments are susceptible to fraud because of the relatively small amounts invested in any company (making monitoring by individuals inefficient); the agency costs inherent in hiring managers to be in charge of one’s money; the speed and complexity of modern trading markets, and because stock prices reflect nothing more than promises about the distant future. As such, there are enormous social stakes implicated in ensuring that stock markets are well-regulated.

Second, stocks and stock markets are regulated as they are because of their central role in determining how scarce resources are allocated in our capitalist economy. As discussed below, stock prices dictate where capital, labor, and raw materials are invested in the economy. If prices are “wrong”—that is, stocks in industry A are overvalued and those in industry B are undervalued—then resources will inefficiently flow to industry A instead of industry B, where it would be more productive. High prices are our best evidence of value, and equivalent to a giant flashing sign saying to everyone in the economy, “Do this!” If the this is not worth doing, we are all worse off.

Accurate prices, in turn, depend on liquid markets, which attract numerous traders and reward those investments that uncover information and truth about companies’ prospects. If prices are wrong over extended periods of time—for one stock or for many—the knock-on effects transcend losses to individual investors. Every investor, entrepreneur, employee, and supplier in the economy makes decisions based, in part, on where the most value can be created, and the best proxy for that is the stock market.

These two purposes are explored in the next section.

A. The Dual Purposes of Stock Market Regulation

The U.S. stock market is the most important market on earth; nothing else comes close. More than $134 trillion in U.S. equities were traded in 2021, making it among the largest global markets by volume.[39] The market for stocks in the United States is almost 700 times larger than the market for online advertising, which was about $200 billion in 2021.[40] More than two-and-a-half times as much stock—about $532 billion—is traded every day.[41]

It is not just the size of the market that makes stock markets fundamentally different from advertising markets, and much more essential from a social perspective. While ads can help get information about goods and services to potential customers, stock markets have two features that are essential to a functioning economy. At the most basic level, the stock market is where individuals with money come together to meet individuals with business ideas. The money invested in stocks is used by businesses of all sizes to make investments in projects that generate wealth, employment, and the goods and services that make people happy. On the other side of the equation, participation in the securities market is the primary way in which individuals save and invest money for retirement. Stock markets are profoundly forward-looking, not about the moment.

These two aspects of securities are what make the entire economy function efficiently, but they present several special problems. Most obviously, stocks are different than other things bought and sold in markets, like apples or advertisements. Stocks are just promises about the future, not something that is consumed immediately. They are intangible. You cannot kick the tires on a stock. A stock isn’t consumed, but rather is just the right to receive cash that might or might not appear at some unknown point in the future. As such, there is a huge informational asymmetry between the people with the money and the people with the business idea. In general, the former turn over their money to the latter, who promise to, sometime in the future, turn it into more money. But the whole magic-box part (where the money becomes more money) is entirely within the latter’s control. Without a regulatory apparatus to force truthful disclosure of certain things, the risk may be too great to justify an efficient investment. Finally, investors in a stock rarely go it alone, meaning that any bargaining about information disclosure or attempts to exert control over those running the business will be beset with collective action problems. Regulations about disclosure, voting, liquidation rights, control rights, and other matters are essential to ensure the system operates efficiently.

At their core, securities laws and regulations are about both sides of this capitalist market—about protecting investors and about ensuring businesses can raise money at the lowest possible cost. These are the dual purposes of securities regulation. Without them, there would be little need for regulation.

1. Protecting Investors

There is about $50 trillion invested in U.S. public companies.[42] Almost all of this is money that is owned (directly or indirectly) by individual Americans. From the investor’s perspective, the goal is to turn money into more money long into the future, whether this is called savings, investment, or income smoothing. The stock market is the best place to do this.

Since 1928, valuation levels in the stock market have increased, on average, about 10% annually.[43] This means $100 invested in the stock market in 1928 would be worth more than $760,000 today. (Adjusting for inflation, the return is still more than 7%.[44]) Alternative investments—corporate bonds, government debt, and real estate—perform much worse. The same $100 invested in 1928 in corporate bonds would have yielded only around $54,000; in government debt, it would have yielded about $8,500; and, in a real estate portfolio, it would have returned just about $4,700.[45]

a. The centrality of individual investors

U.S. households are the largest holders of the $50 trillion in stocks. As shown in Figure II, about 38% of stocks are owned directly by individuals. The next largest bucket (22%) is mutual funds, which represent stocks owned indirectly by individuals saving for retirement. Most of the other categories—including exchange-traded funds (ETFs) and private and public pensions—likewise represent mechanisms that allow individuals to smooth their incomes over time—that is, save for retirement.

These stock investments are the largest single category of liquid assets (that is, excluding real estate and personal possessions) for U.S. households. According to data from the Federal Reserve, stocks represent about 42% of liquid assets for individuals, compared with 23% held in bank accounts.[46] Stocks are vital to the economic health of millions of families. This is true not just insofar as the stock market enables capital raising that produces employment and the things we want, but also insofar as it is the primary mechanism of personal wealth creation.

Importantly, stock ownership is not limited solely to wealthy individuals. The Federal Reserve estimates that, in 2019, about 53% of households owned stocks (about 65 million households).[47] The median value of holdings is about $40,000. According to analyses done by the Securities Industry and Financial Markets Association (SIFMA), which used data from the Federal Reserve and the U.S. Census Bureau, the median stock ownership is associated with “an income range of $77.2 thousand to $126.6 thousand and therefore shows a wide universe of Americans own stocks, not just the 1%.”[48] Many typical Americans are heavily invested in securities, whether it is through individual accounts at E-Trade or similar services, or through mutual funds, ETFs, 401(k) plans, or private or government pension plans. Protecting the best source of wealth creation for American families is why we have securities regulation.

SOURCE: Federal Reserve, Financial Accounts of the United States[49]

It is for this reason that the SEC’s unofficial moto is “We are the investor’s advocate.”[50] The approximately 4,500 staff at the SEC have a variety of jobs and areas of focus, but the mission is squarely focused on protecting individual investors, especially vulnerable, unsophisticated, poorer, and informationally disadvantaged investors.[51] Concerns about these individuals motivated the securities laws passed during the New Deal, and have animated every major SEC action over the past century.[52]

There are two specific worries. First, that investors will lose part or all of their savings by investing in businesses that are not what they appear to be. As noted above, buying a stock is a bet on the future based solely on promises, not something that will be consumed immediately. One can inspect an automobile or taste an apple; a stock is just a prediction about future cash flows. Since the future is uncertain and fully outside of the investor’s control, there is significant risk of fraud, or of simple mistakes. This risk is far greater than in the purchase of goods, including advertising. If stock prices do not (as best as possible) reflect the intrinsic value of companies, then individual investors will not be saving for the future. They instead will suffer or have to rely on alternatives, such as less-efficient government-welfare programs.

This problem occurs in both the primary market for stocks, when buying from a company issuing stock—as in an initial public offering (IPO)—and in the secondary market, when buying from other investors on an exchange, such as the New York Stock Exchange (NYSE).

In the primary market, companies have information about their prospects that may not get out to investors. Companies have incentives to disclose positive information to investors voluntarily, but they are run by individuals who may privately gain from withholding full disclosure even of positive information. Overcoming these agency costs to ensure IPOs are accurately priced is a core function of securities markets. With regard to bad news, companies have much weaker incentives. If they raise money repeatedly, the incentive to have a reputation for fair dealing might do some work. But although mature companies do come back to the capital markets on occasion, the possibility of a one-and-done offer is significant.

If investors cannot distinguish these two types ex ante, then they will pay less for a security with a given intrinsic value as a means of self-insurance. This raises the costs of capital for all firms. Regulation in the form of mandatory disclosure, regularized disclosure, and strict anti-fraud rules can help to reduce the uncertainty, and thus the cost of capital. This has massive spillovers to the economy as a whole, since capital costs are a significant determinant of the amount of wealth creation possible in the system.

There are similar concerns in secondary markets. Although issuing firms are not directly involved in trades on securities exchanges, which happen among investors who are strangers both to each other and to the issuer of the securities, problems of information asymmetry remain significant. If companies do not keep information about their future prospects current, this will decrease the accuracy of the stock price at any moment, and therefore reduce the number of trades that happen. After all, if one is less certain about the value of the stock, and if the person on the other side has better information, then the range of offers and bids will increase, which in turn will decrease the chance that a deal can be reached. The net effect will be to reduce the liquidity of an investment in a particular company. Shares will be worth less, all else being equal, because they will be harder to move in and out of, ultimately reducing the amount that investors are willing to pay for shares in the primary market. The result is higher capital costs, and therefore less economic activity.

Although there exist incentives for voluntary disclosure by companies, mandatory disclosure is justified on the grounds that the amount of voluntary disclosure, especially regarding bad news, will be suboptimal.[53] The goal is to provide traders with assurances that they are trading on reasonable terms and can exit their investment as easily as possible. This is, in part, about “fairness” for investors, but the ultimate goal is price accuracy and thus, efficient capital allocation.

The same logic that justifies mandatory disclosure also supports ancillary trading rules. Rules about trading on “inside information,” “front running,” and the like are all about ensuring that traders freely come to the market and can expect to get a fair deal. If they do not expect to get a price that reflects the fair value of the stock, they will not come or will apply a risk-adjustment to the price they are willing to take. The result will be more illiquid markets, less-accurate prices, and higher capital costs for firms. Concerns about fairness for the investors may sound like first-order issues, but they are not. After all, every stock trade has a winner and a loser, and the net social effect is zero. What motivates regulation is, instead, the impact that systematic biases about who wins and who loses might have on the market’s liquidity, and thus on capital efficiency.

The second concern follows from this possibility. If individual investors cannot confidently invest in stocks as a means of savings and building wealth, they may resort to alternatives that are riskier and less socially valuable. As noted above, the stock market is the place where individuals with ideas come together with individuals with money to cooperate to create valuable goods and services. If individuals looking to build wealth do not trust this system, they may bet their income in speculative assets like gold or cryptocurrencies; gambling on sports or horses; or any number of get-rich-quick schemes. This not only exposes them to greater risks (without offsetting increases in returns), but is also less socially valuable, since scarce economic resources are devoted to gambling instead of productive economic activity.

b. Special problems for intermediaries

Even when individuals’ investments in stocks are intermediated by professionals—either investment advisors or investment funds (such as mutual funds)—there are potential issues. The biggest one is the cost of trading. Institutional investors, such as pension funds or mutual funds, are generally not terribly concerned about the value of an individual stock. After all, if the fund holds a diversified portfolio, what matters is whether the market as a whole is up or down. What does matter for investment funds, however, is the cost of buying and selling stocks, as they purchase and sell countless stocks each day, as investors move in and out of their funds. The costs of trading include implicit costs based on information asymmetries in the market. This begets regulation to reduce these costs, since they are passed on to individual investors saving for retirement.

The costs arise because of the unique ways in which stocks are bought and sold. In general, buyers and sellers of stock come together in a market, be it on an exchange like the NYSE or through a variety of off-exchange markets. In each of these, liquidity (the existence of many buyers and sellers) is provided by high-frequency traders (HFTs), which are companies that are continuously entering buy orders and sell orders for all stocks. Some of these orders clear at market prices, meaning a buy order at a particular price from an HFT will intersect with a sell order from an investor at that price. The goal of the HFT is not to buy and hold that particular stock, however, but rather to turn around quickly and sell it to a different investor willing to own it. If the price at which the HFT buys is less (usually less than a penny less) than the price at which the HFT sells, then this is a profitable business to be in. The HFT is not an investor, but rather, a firm that makes the market happen—a “market maker.”

A problem for HFTs can arise, however, if in the period after they buy a stock and before they resell it, the price moves in a way that makes the trade unprofitable. Imagine the HFT buys at $10, and is hoping to resell it at $10.25, in order to cover its costs of operation with a small profit for investors. But suppose that, after it buys, negative news is revealed about the company’s prospects, and the stock drops to $9.75. The HFT can now only resell at a loss.

There are several ways in which an HFT can protect itself. Most obviously, it can demand more than 250 basis points compensation for the round-trip in and out of the stock. After all, its margins—the difference in the price to acquire the stock and the price to sell it (known as the bid-ask spread)—represent the profit it needs to make the business work. Any amount above its costs and reasonable allowances for profit is a form of insurance against trading against those with better information. If the HFT suspects it may be trading against investors with better information, it will widen the spread (to insure against this possibility). But if the HFT widens the spread, this means less liquidity for investors (like pension funds and individual investors), who are looking to move in or out of a stock. Less liquidity means higher risk, which translates into a greater cost of capital for companies, which reduces the number of profitable projects, which in turn reduces wealth and economic growth for everyone.

Others buying and selling stocks, like pension funds, can also find themselves bitten by informational asymmetries. They can address this by trying to time their trades so that they do not trade against an investor with an informational advantage. After all, if the pension fund systematically trades at inferior prices, it earns less returns for its beneficiaries, who are investing for retirement. Regulation of stocks and stock trading is designed to address all of these ways in which individual investors can be harmed in their pursuit of retirement savings.

2. Capital Allocation, Efficiency, and Economic Productivity

The other side of the stock market (from investors) consists of firms seeking to raise money. The stock market is one of the primary mechanisms by which firms raise capital, which is then used to invest in projects that provide employment and most of society’s goods and services. Although more money is raised in debt markets than in stock markets, there is another way in which the stock market is vital to the market economy: the stock market produces price signals that investors and entrepreneurs use to direct their activities.

Therefore, from the firm’s perspective, efficient stock markets are about two things. First, ensuring that businesses can raise money at the lowest possible cost. And second, the vital role that stock-price signals play in allocation of scarce capital (both financial and human) in the economy. These features make the stock market one of the, if not the, most important social institutions. As discussed below, while advertising is also important—in that it conveys information about products to consumers—the advertising market is trivial in comparison to the stock market, along just about any social dimension.

The price of a share of stock is not just what willing buyers and sellers are willing to accept, but a collective judgment about the intrinsic value of something. Specifically, a stock is not a thing to be consumed, like an apple or an advertisement, but rather the right to future cash flows, voting rights, and the full bundle of other rights (such as access to books and records or litigation claims for breach of duty) that arise from ownership.

In terms of economic rights, stock prices represents the market’s estimate of the future value that will be produced by the company that issued the stock, divided by the total number of outstanding shares.[54] In this way, the price is society’s best guess about the value of devoting scarce resources (that is, capital, labor, and raw materials) to this particular economic endeavor. Stock-price accuracy is therefore the foundation of resource allocation in the economy. If a stock is mispriced for a significant period, scarce resources will be misallocated.

For instance, from January 2000 through July 2001, the share price of Enron traded above $50, reaching peaks of about $90. During this period, money flowed into Enron’s businesses, in the form of investments and loans. Workers chose Enron over alternative employers. Customers inked deals with Enron, and entrepreneurs started new businesses in the fields of energy trading that Enron touted as the key to its success. Countless people invested in Enron as a source of retirement funds or wealth enhancement. All of this was utterly wasted. By the fall of 2001, Enron was worth nothing.[55]

Although thousands of individuals lost money betting on Enron stock, it is important to note that these losses were mostly offset by individuals on the other side of these trades. Stock trades are generally a zero-sum game. If A sells B a stock for $100, and the stock drops to zero, A has avoided $100 in losses, which offsets the $100 lost by B. Without belittling B’s losses, the true social harm arises from the fact that, for 18 months, if not longer, enormous numbers of decisions regarding allocation of scarce resources were influenced in whole or in part by the incorrect valuation of Enron stock. Getting Enron’s stock price, and the stock price of every other company, as accurate as possible ensures efficient capital allocation. This cascades across every economic decision at every level of the economy and society.

A properly functioning stock market serves several essential social roles, which transcend questions of who wins or loses each trade in the stock market. If an apple or an advertisement is mispriced relative to value, there will be winners and losers. Buyers might suffer (if the price is too high), or sellers might be worse off (if the price is too low); middlemen might take too much of the surplus. But in these typical commodity markets, the harms, such as they are, are relatively limited. They are likely to wash out for people who are just as likely to be buyers as they are sellers. Stock prices are totally different. They have these aspects, but the social stakes are completely different.

First, an efficient stock market provides a signal to corporate managers about the health of and prospects for the corporation. Managing a public company, no matter the size, is a complex endeavor, and the stock price is a single reference point that gives managers a sense of whether things are going well or poorly. The stock price can therefore be thought of as the firm’s slope or vector. If the price is rising, this suggests that the wisdom of the crowd of investors believes the company is going in the right direction. Managers can continue down that path. On the other hand, if the stock price is falling, managers may want to change course in some way.

This handy metric simplifies and distills countless questions or decisions—from human resources to research and development to project choice—into a single number. This massively simplifies management’s role by giving it a scoreboard of its performance. In the absence of the stock market, managers would have to rely on multiple external signals (e.g., from government or banks or consumers) along each key decision point, which would then have to be aggregated in some fashion. A stock price is a far more efficient tool, as it does all the aggregating, while integrating real-time assessments of everyone on earth with an interest in the marginal dollars that will be created or lost by the firm’s activities. All of this depends on the stock price being accurate.

Second, an efficient stock market promotes alignment between shareholders and managers. As Adolph Berle & Gardiner Means noted in their canonical work, the modern corporation is characterized by a separation between those in charge of corporate decision making (known as managers) and those investors who benefit on the margin from each dollar the corporation earns (known as shareholders).[56] Unconstrained managers have incentives to act selfishly, serving their own interests, rather than those of shareholders. This might mean being lazy, taking less risk than shareholders would prefer, or lining their own pockets with money or perks.

Since the social value of corporations is premised on their serving the interests of shareholders (more or less), managerial agency costs are a significant social problem. The stock price, therefore, is an elegant mechanism to reduce agency costs. Just as it is a simple and useful signal to managers about how they are doing and what they should be doing, so too is it a useful signal for shareholders to gauge managerial performance. Shareholders can use the stock price to inform how they vote, whether the question is representation on the board (which picks management) or compensation for managers. In extreme cases, the stock price may fall sufficiently that it triggers a takeover by an investor who wants to replace the incumbent managers. The market for corporate control, enabled by stock-price signals and hostile takeovers, is thought to be a key driver of managerial performance and economic efficiency. It depends entirely on stock price accuracy. If a given company’s stock price is “wrong,” meaning systematically mispriced, then the stock market will send false signals about incumbent management’s performance and the value to be gained from replacing them.

Third, and related to both of the first two points, an efficient stock market provides a mechanism to compensate managers for good performance. Prior to the 1990s, corporate managers were largely compensated with cash, in the form of a salary and bonus determined by the board of directors. Since pay was determined in large part in advance of any performance (salary) and performance pay was discretionary and set by a board largely appointed directly by or with the courtesy of the CEO, the system rewarded risk-averse CEOs of big firms with cozy board relations.

As a famous and influential Harvard Business Review article noted, what matters is not how much CEOs are paid, but how they are paid.[57] If shareholders are worried about managers being insufficiently focused on shareholder value (as discussed above), the solution is to align the interests of shareholders and managers by compensating the latter with stock. This helps to ensure that CEOs make decisions in the interests of shareholders. If the stock price goes up, managers’ pay goes up; if it goes down, managers’ pay goes down. Today, stock represents about 70% of the typical CEO’s pay. This revolution in compensation has dramatically increased the efficiency and value of publicly traded U.S. companies. And, as above, it depends in large part on stock prices being accurate. If stock prices are wrong, then managers will be overpaid or underpaid. This would thus distort managerial decision making, the market for corporate control, and the labor market for CEOs.

Fourth, an efficient stock market can reduce the cost of capital for firms, thereby enabling them to invest in more projects and, consequently, to increase employment and output. Companies are devices for shareholders, creditors, employees, and other stakeholders to collectively engage in certain projects. Managers decide whether to invest in a particular project based on a simple calculation—if the expected cash flows from the projected (discounted to present value) exceeds the cost of raising money to fund the project, then the company will invest. The cost of raising money—called the weighted average cost of capital (WACC)—is the sum of the cost of raising debt and the cost of raising equity to fund the project. All else being equal, the lower the cost of equity, the lower WACC, and the more projects a firm can invest in profitably.

The cost of equity is, in turn, based on a variety of factors, but overwhelmingly on the risk of the investment. An efficient stock market can reduce risk in several important ways. Accurate stock prices for peer firms provide a metric against which the current investment can be measured. Moreover, if a stock market is liquid, risk will be lower, because investors will be able to exit bad or undesirable investments readily. Finally, liquidity depends on intermediaries, known as market makers, being willing to buy or sell at posted prices. Stock markets depend on market makers constantly buying and selling shares, rather than trying to match an investor willing to sell and an investor willing to buy.

In the old days, market makers were individuals who were contractually obligated to buy and sell a particular stock at quoted prices, while today, they are HFT firms that use more sophisticated computer programs to always make liquidity available. In either case, the intermediaries earn a profit for their liquidity-making role by pocketing the difference between the price investors are willing to pay and the price at which investors are willing to sell. This difference, known as the bid-ask spread, depends on whether market makers believe stock prices accurately and efficiently process available information. If a market maker is constantly buying a stock at the market price (say, $10), it may worry that, if it tries to resell moments later, new information may reveal that the $10 price was wrong. If this fear is substantial, the market maker will increase the bid-ask spread as a means of raising its profit on some trades to offset losses on others. Increased bid-ask spreads reduce liquidity, and therefore increase the cost of capital. This raises WACC and therefore reduces the amount of socially useful projects in which companies can engage. In short, accurate stock prices flow through directly to the ability of companies, great and small, to engage in an efficient amount of economic activity.

More could be said about the various ways in which the value of accurate stock prices go far beyond investor protection or even fairness. Books and articles are written on this topic alone. For present purposes, the above should be sufficient to demonstrate the central role that accurate stock prices play in the economy.

B. Why Ads Are Different

None of the foregoing discussion applies to advertising, let alone online advertising. As the title of this article declares, ads are not stocks, and this makes all the difference in the world. The discussion above sets out the importance of looking at the purpose of a regulatory system to form the basis for an analogy to another market. As this section sets out, there are several profound differences between advertisements and stocks that undercut any connection between the purpose of stock-market regulation and any regulation of advertising markets.

Stock markets are regulated as they are because of the peculiar characteristics of stocks—their role as the primary mechanism of savings and investment for individuals and their centrality in allocating capital in the economy. Ads—like packaging, signs, and product quality—are an important means of attracting and retaining customers for individual businesses, but they do not present any of the social problems inherent in the buying and selling of stocks. This can be seen by considering the ways in which stocks are different than ads.

The sale of regular consumer goods, like avocados or antiperspirant, is not subject to the vast federal regulatory regime that the sale of stock is. Advertisements are much more akin to avocados than they are to stocks. There are several reasons for this.

1. High Stakes Versus Low Stakes

The first difference is that the stakes are much lower for the typical consumer good or advertisement, relative to stocks. As discussed above, stocks are the largest source of savings and investment for individual Americans. In addition, they provide an essential function in funding projects that provide most goods and services in the economy, as well as directing almost all economic activity. Accurate stock prices, enabled by various regulations, also enables efficient management, reduces agency costs within firms, provides a socially regarding mechanism of compensation for management, and enables the market for corporate control.

Advertising is also important. It provides consumers with information about goods and services that might not otherwise be available, or only available at a higher cost. It reduces search costs for consumers and producers. Advertising also serves as a bonding mechanism, since money spent developing a brand is a bond against bad performance. But while important, these considerations pale in comparison with the direct and indirect impacts of the stock market. For small businesses, something less than 10% of all sales are devoted to marketing of all kinds, making it an insubstantial business expense.[58] The cost of capital for funding projects is a bigger first-order concern for companies, not to mention the other impacts mentioned above.

The relatively low stakes of advertising can be seen in the ways that advertising is regulated. Under federal law, advertising must generally be truthful. The Federal Trade Commission (FTC) polices false and deceptive advertising, and there are special rules for certain types of specialty products (such as drugs) or certain types of advertisements (such as political endorsements). But there is no giant federal system for regulating billboards, print ads, or television ads, the way there is for securities. In fact, advertising about stocks and stock-related services are among the most heavily regulated advertising fields. Together, the major securities regulators—the SEC, the Financial Industry Regulatory Authority (FINRA), the Municipal Securities Rulemaking Board (MSRB), and the Securities Investor Protection Corporation (SIPC)—have together promulgated more than 30 different rules related to the advertising of brokerage services to the public.[59] These rules (and other stock-market regulations) go so far as to, in some instances, forbid brokers and issuers of securities from making truthful claims to the public, notwithstanding the First Amendment. This kind of speech restriction is typically found only for the most dangerous products, such as cigarettes.

2. Intrinsic Value Versus What Something Will Fetch

The second big difference is that the price of an advertisement is based on supply and demand, while stocks have intrinsic value. Whether an ad was placed at a “fair” price can be difficult to determine in the abstract, since anything set by the forces of supply and demand is worth only “what it will fetch.” An advertisement could be compared with other similar advertisements displayed to other similar people at other similar times, but there are numerous variables that make this comparison challenging. More fundamentally, there is a big difference between the goal of advertising markets (which offer buyers and sellers opportunities to come together at a market-clearing price) and stock markets (which are about price discovery).

The goal of the stock market is to determine, as best as practicable, the intrinsic value of a share of stock. A stock’s value is something that can be determined, and the purpose of the stock market is to determine what that value is. At a base level, the value of a stock can be approximated by the value of all the cash that the company expects to generate in the future, discounted to the present. Although there may be temporary deviations from this, as well as errors in estimating it, a stock is inherently “worth” something in a way that a consumer good is not. As noted above, ensuring a reliable mechanism of wealth creation and the proper allocation of scarce resources in the economy depends on stock markets to function as a mechanism to ascertain this value.

Consider, for instance, the stock of an oil company like ExxonMobil. How much is a share of ExxonMobil worth? Stock-market professionals estimate this value by looking at all the projects and activities of the company—its oil fields in production and its new explorations—as well as the demand for its products and the expected share of the market it is likely to have into the future. This involves complex calculations about the demand and supply of inputs and outputs from ExxonMobil’s sprawling operations. The final calculation involves estimating how much net cash ExxonMobil will generate each year, and then applying a discount rate to bring that value into present-dollar figures. This number, divided by the number of shares outstanding, tells one the approximate intrinsic value of a share of stock. Investors will, at any given moment, be willing to buy ExxonMobil if the price falls below its intrinsic value, and to sell it if it rises above it.

The price of an advertisement, by contrast, is just what someone is willing to pay to alert others to their product. The price is determined solely by the forces of supply and demand. The ad exchanges run auctions to get the ad space to the person who values it the most. That is not what the stock market is doing. The stock market is running an auction to allow people to shift in and out of savings versus consumption, to discover the more “accurate” price to help the real economy operate better.

There is another difference. A particular advertisement is worth something different to different people. Company A might be willing to pay $1 to get the eyeballs of Person X, while Company B might be willing to pay just $0.75. The possibilities are practically infinite, and the auction process in online-advertising markets is designed to elicit the willingness-to-pay and willingness-to-sell prices of particular buyers and sellers for every piece of online real estate exposed to every individual. A share of stock, by contrast, is worth the same (more or less) to everyone.

Returning to the example of ExxonMobil, imagine that some large investors—such as so-called “environmental, social, and governance” (ESG) investment funds and university endowments—start selling their shares because they no longer want to be complicit in contributing to climate change. The influx of sell orders arriving at the stock market may reduce the current price, but any such demand-based reduction will be temporary. After all, what determines the value of a share of ExxonMobil stock is not the meeting of supply and demand for the stock at a given moment, but rather, the value of the cash that a share can expect to generate in the future. This, in turn, depends on how profitable ExxonMobil is at selling its products. If the demand for the stock drops but the demand for oil (and ExxonMobil’s efficiency at delivering it) does not, then the stock price will not change. Any temporary drop owing to the increase in sell orders merely generates profit-making opportunities for investors willing to buy shares at artificially depressed prices.

Nothing even remotely like this happens in advertising markets. An auction for advertising space on a particular website is worth precisely and only what someone is willing to pay for it at that moment. If there is a lot of interest, prices will be high; if little, prices will be low. As soon as the ad space sells, that is the end of it. There is nothing but a one-time shot to reach a potential customer. There is no opportunity to buy up undervalued space or, importantly, sell overvalued space. Prices clear markets, and then the thing—an ad—happens or is consumed. The process starts again for the next opportunity: a combination of real estate, an ad, and a particular set of eyeballs.

In the stock market, by contrast, the thing being auctioned lives on after it is sold. It can be resold. It can also be sold short, betting the price will fall. One can sell shares one does not own in the hopes that the stock price falls, and the borrowed shares can be repaid after being bought at a lower price. Shorting helps process information from pessimistic investors in the market hoping to get the stock price right. You can’t short an ad space because there is no “right” price.

Ads have many (infinite) prices, while there is one price for a particular stock at any time, knowable to everyone. A share of ExxonMobil is worth $30 at this moment, and anyone can buy it for $30. By contrast, in ad markets, the price of every ad is not just for a particular plot of land on every website, but also for a particular viewer of that site. There is not one price; there are effectively an infinite number of prices.

The upshot of this is that stock markets are engaged in the constant evaluation of the intrinsic value of a single thing, which has the same value for every holder, more or less. Finding that intrinsic value is the stock market’s purpose, and the regulation of disclosure and trading activity is centrally about that purpose. Ad markets, on the other hand, are not about finding the intrinsic value of information conveyed on a website to a particular individual, but rather just what someone is willing to pay for it in that instant. This makes ads much more like regular consumer goods, rather than stocks.

3. Consumption Versus Investment or Speculation

A third big difference is that advertisements are consumed after they are sold, while stocks exist forever. Ads are, in this way, just like other consumer goods. This simple fact reduces the need for anything like the vast securities-regulation apparatus.

When one buys a regular good, like a cookie or a computer, the distance between the purchase and the realization of the value from the purchase is relatively close in time and something whose value is easily discernable to the average consumer. You know when you get a bad deal and, as a repeat player, you can choose to take your business elsewhere. Regulation is less necessary because self-help—in the form of an immediate, tangible, familiar experience—is readily and widely available. If the cookie tastes bad, the consumer will know, and will buy one somewhere else in the future. These transactions are consummated and evaluated in an instant. When that instant is gone, the price paid, and the value received vanishes. In economic parlance, it is consumed. And then there will be more opportunities for “consumption” based on that experience.

Stocks are different. As noted above, stocks are bets about the future and are primarily used as a mechanism for saving and investment over many years. The experience of buying stock in a company is completely different than purchasing a consumer good. Whether or not it was a good buy will likely not be revealed for perhaps decades, when the value is cashed out. Moreover, whether or not it was a good deal in the short run will depend on whether the price paid was the correct one, on an intrinsic level.

4. Vulnerability

A fourth significant difference between stock and advertising markets is that the typical participant in the ad market is likely to be far more sophisticated and better able to protect themselves than retail investors in the stock market. Although almost all businesses advertise in one way or another, even the smallest businesses buying or selling advertising are more sophisticated than the average retail investor. Even small businesses hire lawyers, deal with various bureaucracies, engage with suppliers and customers in complex legal and business situations, and must think critically about a range of issues at least as challenging as advertising. Every business must buy services in markets from a range of suppliers, whether it is inputs to the business, labor, or capital.

By contrast, many investors in the stock market have no experience with the complicated products and services offered by stockbrokers or other financial intermediaries. As noted above, many tens of millions of average Americans are invested directly or indirectly in the stock market. U.S. householders are the largest holders of U.S. equities, and, as research from the SIFMA shows, this is not limited to the wealthy.[60] The stock market is where everyday folks put their income in the hopes of growing it over time. Moreover, this is where society wants individuals to put their money to save for retirement. Doing so is not just the best possible way to ensure a prosperous retirement, but it also generates liquidity that attracts traders with information about stock prices such that prices tend toward intrinsic value.

The vast majority of securities laws are based on the idea of protecting average Americans. That investor protection is the end goal of securities regulation can be seen in the fact that many of the rules and regulations are waived or relaxed in cases where the SEC determines that particular investors can “fend for themselves.” If individuals are sophisticated or reasonably wealthy, one can raise money from them without complying with most of the securities laws. If it is deemed that an investor does not need the protections of the securities acts or regulations, then the rules simply do not apply to them. Sophisticated investors—who can protect themselves through contract, monitoring, or otherwise—do not have to comply with the same obligations as other investors.

There are several places where this regulatory approach can be seen, both in the primary market for securities—where companies (or issuers of securities) first offer them for sale to investors—and in the secondary market for securities—where investors trade stock among each other. Both markets are interrelated, as the primary market is only attractive because a secondary market (where buyers in the primary market can find liquidity and the ability to exit their investment freely) exists. As noted above, the point of regulation in both markets is to ensure accurate prices. This ensures investor-protection goals (discussed above) and capital-market efficiency goals (discussed below) are met. Regulation is deemed unnecessary to achieve these goals in certain cases in both markets.

In the primary market, securities laws generally do not apply in “private placements.” While companies selling securities generally have to comply with a complex set of rules regarding the sales process (the “gun-jumping” rules) and have to disclose voluminous information to individual investors, these rules are waived if, among other things, the only purchases of the securities are “accredited investors” or “qualified institutional buyers.”[61] For instance, under Regulation D, companies can raise an unlimited amount of money from “accredited investors”—such as those with annual income in excess of $200,000—without complying with any of the disclosure obligations under securities laws.

This is emblematic of the view that securities laws’ investor-protection goals are deemed to be sufficiently satisfied by the parties’ self-interest and the available contractual mechanisms and private remedies. Mandatory disclosure is thought necessary to ensure accurate stock prices and investor-protection goals for average investors, but not for relatively sophisticated ones. If they can bargain for their own deal, the securities laws allow them to do so.

The same is true in the secondary market. There are private markets in which publicly traded stocks are bought and sold. So-called “dark pools” are stock exchanges owned by broker-dealers where certain sophisticated buyers and sellers can come together to do business without the regulatory requirements imposed by transactions in the same securities on public exchanges, like the NYSE. The logic in this example, as in the case of private placements, is that law and regulation is not essential to the delivery of investor protection or capital-market efficiency goals based on conduct in these markets.

5. Liquidity

A final difference for the purposes of this argument (but far from an exhaustive list) is that there are special problems in securities presented by issues of liquidity. As noted above, stocks are bought and sold in markets intermediated by market makers of various kinds. The riskiness of an investment in a particular stock, and thus what one would be willing to pay for that stock, is influenced in large measure by the ability of investors to move in and out of the stock—that is, the liquidity of the market. The secondary market for stocks has a profound impact on the primary market for stocks.

This interplay is completely absent in the advertising world. There is no secondary market for ads. As such, the problems addressed by much of the regulation of stock markets and brokers is entirely absent. These regulations are about ensuring a vibrant secondary market, with an eye to ensuring sufficient liquidity to reduce the risk of investment.

The liquidity of secondary markets in securities impacts the cost and value of retirement savings, the costs of capital for firms, and the allocation of scarce resources in the economy. It is for these reasons that there is abundant regulation of the potential conflicts of interest between investors and brokers, as well as regulation of exchanges. There are conflicts of interest throughout the economy, but these do not generate anything close to the regulatory scrutiny of securities markets, because these concerns are absent.

C. Other Analogies

There are some surficial similarities between advertising markets and stock markets. Both markets feature “brokers” and “exchanges” and “auctions.” As in all electronic transactions, speed matters in both stock markets and advertising markets. And there are potential conflicts of interest, as well.

But as mentioned in the introduction, there are also countless other markets in which all of these things are present. All of them raise issues similar to or greater than those presented by online-advertising markets. But none are mentioned as potential analogs. Perhaps this is because none of them are regulated anything like securities markets.

Consider art auctions. The art market sees about $50 billion of sales annually, of which about 25% is done through online transactions.[62] As in online advertising, there are a few major players that dominate. Three large auction houses, a few major museums, and a couple of galleries set the market’s terms and do most of the deals for artists of all kinds and countless art brokers and advisors. According to experts, the market is plagued by a lack of transparency (one rated it a 3 out of 10), and it is, according to a former auction-house executive, completely unregulated.[63]

As in securities markets and online advertising, there are buyers, sellers, brokers, and auction houses or exchanges. The firms that run the online and in-person marketplaces offer not just a place where buyers and sellers come together, but a variety of tools for buyers and sellers. as well. Christie’s, Sotheby’s, and the other auction houses sell services to sellers to help them figure out the value of their works. They also provide tools for buyers. For instance, in 2016, Sotheby’s bought the buy-side art consultancy Art Agency Partners, expanding the range of services that it provides to its buy-side clients.[64] According to the New York Times, Sotheby’s now helps “clients with everything from art consultation and investment to estate planning and museum development.”[65]

In addition to owning the exchange where buyers and sellers come together, and providing tools on the buy side and sell side to market participants, the major auction houses also actively participate in the auctions they run. Just as stockbrokers and banks do, as set out above. To attract sellers of art, auction companies will guarantee a minimum, effectively becoming a buyer standing on the other side of the transaction. This may work to the benefit of the seller, but it also presents an obvious conflict of interest. In theory, an auction house that wanted to buy the piece at the minimum could rig the auction—say, by failing to sufficiently publicize it or talk up the work to established buyers. The guarantee only kicks in if the piece fails to sell above that amount but, of course, the auction house has some influence on this. To guard against this potential conflict of interest, buyers can refuse a minimum (which raises its own problems) or take their business down the street to a competitor.

Not only do auction houses provide conflict-raising guarantees, but increasingly, they sell these guarantees to third parties, in whole or in part.[66] The guarantee is a risk for auction houses, and so they logically look to offload this risk, as well as to exploit a profit-making opportunity. Some auction houses pay a financing fee to a third-party guarantor regardless of whether the price exceeds the guarantee, while others, such as Sotheby’s, pay only if the guarantor does not end up buying the piece. In Sotheby’s case, it might work as follows. Imagine the guaranteed price is $1 million, which Sotheby’s sells to an investor. The final hammer price is $2 million. The auction house charges the buyer a 30% premium, meaning the buyer pays Sotheby’s $2.6 million. The investor’s guarantee entitles it to a 50-50 split on 30% of the upside (the difference between the guarantee and the hammer price), as well as 50% of the buyer’s premium. In this case, the investor’s fee is $600,000.

The economic incentives for the auction house here are complicated, but it is fair to say that they may not align perfectly with that of the sellers (for whom they are agents). According to an attorney in the field, the practice of third-party guarantees “conflicts with . . . traditional fiduciary obligations because the auction house is essentially negotiating deals with two different parties—the consignor and the third-party guarantor—all of whom have financial interests in the outcome of a sale.”[67] Another lawyer notes that the third-party guarantors are not typically strangers to the auction house, but rather come from the auction house’s top list of buyers. This makes the problem worse since the practice ends up “pitching two clients’ interests against one another.”[68]

Moreover, these deals are often not entirely transparent, if at all. Under local law in New York, the existence of guarantees must be disclosed, but the amount or other details of the guarantee need not be.[69] This may give guarantors an advantage, since they know the minimum price and can use  information about the minimum to manipulate the bidding to increase the profit they earn on the spread.[70]

The economics are good for the auction houses too. If the hammer price, as in this example, is $2 million, the typical auction house charges a premium of 25-30% to both the buyer and the seller, meaning (in the 25% case) that the seller gets $1.5 million, and the buyer pays $2.5 million.

There are other potential conflicts of interest in this market. Auction houses sometimes pay introductory commissions on both sides of the market. Sell-side introductory commissions are finders fees paid to third parties that introduce a collector interested in selling art to the auction house. The third party may share information with the auction house about the motives, price elasticity, negotiating prowess, wealth, and other details about the seller in return for a fee that is often a percentage of the final price. Buy-side commissions are also common. An art advisor may have an agreement with a client permitting a fee (say, 10%) to be added to the sale price of any art the client buys on their recommendation. In addition, the auction house or gallery may pay a fee (say, 10%) to the advisor for the introduction. These arrangements, which are not always disclosed, present potential conflicts of interest.[71]

One final example is illustrative. Auction houses occasionally engage in “mock bidding,” which sends false signals to the market. This mock biding, sometimes called “chandelier bidding,” is a fake bid that starts or gooses the auction along.[72]  The practice generates mixed feelings. In an interview with ARTnews magazine, a former Christie’s director noted that “The auctioneer has to start the bidding somewhere. People don’t start bidding right away, and you need to build up momentum.”[73] On the Art Law Podcast, another commentator defended the practice of “warm[ing] up the room.”[74]

On the other hand, critics point to the fact that the practice looks like market manipulation. A legislator in New York tried to outlaw the practice, noting that “Consumers can get hurt when everything isn’t out in the open, when they’re competing against imaginary bidders at an auction.”[75] As a blog post from the Center for Art Law noted, “Chandelier bids, which are essentially fake bids used to create the appearance of interest to warm up the auction room, would be illegal if transacted in the U.S. securities markets.”[76] These conflicts of interest, high margins, and lack of transparency have led University of Chicago economist Canice Prendergast to call the art market “one of the strangest markets that I think I have ever seen.”[77]

Whatever its strengths and weaknesses, the art-auction market—worth tens of billions of dollars a year—is beset by various conflicts of interests that result from the fact that art-auction houses provide services that are fully integrated along the spectrum from buyer to seller. Market participants seem comfortable with this arrangement, notwithstanding the dominant market position of two leading players, Christie’s and Sotheby’s. This is not to say that improvements could not be made in transparency or other practices. Rather, it speaks to the fact that there are large and sophisticated markets that work effectively to reward buyers and sellers, and yet have features of vertical integration and conflicts of interest that are at least as bad, or worse, than those present in the online-ad market.

The fact that this is vertical integration across the art-auction “stack”—that exchanges function as brokers, dealers, buyers, and sellers simultaneously—also suggests there are inherent efficiencies in this structure that should not be cast aside willy-nilly. There may be good reasons for participants in the art-sales market to want to buy a full-service product from an auction house, relying on competition among exchanges to provide a check on any conflicts of interest or unfair terms or conditions. In other words, general antitrust principles may be sufficient to regulate any shortcomings in this market. So long as there are alternatives, the details of the structure may be a second-order concern.

As noted in the introduction, the art-auction market is not unique in this regard. Vertical integration is extremely common in modern markets, with owners of platforms acting in various roles, providing services or tools to buyers and sellers in those markets, and sometimes acting as a market participant. This is true in various retail environments, in wholesale markets, and for almost all online platforms, from Amazon to eBay. In all these cases, we rely on general fraud law, some transparency requirements, and competitive alternatives as the protection mechanism for buyers and sellers. The primary reason why these markets do not require a massive federal regulatory apparatus is because they do not involve the purchase or sale of stocks, but rather normal consumer or business goods. Purpose dictates regulation, above an antitrust baseline.

Thus, the AMERICA Act’s invocation of financial regulation is misplaced because the object of the regulation (online advertising) shares nothing relevant in common with the object of financial regulation (stocks). This should be sufficient to raise significant concerns about the legislation, but there are additional problems with it. The next section offers a deep dive into the two parts of the bill, revealing that neither the physical-separation requirement nor the best-interests rule actually tracks with the way stock markets are regulated. Any claim that the AMERICA Act’s proposed reforms follows from stock-market regulation is unwarranted.

IV. The False Foundations of the AMERICA Act

The two parts of the AMERICA Act—physical separation and the “best interests” rule—are based on an incomplete understanding of how securities markets work and are regulated. While there is some truth to the claim that there is separation between companies that help others buy and sell securities, and some exchanges on which such trades happen, it is simply not true that there is a ban on such joint ownership in financial regulation. Banks and other brokers do own exchanges and provide services to both buyers and sellers of stocks. About half of the securities traded each day do so on exchanges owned by banks that provide brokerage and other services to buyers and sellers. The situation in advertising markets today (without the AMERICA Act) are, in that way, quite similar to stock markets. Arguing for the physical-separation portion of the legislation by analogy to current securities regulation is awkward, to say the least.

One reason why there is no legal requirement of physical separation in securities markets (as the bill would require for ad markets) could be the requirement that stock trades must execute at the best available price. If stockbrokers are required to give their customers the best price, then ownership of exchanges is much less relevant. And there is, in fact, a rule requiring that, in directing stock trades to different trading venues, brokers must act in the “best interests” of the client. In stock markets, this rule is premised on the fact that brokers are permitted to direct trades to different exchanges, including ones that they may own, or to fill trades from their own inventory, a process called “internalization.”

If the AMERICA Act bans ad brokers from owning exchanges, a best-interests rule seems far less compelling. Moreover, the best-interests rule does not do the work in financial regulation that the legislation’s backers think it will do in the ad market. Most trades do not, in fact, take place at the best available price. And the regulatory infrastructure to enforce the rule, such as it is, is massive. The AMERICA Act elides this issue, with the implication that the bill’s drafters assume that enforcing a best-interests rule would be straightforward and not costly. Experience in financial markets tells a much different story.

Finally, a best-interests rule in stocks is actually far simpler than one in advertising markets would be, given the relative complexity of the two markets. Whatever would be required to enforce such a rule in ad markets would be significantly more than the large infrastructure in place for stock markets.

A. The Myth of Physical Separation in Stock Markets

A central premise of the AMERICA Act is that there is something anti-social about Google simultaneously owning an ad exchange and providing services for buyers and sellers of online ads, or buying or selling ads. The assumption is that vertical integration across the ad stack creates conflicts of interest that systematically disadvantages certain participants in ways such that individual choices in the market cannot reduce to acceptable levels. This is why the bill requires Google to get out of the adtech business.

The argument for this part of the bill can be found in Dina Srinivasan’s article, where she notes that a structural separation of brokers and exchanges is a mechanism to protect competition in securities markets.[78] To put a fine point on it, Srinivasan declares: “a company that runs an exchange like the NYSE cannot also operate a division involved in trading.”[79] In support of this assertion, she cites to “[c]onversations with securities professionals . . . .”[80]. This idea found its way into the rhetoric around the Texas antitrust suit (which she helped to draft).[81]

News reports about the introduction of the original CTDA also referenced the analogy to financial regulation. The Wall Street Journal noted that, “[a]t its core, the bill . . . borrows concepts from financial regulation and applies them to the market for electronically-traded, or ‘programmatic,’ online advertising.”[82] The Register, a technology-news website, explained that “[s]imilar to rules governing financial trading, the bill forbids entities with more than $20bn in annual digital advertising revenue from participating in the online ad ecosystem in a way that creates conflicting interests, such as simultaneously buying ads, selling ads, and operating the ad exchange that handles those transactions.”[83] One of the bill’s co-authors, Sen. Richard Blumenthal (D-Conn.), echoed the idea, allegedly based on the stock market, that the same party can’t represent the seller, the buyer, make the rules, and conduct the auction.”[84]

There is a nugget of truth in the claim that vertical integration is forbidden in financial markets (that is, that brokers cannot own exchanges), which is what makes it plausible, and thus likely to lead lawmakers astray. If one looks just at the surface of the market for stocks, the claim that “a company that runs an exchange like the NYSE cannot also operate a division involved in trading” is literally true. The SEC uses its regulatory authority to prevent certain exchanges, such as the NYSE and Nasdaq Composite, from owning or being owned completely by broker-dealers. Neither the NYSE, Nasdaq, nor any of the other 22 exchanges[85] operate a trading division.

A more fulsome look at the way securities markets operate, however, reveals that this foundational claim for the AMERICA Act is misleading in two ways. First, stockbrokers do own and operate stock exchanges. Second, the NYSE is owned by public shareholders, including banks that function as brokers, and provides services to buyers and sellers of stocks.

1. Broker-Owned Exchanges, or Dark Pools

Stocks do not trade just on the NYSE or Nasdaq, but on numerous “exchanges” of various kinds. The article cited in support of the original CTDA itself noted that stocks “trade on dozens of electronic trading venues at the same time . . .,” not just on the NYSE—the exchange held up as the paramount of independence imagined by the Lee bill’s supporters. None of these other venues share the characteristics claimed by those who supported the CTDA and now support the AMERICA Act.

The claim that there is legally enforced physical separation in financial markets is, however, deeply misleading. As discussed below, about half of the trades in publicly traded U.S. stocks take place on exchanges owned by brokers.[86] The CTDA was originally premised on the idea that it would be absurd if “Goldman . . . owned the NYSE.” In fact, Goldman Sachs owns SigmaX2, an off-exchange trading platform that, by itself, accounts for about 6% of stock-market trades.[87]

There are three primary places in which stocks are traded on exchanges.[88]

First, there are 24 official exchanges licensed by the SEC under section 6(a) of the Securities and Exchange Act as national securities exchanges.[89] These include the NYSE and Nasdaq, as well as the Cboe BYX and BZX exchanges (formerly the BATS Exchange); the Miami International Securities Exchange (MIAX); and the Members Exchange (MEMX).[90] These national securities exchanges are independent of banks or brokers, as Srinivasan notes. But as discussed below, even these are not quite the model of independence that advocates of the AMERICA Act appear to believe. The registered national securities exchanges account for a little more than half of all stock trades.[91]

Second, there are broker-owned exchanges, known officially as “alternative trading systems” (ATS), and known colloquially as “dark pools.” The SEC adopted Regulation ATS in 1998 to “encourage market innovation, while ensuring basic investor protections.”[92] The rule permits operators of securities markets to either register as a national securities exchange (like the NYSE) or to operate as an ATS. The regulation defines an ATS as “any organization . . . [t]hat . . . provides a market place . . . for bringing together purchasers and sellers of securities . . . [t]hat does not . . . [s]et rules governing the conduct of subscribers . . . other than by exclusion from trading.”[93]

In other words, ATS cannot engage in the kinds of quasi-governmental regulation of participants that the self-regulatory exchanges like the NYSE do, but rather are limited merely to prohibiting bad actors from trading on their exchange in the future. Notably, implicit in this regulatory structure is the power that an ATS has to exclude certain traders. This ability to admit only certain traders, as well as the fact that trades on an ATS do not have to be publicly disclosed, is what has earned them the moniker “dark pools.”

According to data from FINRA, there are 33 dark pools.[94] They are shown in Figure III. As demonstrates, many of these prominent securities exchanges are owned by large investment banks and broker/dealers, such as UBS, Barclays, J.P. Morgan (JPM), Morgan Stanley (MS), and Goldman Sachs (Sigma).


There are also various independent exchanges. The four biggest, accounting for about half the market, are owned by UBS (17% of volume), Goldman (13%), Credit Suisse (10%), and JP Morgan (8%). (At the time of writing, Swiss regulators are considering whether to approve UBS’ proposed acquisition of Credit Suisse.)[95]

All of the ATS exchanges are owned by registered broker-dealers. This is legally required. This bears repeating in light of the claim that the AMERICA Act must ban brokers from owning exchanges for buying and selling ads because brokers cannot own exchanges for buying and selling stocks—the law requires some stock exchanges to be owned and operated by stockbrokers.

Third, there are over-the-counter (OTC) markets where buyers and sellers come together to trade. According to FINRA, there are more than 200 of these stock exchanges. An OTC venue is a network of market makers and brokers, trading as a principal for their own account. These exchanges are places where wholesalers and consolidators direct the buy and sell orders of retail investors. Like ATS exchanges, these stock markets are owned and operated by banks acting as broker-dealers.

The two types of off-exchange trading venues (ATS markets plus OTC markets) account for a bit less than half of the total equity-trading volume. This is shown in Figure IV.[96] These off-exchange venues, owned by brokers, are growing faster than the independent stock exchanges. According to the securities industry trade association, SIFMA, “[f]rom 2016 to 2020, total consolidated equity volumes increased 50.0%, while off-exchange volumes increased 69.4%, a 19.4 pps differential.”[97]


There are myriad reasons for this growth, but fundamentally, broker-owned exchanges (ATS and OTC) are attractive because they may provide customers with better services across a range of demands. Buyers and sellers are not just interested in the price they are willing to pay. Price may be paramount, but the costs of trading, the speed at which trades execute, whether the trade will be anonymous, whether the trade will execute, and the reliability and integrity of the broker and exchange will all matter, as well. It is not as simple as “get the best price” for the client, an issue discussed further below. Order size matters, as the best price may be available only for a fraction of the amount demanded by a client. There is also the possibility of slippage in price or volume available depending on the presence or absence of retail or institutional investors. Finally, there are the search and transaction costs of finding the “best” venue to trade. A better price (or some other better) may be found at a different venue than the one chosen, but the costs (in broker time) may be greater than the gains from price reduction.

There is one final “exchange,” or market in which brokers may execute client trades, and it puts a fine point on the argument above that the idea of “physical separation” in the trading of stocks is deeply misleading. A broker can direct a client’s buy or sell orders not only to the independent exchanges (NYSE, etc.) and to the off-exchange markets (ATS and OTC), but also fill the order from their own inventory. The process is called “internalization.” The SEC describes it this way:

Instead of routing your order to a market or market-makers for execution, your broker may fill the order from the firm’s own inventory. . . .In this way, your broker’s firm may make money on the ‘spread’—which is the difference between the purchase price and the sale price.[98]

This system of independent and broker-owned markets competing with each other did not arise by accident, but was a deliberate policy choice by Congress and the SEC. Historically, buyers and sellers came together in a single, centralized exchange, such as the NYSE. In fact, the SEC approved an NYSE rule that prohibited members of the exchange from trading NYSE-listed stocks on venues other than the NYSE.[99] This approach was plagued by inefficiencies and high commission fees, owing to the fact that the exchange had monopoly power.[100] Bid-ask spreads (a measure of liquidity and costs for traders) and commissions were much larger than they are today.[101]

Competition could check these inefficiencies, but prior to the 1970s, technology was not available to link competing exchanges in a way that ensured liquidity and investor protection. By 1975, however, advancements in communications technology portended a time in which a network of connected markets could increase innovation and offer a range of services to buyers and sellers of securities. In the Securities Act Amendments of 1975, Congress required the SEC to create a “national market system” along these lines. Those amendments are now found in Section 11A of the Exchange Act.[102]

The development of the national market system has taken decades. Congress delegated to the SEC power to develop the system, and the SEC has promulgated a series of rules to nudge the hundreds of stakeholders and market participants in this direction. The SEC promulgated the most recent rule, Reg NMS, in 2005.[103] Reg NMS has several notable rules regarding the trading of securities on the various markets noted above. These include rules about reporting trades,[104] dissemination of prices,[105] routing transparency,[106] fee limits,[107] and best-price rules.[108] The best-price rules are discussed in the next section, but in general, it holds that all trades be reported to a consolidated trade tape and must take place at the best price reasonably available.

2. The Exchange Model

Even in the half of the market that trades on exchanges, the model of pure separation imagined by Dina Srinivasan and the AMERICA Act does not exist. The NYSE is owned and operated by International Exchange Inc. (ICE), a publicly traded corporation. This means that it is, in fact, owned by countless individual and institutional investors, including banks and broker-dealers. No individual broker-dealer “owns” the NYSE, it is true, but many have a stake in it, while also selling shares for their clients. Moreover, the demutualization of the NYSE, and its conversion to a profit-making enterprise, has meant that the NYSE has entered the business of offering services to buyers and sellers of stocks. The NYSE sells products and services to its customers through a large sales team, representing a large portion of its income.

Consider two types of products offered by ICE. First, ICE offers various types of trades for buyers and sellers on the NYSE. These products, whether widely used or bespoke, are designed to drive volume to the NYSE in light of the leakage to off-exchange venues (ATS and OTC) discussed above. Exchanges have designed products, such as “hide not slide” or “iceberg orders,” that permit buyers or sellers to transact in ways that skirt the rules or achieve an advantage over off-exchange venues.

For instance, in a “hide not slide” order,[109] an exchange permits a trader to buy at a price forbidden by the rules. The problem arises because transactions are supposed to happen at the NBBO prices, which are aggregated from orders on all markets into a single bid-ask spread. These prices are set on different exchanges and systems, however, and they have different latencies and processing speeds. Thus, it is possible that quotes will arrive at times when prices have moved, and the best available bid or ask shown will be “out of date.” This can lead to the bid-ask spread being zero—the bid is the same as the ask. One would think that the trade would just execute at that price, but it exists because of out-of-date information. The SEC calls this a “locked” market, and prohibits it.

To resolve this problem, a trader who wants to put in an order that would “lock” the market has two choices. The trader can put in a “limit order” that will clear when prices move to the point specified by the order, allowing it to clear. But, in this case, the trade will be prioritized in time at the point when prices move. If a trader instead wants to have its trade time stamped at the time the order is entered, it cannot do so if it would lock the market. The order would “slide” up or down by a penny to the next lowest/highest price in order to unlock the market. Here, the exchange offers a service that permits the trader to enter the order with the specified time stamp, but “hide” it from public view and the consolidated bid-ask record. When the prices move in a way that unlocks and allows the trade to clear, the trade is revealed, with the earlier time stamp. It clears at that price. The order permits the trader to hide, not slide.

This exchange-provided service or tool for trader is fairly generic and has been deployed by multiple exchanges. There are dozens of other tools that exchanges provide to buyers and sellers to get them to route their business to that exchange.[110]

Exchanges also offer more sophisticated buy-side and sell-side tools. For instance, the NYSE now offers potential traders a suite of algorithmic-trading tools. High-end hedge funds and institutional investors have developed high-speed trading algorithms that enable them to improve their returns by being faster to market. Increasingly, these investors have taken their business to off-exchange venues and, when they stay on exchange, they are able to outperform other investors. To compete with investors who have developed their own algorithms, the NYSE offers algorithmic-trading tools, advertising that “Floor Brokers can choose from NYSE-provided algos or contract directly with algos available from third-party providers.”[111] If traders choose exchange-provided “algos,” they enter into an “algorithmic routing access agreement” with the NYSE. The agreement sets out the nature of the tools provided by the exchange to its traders:

WHEREAS, [the trader] desires to make certain of its proprietary and/or licensed computerized or electronic algorithms and related services (collectively, the “Algo Product”) available to certain Member Organizations over Exchange trading systems . . . and

WHEREAS, the NYSEM desires to allow [the trader] to interface with the NYSE System and provide Authorized Floor Brokers with access to the Algo Product using the NYSE System on the terms and conditions set forth herein.[112]

This market structure makes perfect sense. Multiple exchanges bring competition (although the top three—NYSE, Nasdaq, and Cboe—account for about 50% of all trades). Exchanges and other markets (some owned by brokers) compete with each other for volume by offering services and tools to customers. Those investors who can build their own tools may do so, while those for whom it is more efficient to buy off-the-rack tools may do so, from exchanges, brokers, or other providers.

The above examples show that, in today’s stock markets, exchanges provide buying and selling tools for their customers. This is exactly the type of conduct that would be prohibited in ad markets under the AMERICA Act. Any contention that the legislation is supported by what has “worked” in regulating securities markets is, therefore, deeply misleading. The “physical separation” envisioned by the bill does not exist in financial markets.

B. The Problems with Best Prices

The second reform proposed by the CTDA, and now the AMERICA Act, is that those offering services to buyers and sellers of advertisements act in the “best interests” of their customers. For the larger digital-advertising companies, this would require several things. First, they must “make the best execution for bids on ads”; second, they must provide “transparency to their customers”; third, they must “erect firewalls to prevent . . . conflicts of interest”; and finally, they must “provide fair access to all customers with respect to performance and information related to transactions, exchange processes, and functionality.”[113]

As noted in the original Lee bill explainer, these rules “mirror those imposed on electronic trading in the financial sector.”[114] Specifically, the original CTDA was based on Reg NMS, promulgated by the SEC in 2005. Reg NMS is designed to ensure that traders are treated fairly in a world of competitive exchanges. Remember, in a world of a single exchange, there is no concern about orders being routed to locations with inferior prices, but there are monopoly concerns about prices being set too high or trading options being limited. Congress intended to move toward a competitive exchange model with the 1975 amendments to the securities laws, and delegated to the SEC the authority to implement regulations to ensure that the various trading venues (some owned by brokers and banks) compete on fair terms. In 2005, the SEC promulgated Reg NMS, which requires exchanges and other venues to report trades in a timely manner,[115] to disclose prices,[116] and to be transparent about the routing of orders,[117] as well as imposing fee limits,[118] and setting best-price rules.[119]

Several of the proposed reforms in the AMERICA Act seem relatively unobjectionable, although it is not clear whether the benefits exceed the costs. It is straightforward to support “transparency” and “fair access,” but these things are not free and, so long as there exists competitive alternatives in the market and market participants are relatively sophisticated, it is possible that additional regulation may impose unnecessary costs. These issues are beyond the scope of this paper.

It is important to note, however, that the reasons Reg NMS imposed similar rules on securities markets had to do, in large part, with the fact that securities have social importance that far exceeds advertisements. Reg NMS rules are designed to ensure that the prices of stocks are as accurate as possible because, as noted above, this matters greatly to individuals (saving and investing) and for the economy writ large, in terms of capital allocation and efficiency. Stock markets are the engine and nerve center of the market economy. If individuals are cheated by their brokers, they may invest their money in less-efficient ways (e.g., buying gold), leading to higher costs of capital for firms that create jobs and generate wealth. Moreover, if prices are inaccurate, because a lack of transparency or competitive alternatives cause trades to happen at inferior prices, this may lead to capital being misallocated or, at a minimum, to socially inefficient arbitrage opportunities for certain investors.

But there is one element of the AMERICA Act’s proposed “best interests” regulation that warrants closer scrutiny here. The bill draws from financial regulation to impose a requirement that digital-advertising companies must make the best execution for bids on ads. This translates into an obligation that advertising sold through auctions happen at the “best price” available in the market. As Sen. Lee’s explainer describes, such an obligation would be “enforced by the Department of Justice and state attorneys general,” and “includes a private right of action for violations of the best interest, transparency, and other requirements imposed at the $5 billion threshold when committed by companies over the $20 billion threshold.” In other words, Google (the only company with more than $20 billion) will be subject to oversight by the federal government, state governments, and plaintiffs’ lawyers regarding whether the prices it charges are the best available prices.

As with the other elements of the AMERICA Act, the “best price” rule is premised on rules from the stock market. As noted above, Reg NMS Rule 611—the “order protection rule”—requires a “trading center” to “establish, maintain, and enforce written policies and procedures that are reasonably designed to prevent trade-throughs on that trading center of protected quotations in NMS stocks . . . .”[120] This means that any securities market—an exchange, ATS, or OTC market—is required to ensure that trades do not happen at inferior prices—that is, “at a price that is lower than a protected bid or higher than a protected offer.”[121] In essence, brokers have to direct customer trades to markets in which they will receive a price equal to the best price available in the market. The SEC requires that all trading venues report price quotes and trades to a consolidated tape as soon as practicable (but not later than 10 seconds), and that trades take place at the best price reasonably available, typically at or within the bounds of the current national best bid and best offer (NBBO) in accordance with Reg NMS Order Protection Rule.

There are problems with this approach. First, as noted above, traders care about more than just price. If the rule required brokers to always send an order to the market with the best price, some customers would be worse off. Traders may also care about the quickest execution of a trade, reliability in execution, or other aspects of account management, anonymity, or particular tools or services offered by one market and not another. It is all about the margins. A slight improvement in price might be worth less to a trader than a trade that is anonymous, certain, and immediate.

Second, trying to ensure that trades happen at the best price is not free. All the parties in a transaction chain—brokers, clearing banks, trading firms, and trading venues, as well as the government—must invest in systems and people to ensure compliance with the rules and regulations. On the private side, the compliance industry (internal and external to firms) has grown enormously in the past few years, much of it having to do with enforcing rules like Reg NMS. In a shareholder letter a few years ago, J.P. Morgan CEO Jamie Diamond bragged that his bank was hiring thousands of compliance professionals.[122] There is little evidence that the social benefits of this work exceeds the costs, which are born by investors and society at large.

In addition to the growth of compliance departments within firms, the SEC and FINRA have thousands of employees, many of whom engage in oversight, audits, and enforcement against brokers who allegedly violate Reg NMS and related rules. As argued above, while this is of debatable value, the value it does have is related to the fact that the object of the trading sits at the nerve center of the capitalist economy. We do not, for example, have a regime to ensure the best price across multiple car dealers or grocery stores.

Notwithstanding all of the money spent on compliance and regulation to ensure that trades happen at the “best price,” recent empirical evidence suggests that only about half of trades in public securities take place at the best (or NBBO) price. In an empirical look at the prices of millions of stock trades, a recent paper finds that “57% of the orders in [their] sample refuse Reg NMS routing to the NBBO.”[123] They find that the most sophisticated investors using the most sophisticated orders routinely route their orders to places offering something less than what regulators believe is the “best” price for them.

There are two possible theories as to why this happens. Under the agency-cost theory, brokers are routing trades of unwitting customers to trading venues with inferior prices because it serves the brokers’ interests (e.g., through rebates that the brokers can capture) rather than clients’ interests. This may, indeed, be the case in some instances, but the authors conclude that it is not generally retail investors whose orders are routed at inferior prices, but large institutional investors. This is consistent with the second theory, which is that the “best” price set by regulators is not, in fact, the best price for traders.

Whether the first or second theory is the predominant explanation, the implications for the digital-advertising market is that, contrary to the claims of proponents of the AMERICA Act, securities trades are frequently executed at other than the “best” price. There are a variety of ways this can happen.

First, the SEC permits trades to happen at inferior prices, even though other SEC rules seem to forbid it. SEC regulations permit trades to be routed to locations with inferior prices, so long as the “top of the book” (the specific number of shares available at the best price) is cleared. Rule 611 protects only the volume available at the top of the book. If the two “best” quotes available for a particular stock at a particular time are both available in one market, and thus superior to any prices in another market, a broker may nevertheless fill an order on the market with inferior prices, so long as the inventory available at the best price on the first market is utilized to fill part of the order.

For instance, imagine a DNS order for 10,000 shares is routed to the BATS exchange, but the NYSE has a better price available for 1,000 shares (the top of the book) and a slightly better price than BATS available for the remaining 9,000 shares. Under Rule 611, BATS has to avoid “trading through” the better price available on the NYSE for the top of the book. It can accomplish this, however, by sending the order for the first 1,000 shares to the NYSE—taking this liquidity from the NYSE—and then filling the rest on BATS. This type of limit order, known as an inter-market sweep, enables traders to achieve the balance of various interests (in speed, pricing, anonymity, and reliability) that maximizes for them. Importantly, the 9,000 shares trade at prices that are clearly not the “best” available price.

Another reason that trades can happen at “inferior” prices is because of payments and rebates made to traders by exchanges to attract trades to their venue. These are called “payment for order flow” or “maker-taker liquidity payments.” Exchanges or other trading venues earn money by charging fees for each trade. It is therefore important that they attract brokers to send trades to their markets. To do this, they offer not just trader tools and services, but also give rebates to brokers for directing trades to them. For instance, a trading venue might offer a rebate of, say, $0.10 per-share for orders that provide liquidity to the venue (offer shares for sale), and charge a fee of, say, $0.20 per-share for orders that route trades outside the exchange. Net of these fees, a price that appears better in one venue may turn out to be worse for a particular trader. To route orders to a particular exchange, brokers attach “do-not-ship” instructions (DNS), which instruct the venue to which an order is routed not to send it to another exchange.

Here is how a recent paper describes this phenomenon:

We find that exchange fees serve as one driver of exchange-routing refusal. We find that exchanges often have to route displayed limit orders to worse prices after adjusting for fees to comply with Rule 610 of Reg NMS, which prohibits a displayed order in one exchange to lock or cross an existing quote in another exchange. Suppose that the best NYSE ask price is $10.00 while the best NYSE bid price is $9.98. A trader who submits a sell limit order at $9.99 would improve the NYSE best ask price by one tick. If NASDAQ has a bid price of $9.99, even if the bid is established a small fraction of a second earlier, the NYSE limit sell order at $9.99 locks the NASDAQ bid at $9.99, and Rule 610 would require the NYSE to route the limit sell order at $9.99 to take liquidity from NASDAQ. Routing unlocks the market, but it leads to a worse price for the NYSE limit sell order because the NYSE offers a rebate of 0.13 cents per share for orders that make liquidity and charges a fee of 0.30 cents per share for routing orders outside the exchange. Therefore, we find that more than 50% of non-marketable orders are attached with “do-not-ship (DNS)” instructions, which ask the NYSE to cancel an order if it locks or crosses quotes in another exchange. We find that DNS limit orders earn a small and quick profit of 1.34 bps after collecting the rebate but would lose 0.38 bps if they paid the routing fee.[124]

To be clear, brokers have an obligation to ensure that they pursue the “best interests” of their customers. Some have criticized “payment for order flow” and various “maker-taker” liquidity payments as serving the interests of brokers and trading venues, rather than investors.[125] Without weighing into that debate, one thing is clear and germane to this article: in the relatively straightforward world of stocks—where value is inherent, a single definable thing is being exchanged, and price is the same for everyone at a given moment—the complexity of multiple venues and individuals pursuing their own self-interest nonetheless makes enforcing a “best interests” standard extraordinarily complex.

Now imagine this obligation being required for online advertising. While a stock has one price for every potential investor at any time, and it has some intrinsic value, online advertisements have many more degrees of interest. In online display-ad auctions, there is a price for a particular viewer for a particular location at a particular time. The multiple factors and the lack of an objective valuation makes determining the “best” price, or even a reasonable price, far more complex.

As discussed above, the best-interests rule is difficult to enforce in stock markets, and accordingly only about half of all trades happen at the established NBBO (or best available) price. Establishing something akin to the NBBO price would be a monumental task in online display advertising. One wonders, if that were even possible, what the deviations would look like. After all, considerations include not only the three particulars discussed above, but how various ads might be inappropriate for some users or sites, the placement of competing ads next to each other, and so on.

It would be an understatement to suggest that the bill’s proposal to have the best-interests rule enforced by “the Department of Justice and the states attorneys general” represents a massive underestimate of the bureaucracy needed to establish and enforce such rules on market participants.

V. Some Particular Concerns

Dina Srinivasan’s law-review article that spawned the CTDA (and now, the AMERICA Act) identified a few specific concerns about the online display-auction market that should be mentioned briefly. There were three major “problems” identified with the market and, specifically, with Google’s behavior in that market.

First, there is the issue of speed and latency. The article alleged that Google somehow manipulates its auctions to exclude certain bidders from them within the time allotted, giving preference to certain other (favored) bidders or to its own properties. According to data at that time, about one in four bids submitted to Google’s exchange “timed out” because they were not received by the time the auction ended.[126]

Srinivasan leaps from this to an analogy to securities regulation: “Like the trading firms on Wall Street that benefit from speed advantages, Google-owned intermediaries . . . also have speed advantages.”[127] Google responded to these concerns by offering any sales intermediaries to co-locate in the cloud and by promising equal access, as the article notes.[128] Nevertheless, the article attributed part of Google’s market success to these speed advantages.

That argument is far from convincing. No data was presented to make this link, other than the topline claim about one in four bids being timed out. We cannot say whether these bids were ones that would have been successful or whether this timing matters sufficiently to buyers and sellers to dictate their choice of intermediary. The article seemingly recognized this by claiming, at the end of a series of accusations against Google, that more transparency was needed regarding speed and transactions.

As noted above, more transparency may be a good thing in this market, although it is not costless. But it is notable that, when the UK Competition and Markets Authority dug into transaction-level data for millions of Google’s online display-ad auctions, it did not find any unfairness or significant impact from these policies.[129] At their core, the article’s allegations come down to an assertion that Google runs unfair auctions. The most comprehensive transaction-level look at the data found no support for this claim.

Even if the claim was that Google was giving a speed advantage to owned intermediaries, this may not be a problem. By vertically integrating, Google is offering potential efficiencies to its customers. This is a feature of all vertically integrated markets. Whether it is problematic depends on whether there are ready alternatives. If an ad buyer or seller can choose an alternative provider on commercially similar terms, then the issue becomes second order, if it matters at all. Google is offering a bundle, and insofar as customers can choose other bundles, then they are protected from abuse. In this way, the speed issue, like others, becomes a simple antitrust question at the higher-level of generality.

Whether additional transparency would improve the market is arguable, at least, but the analogy to securities markets is deeply misplaced. At the most basic level, online display ads are sold in auctions, while stocks are not. This matters a great deal. Auctions have a set duration, and so long as the bid arrives in time, it will be considered. Speed (within the window) is irrelevant in online advertising. Stock markets, however, are sold instantaneously. If one has a millisecond advantage over a competitor in the stock market, this can be the difference between a profitable and an unprofitable trade. The stock in question is available at a given price at a given moment to the first person who arrives to claim it. When it is gone, the price may move in the next instant in a way that disadvantages the second person to arrive.

It is for this reason that Wall Street firms, as Srinivasan makes much of, spend large amounts of money to decrease their latency with exchanges, and why the colocation of intermediaries’ servers and exchanges’ servers are so tightly regulated. If they were not, then exchanges could dictate winners and losers in the market simply through location of their servers. This cannot happen in advertising markets. Not only is speed much less important, but there cannot be competition across exchanges in the same way as there is on stock markets, as there effectively is a single national market in which stocks are sold.

It is also far from obvious that the speed issue is a first-order concern. There is a time-out problem for all auctions, and every player in the market has time-out requirements and latency issues. Each exchange sets the time based on a tradeoff: the longer the duration, the slower the web page will load, while the longer the duration, the better the price likely will be because the auction will include more bidders. For example, context ads are timed out more often. This choice, which seems like a primary one for customers to make, differs across platforms, but the times and choices are basically in the same ballpark. At the end of the day, the fact that Google is painted as manipulating markets is, at base, nothing more than a claim that Google has a large market share.

Second, there is the issue of informational advantage. Srinivasan analogizes these features of the adtech market to insider trading and front-running in securities markets, claiming that Google has informational advantages that it uses to disadvantage competitors. Specifically, the article alleged that Google knows the identity of certain potential consumers of advertisements (based on search history), and it uses this information to provide more value to advertisers, while scrambling the unique identifiers when it comes to third-party access.

The arguments here are similar to those about speed. For one, the issue is not simply one of fairness, as there are concerns about storing and sharing personal data. Moreover, insofar as Google offers a bundled service, the question devolves into a simple antitrust issue at the macro level. If Google does not have viable competitors or earned its dominant position through anticompetitive behavior, rather than superior service, then an antitrust remedy may be warranted. Again, however, the only deep dive into transaction-level data found no evidence of any unfairness in Google’s behavior.

Moreover, the analogy to securities markets is deeply misplaced. Stocks have posted prices that apply to everyone. At a particular time, a stock might be available at $10. Certain people may know—for sure—that this price is wrong. An insider with private information that the company has discovered the cure for cancer can buy the stock at $10, and earn a for-sure profit when the news is revealed, and the stock price jumps to $100. Similarly, a broker who receives a large limit buy order at a price up to $15 can buy the stock at $10 and resell it to its customer at prices up to $15, earning a riskless profit. The former is called “insider trading” and the latter “front running.” Both are banned by regulation and are illegal. Of course, nothing like this could happen in online-advertising markets, as there is not a single price, not an intrinsic value, and no riskless profits akin to these schemes.

There is another big difference. If insider trading is not banned, this would open the door to deliberate market manipulation or other conduct that would have serious knock-on effects on the economy. If an insider can profit from nonpublic information, that insider would have incentives to delay the release of market-moving information, which would make stock prices wrong, and therefore disrupt capital allocation. In extreme cases, the insider could have incentives to destroy value or create excessive volatility, simply to be able to profit from insider trades.

Again, nothing like this is remotely going on in the online display-ad market. Insofar as Google uses information from users of some of its products, like Search or YouTube, to provide a better service for its advertising customers, this looks like the behavior of any retailer or the operator of any platform, rather than a problem akin to securities manipulation.

Think about a trip to the grocery store or to Walgreens. These retailers collect data about everything you do in their store, from what products you buy, to how long you spend in particular aisles, to where your eyes go when looking at shelves. They use this to their advantage, and they do not share it with competitors, including the companies that stock their shelves. After all, retailers offer both brand-name and generic options for many products, and when and how they do so is not random. It is based on data and customers’ observed buying patterns.

The same is true of Amazon, of art-auction houses, and of countless other providers of markets and services. If these companies have a monopoly, that may be a problem; if they do not, it may instead seem like a source of competition and value to customers. But in any event, none of the special concerns about securities regulation are remotely implicated.

VI. Conclusion

In nature, the saying goes, dogs wag tails, not the other way around. The case against Google’s behavior in the online display-ad market is premised on a claim about tails wagging dogs. Google’s revenues and profits are overwhelmingly derived from its Search business, not its online-ad business. The profitability of Search depends on people using online search tools to access content on the Internet, instead of, say, app-based walled-gardens, like Facebook, Amazon, or the New York Times’ apps. One of the key features that makes Search valuable is tailoring and quick-loading web pages. And since Google’s vertical integration across the ad stack means that it is simultaneously serving buyers, sellers, and consumers of advertising, it has strong incentives to optimize an efficient way.

After all, sellers of advertising might prefer slower-loading web pages that allowed more bidders and thus higher prices, while buyers of advertising might prefer the opposite. Of course, customers may have various preferences related to tailoring and speed. By owning every aspect of this, and being able to make tradeoffs with the goal of the “open Internet,” Google is offering a compromise product with a clear end goal. In this way, it is competing with alternative conceptions, such as the walled-garden approach. The rise of “header bidding” and other features discussed above is a clear example of this. If the AMERICA Act is enacted, it will hobble Google’s ability to make market-regarding tradeoffs, and thus bias the development of the Internet in a particular direction.

At root, the case against Google amounts to a claim that it runs unfair auctions. This is, however, belied by the only transaction-level look at Google’s online display-ad auctions. The UK Competition and Markets Authority did not find unfairness in these auctions; they find the opposite when they dig into Google’s event-level data.

With all of that being said, it is beyond the scope of this article to determine whether there is an antitrust problem with regard to Google’s market position or its behavior. Google has recently responded to the concerns of some critics with commitments to increased data sharing and unbiased integration, including with servers that participate in header bidding.[130] Whether these are sufficient or whether more transparency would be worthwhile from a social perspective is arguable.

What is inarguable, however, is that the analogies between online display-ad auctions and securities markets that have been made by academic and legislative proponents of the AMERICA Act are utterly unfounded and based on a deep misunderstanding of the purpose and reality of securities regulation. Most importantly, securities markets are not selling commodities, like online ad markets are. Securities markets are regulated as they are because they are selling stocks, and stocks are not ads. Stocks are the market’s primary mechanism of savings and investment, and they are the nerve center of the capitalist economy. Stocks have intrinsic value, and getting that value “right” is one of the most important social activities in which humans engage. The way that every business is run, what gets built, what people do for a living, and the goods and services we all enjoy all depend, at a fundamental level, on the accuracy of stock prices. These facts, coupled with the fact that informational advantages would enable riskless profits and encourage manipulation, make stock markets unique, and amendable to a vast regulatory apparatus. None of this is remotely true for online ad markets.

Not only is the purpose of securities regulation strikingly different than the purpose of ad-market regulation, the descriptions of securities regulation that have been offered in pieces supporting the CTDA and the AMERICA Act are misleading. Proponents allege that there is a physical separation between owners of stock exchanges and those selling services or providing tools to stock-market participants. This is false. Brokers do own and operate exchanges, and these broker-owned exchanges are where about half of trades execute. Moreover, they are growing faster than traditional exchanges. Indeed, even the traditional exchanges like the NYSE provide services to buyers and sellers of stocks.

Broker-owned exchanges do present potential problems of front-running and inferior price trades due to conflicts of interests. It is for this reason that securities markets impose various best-interests or best-price rules. (Note here, that the two parts of the AMERICA Act are already at odds with securities regulation, being a belt-and-suspenders approach that actually is more restrictive than securities regulation.) But even then, such rules have much less bite than proponents of the AMERICA Act believe. SEC rules permit trades to happen at less than the best price for a variety of reasons set out above, and the end result is that only about half of trades happen at the best price.

It is worth further noting that the best price is a known and published quantity for a particular stock at a particular time, and it has nothing to do with who the buyer, seller, or others are. This is not the case in online advertising, which is infinitely more complex. And yet, it still requires a massive regulatory apparatus for stock markets to police various best-price rules. Any analogous regulatory regime for online ad markets would have to be much, much bigger and much more intrusive.

[1] Keach Hagey, GOP-Led Legislation Would Force Breakup of Google’s Ad Business, Wall St. J. (May 19, 2022),

[2] On the Senate side, the bill was sponsored by Sens. Mike Lee (R-Utah), Ted Cruz (R-Texas), Amy Klobuchar (D-Minn.), and Richard Blumenthal (D-Conn.); on the House side, the bill was sponsored by Reps. Ken Buck (R-Colo.), Burgess Owens (R-Utah), Pramila Jayapal (D-Wash.), David Cicilline (D-R.I.), and Matt Gaetz (R-Fla); Competition and Transparency in Digital Advertising Act, S. 4258, 117th Cong. (2022).

[3] Advertising Middlemen Endangering Rigorous Internet Competition Accountability Act’’ or the ‘‘AMERICA Act,” S. 1073, 118th Cong. (1st Sess. 2023).

[4]  Press Release, The AMERICA Act: Lee Introduces Bill to Protect Digital Advertising Competition, Sen. Mike Lee (Mar. 30, 2023),

[5] Id.

[6] Id. (quoting Sen. Klobuchar).

[7] Fact Sheet, Competition and Transparency in Digital Advertising Act, Sen. Mike Lee (May 19, 2022), available at

[8] Texas, et al. v. Google LLC, No. 1:2021cv06841 (SDNY 2022) (third amended complaint), ?available at

[9] Id. at 12.

[10] Hagey, supra note 1.

[11] John McCrank, Goldman Sachs to Launch New “Dark Pool” for Stocks on Friday, Reuters Bus. News (May 11, 2017),; see also, Sigma X2 Monthly Metrics, Goldman Sachs (Mar. 2023), available at

[12] US Equity Market Structure Analysis: Analyzing the Meaning Behind the Level of Off-Exchange Trading, SIFMA Insights (Sep. 2021), available at (reporting 44% of trades in 2021 (through June 30) were “off-exchange”).

[13] See, e.g., How Stock Markets Work: Executing an Order, Sec. Exch. Comm’n, (last visited Apr. 9, 2023).

[14]  Merritt B. Fox, Lawrence R. Glosten, and Gabriel V. Rauterberg, The New Stock Market: Law, Economics, and Policy 261 (2019).

[15] For a discussion of Rule 611, see, Rule 611 of NMS, Sec. Exch. Comm’n (Apr. 30, 2015), available at

[16] See Sida Li, Mao Ye, & Miles Zheng, Financial Regulation, Clientele Segmentation, and Stock Exchange Order Types, Nat’l. Bureau Econ. Research Working Paper Series No. 28515 (2021), available at

[17] Dina Srinivasan, Why Google Dominates Advertising Markets: Competition Policy Should Lean on the Principles of Financial Market Regulation, 24 Stan. Tech. L. Rev. 55 (2020).

[18] Id. at 84.

[19] Id. at 68.

[20] Id. at 149-54.

[21] Id. at 172.

[22] Daniel S. Bitton & Stephen Lewis, Clearing Up Misconceptions About Google’s Ad Tech Business, Comp. Pol’y Int. (Jul. 13, 2020), (“Direct transactions thus make up the large majority of online display ad sales…”).

[23] Online Platforms and Digital Advertising Market Study, U.K. Competition & Mkts. Auth. (last updated Jul. 1, 2020),

[24] Matteo Dúo, 21 Best AdSense Alternatives to Consider for Your Website in 2021, Kinsta (Mar. 11, 2020),

[25] Back to Basics, What Is Header Bidding, Lotame (Mar. 4, 2021),

[26] Id.

[27] Id.

[28] Id.

[29] Ross Benes, Five Charts: The State of Header Bidding, Insider Intelligence (May 30, 2019),

[30] Id. at 13.

[31] Edward Hirsch Levi, An Introduction to Legal Reasoning, 15 U. Chi. L. Rev. 501, 502 (1948).

[32] See, William A. Birdthistle & M. Todd Henderson, Becoming a Fifth Branch, 99 Cornell L. Rev. 1 (2013).

[33] See, e.g., Paul G. Mahoney, The Economics of Securities Regulation: A Survey, Virginia L. & Econ. Res. Paper No. 2021-14 (Aug. 24, 2021); Kevin S. Haeberle & M. Todd Henderson, A New Market-Based Approach to Securities Law, 85 U. Ch. L. Rev. 1313 (2018).

[34] The DoubleClick Ad Exchange, Google (Oct. 3, 2020), available at

[35] On DoubleClick Ad Exchange: More Digital Media Industry Reaction, AdExchanger (Sep. 22, 2009),

[36] Srinivasan, supra note 17.

[37] Texas v. Google, supra note 8.

[38] See, e.g., Robert Bartlett III & Justin McCrary, How Rigged Are Stock Markets? Evidence from Microsecond Timestamps, 45 J. Fin. Markets 37 (2019); see also, Merritt B. Fox, Lawrence R. Glosten & Gabriel V. Rauterberg, The New Stock Market: Law, Economics, and Policy 261 (2019); for a popular account of Bartlett & McCrary’s empirical results calling Flashboys’ claims into question, see Herbert Lash, Berkeley Study Finds Scarce Evidence of Market Front-Running, Reuters (Jul. 29, 2016),

[39] The largest overall is the foreign-exchange market (Forex), which sees more than $6.6 trillion dollars traded each day. See Triennial Central Bank Survey, Foreign Exchange Turnover in April 2019, Bank for International Settlements (Sep. 16, 2019),

[40] See, e.g., Online Advertising Revenue in the United States From 2000 to 2021, Statista (2023),

[41] This is the notional value reported by Cboe Global Markets for all trading days in 2021. “Notional value” is the dollar value traded each day, and is the product of the price for each trade and the number of shares traded at that price. Cboe reports daily values for trades from 19 trading venues/sources. The author calculated the daily average for the year. Data from Cboe Global Markets is available at

[42] Total Value of the U.S. Stock Market, Siblis Research, available at, (last visited Apr. 9, 2023).

[43] Measured by the S&P 500, the stock-market return since 1928 is about 10.2%. See Kent Thune, What is the Average Return of the Stock Market, Seeking Alpha (Jan. 2, 2023),

[44] Inflation-adjusted returns over the past 30 years are more than 8%. Id.

[45]  Aswath Damodaran, Historical Returns on Stocks, Bonds and Bills: 1928-2022, New York University Stern School of Business, (last visited Apr. 5, 2023).

[46] Id.

[47] Id. This is in line with polling data, which suggests an average of about 54% since 2010.

[48] See, Who Owns Stocks in America, SIMFA Insights, available at (last visited Apr. 5, 2023).

[49] Id.; Households include nonprofit organizations. Other contains foreign banking offices in the United States, and funding corporations.

[50] Mary L. Shapiro, Sec. Exch. Comm’n. Address to the Council of Institutional Investors, Sec. Exch. Comm’n. (Apr. 6, 2009),

[51] See, Agency and Mission Information, Sec. Exch. Comm’n. (2014), available at

[52] See, e.g., Paul G. Mahoney, The Economics of Securities Regulation: A Survey, Virginia Law and Economics Research Paper No. 2021-14 (Aug. 24, 2021),

[53] Id.

[54] Intrinsic Value, corporate finance institute (Dec. 6, 2022),

[55] For a thorough description of the fall of Enron, see, e.g., Ron Rimkus, Enron Corporation, Corporate Finance Institute (Dec. 7, 2006),

[56] Adolph Berle & Gardiner Means, The Modern Corporation and Private Property (1932).

[57] Michael C. Jensen & Kevin J. Murphy, CEO Incentives—It’s Not How Much You Pay, But How, Harv. Bus. Rev. (May 1990),

[58] Erin Ryan Connolly, What’s the Average Marketing Budget for Small Businesses (and How Much Should You Spend)?, Fast Capital 360 (Nov. 8, 2022),

[59] Advertising Regulation, FINRA, (last visited Apr. 9, 2023.)

[60] SIFMA, supra note 48.

[61] See, e.g., 17 CFR § 230.506; for a description of Regulation D private offerings, see, Private Placements – Rule 506(b), Sec. Exch. Comm’n, (last visited Apr. 9, 2023).

[62] The Art Market Is in Massive Disruption, Freakonomics Radio (Dec. 15, 2021),

[63] Id. Comment of Amy Capalazzo.

[64] Robin Pogrebin, Sotheby’s, in a Gamble, Acquires Boutique Art Advisory Firm, The New York Times (Jan.11, 2016),

[65] Id.

[66] Financial Machinations at Auctions, The Economist (Nov.18, 2011),; Henri Neuendorf, Art Demystified: Auction’s and Buyer’s Premiums, Artnet (May 12, 2016),

[67] Amber Lee, Secrecies, Guarantees, and Securities in the World of Auction Houses, Center for Art Law (Jul. 22, 2020),; see also, Anna Brady, Guarantees: The Next Big Art Market Scandal?, Art Newspaper (Nov. 12, 2018),

[68] Id.

[69] The Rules of the City of New York, § 2-122(d).

[70] Rebecca Foden, Auction House Guarantees: Friend or Foe?, Boodle Hatfield (Jan. 1, 2017),; Isaac Kaplan, The Auction House Buzzwords New Collectors Need to Know, Artsy (Mar. 15, 2017),

[71] Doug Woodham, Identifying and Managing Conflicts of Interest in the Art World, Doug Woodham (Jan. 8, 2019),

[72] Hanna Feldman, The “Chandelier” in the Phantom of the Auction, Center for Art Law (Jul. 24, 2018),

[73] Daniel Grant, Legislators Seek to Stop “Chandelier Bidding” Auction, Art News (Sep. 4, 2007),

[74] Art of the Chase: Inside Art Auctions, The Art Law Podcast (May 10, 2018),

[75] Grant, supra note 73.

[76] Woodham, supra note 71.

[77] A Fascinating, Sexy, Intellectually Compelling, Unregulated Global Market, Freakonomics Podcast (Dec.1, 2021),

[78] Fox, Glosten, & Rautenberg, supra note 14 at 81-2.

[79] Id.

[80] Id. at fn. 51.

[81] Daisuke Wakabayashi, The Antitrust Case Against Big Tech, Shaped by Tech Industry Exiles, The New York Times (Dec. 20, 2020), (“In September, Ms. Srinivasan became a technical consultant to the team of lawyers in the Texas attorney general’s office working on the investigation into Google. With her understanding of economics and the advertising market, she took on an expanded role and was instrumental in drafting the complaint . . .”).

[82] Keach Hagey, GOP-Led Legislation Would Force Breakup of Google’s Ad Business, Wall Street Journal (May 19, 2022),

[83]   Thomas Claburn, Lawmakers Launch Bill to Break up Tech Giants’ Ad Dominance, The Register (May 19, 2022),

[84] Press Release, Senator Blumenthal Week In Review 05/13/2022 – 05/20/2022, Sen. Richard Blumenthal (May 20, 2022),

[85] National Securities Exchange, Sec. Exch. Comm’n, (last visited Apr. 9, 2023).

[86] Analyzing the Meaning Behind the Level of Off-Exchange Trading, SIFMA Insights, (Sep. 2021), available at (reporting that, through June 30, 44% of 2021’s trades were “off-exchange”).

[87] 13% of ATS trades, according to FINRA. See, ATS Quarterly Statistics, Financial Industry Regulatory Authority, (last visited Apr. 9, 2023); And then 44% off-exchange, from SIFMA. Id.

[88] US Equity Market Structure Analysis Analyzing the Meaning Behind the Level of Off-Exchange Trading Part II, SIFMA Insights (Dec. 2021),

[89] Id.

[90] Id.

[91] Id.

[92] For a discussion, see Press Release No. 2018-136, SEC Launches New Strategic Hub for Innovation and Financial Technology, Sec. Exch. Comm’n (Oct. 18, 2018),

[93] Rule 300(a) of Regulation ATS at 17 CFR 242.300(a).

[94] Rule 300(a), supra note 90.

[95] John Revill, Swiss Finance Minister Sees No ‘Stumbling Blocks’ to UBS Takeover of Credit Suisse, Reuters (Apr. 8, 2023),

[96] US Equity Market Structure Analysis Analyzing the Meaning Behind the Level of Off-Exchange Trading Part II, SIFMA Insights (Dec. 2021), available at

[97] Analyzing the Meaning Behind the Level of Off-Exchange Trading, Part II, SIFMA Insights (Dec. 13, 2021),

[98] Executing an Order, Sec. Exch. Comm’n, (last visited Apr. 9, 2023).

[99] See, In the Midst of Revolution: The SEC, 1973–1981, Securities and Exchange Historical Society, (last visited Apr. 9, 2023).

[100] See, e.g., Craig Pirrong, The Thirty Years War, 28 REG. 54 (2005-2006) at 4 (“[F]undamental economic considerations can create inefficiencies in securities markets. Network effects arising from the rational choices of traders tend to cause trading to consolidate on a single exchange that can then exercise market power by rationing access either explicitly (through membership limits) or through price.”).

[101] See, e.g., Paul G. Mahoney, The Economics of Securities Regulation: A Survey, Virginia Law and Economics Research Paper No. 2021-14 (Aug. 24, 2021),

[102] Securities Exchange Act of 1934, 15 U.S.C. § 78k-1 (2021)

[103] 17 C.F.R. 242, available at

[104] Rule 601.

[105] Rule 602.

[106] Rule 606.

[107] Id. Rule 610.

[108] Id. Rule 611.

[109] Scott Patterson & Jenny Strasburg, How ‘Hide Not Slide’ Orders Work, The Wall Street Journal (Sep. 18, 2012),; Matt Levine, ‘Hide Not Slide’ Orders Were Slippery and Hidden, Bloomberg (Jan. 13, 2015),

[110] Order Type Differences, NYSE, available at (last visited, Apr. 5, 2023); NYSE Pillar Binary Gateway Order Type Matrix, NYSE, available at (last visited, Apr. 5, 2023).

[111] Algorithms for NYSE Floor Brokers, NYSE, available at (last visited, Apr. 5, 2023).

[112] Algorithmic Routing Access Agreement, NYSE (Jan. 26, 2015), available at

[113] See, Competition and Transparency in Digital Advertising Act, Sen. Mike Lee, (last visited, Apr. 5, 2023).

[114] Id.

[115] Rule 601.

[116] Rule 602.

[117] Rule 606.

[118] Rule 610.

[119] Rule 611.

[120] Rule 611.

[121] Memorandum SEC Division of Trading and Markets, Sec. Exch. Comm’n (Apr. 30, 2015), available at

[122] See, e.g., Annual Report 2011, JPMorgan Chase & Co. (Mar. 30, 2012), available at

[123] See Sida Li, Mao Ye, & Miles Zheng, Financial Regulation, Clientele Segmentation, and Stock Exchange Order Types, NBER Working Paper Series, 1-52 (2021), available at

[124] Id.

[125] The SEC recently promulgated a proposed rule on the topic. See, SEC Proposes Rule to Enhance Competition for Individual Investor Order Execution, Sec. Exch. Comm’n (Dec. 14, 2022),

[126] Srinivasan, supra note 17, at 110.

[127] Id. at 109.

[128] Id.

[129] See, e.g., Online Platforms and Digital Advertising Market Study: Appendix R: Fees in the Adtech Stack, UK Competition and Markets Authority, 275 (Jul. 3, 2019), available at; for a full set of appendices, see

[130] Maria Gomri, Some Changes to Our Ad Technology, Google Blog (Jun. 7, 2021),

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Antitrust & Consumer Protection

A Reputational View of Antitrust’s Consumer Welfare Standard

Scholarship Abstract A reform movement is underway in antitrust. Citing prior enforcement failures, deviations from the original intent of the antitrust laws, and overall rising levels . . .


A reform movement is underway in antitrust. Citing prior enforcement failures, deviations from the original intent of the antitrust laws, and overall rising levels of sector concentration, some are seeking to fundamentally alter or altogether replace the current consumer welfare standard, which has guided courts over the past 50 years. This policy push has sparked an intense debate on the best approach to antitrust law enforcement. In this Article, we examine a previously unexplored potential social cost from moving away from the consumer welfare standard: a loss in the information value to the public from a finding of liability. A virtue of the current standard is the knowledge that firms who violate the antitrust laws have harmed consumers. This simple reality is a direct, easy-to-interpret signal to market participants and investors. In contrast, a broader and more nebulous standard, such as a “public interest” approach—which has been proposed by some academics and agency officials—could conceivably water down the information value of a finding of liability. In essence, the greater license that regulators and courts have to condemn a business practice beyond a finding of harm to consumers, then the noisier the signal to the public about what the verdict actually means. We can call this phenomenon “the stigma dilution effect.” To that end, we develop a formal model to gain insight into the role of reputation in the enforcement and deterrence effects of antitrust laws. The model reveals broadening the welfare standard is likely to weaken the reputational impact of antitrust violations. This dilution can, in turn, have implications which go against what the proponents of abolishing the consumer welfare standard desire. Namely, a new standard could increase, rather than decrease, the frequency of conduct they seek to deter. Thus, our analysis suggests that there may be important and underappreciated costs associated with departures from the consumer welfare standard. In fact, the presence of reputational considerations suggests that these departures can produce effects contrary to the stated goals of their proponents.

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Antitrust & Consumer Protection

Doomsday Mergers: A Retrospective Study of False Alarms

ICLE White Paper Executive Summary A well-placed cadre of progressive scholars and advocates—several of whom have in more recent years come to occupy top positions in America’s antitrust . . .

Executive Summary

A well-placed cadre of progressive scholars and advocates—several of whom have in more recent years come to occupy top positions in America’s antitrust agencies—have long-focused their attention distinctly on high-profile mergers and acquisitions. For more than a decade, hardly a deal could be proposed without these critics claiming that it would create an unassailable monopoly, be the final nail in the coffin of small businesses, and/or cement the political sway of big business. For these so-called “neo-Brandeisian” critics, the repeated pattern has been, first, to entreat authorities to block these deals and then, should they be cleared nonetheless, to cite such approvals as evidence that U.S. antitrust law is in dire need of reform.

The bombastic rhetoric employed by these critics stands in sharp contrast with the technocratic and measured approach to enforcement that has traditionally been the norm for U.S. antitrust agencies and courts. Indeed, for better or worse, antitrust case law in the United States generally focuses on tangible and short-term metrics, rather than hypothetical doomsday scenarios that are notoriously hard to predict. Under this measured approach—rooted in the consumer welfare standard—theories of harm are dismissed if they rely on mere conjecture. Unsurprisingly, the critics have routinely lambasted this status quo.

But the paradigm has been shifting. With the elevation of progressive critics such as Lina Khan to chair the Federal Trade Commission (FTC), Jonathan Kanter to head the U.S. Justice Department’s (DOJ) Antitrust Division, and Tim Wu to serve as special assistant to President Joe Biden for technology and competition policy, the tide of U.S. antitrust enforcement may be turning. In recent months, the antitrust agencies have brought several high-profile suits that seek to combat what their new leadership believes to be excessive corporate consolidation. This includes the FTC’s failed challenge of the Meta-Within deal, as well as ongoing cases against the Microsoft-Activision Blizzard and Illumina-Grail mergers.

The rhetoric accompanying these challenges has departed significantly from traditional antitrust discourse and has instead been more closely aligned with the populist style that these agencies’ leaders employed before their nominations. For instance, in its Meta-Within complaint, the FTC argued that clearing the deal would put Meta “one step closer to its ultimate goal of owning the entire ‘Metaverse.’” In the Illumina-Grail suits, the agency claimed that “after the Acquisition, Illumina will control the fate of every potential rival to Grail for the foreseeable future.”

Against this backdrop of increasingly alarmist merger claims, this paper analyzes whether previous doomsday merger scenarios have materialized, or whether the critics’ claims missed the mark. Our retrospective analysis shows that many of the alarmist predictions of the past were completely untethered from prevailing market realities, as well as far removed from the outcomes that emerged after the mergers.

Amazon-Whole Foods

The first merger we look at is Amazon’s purchase of Whole Foods. Critics at the time claimed the deal would reinforce Amazon’s dominance of online retail and enable it to crush competitors in physical retail. As now-FTC Chair Lina Khan put it: “Buying Whole Foods will enable Amazon to leverage and amplify the extraordinary power it enjoys in online markets and delivery, making an even greater share of commerce part of its fief.”

These claims turned out to be a bust. As we explain, at the time of writing, several large retailers have grown faster than Amazon; Whole Foods’ market share has barely budged; and several new players have entered the online retail space. Moreover, the Amazon-Whole Foods deal appears to have delivered lower grocery prices and increased convenience to consumers.

Beer-Industry Consolidation

A second notable example comes from the beer industry. In the early 2000s, the industry witnessed a wave of consolidation, culminating with ABI’s acquisition of SABMiller in 2016, which critics claimed would increase the price of beer and decimate the burgeoning craft-beer segment.

Instead, the concentration of the beer industry decreased after the mergers, prices did not increase on average, and the craft-beer segment thrived. This is not to say that all is rosy; the price of some beers did indeed increase after the wave of mergers. Regardless, it is clear the post-merger outcome was a far cry from the doomsday scenario that critics predicted.


Along similar lines, Bayer’s acquisition of Monsanto (along with the Dow-Dupont merger) was met with stern rebukes from policymakers and academics. Critics argued that the merger would raise the price of key seeds, such as corn, soy, and cotton. Perhaps more fundamentally, the deal’s opponents argued it would further concentrate the agri-food industry, forcing farmers to deal with only a handful of seed providers. Accordingly, many cited this merger as evidence that antitrust merger enforcement needed reform.

Fast forward to today, and these fears appear overblown. Seed prices have remained roughly constant (though we do not know the counterfactual), and there is little evidence that the life of farmers and rural communities has been significantly affected by the merger. There is thus little reason to believe that the mergers justified the legislative and policy changes that many called for at the time.


Google’s acquisition of Fitbit is another case where progressive scholars’ dire predictions failed to materialize. The deal’s opponents claimed the merger would reinforce Google’s position in the ad industry and prevent new entry; harm user privacy by enabling Google to integrate Fitbit health data into its other ad services (or sell this data to health insurers); and crush burgeoning rivals in the wearable-device industry.

At the time of writing, available evidence suggests the exact opposite has occurred: Google’s share of the online-advertising industry has declined, as has Fitbit’s position in the wearable-devices segment. Likewise, Google does not use data from Fitbit in its advertising platform; not even in the United States, where it remains free to do so. Meanwhile, the merger enabled Google’s entry into the smartwatch market as an upstart competitor against the market leader, Apple. In short, enforcers’ “terrible decision” to clear the merger appears vindicated.


Facebook’s acquisition of Instagram provides a different perspective. At the time, basically no one worried about it from an antitrust perspective and many pundits lambasted the purchase as a poor business decision. It is only in retrospect that people have started to see it as the merger that got away and evidence of the problems with allegedly weak enforcement. This perspective ignores the fact that enforcement agencies only ever have that data which is available at the time.

Even in retrospect, however, it is far from obvious that the acquisition was anticompetitive. Immediately upon purchase, Facebook was able to bring Instagram’s photo-editing features to a much larger audience, generating value for users. Only later did Instagram turn into the social-media giant that we know today. The recent rise of TikTok casts further doubt on claims regarding the supposed market dominance of a combined Facebook and Instagram. A merger that benefited consumers without generating impenetrable market dominance hardly seems like overwhelming proof of the failures of enforcement.

Ticketmaster-Live Nation

We close with Ticketmaster for two reasons. First, it has received significant negative attention recently due to technical failures during Taylor Swift’s latest concert sales, which has prompted the DOJ to investigate the company. Second, people have complained about Ticketmaster being a monopolist ever since it came to prominence. Yet, there was little outrage at the merger with Live Nation. While there was a congressional hearing at the time and some concern expressed in The New York Times, the contemporaneous claims were refreshingly mild relative to more recent comments by the neo-Brandeisians.

Despite having antitrust authorities investigate its previous acquisitions, including the merger with Live Nation, Ticketmaster has avoided having any of its mergers blocked outright. Perhaps more importantly, Ticketmaster’s market share appears to have fallen following the merger with Live Nation. There is thus little sense that the deal harmed consumers. So why the disconnect between longstanding frustration and antitrust enforcement? The agencies have seen the beneficial effects of mergers in a difficult multi-sided market between fans, venues, and artists. After investigation, the agencies found that the merger was primarily a vertical one between a ticketing website (Ticketmaster) and a concert promoter (Live Nation), which could be pro-competitive for the overall multi-sided market. The DOJ placed behavioral remedies in place and allowed the merger. We explain how a technical failure more than a decade later can hardly be blamed on the antitrust authorities for letting it slip through.

The Upshot

One potential counterargument to the focus of this paper is that the mergers we discuss may not be representative of broader trends—and, accordingly, that tougher antitrust enforcement may still be warranted. While this is a possibility, it misses our main point. Too often, mergers are met with alarmist fearmongering in policy circles, with many observers arguing a given transaction will irrevocably harm consumers and the economy. These calls for action occur despite the existence of a highly sophisticated merger-control apparatus that is designed precisely to minimize the likelihood of such harms, while enabling consumer-benefitting transactions to pass regulatory muster.

Our call for regulatory prudence may seem modest, but it increasingly faces challenges. The most high-profile challenge is perhaps the FTC and DOJ’s joint repudiation of the most recent (2010) merger guidelines, and their ongoing effort to revise the guidelines, almost certainly in ways to facilitate more aggressive merger enforcement. As FTC Chair Lina Khan remarked upon the initiation of the merger-guidelines-revision effort, in the wake of merger activity allegedly due to lax enforcement, “many Americans historically have lost out, with diminished opportunity, higher prices, lower wages, and lagging innovation…. These facts invite us to assess how our merger policy tools can better equip us to… halt this trend.”

And as Matt Stoller approvingly notes of the revision effort, “mergers are the key fulcrum that has consolidated power in American society. And now, for the first time in our lifetimes, antitrust enforcers are genuinely pushing back, with real merger challenges and now a revamp of this until-now catastrophic set of guidelines.”

Many in the media have similarly pushed for more aggressive merger enforcement, unmoored from its economic rigor. A recent Financial Times piece by Rana Foroohar, for example, encapsulates the prevailing zeitgeist, intimating as it does that authorities should ditch sophisticated and technocratic economics in favor of what she calls “kitchen table economics,” in which “economic policy discussions [should be in] the purview of not just economists, but also lawyers, activists and ordinary people.”

If there is one thing to take away from our paper, it is that basing merger enforcement on kitchen-table economics—the idiosyncratic preferences of “activists and ordinary people”—would be disastrous. Our retrospective study shows that popular and populist fears about corporate consolidation are often completely untethered from economic reality and wildly erroneous. The less these fears influence antitrust policy, the better.


Antitrust law and policy may be on the move. The neo-Brandeisian antitrust movement advocates radical reform,[1] and seems not so much ascendent as ascended, finding support in the White House[2] and at the head of the two federal antitrust agencies, the Federal Trade Commission (FTC)[3] and the Antitrust Division of the U.S. Justice Department (DOJ).[4]

In remarks often quoted or echoed by FTC Chair Lina Khan, President Joe Biden laments that “we’ve lost the fundamental American idea that true capitalism depends on fair and open competition.”[5] He lays that supposed loss at the feet of antitrust: “Forty years ago, we chose the wrong path, in my view, following the misguided philosophy of people like Robert Bork, and pulled back on enforcing laws to promote competition.”[6]

The bombastic rhetoric employed by these critics stands in sharp contrast with the technocratic and measured approach to enforcement that has traditionally been the norm for U.S. antitrust agencies and courts. Indeed, for better or worse, antitrust case law in the United States generally focuses on tangible and short-term metrics, rather than hypothetical doomsday scenarios that are notoriously hard to predict. Under this measured approach—rooted in the consumer welfare standard—theories of harm are dismissed if they rely on mere conjecture.[7] Unsurprisingly, the critics have routinely lambasted this status quo.[8]

These neo-Brandeisian ideas are now starting to filter into mainstream antitrust policy. With the elevation of progressive critics such as Lina Khan to chair the Federal Trade Commission (FTC), Jonathan Kanter to head the U.S. Justice Department’s (DOJ) Antitrust Division, and Tim Wu to serve as special assistant to President Joe Biden for technology and competition policy, the tide of U.S. antitrust enforcement may be turning. In recent months, the antitrust agencies have brought several high-profile suits that seek to combat what their new leadership believes to be excessive corporate consolidation. This includes the FTC’s failed challenge of the Meta-Within deal, as well as ongoing cases against the Microsoft-Activision Blizzard and Illumina-Grail mergers.[9]

The rhetoric accompanying these challenges has departed significantly from traditional antitrust discourse and has instead been more closely aligned with the populist style that these agencies’ leaders employed before their nominations. For instance, in its Meta-Within complaint, the FTC argued that clearing the deal would put Meta “one step closer to its ultimate goal of owning the entire ‘Metaverse.’”[10] In the Illumina-Grail suits, the agency claimed that “after the Acquisition, Illumina will control the fate of every potential rival to Grail for the foreseeable future.”[11]

Meanwhile, the FTC recently issued a new Statement of Enforcement Principles Regarding “Unfair Methods of Competition” Under Section 5 of the FTC Act[12] that turns the established methods, measures, and goals of antitrust on their heads.[13] It rejects, among other things, the consumer welfare standard and the rule of reason that are at the heart of contemporary antitrust jurisprudence. And more importantly for this paper, it is anticipated that the FTC and the Antitrust Division will soon release new merger guidelines, covering both horizontal and vertical mergers. The agencies have launched a “Request for Information on Merger Enforcement,”[14] soliciting public input on diverse issues that range from basic concepts, evidence, and analytical methods to the goals of merger enforcement, some 91 questions under 15 topical headings. More recent statements from the agencies suggest that new guidelines are forthcoming.[15]

The agencies’ aim seems clear: strengthening—or at least increasing—antitrust merger enforcement.[16] Khan has quoted from President Biden’s executive order that “industry consolidation and weakened competition have ‘den[ied] Americans the benefits of an open economy,’ with ‘workers, farmers, small businesses, and consumers paying the price.”[17] That same executive order includes a general condemnation of the state of U.S. competition, which it blames on “Federal Government inaction”—that is, on a putative failure of antitrust enforcement. Khan goes on to note that:

[The merger guidelines review] comes against the backdrop of a broader reassessment of the effects of mergers across the U.S. economy. Evidence suggests that decades of mergers have been a key driver of consolidation across industries, with this latest merger wave threatening to concentrate our markets further yet…. While the current merger boom has delivered massive fees for investment banks, evidence suggests that many Americans historically have lost out, with diminished opportunity, higher prices, lower wages, and lagging innovation. A lack of competition also appears to have left segments of our economy more brittle, as consolidated supply and reduced investment in capacity can render us less resilient in the face of shocks.

These facts invite us to assess how our merger policy tools can better equip us to discharge our statutory obligations and halt this trend.[18]

And as Matt Stoller approvingly notes of the revision effort, “mergers are the key fulcrum that has consolidated power in American society. And now, for the first time in our lifetimes, antitrust enforcers are genuinely pushing back, with real merger challenges and now a revamp of this until-now catastrophic set of guidelines.”[19] Whether or to what extent this drive for revision or reform might find support in the federal courts is less clear.[20]

Neo-Brandeisian scholars are not the only ones pushing for substantial reform and, specifically, considerably increased interventions by antitrust enforcers into mergers and other commercial conduct. For example, the American Antitrust Institute (AAI) identifies itself as an original and central player in “the modern ‘progressive antitrust’ movement.”[21] The AAI advocates for “vigorous” public enforcement, characterizing its mission as a reaction against “the conservative law and economics movement,”[22] which, AAI says, “steered antitrust policy in a non-interventionist direction marked by lax merger control and forbearance from policing monopolistic and other anticompetitive practices.”[23] While AAI has a decidedly pro-intervention perspective, it is arguably more moderate and research-based than the neo-Brandeisian movement. Yet, collectively, progressive antitrust advocates and neo-Brandeisians have formed a vocal movement in favor of more invasive antitrust enforcement, based on a shared view that lax enforcement has caused unremedied harm throughout the economy.

And many in the media have similarly pushed for more aggressive merger enforcement, unmoored from its economic rigor. A recent Financial Times piece by Rana Foroohar, for example, intimated that authorities should ditch sophisticated and technocratic economics in favor of what she calls “kitchen table economics.” Her piece encapsulates the prevailing zeitgeist:

The popularisation of antitrust is part of a much larger shift in which economic policy discussions are increasingly the purview of not just economists, but also lawyers, activists and ordinary people. These groups are less interested in technocratic debates about market mechanisms than in a grassroots discussion about how corporate power has distorted the market in ways that they find absurd….

Thus, traditional economic theories about markets are no more, or less, useful than the collection of real world facts that either side can bring to a case.”[24]

The classic problem with most antitrust enforcement—and merger enforcement, in particular—is that it is prospective; it entails making predictions about future effects and determining appropriate enforcement under conditions of uncertainty. Proponents of more vigorous enforcement assert that past failures to enforce have led to great economic harms and, thus, that merger policy should be categorically more stringent to protect against such harms in the future. But it is an open question whether these claims are accurate, and an even harder question to answer whether more stringent enforcement in any particular case would be desirable, even if it were established that an overall increase in enforcement would be. It is almost certain that separating merger enforcement policy from economic rigor would magnify this uncertainty.

This paper seeks to assess predictions from progressive and neo-Brandeisian advocates regarding the immense harm that past mergers would supposedly cause. We examine six selected mergers that were widely condemned, but nevertheless consummated, prior to the current administration’s appointment of its competition-policy team.[25] We assess whether the predictions concerning these mergers’ deleterious effects have ultimately materialized. The goal of this paper is not to provide rigorous, empirical analysis of the effects of these seven mergers, but rather to provide an accurate—but necessarily casual—assessment of the state of the post-merger markets. Using public information and relying on the insights of industry experts, we offer a detailed picture of these markets and an assessment of how they may have changed post-merger.

Our analysis shows that critics of the antitrust status quo routinely make dire predictions concerning the likely future effects of mergers that, as we explain, tend to be wide of the mark. This is not surprising: there is a reason why antitrust merger enforcement is entrusted to technocratic antitrust authorities with, among other assets, huge teams of PhD economists to run merger simulations. At the very least, however, our analysis suggests popular claims that given mergers will be harmful should be taken with a grain of salt; such claims tend to say more about the person making them than they do the likely effects of a merger. Likewise, these same scholars also routinely claim that antitrust merger enforcement is insufficient precisely because it enabled these mergers to go through unchallenged. Again, our analysis suggests that things are (unsurprisingly) more complicated: no single merger provides a silver bullet to sustain claims that antitrust merger enforcement is too lax—something that needs to be shown empirically.

While our selection of mergers is ultimately somewhat arbitrary, the list includes some of the most contentious mergers of the past decade. Our selection has been guided by public statements about these mergers by prominent neo-Brandeisians and others. Unifying themes are, first, the contention that antitrust enforcement had fundamentally dropped the ball and, second, that dire consequences would follow.

Two caveats are in order. First, statements from the neo-Brandeisian movement—sometimes called “populist”[26] or “hipster antitrust”[27]— have not been monolithic: this is an identifiable (and self-identified)[28] movement, but it is united by common concerns and an orientation, not by any official positions or definitive membership.[29] Still, there is an identifiable family of statements that has been directionally consistent, and often dire.[30] Second, although we cite to specific individuals, our focus is not on those individuals or the neo-Brandeisian movement per se. Rather, we examine certain dire predictions about specific mergers, and the reasoning that lay behind those predictions. While these are characteristic of certain staunch advocates of substantially greater intervention into mergers, the predictions were not all made by individuals associated with the neo-Brandeisian movement. Moreover, we do not assume that views or assessments, or methodological or theoretical priors, are uniform across a wider group of progressives. Given the considerable political influence of the neo-Brandeisians, however, it is not impertinent to ask whether they are generally correct in their policy prescriptions.

In brief, we examine a string of what might be called doomsday merger predictions. All of these mergers were supposed to damage competition and raise prices. For example, when Amazon acquired Whole Foods, Barry Lynn of Open Markets—an organization commonly associated with the neo-Brandeisians—provided a dire and sweeping assessment to the New Republic: “This is the crushing of competition. Amazon is monopolizing commerce in the United States.” “Commerce” seems an awfully broad market for antitrust analysis, but Lynn offered no further qualification about, e.g., “premium natural and organic food markets,”[31] online retail commerce, or even retail commerce writ large. Rather, the acquisition—a sizeable acquisition of a mid-sized grocery chain that was not among the 20 largest in the United States—would somehow lead to Amazon’s monopolization of commerce. Lynn would go on to say that only Uncle Sam would be able to save competitors from certain death.[32]

In less hyperbolic terms, in 2014, it was predicted that the merger of ABI and SAB Miller would “impose significant price increases on consumers” and “undermine the continued emergence of craft beer.”[33] While there is evidence of slight price increases associated with certain previous mergers, such as the Miller-Coors merger that we analyze in this paper, the growing craft-beer trend has continued apace. In 2020, six years after dire predictions about ABI/SAB Miller, the staffs of the FTC and the Antitrust Division jointly observed a long-running growth trend in comments on a proposed policy change in California: in California alone, there were 200 craft brewers in 2000 and 1,039 in 2020.[34] There, the staffs’ concerns had to do with regulatory barriers to competition, not manufacturer consolidation.[35]

One final prefatory note about this project and about merger retrospectives generally: Merger retrospectives have played an important role in incremental antitrust reform for several decades. For example, a series of retrospective studies of hospital mergers conducted by the staff of the FTC’s Bureau of Economics—sometimes in collaboration with academic economists—have been identified as key drivers in changing the way the federal courts view hospital mergers, where they seemed central to reversing a trend of agency losses in merger-challenge cases. They have, as well, helped to refine the tools available to enforcers and academic economists. In simplest terms, merger retrospectives examine quantifiable changes in competitively important market outcomes, such as price and output and, where demonstrable, quality or quality-adjusted price.[36] More specifically, retrospective analysis investigates “ex post how, if at all, a particular merger affected equilibrium behavior in one or more markets.”[37]

To be clear, these merger retrospectives are most informative when situated within a larger body of theoretical and empirical research. They do not, in themselves, determine the framework within which, or methods with which, mergers are scrutinized. Moreover, we cannot in this paper hope to rival the deep empirical dives of the FTC’s hospital-merger retrospective series, which ranges over some 20 publications scrutinizing diverse methods and models applied by agency staff in specific investigations and the outcomes of consummated mergers.[38] We can, however, examine competitively relevant indicators such as price and output (and price and output trends), as the merger-retrospective literature has done, as well as such signals as market valuations.

While both we and the reform advocates lack access to much of the granular data and privileged information available to enforcers, that is part of our point: informal or off-the-cuff assessments of the likely competitive effects of any given merger are very likely to be inaccurate, if not plainly wrong, as can be crude indicators of concentration, such as 4-digit NAICS codes, when taken to be indicators of market power. That is part of the insight behind the decades-long shift to fact-intensive, rule-of-reason scrutiny in antitrust, and a conspicuous complication for reformers’ advocacy in favor of a return to per se rules and the development of ex ante antitrust regulations.

I.        Amazon-Whole Foods

On June 16, 2017, Amazon revealed its intention to purchase the Whole Foods Market, known commonly as “Whole Foods,” a popular chain of organic and natural grocery stores. Despite Whole Foods’ small 1.2% share of U.S. food and grocery sales,[39] the announcement—along with the FTC’s rapid clearance of the deal—caused an uproar among progressive and interventionist commentators.[40] The merger was completed in August 2017, and Amazon quickly began implementing changes to the Whole Foods business model.

A.      The Predictions

Barry Lynn, director of the Open Markets Institute, claimed the deal would crush competition and allow Amazon to monopolize commerce in the United States, adding that only the government could save Amazon’s rivals from certain downfall.[41] Lina Khan—now chair of the FTC—intimated that Amazon would use its data to transfer its dominance from online to physical retail: “Buying Whole Foods will enable Amazon to leverage and amplify the extraordinary power it enjoys in online markets and delivery, making an even greater share of commerce part of its fief.”[42] And, in a now-deleted tweet, Tim Wu called the merger a super-monopoly, referring to the multiple monopolies that Amazon would hold after the merger (presumably adding a grocery monopoly to its dominance of online retail).[43] Writing in The New York Times, Khan further predicted that “this deal would allow Amazon to potentially thwart future innovations.”[44] Other critics, such as Marshall Steinbaum, acknowledged the merger was legal at the time, but that its legality simply showed the flaws in the antitrust doctrine. According to Steinbaum, “this merger is a no-brainer to approve under existing antitrust doctrines, which is exactly why those doctrines are flawed. We, but not the law, know that Amazon is anticompetitive.”[45] The list goes on.

To support their claims, many of these critics pointed to the merger’s short-term effect on the stock market—Amazon’s competitors took a heavy hit when the deal was announced. Because of the share-price losses suffered by the stocks of rival companies, Scott Galloway surmised that markets were failing, and that Amazon should be broken up.[46] Galloway added:

Within twenty-four hours of the Amazon–Whole Foods acquisition announcement, large national grocery stocks fell 5 to 9 percent.

When the subject of monopolistic behavior comes up, Amazon’s public-relations team is quick to cite its favorite number: 4 percent—the share of U. S. retail (online and offline) Amazon controls, only half of Walmart’s market share. It’s a powerful defense against the call to break up the behemoth. But there are other numbers. Numbers you typically won’t see in an Amazon press release: • 34 percent: Amazon’s share of the worldwide cloud business • 44 percent: Amazon’s share of U. S. online commerce.[47]

To summarize, critics claimed that Amazon’s market shares (for both its online-retail platform and physical-retail business) and its stock price would grow faster than rivals’ and lead to increased concentration in these markets and the exit of smaller rivals. This raises a simple question: have these prophecies come to pass?

B.      What Happened?

Five years after the merger was consummated, it has become increasingly evident that critics’ claims were wide of the mark. If anything, competition appears to have intensified in both the online and physical spaces, with new firms entering the market and Amazon’s share both markets appearing to decline or at least stagnate.

One important indicator is the stock prices of both Amazon and its rivals. Indeed, if critics were correct and Amazon did indeed grab significant sales from rivals, thus increasing its profits, then its stock price should have outperformed those of rivals. Given the idiosyncratic years we have been through—with the COVID-19 pandemic, a marked increase in inflation, and fears of a widespread recession creating the potential for large outliers—it is worth looking at those share prices both one and five years after the merger.

One year after the merger, the picture looked nowhere near as bad as critics’ most dire predictions. The stocks of Amazon’s main rivals registered significant gains in the year following the announcement of the Whole Foods deal. Kohl’s stock actually outperformed Amazon’s (+82.05% versus +64.81%) in the year following the merger. Target, Macy’s, Costco, BestBuy, Kohl’s, and Nordstrom’s also showed healthy gains, rising faster than the S&P 500 index. Of course, firms like J.C. Penney and Sears hit new lows, leading both companies to the edge of bankruptcy (although their decline started well before the Whole Foods merger). In short, the retail industry was still highly competitive, and rivals did not appear to be diminished one year after the merger.

From then on, the market appears to have become even more competitive. Looking at the situation almost five years after the merger, the stocks of many rival companies have significantly outperformed Amazon. These include Costco, Target, Kroger, Walmart, and BestBuy. Granted, this may have something to do with recent decline of tech stocks—a trend that could conceivably be reversed in the future. Whether this recent decline proves permanent or not, the bigger picture is that critics were mistaken when they claimed the merger would cause the food-retail industry to fall under Amazon’s control—notably because of its technological superiority.

Looking at (estimated) market shares tends to paint a similar picture. For a start, available evidence suggests the market share of Whole Foods has not meaningfully increased since its acquisition by Amazon—moving from 1.3% of the U.S. food-retail market to 1.6%.[48] This severely undermines critics’ claims that Amazon would transfer its purported dominance of online retail to physical retail.

The picture is more complicated when looking at Amazon’s online-retail platform. Since the merger, Amazon’s share of online retail has steadily increased from roughly 40% in 2017 to an estimated 56% in 2021 (though this is merely the continuation of a trend that predates the acquisition of Whole Foods).[49] This moderate market-share increase might, at first sight, appear more consistent with critics’ predictions, but a closer look paints a different picture. While Amazon’s share of online retail as a whole has increased relative to many of its rivals, this is not the case for its share of online grocery sales (the part of its online business that should presumably have benefited most from the Whole Foods acquisition). For instance, between 2017 and 2019, Amazon Fresh’s consumer base stagnated, while Walmart’s and Instacart’s grew rapidly.[50] A more recent study explains that, while Amazon’s share of online grocery is hard to estimate, several rivals (Walmart Grocery, Shipt, Peapod, and Instacart) grew significantly between 2018 and 2021,[51] with some data suggesting that their growth outpaced that of online-grocery sales as a whole.[52] While all of this should be taken with a grain of salt, the initial picture we get is certainly not one of Amazon excluding rivals and dominating either the world of physical retail or that of online-grocery sales.

This overall assessment is corroborated by more anecdotal evidence suggesting that the Whole Foods deal has failed to live up to expectations. For a start, Amazon’s executives have often been compelled to defend the deal against suggestions that Amazon overpaid and that the deal had failed.[53] As one piece surmised:

The success of the Whole Foods acquisition is difficult to measure because Amazon rolls its sales into the physical stores category, alongside its 60 Amazon Fresh grocery stores, an Amazon Style clothing store and 25 smaller Amazon Go stores. But Whole Foods is by far the biggest individual contributor in the group.

Earlier this year, things looked a little bleak. Days after Amazon missed estimates for its first-quarter earnings results, the company announced the closure of six Whole Foods stores.

As consumers get back into the habit of shopping in person, Whole Foods is showing signs of recovery. found the number of visits people make to Whole Foods is now hovering at about the same level as July 2017, before Amazon took over.[54]

Of course, some may retort (fairly) that rivals might have performed even better absent the merger, but that is not the harm that critics were predicting when the deal was cleared. Instead, they claimed that many of Whole Foods’ rivals would go out of business, and that Amazon would also dominate online-grocery retail. That simply was not the case.

Looking at the direct effects of the merger on Whole Foods’ business model, we see many innovations. One of the most notable changes was the introduction of lower prices on a selection of Whole Foods products, with Amazon Prime members receiving even deeper discounts.[55] This move aimed to make Whole Foods’ prices more competitive with other grocery stores, and it helped to increase foot traffic in stores.

In addition to lower prices, Amazon also introduced new technologies to Whole Foods stores, such as the use of cashier-less checkout systems[56] and in-store pick-up for online orders.[57] They’ve even introduced entire stores without checkout lines.[58] Whole Foods also began offering a wider selection of products through Amazon’s online marketplace.

The merger also had an impact on the broader grocery industry. Other major retailers, such as Walmart and Kroger, responded by also cutting prices and increasing their online-grocery offerings.[59] Kroger’s partnership with Ocado marks a major shift in the grocery industry. Through this collaboration, Kroger will be able to benefit from Ocado’s robotic technology for packing orders placed online.[60] Similarly, Target has tried to stay up to date with emerging technologies with its $550 million acquisition of Shipt, a startup offering same-day delivery services.[61]

Walmart followed suit by acquiring Parcel, another startup that offers same-day delivery services, and has announced a partnership with Alert Innovation, which employs automated carts to fulfill grocery-pickup orders at stores. Walmart first introduced grocery pickup in 2017 and initiated a harder push starting in 2019.[62] In 2018, the company also introduced same-day grocery delivery.[63] It’s hard to square these developments with Lina Khan’s prediction that the Whole Foods deal “would allow Amazon to potentially thwart future innovations.”[64]

The point is not that the Amazon-Whole Foods merger was the sole cause of these innovations. They required technological innovations that are separate from anything related to groceries. The important takeaway is that the grocery market continues to innovate, particularly in the direction of online orders and rapid delivery. These are exactly the areas in which Amazon specialized and was expected to bring to Whole Foods with the merger. Despite Stacy Mitchell’s claim that “delivery is key to sustaining a monopoly online” or that Amazon can “control rapid-package delivery,” it appears today that delivery is just another part of the competitive process, and all the players realize they need to offer the service. Lina Khan’s prediction that “]b]y bundling services and integrating grocery stores into its logistics network, the company will be able to shut out or disfavor rival grocers and food delivery services” has not panned out.[65]

The reality of the grocery market is that competition has increased, as retailers like Walmart, Kroger, Giant, Harris Teeter, and others have expanded their delivery offerings. Similarly, delivery companies like Instacart, DoorDash, and UberEats have also expanded their offerings to include groceries. This has led to the emergence of successful startups in the grocery-delivery market, such as Thrive Market. As a result, consumers now have more options for convenient and efficient grocery delivery, while retailers and delivery companies are adapting to meet the market’s demands.

All of these efforts demonstrate how traditional grocers are embracing new technologies in order to keep up with the ever-changing digital landscape and remain competitive in the market. These technological improvements allowed grocers to be better positioned for grocery pickup at the start of the COVID-19 pandemic. For example, online sales for Walmart grew 74% in the first quarter of 2020.[66]

C.      In Retrospect

Although it is still too early to draw any firm conclusions, it seems that the merger’s anticompetitive potential was dramatically overplayed by its opponents. Most of Amazon’s direct rivals are still making healthy profits (as reflected by their stock prices). This is inconsistent with the vertical-foreclosure and predatory-pricing stories put forward by critics. Under vertical foreclosure, rivals are deprived of key inputs (or outputs) that prevent them from competing. Predatory pricing occurs when a dominant firm prices below cost in the hope of recouping its losses once rivals have exited the market. Crucially, both of these scenarios necessarily imply that the bottom lines of rivals will suffer (ultimately falling to zero). At the time of writing, these theories have failed to pan out.

Of course, just because anticompetitive scenarios have not yet transpired does not guarantee that they will not occur in the future. Likewise, rivals’ overall profits may conceal losses in those markets where they actually compete with Amazon. Finally, it is possible that these rivals’ profits would have been higher still had the merger not gone through. Although these potential counterarguments might deserve some attention, they do not detract from the inescapable conclusion that, as of yet, Amazon has not managed to exclude any of its large retail competitors thanks to its acquisition of Whole Foods.

More fundamentally, it is important not to lose sight of the other side of the coin: Amazon’s purchase of Whole Foods may have generated important benefits that critics failed to consider. First and foremost, Amazon immediately implemented a number of price reductions following the deal.[67] It also started to harness the various synergies that existed between itself and Whole Foods. It notably made some of Whole Food’s items purchasable on Amazon, and placed Amazon lockers in numerous Whole Foods stores (allowing consumers to pick up packages from these locations).[68] The online retailer also ensured that its Prime members would receive various discounts when they visit Whole Foods stores.[69]

And thanks to the forces of competition, the benefits extend beyond Amazon and Whole Foods stores. Rivals notably reacted to the merger by replicating these cost reductions and innovative services. Walmart concluded a deal with Google to allow users to make purchases using Google’s voice assistant.[70] Kroger decreased its prices and expanded its delivery service.[71] And Target introduced a same-day delivery service.[72] Of course, some of these changes would have happened anyway—grocery delivery was always going to gather momentum thanks to consumers’ ever-improving access to the internet. It is also fair to assume, however, that Amazon’s purchase of Whole Foods accelerated this trend by signaling to rivals they needed to up their game rapidly, or Amazon-Whole Foods might ultimately eat their lunch.

Of course, it is hard to tell whether these benefits would have been achieved without the Amazon-Whole Foods merger. Amazon could conceivably have concluded a long-term contract with Whole Foods, leading rivals to introduce their improvements regardless of the merger. But this is far from certain. As Benjamin Klein, Robert Crawford, & Armen Alchian famously pointed out, long=term contractual relationships sometimes entail significant practical obstacles.[73] The upshot is that it is often more cost-effective for firms to opt for an outright merger. And if a merger was indeed necessary to generate synergies between Amazon and Whole Foods, then there is little doubt that it also played some part in the competitive response of rivals. In short, there are strong reasons to believe that Amazon’s acquisition of Whole Foods may have caused some of the benefits that U.S. retail consumers currently enjoy.

In short, many critics’ response to the Amazon-Whole Foods merger was simply kneejerk antitrust populism. Nothing at the time of the merger—other than a presumption that big is bad and a dystopian fear that big firms inevitably continue to increase their market shares[74]—justified the doomsday scenarios that were bandied about. This, among many other factors, is why the FTC ultimately allowed the merger to proceed without a protracted in-depth investigation.[75] Five years on, this decision appears fully vindicated, and critics’ arguments appear even more unreasonable with hindsight. The doomsday scenario failed to transpire.

II.      Consolidation in the Beer Industry

The beer industry has undergone significant changes in the 21st century, with a shift towards craft beers, an increase in the number of microbreweries, and a growing interest in different styles of beer. In the early 2000s, the industry was dominated by a small number of large multinational corporations, but over the past two decades, a wave of small, independent breweries has emerged, challenging the status quo and changing how consumers think about beer.

At the same time, there has been a reshuffling of ownership among the biggest U.S. brands: Anheuser-Busch, Miller, and Coors. In 2002, South African Brewing (SAB) acquired Miller Brewing to become SABMiller. In 2005, the Canadian brewing company Molson merged with Coors to become Molson Coors. In 2007, SABMiller and Molson Coors announced their “joint venture.” In 2008, InBev (itself a merger between the Belgian firm Interbrew and the Brazilian conglomerate AmBev) acquired Anheuser-Busch to become AB InBev or just ABI. In July 2016, ABI acquired SABMiller after approval from antitrust authorities. The deal included commitments from ABI to divest SABMiller’s 59% equity stake in Molson Coors. Given this list of major mergers within the space, it is appropriate to consider both the effects of specific mergers and also the general trends.

A.      The Predictions

While the earlier mergers were relatively underdiscussed, the final ABI-SABMiller merger received significant attention from antitrust watchers and commenters in the ABI-SABMiller merger process. The American Antitrust Institute warned that the merger would “eliminate competition,”[76] “impose significant price increases on consumers,” and “undermine the continued emergence of craft beer.”[77] AAI President Diana Moss told the Washington Post that the deal was “a terrible, terrible idea” and that “[t]his should be dead on arrival at the DOJ. There would be grave concerns over their power to control price … and the effects on the craft-brewing industry would be devastating.” President Biden’s 2021 executive order on competition singled out several sectors, including alcoholic-beverage production, as embodying apparently problematic concentration and a weakening of competition.[78] The U.S. Treasury Department report created in response to the executive order claimed that “[s]ome of the increased concentration may have resulted from the absence of consistent merger enforcement.”[79] While these claims are much less extreme than those we find in other contexts, it is still worthwhile to evaluate how reasonable they were and what evidence we have at this point about the effects of consolidation in the beer industry, to the extent that it has happened.

B.      What Happened?

First, has concentration been rising in beer? The Treasury report assessing competition in the beer market asserts that concentration is rising.[80] It is unclear what period was under consideration, although the citations are to older literature from the early 2000s. A recent study by Kulick & Card using U.S. Census data suggests otherwise.[81] They consider the concentration for the four largest firms in the industry. For breweries, that number was 90.8% in 2002, but has fallen to 68.6% in 2017, which is the most recent data. Instead of rising concentration, as commonly asserted, we actually see falling concentration within all alcoholic-beverage sectors, with the largest drop in beer brewing.

It is quite possible that those declines in concentration would have been even greater but for the mergers, but the falling concentration is an important datapoint to understand in this discussion.

If we want better identified estimates, we need to look at specific mergers and events. The ABI-SABMiller merger is too recent for the economics-publishing process, but the merger with the best econometric evidence is SABMiller and Molson Coors. SABMiller and Molson Coors announced their “joint venture” in October 2007 and was approved in June 2008. At the time, Miller had a 17.52% market share and Molson Coors had a 10.43% share.[82] Despite growing craft brewers, even at the time, almost 90% of beer revenue was from lagers.[83] In addition to high concentration, the main products were seen as close substitutes (Miller Lite and Coors Lite, for example).

Despite these possibly worrisome features of the market, the parties claimed large efficiency gains that would offset the market-power increases. The DOJ stated publicly that, in its investigation, “the Division verified that the joint venture is likely to produce substantial and credible savings that will significantly reduce the companies’ costs of producing and distributing beer.”[84] The reason was that “[p]rior to the merger, Coors was brewed in only two locations, whereas Miller was brewed in six geographically dispersed locations. The merger was expected to allow the combined firm to economize on shipping costs primarily by moving the production of Coors beer into Miller.”[85]

Ashenfelter, Hosken, & Weinberg (2015) use retail-scanner data collected by IRI.[86] The data used was only for supermarkets, which Ashenfelter, Hosken, & Weinberg estimate accounted for 23% of total sales for 2011. They have data on brand, package size, and container type. They find that the concentration effect was roughly (but not completely) offset by the efficiency effect. In their preferred specification, the increase in concentration from the merger was predicted to increase by 2% across all lager-style beers but that was nearly offset by efficiency created by the merger.[87] Overall, prices were unchanged on average.

If we focus on specific beers, Miller & Weinberg (2017) find a significant price increase (6%-8%) after the merger for the most popular beer brands (Coors Lite, Miller Lite, and Bud Lite) but no effect for Corona Extra and Heineken, which are seen as more differentiated.[88] The authors take this as evidence of a coordinated price effect between ABI and Miller-Coors, since the market now had only two major players, compared to three before the merger. Looking at a local level, Ashenfelter, Hosken, & Weinberg (2015); Miller & Weinberg (2017); and Azar & Barriola (2022) all find a positive correlation between increases in HHI and price increases. Overall, there is credible evidence that the merger led to a price increase for the flagship brands.

However, before we conclude that the merger was disastrous for the beer market, remember that concentration has been falling. That is because the big three are not the only players. Azar & Barriola (2022) study the effects of the merger on the craft-beer market.[89] They find that, in the average market over the four years following the merger, the merger led to over an 11% increase in the number of craft brewers, while the number of products per craft brewer remained the same. Since most of these entrants were small, the market shares were largely unaffected by entry. They point to the price increases as the driver of entry into the craft market, as it made entry profitable. This goes against a common theory that larger firms with more power will deter entry.[90] Another possibility, unexplored but consistent with higher entry, is that the merger increased the possibility that craft beers would be acquired by the large brewers.

At the same time, the large breweries are acquiring smaller breweries and changing their production process. For example, according to Elzinga & McGlothlin (2021), when ABI acquired Goose Island, there was a large increase in sales of craft beers, suggesting some sort of spillover from the big names to the craft beers.[91]

C.      In Retrospect

Overall, the effects of beer mergers seem to be neutral. While the prices of Coors Lite, Miller Lite, and Bud Lite increased, efficiency gains meant that the average price stayed flat, and we saw new entry from craft brewers. Continued growth in craft brewing suggests that Diana Moss’ concern that “the effects on the craft-brewing industry would be devastating” appear not to have panned out. One thing that makes predictions about the ABI-SABMiller merger hard to assess in retrospect, however, is that many came before the spin-off of Coors was finalized as part of the deal. It is possible that these concerns were conditional predictions that did not ultimately apply, as SABMiller needed to divest from Molson Coors as part of the DOJ agreement.

One aspect that affects the study of mergers in the beer market is that the alcohol market is extremely regulated, and those regulations change over time. Differences in regulatory regimes can serve to distinguish alcohol markets across states and over time, which makes it easier to compare more and less concentrated markets. At the same time, changing regulations also contaminate any causal analysis. The regulations introduce pressures to beer markets that differ from more standard product markets, such as smartwatches. As Barry Lynn of Open Markets described it: “The great effervescence in America’s beer industry is largely the product of a market structure designed to ensure moral balances…” (emphasis added).[92] He added that “consolidation can also threaten the primary outcome of this market — the ability of communities and individuals to manage for themselves this ever so extraordinary commodity.”[93]

Such moral questions, or questions about communities’ ability to manage themselves, are beyond the scope of this merger retrospective, but an unavoidable part of the larger policy debate surrounding beer.

III.    Bayer-Monsanto

The Bayer-Monsanto merger, completed in 2018, brought together two of the world’s largest and most innovative agricultural companies, creating a leading player in the industry. The merger, valued at $66 billion, has had a significant impact on the global agriculture industry and brought several benefits to farmers and consumers. After earning approval from the European Union, Russia, and Brazil, approval in the United States (particularly by the DOJ) was the deal’s final hurdle.

In order for the Bayer-Monsanto merger to pass, the DOJ required the companies to make certain divestitures. Divestitures are the process of selling off certain assets or businesses in order to mitigate concerns about the merger reducing competition in the market. The DOJ required Bayer to divest certain seed and herbicide assets in order to address concerns about the merger’s potential impact on competition in the seed and herbicide markets. In total, the two companies spun off $9 billion in assets.[94] Specifically, Bayer was required to divest its cotton, canola, soybean, and vegetable-seed businesses, as well as its Liberty herbicide business, to BASF, a German chemical company. This divestiture helped to ensure that there would continue to be strong competition in the seed and herbicide markets after the merger.

Additionally, Bayer was also required to divest certain assets to ensure that there would continue to be competition in the digital-agriculture market. Specifically, the company was required to divest its “Xarvio” digital-agriculture platform to an independent third party.

The DOJ also imposed restrictions on Bayer’s behavior to ensure that the company would not use its strengthened position in the market to harm competition. For example, Bayer was required to license certain intellectual property to competitors to ensure that they could continue to compete effectively.[95] These required divestitures and restrictions on behavior helped to ensure that there would continue to be strong competition in the market after the merger.

A.      The Predictions

Perhaps unsurprisingly, the merger drew stern rebukes from progressive advocates of more aggressive antitrust enforcement. Spencer Waller, a professor at Loyola University Chicago’s School of Law and the director of the Institute for Consumer Antitrust Studies, expressed standard fears about the merger: “The fear is that price is going to go up, quality is going to go down, and whichever company was trying super hard before, well, they got merged in, and they’re going to stop caring.”[96] Sen. Amy Klobuchar (D-Minn.) opined that “[l]arge-scale consolidations in the agricultural inputs sector could also significantly reduce competition, limit seed options for farmers, and raise prices for both farmers and consumers,” adding that the “company created by the Bayer-Monsanto merger would control about 24 percent of the world’s pesticides sales. Together, Bayer-Monsanto and Dow-DuPont would control 76 percent of the market for corn and 66 percent of the market for soybeans.”[97] These fears were echoed by academic work arguing that increased consolidation resulting from the Bayer-Monsanto and Dow-Dupont mergers would lead to significant price increases in the markets for corn, soy, and cotton seeds.[98]

More generally, the merger (as well as others deals in the food sector) was repeatedly cited as an example of the failing state of antitrust enforcement. For instance, the Democratic Party’s “Better Deal” platform, published in July 2017, cited the food sector as one of five key sectors that required more stringent antitrust merger enforcement.[99] It also argued that the Dow-Dupont, Bayer-Monsanto, and Syngenta-ChemChina mergers would harm farmers and rural communities. According to the document, these harms justified a more holistic approach to antitrust policy.[100]

Finally, in addition to standard market-power concerns, some critics raised fears about the use of data to harm farmers. Margrethe Vestager, the European Union’s top antitrust enforcer at the time of the merger, worried about the effects of collected data on farms. “Digitalization is radically changing farming,” Vestager told a German newspaper. “We need to beware that through the merger, competition in the area of digital farming and research is not impaired.”[101] “If they own the data, then they can dictate what they plant, where they plant it, and how they’re harvested,” said Joe Maxwell, executive director of the Organization for Competitive Markets.[102]

B.      What Happened?

The merger did increase market concentration within the agriculture industry. Prior to the merger, Bayer and Monsanto were already two of the industry’s largest players and the merger served to further consolidate their position. Increased concentration led to concerns about reduced competition and higher prices for farmers and consumers. But did they play out?

While people will point to rising seed prices as evidence of the merger’s harms, it is important to view the rising prices in context. Several factors, unrelated to any mergers, contribute to the rising cost of seeds over time. One reason is the ongoing development of hybrids that have higher yields, making the seed more valuable. Additionally, the incorporation of biotechnology traits in corn hybrids has provided farmers with management advantages, such as possible reductions in the use of pesticides and tillage, which further increases the value of the seed.[103] Improvements in seed genetics and technology have led to increased costs of seeds, specifically, but may reduce the true costs of corn per-bushel, as yields have increased.[104]

In addition, the merger has led to concerns about the potential for the newly merged company to wield significant influence over the regulatory process. The company will have significant resources at its disposal, which could be used to influence regulators and shape policies in ways that benefit the company, but not necessarily the public.

Regulators argued that, by merging with Monsanto, Bayer would become a major player in the corn-seed market. The newly merged company would have significant market share and an increased ability to influence prices. Additionally, since Bayer also sells a key seed treatment to corn farmers, the company would have an incentive to raise the price of the treatment, knowing that farmers would have fewer choices of seed suppliers, which was one of the concerns that the government raised about the merger. This argument ignores the complementarity between seeds and seed treatment, in that any increase in price for seed treatment lowers the demand for your seeds. The merger actually aligned these incentives.

One market where Monsanto had relatively large market share is in corn and soybean seeds. Sen. Klobuchar worried that “Bayer-Monsanto and Dow-DuPont would control 76 percent of the market for corn and 66 percent of the market for soybeans.” While hardly rigorous econometric evidence, we can look at global corn and soybean prices, as shown in Figure III, to assess how the corn and soybean markets are doing. Both prices stayed steady after the merger, but these prices are not adjusted for inflation. Corn and soybean prices actually fell in real inflation-adjusted terms. Only the onset of the COVID-19 pandemic, with the ensuing inflation and supply-chain issues, drove corn prices back on par with previous nominal highs from around 2012-2013.

Among the primary benefits of the merger have been increased efficiency and cost savings. By combining the resources and expertise of both companies, the newly merged company is better positioned to invest in research and development, improve yields, and reduce costs for farmers. In 2018, along with the acquisition of Monsanto, Bayer announced annual cost savings of around $1.5 billion.[105] In 2020, it announced an addition $1.8 billion in annual savings.[106] It is important to note, however, that this latter cost savings was partially in response to the COVID-19 pandemic and should not be directly attributed to the merger.

These sort of cost reductions do, however, tell us something about the relevant markets, as well as the market position in which Bayer now finds itself. The need to cut costs drastically does not comport with a firm soaking in monopoly profits. If the best of all monopoly profit is a quiet life, Bayer does not have that life. Over the past five years, since just before the merger was allowed, Bayer’s stock is down more than 50%.

C.      In Retrospect

Five years after the merger, there is no evidence that Bayer can “dictate what they plant, where they plant it, and how they’re harvested.”[107] Again, the direst predictions have not occurred. Farming remains a difficult life. The hours are long, and prices are volatile. But it is hard to find a break in any trends.

One of the challenges of a retrospective on the Bayer-Monsanto deal is the sheer variety of markets in which each company participates. This is a broader issue that applies to any retrospective analysis of mergers. We need to be careful that any perceived market harms are not actually the result of random chance. Even if most mergers are beneficial for competition, some will turn out to have generated a rise in prices. This is not conclusive evidence that allowing the merger was a mistake, even if it may appear so in hindsight. It is quite possible that at least one of the many markets affected by the Bayer-Monsanto merger did see a rise in prices. But looking across those many markets to find the particular one that generated a price rise is equivalent to p-hacking. We have the same problem in looking explicitly for markets where harm did not occur.

Instead, this retrospective focused on Bayer’s overall market position, as reflected in its stock returns and need to cut costs, as well as the market for corn and soybean seeds, because these were markets that were explicitly highlighted as areas of potential concern by progressive critics. Looking at these metrics suggests that, despite an increased level of market power from the merger, Bayer has failed to raise prices or exploit its position in any meaningful way.

IV.     Google-Fitbit

Google’s purchase of Fitbit was one of the largest tech acquisitions of 2019. The $2.1 billion deal marked Google’s entry into the wearables market and added Fitbit’s popular fitness-tracking devices to the tech giant’s portfolio.[108] The acquisition also sparked a debate among industry experts, privacy advocates, and consumers regarding the potential consequences of combining the vast data collected by Fitbit with Google’s already extensive data-collection and analysis capabilities.

A.      The Predictions

The deal’s announcement was swiftly met with cries of alarm from both privacy advocates, who feared it would enable Google to use consumers’ health information to target ads, and from progressive-minded competition scholars, who believed the deal would cement Google’s market position in online advertising. Lina Khan called allowing the acquisition a “terrible decision.” This was part of her larger complaint that “[e]nforcers spent the last two decades waiving through hundreds of acquisitions by Google, only to watch it illegally renege on commitments, exclude rivals, & monopolize markets.”[109]

The fears surrounding the Fitbit acquisition are perhaps best summarized in a joint statement, signed by several consumer associations and progressive-advocacy groups, including BEUC (Europe’s largest consumer organization), the Open Markets Institute, and the Omidyar Network.[110] Among other things, the organizations claimed the merger would prevent new firms from entering the market and would harm consumer privacy:

Wearable devices could replace smartphones as the main gateway to the internet, just as smartphones replaced personal computers. Google’s expansion into this market, edging out other competitors would thus be significant. Wearables like Fitbit’s could in future give companies details of essentially everything consumers do 24/7 and allow them to feed digital services back to consumers…. The exploitation of such data in a commercial context is an important concern that demands close scrutiny by regulators both for its anticompetitive effects (where huge bundles make it near-impossible for entrants to compete against incumbents) and anti-consumer effects (creating ever bigger bundles that undermine consumer choice).[111]

Along similar lines, Tommaso Valletti & Cristina Caffarra intimated the deal would enable Google to use data from Fitbit devices in order to better target its ads. According to them, this would harm user privacy and suppress competition from other advertisers:

With Google as the acquiror, the concern is that the acquisition is intended to pre-empt the emergence of a potential rival who could otherwise develop by exploiting a key ‘access point’ for the collection of data and for access to our attention, with the ultimate aim to defend and enhance its position in the core advertising business…

[Google] already owns locational data that is hugely important for targeted advertising…. Combining this existing stock with enormously valuable biometric and behavioural data that can inform on other dimensions of the user’s experience, Google will gain further strength in the supply of digital advertising in which it is already super dominant.[112]

In both cases, an important part of the argument was that the merger would harm competition because data from Fitbit devices would reinforce Google’s already strong position in the online-ad industry.[113] The authors supported this assertion by claiming essentially that the incentives to do so were simply too powerful for Google to ignore:

Google/Fitbit involves the acquisition by a giant digital platform—whose business is based on the monetisation of customers’ data through microtargeted ads, and is already sitting on a mountain of personal data and analytics capabilities—of a target with unique data-generating assets in the most sensitive of all areas: capturing biometric data (health, and even emotions) 24 hours a day, every day.[114]

Or, as seven Democratic senators claimed:

Adding Fitbit’s consumer data to Google’s could further diminish the ability of companies to compete with Google in… ad technology markets and could raise barriers for potential competitors to enter these markets,’ the lawmakers wrote.[115]

Others, including Gregory Crawford, speculated that Google would combine health data from Fitbit devices with more general data about those same users, and sell this to insurance providers, enabling them to better price discriminate between consumers:

Combining health and non-health data will allow Google to use non-health data to “customize” insurance offers. Does he gamble? Does she search for symptoms of life-threatening illnesses? It’s easy to see how such info could reduce the quality of insurance offers.[116]

Regulators, however, were largely unconvinced by these claims, with the world’s largest antitrust authorities clearing the merger with only limited remedies. In the United States, the DOJ essentially waved the deal through, while the European Commission required only limited API access and data-use-related remedies.[117]

In short, vocal critics made three key claims about the merger, all of which have since turned out to be false: (i) that Google would use data from Fitbit devices to better target its ads, (ii) that Google would obtain a dominant position in wearable devices and prevent the entry of rivals in this segment, and (iii) that Google would reinforce its already strong position in the online-advertising market. As explained below, not one of these claims has turned out to be even remotely accurate.

B.      What Happened?

Critics’ claims appear most mistaken in the advertising industry. Indeed, the fear was that, by purchasing Fitbit, Google would be in a position to better target ads throughout its entire platform, thereby increasing its hold on the broader advertising industry. Four years on, however, the opposite appears to have happened. From 2017 to 2022, Google’s share of online advertising spend has steadily declined, falling from 34.7% to 28.8%.[118] And it is not just in relative terms; the company’s quarterly earnings reports show a clear decline in ad revenue, including year-over-year drops in the fourth quarter of 2022 of 8.6% for the Google network and 7.0% for YouTube.[119] As usual, critics may retort that Google’s revenues and market shares would have declined even more absent the merger but, once again, that was not the initial claim. Instead, they wrote that the merger would give Google an unbreakable grip on the online-advertising industry—the “horse has bolted” as Gregory Crawford put it[120]—and that has not been the case.

A second major piece of the doomsday claims concerns the combination of health-related data from Fitbit with Google’s other data concerning its users, either with the purpose of using it for Google ads or in order to sell it to insurers. While the remedy imposed by the European Commission precluded Google from combining data across platforms with the purpose of selling Google ads, it said nothing about the use of Fitbit and Google data for insurance purposes.[121] Meanwhile, nothing prevented Google from doing any of this in the United States, where the DOJ chose not to challenge the acquisition.[122] And yet, at the time of writing, even in the United States, Google does not use Fitbit data to target Google Ads. Fitbit’s privacy policy is unambiguous in this respect. The “how we use information” section of the policy lists only four uses:





None of these categories (which the privacy policy delves into in great detail) could reasonably be construed as entailing the use of Fitbit data in order to better target Google ads. The same applies to the “how information is shared” section of the same privacy policy.[124] In short, Google does not use Fitbit data to target Google ads. As the company summarized in an explainer regarding the merger:

Currently, all customers log in to Fitbit with a Fitbit account, and so your Fitbit data syncs to your Fitbit account, not to a Google account. However, you may still choose to transfer some Fitbit data to Google in limited cases, like if you use Fitbit with a Google service. For example, you may authorize Google Assistant to provide your Fitbit activity, like your step count and calories burned. For more information on connecting Fitbit and Google Assistant, please see How do I use a voice assistant on my Fitbit smartwatch? and the related Google help article. For more information on how Fitbit shares data with others, including Google, please see the Fitbit Privacy Policy section titled “How Information Is Shared.”[125]

Thus, contrary to critics’ claims, Google does not integrate users’ Fitbit data into its broader advertising platform, nor does it share (or sell) that information with (to) insurers.[126] And nothing suggests it plans to do so in the future.

This leaves one final question: did the acquisition of Fitbit enable Google (and Fitbit) to significantly increase either of the firms’ market position in the burgeoning wearable-device industry? Once again, critics’ claims appear to fall short. Fitbit has been slowly losing market share. According to Counterpoint Technology Market Research, the overall smartwatch market grew by 22% from 2020 to 2021, but Fitbit’s share fell from 5.7% to 3.8%, as shown in Figure V. Counterpoint found similar declines in market share from 2021 to 2022.[127] Other competitors, such as Samsung and Garmin, saw an increase in their market shares, but Apple (rather than Google-Fitbit) remains the major player in the market by a substantial margin.


C.      In Retrospect

It is important to situate the Fitbit acquisition in a broader tech-hardware market that all of the major players are trying to enter. One year after the relevant merger took place, Amazon introduced its Amazon Halo, which it describes as “a new service dedicated to helping customers improve their individual health and wellness. Amazon Halo combines a suite of AI-powered health features that provide actionable insights into overall wellness via the new Amazon Halo app with the Amazon Halo Band, which uses multiple advanced sensors to provide the highly accurate information necessary to power Halo insights.”[129]

Many argued at the time that Amazon’s invention would become one of the biggest game-changers in the market for smartwatches. Nevertheless, two years after its launch, the Halo had not set the sales charts on fire and, in July 2022, the company cut its price steeply to $45. It continues to stand as a cheaper alternative to more entrenched producers. Market watchers saw Amazon’s struggles as similar to Fitbit’s, with one tech-news site noting: “The Fitbit comparisons are immediately obvious, given the similar design and form factor.”[130] Yet, neither cheaper option has been able to supplant the Apple Watch.

It is also important to note that the Google-Fitbit merger helped enable Google to enter the smartwatch market to compete with the market leader, Apple. And the Fitbit acquisition was not the only move Google made aimed at competing with its biggest smartwatch rival: In 2019 Google also acquired Fossil Group’s smartwatch-related IP and a portion of its R&D personnel.[131] Google introduced the Pixel Watch in late 2022, following two failed previous attempts (both cancelled ahead of their release) to introduce a Pixel-branded smartwatch to compete with the Apple Watch.[132]

Why did Google take so long to build a smartwatch? When I asked that question to Rick Osterloh, Google’s SVP of hardware…, his answer was one word: Fitbit. Google couldn’t make the smartwatch it wanted without a killer health and fitness platform, and until very recently, it simply didn’t have one.[133]

There have also been policy changes that have affected the market and particularly the data concerns that some observers raised. Among the significant legislative changes were the EU’s General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA), both of which took effect in in 2018. In 2019, Sens. Bill Cassidy (R-La.) and Jacky Rosen (D-Nev.) first introduced the Stop Marketing And Revealing The Wearables And Trackers Consumer Health (SMARTWATCH) Data Act, which proposes “prohibitions on the use, sharing, or selling of health data collected, stored, and transmitted by wearable devices, including smartwatches.”[134]

Those developments notwithstanding, it appears clear that critics’ fears concerning the Fitbit acquisition were dramatically overblown and failed to reflect the competitive reality that Google faced. With intense competition for wearable devices, integrating Fitbit data into the broader Google Ads ecosystem was always going to be an unpopular move that Google could ill afford. Meanwhile, integrating the Fitbit platform into Google’s smartwatch ecosystem was exactly the needed boost to finally enable it to compete with Apple in the smartwatch space.

V.      Facebook-Instagram (and WhatsApp)

Public reaction to the Facebook-Instagram merger (and, to a lesser extent, Facebook’s purchase of WhatsApp) could be seen as the inverse of what happened with the mergers discussed in the previous sections. While many progressives today see this merger as “the one that got away” from authorities, at the time, it was mostly seen as benign and was even derided as a poor business decision on Facebook’s part. Very few competition scholars or advocates of aggressive antitrust stepped forward to assert that it would harm competition. In other words, a deal that is now seen by many as the quintessential “killer acquisition”[135] struck most as harmless when it was announced. As in the previous case studies, this suggests that media coverage and the commentary surrounding a merger is often a poor predictor of its likely future effects on competition—or, at least, a poor predictor of which mergers critics will come to see as harmful in the future.

As the previous paragraph intimated, critics today (and a handful of them at the time of the deal) have come to see Facebook’s acquisition of Instagram (and WhatsApp) as uniquely harmful to competition. It has been described as a killer acquisition, not for actually killing Instagram, but for Instagram’s failing to develop as it might have but for being acquired.[136] It is worth noting, as we explain at length in a separate paper, that even this contemporary take is deeply flawed.[137] Indeed, there are important reasons to believe that, rather than kill a competitor, the merger is ultimately what enabled the Instagram platform to thrive in ways that would have been impossible without the merger.

A.     The Predictions

While they were few and far between, there were some objections to the deal when it was announced. For example, Om Malik opined that Facebook was essentially buying off a competitor: “Facebook was scared shitless and knew that for first time in its life it arguably had a competitor that could not only eat its lunch, but also destroy its future prospects.”[138] This critique aside, the merger did not draw anywhere near the amount of attention at the time as it currently occupies in policy discussions.

Indeed, the deal was widely derided when it was announced, not for antitrust reasons, but as a terrible purchase by Facebook. For instance, Florian Ederer remembers telling his MBA students, “This makes no sense.”[139] Others argued that it was evidence of a tech bubble. Charles Arthur, a columnist for The Guardian, wrote that:

[I]t’s hard to imagine how a service that just lets you take a photo of your breakfast, colour it blue and share it could possibly be worth anything. Perhaps Instagram isn’t really worth anything: if the electricity goes off, it will simply cease to exist, except as some bits on a hard drive somewhere. But until then, enjoy the bubble while it lasts.[140]

Along similar lines, another Guardian piece asked several progressive commentators, including Kara Swisher, what they thought was the rationale for the deal. None of them cited anticompetitive behavior—some even brushed that concern aside. Instead, the consensus appeared to be that the merger would reinforce Facebook’s platform and enable it to compete against Google’s now defunct Google+ social-media service:

Seeing the Instagram acquisition as merely quashing a potential competitor to one aspect of Facebook’s offering is far too narrow an outlook, though. Better, surely to view the deal against the increasingly familiar backdrop of Facebook’s “It’s complicated” relationship with Google and Apple. One of the things people like most about the Google+ social network is its photo-sharing features. Buying Instagram not only bolsters Facebook’s capabilities on that front—photo filters in its official app within a few months, anyone?—but also keeps the startup out of Google’s clutches, should it have been tempted to make its own acquisition bid.[141]

These reactions are understandable. The Instagram platform grew from roughly 24 million users and no revenue at the time of the acquisition to more than 1.2 billion users today.[142] Given that, contemporary observers unsurprisingly failed to imagine that the merger would later be construed as a ploy to take out Facebook’s budding rival.

With the benefit of hindsight (or perhaps the “benefit” of a newly accommodating political environment), however, many have come to see Facebook’s purchases of Instagram and WhatsApp as perhaps the quintessential “killer acquisitions”—in which an incumbent acquires a potential rival in order to preserve its market position.[143] This criticism ultimately led the U.S. House Judiciary Committee to open an investigation into competition in digital markets that focused heavily on Facebook’s acquisitions.[144] It also led the FTC and 46 state attorneys general to lodge antitrust complaints.[145] As Rep. Ro Khanna (D-Calif.) put it: “Imagine how different the world would be if Facebook had to compete with Instagram and WhatsApp. That would have encouraged real competition that would have promoted privacy and benefited consumers.”[146]

There has also been significant criticism of the deals in academic circles. Among the more restrained, Steven Salop has written that “while Instagram might have provided an efficient photo-sharing technology that Facebook could utilize, it might have grown into a social media competitor absent the acquisition.”[147] This led Jason Furman and his co-authors to conclude that the deal should likely have been blocked by authorities:

With the benefit of hindsight, we can now observe that Instagram has grown considerably since 2012 and offers a service that many see as an alternative to Facebook. Facebook owns both networks, meaning that consumers switching from its original network to Instagram do not cause it competitive concern, and does not provide an incentive for Facebook to improve its services in response. Analysis of the social media market in Chapter 1 illustrates how this acquisition may have offset some of the decline in Facebook’s share of the market….

While the CMA continues to be required to demonstrate at phase 2 that a substantial lessening of competition is more likely than not to occur, the panel is concerned that it could be unable to challenge mergers of this kind effectively, despite the scale of potential harm being very large.[148]

Writing only a couple of years ago, these scholars believed that, absent the merger, Instagram would have grown into a powerful social-media competitor to Facebook, leading to better services for users, cheaper advertising on both platforms, and facilitating market entry for new challengers.

Similarly, Tommaso Valletti & Cristina Caffarra have argued that Facebook’s purchase of WhatsApp magnified the company’s ability to extract personal data from users (although their reasoning likely extends to the Instagram purchase, as well):

We have also collectively recognised (ex post) that the review of Facebook/WhatsApp missed the true driver for the deal—capturing the millennial generation’s users and monetising yet more personal data, increasing Facebook’s power in advertising markets in disregard of privacy rules.[149]

In short, while Facebook’s purchase of Instagram was widely seen as benign when it was announced, it later came to be seen as cementing the company’s unassailable position in the social-networking space.

B.      What Happened?

Recent developments in the social-media space are making contemporary criticism of the Facebook-Instagram deal look increasingly misguided. Indeed, only a couple of years after many experts opined that the deal enabled Facebook to maintain its monopoly, the company’s social-media “empire” is showing significant cracks. With the entry and rapid rise of TikTok, there is now a strong sense that Facebook’s market position was never as secure as critics made it out to be. This might not be so bad if these critiques were not so quick to overlook the many consumer benefits that were likely generated by the Instagram deal, and that seem to have been obvious to observers when it was announced.

To begin, despite numerous assertions of the alleged anticompetitive nature of the Instagram and WhatsApp mergers, Facebook (now Meta) has, in fact, experienced a loss in daily users. “Meta’s once all-powerful, unmatched social graph is no longer the market advantage that it once was,” it has been noted. [150] Meanwhile, TikTok “has seen great success (…) with the app opening to a ‘For You’ feed of algorithmically-selected clips, based on your viewing habits.”[151] Thus, 11 years after the Instagram merger and only a couple of years removed from the most scathing condemnations of its effects, Meta is struggling to compete with the growing threat posed by TikTok. This stands in contrast to the many arguments that the merger had cemented Facebook’s long-term supremacy. As one observer put it:

As reported by WSJ, TikTok users are spending over 10x as many hours consuming content in that app as Instagram users currently spend viewing Reels. According to a leaked internal report, Reels engagement is also in decline, dropping 13.6% in recent months—while ‘most Reels users have no engagement whatsoever.[152]

It is estimated that TikTok will grow to 834.3 million monthly users worldwide in 2023.[153] There is thus reason to believe that, within a short time span, it could become the largest of the Big Five worldwide social networks (Facebook, Instagram, TikTok, Snapchat, and Twitter).

This competition is all the more worrying for Meta, given that many segments of the social-media industry are still growing, and new niches are still being discovered. New segments like the so-called “metaverse” and game-based communities such as Fortnite all potentially create new footholds for rivals to exploit. Similarly, older segments of the industry also continue to grow, opening avenues for rivals to compete for new users who are not already attached to one of Meta’s services. This is notably the case for messaging apps, which continue to attract millions of new users every year (see Figure VII).

Given what precedes, it is not surprising that many have started to suggest that Meta’s market position is under significant threat.[154] As one columnist wrote in the New Yorker:

Facebook, it seems, is moving away from its traditional focus on text and images, spread among people who know one another, to instead adopt TikTok’s emphasis on pure distraction. This shift is not surprising given TikTok’s phenomenal popularity, but it’s also shortsighted: platforms like Facebook could be doomed if they fail to maintain the social graphs upon which they built their kingdoms.

Along similar lines, the Washington Post published a piece titled “How TikTok Ate the Internet” that suggested that TikTok may have already won fight to become the largest social-media network:

In five years, the app, once written off as a silly dance-video fad, has become one of the most prominent, discussed, distrusted, technically sophisticated and geopolitically complicated juggernauts on the internet — a phenomenon that has secured an unrivaled grasp on culture and everyday life and intensified the conflict between the world’s biggest superpowers.

No app has grown faster past a billion users, and more than 100 million of them are in the United States, roughly a third of the country. The average American viewer watches TikTok for 80 minutes a day — more than the time spent on Facebook and Instagram, combined.[155]

To make matters worse, Meta’s stock has lost more than half its value between its peak in 2021, when antitrust criticism of Meta reached its apex, and today.[156] While this may be partly due to the increased competition mentioned above, it may also be due to more widespread concerns about the long-term prospects of Big Tech firms, especially in an environment of rising interest rates.

In short, critics of the Instagram and WhatsApp mergers claim that they essentially enabled Facebook to build an unassailable monopoly over social media. Fast forward a couple of years, and claims of competition’s demise appear to have been premature.

C.       In Retrospect

The Facebook-Instagram merger shows that critics are just as likely to underestimate the competitive significance of a deal as they are to overestimate its anticompetitive effects. On the one hand, observers at the time of the deal largely failed to grasp its rationale and implications. The merger was too often dismissed as Facebook overpaying for a photo-filter app, when in fact it was astutely negotiating the shift towards mobile-based social networking. On the other hand, critics writing only a couple of years ago seem to have gone too far in the other direction. The notion that Facebook built an unassailable monopoly over the social-networking industry by acquiring Instagram is largely refuted by the rapid rise of TikTok. While it is conceivable there would be even more competition in the market absent the merger, it seems clear that the deal did not create anything close to an unassailable monopoly. In short, the deal had complex ramifications for the industry. The alarms raised by academics and pundits largely failed to capture this.

Of course, we are not the first to say this. As Robert Crandall & Thomas Hazlett write in a forthcoming review of digital-platform mergers, the effects of the Facebook-Instagram merger are, at this point, “ambiguous.”[157] They summarize the tradeoffs thusly:

In hindsight, it may be that, had Facebook not acquired Instagram, for example, the independent start-up would have evolved more or less as it did (integrated with Facebook) into a large social media platform and, with perhaps fewer economies of scale and scope (but competing with a Facebook having fewer of either, as well), thus creating additional choices for social media users at modest efficiency cost.

We may have a better sense once the FTC’s monopoly maintenance case against Facebook (first filed in 2020 and re-filed in 2021), in which the agency seeks a divestiture of Instagram and WhatsApp, proceeds further in court.[158] With a more thorough analysis, it may become clear that this was, indeed, the tech merger that “got away” from regulators. Nonetheless, as is common in the examples put forth in this paper, there were also large beneficial effects for consumers that we cannot simply wave away. We need to take these market complications seriously.

Moreover, even after the FTC resolves its complaint, we need to be careful about extrapolating too much from this case and thereby overcorrecting. Regulators might have decided, for example, that since they made a mistake on Facebook-Instagram, they should draw a hard line and bar the next merger in the social-media space. In this example, that would have been Microsoft’s acquisition of LinkedIn, which Crandall & Hazlett classify as “competitive,” as it further allowed LinkedIn to compete with Facebook.

We cannot simply conclude that, since there are network effects in social media, therefore social-media companies must not be permitted to grow larger through mergers. Sometimes network effects are beneficial for consumers, as when they allowed Facebook to bring Instagram’s technology to a larger audience more quickly. And the rise of TikTok (and SnapChat, and other social-media platforms) demonstrates that these network effects do not completely seal off competition.

In short, the Facebook-Instagram merger demonstrates that predicting the competitive effects of mergers is incredibly challenging. Even with all the expertise and, often, sophisticated analytical methods deployed by antitrust agencies, there may still be anticompetitive deals that escape enforcers’ vigilance—and the Facebook-Instagram may or may not be one such instance (we believe it is not). While this case-by-case, evidence-based process of adjudication may not be perfect, it remains vastly superior to relying on the intuitions of pundits, activists, and academics. The commentary surrounding the Facebook-Instagram deal suggests that such pronouncements often fall wide of the mark and are thus unreliable for policymaking purposes.

VI.    Ticketmaster-Live Nation

For our last merger, we turn to Ticketmaster, which was back in the headlines in late 2022 after experiencing website issues during its sale of tickets for Taylor Swift’s first tour in five years. Antitrust proponents have used the incident to call for investigations into Ticketmaster and its dominant position within the ticket-sales market. In an open letter to Ticketmaster’s CEO, Sen. Klobuchar wrote “to express serious concerns about the state of competition in the ticketing industry and its harmful impact on consumers.” The New York Times has reported that the DOJ has opened an investigation into Ticketmaster’s parent company, Live Nation Entertainment.[159]

Klobuchar and others have pointed to Ticketmaster’s 2010 merger with concert promoter Live Nation as the primary source of problems in the market. Not mincing words, Rep. Alexandria Ocasio-Cortez wrote in 2022: “Daily reminder that Ticketmaster is a monopoly, it’s merger with LiveNation should never have been approved, and they need to be reigned in. Break them up.”[160] With Ticketmaster back in the news, now is a good time to review its history of mergers and acquisitions and what role they may have played in the public’s current frustration with the company.

As we explain below, recent media coverage of Ticketmaster—particularly its failings related to the Taylor Swift tour—-and the accompanying calls for tougher merger enforcement are largely unmoored from any actual antitrust issues. Indeed, there is little reason to believe that Ticketmaster’s failings would have been averted absent its merger with Live Nation (or, more generally, if it faced tougher competition). Put differently, these issues appear to have little to do with market power and its reinforcement—the harm that antitrust merger enforcement seeks to prevent.[161]

It is also important to note that antitrust enforcers were not naïve about the state of competition in the ticketing market at the time of the merger. They clearly acknowledged that Ticketmaster held a dominant market position. Their assessment, however, was that, conditional on several remedies, the merger would not significantly increase the company’s market power. With hindsight, this assessment appears vindicated, as Ticketmaster’s market share does not appear to have materially increased in the years since. And, as we have repeatedly noted with respect to other mergers discussed here, there may well have been important benefits from the vertical combination of Ticketmaster and Live Nation.[162] The upshot is that not all business failings can be pinned on insufficient competition or lax antitrust enforcement. Progressive policymakers, scholars, and pundits often fail to acknowledge this, and their ensuing calls for tougher enforcement thus lack a sound basis.

A.      The Predictions

In February 2009, concert promoter and venue operator, Live Nation, announced that it had reached an agreement to merge with Ticketmaster in a $2.5 billion, all-stock deal. In January 2010, the DOJ approved the merger under a settlement agreement. Both the merger and the DOJ’s approval were controversial at the time.[163] At the time of the announcement, a columnist for The New York Times wrote that the company was “known for the ever-rising cost of an assortment of tacked-on fees.”[164]

This was not new territory for Ticketmaster. Complaints about Ticketmaster go back decades, and they are not uniquely tied to any one merger or event. In 1993, Variety reported that “Ticketmaster Corp. has been summoned to court Wednesday on allegations the nation’s largest ticket distrib has become an entrenched monopoly whose ‘service charges’ have gouged thousands of Southern Californians for years.”[165] The piece continues: “At stake is the $1 billion-a-year tix purveyor’s unrivaled market position in the Southland for computer-and-telephone sales of seats to live events, from opera to ice hockey, from the Greek Theatre to the Whiskey.”[166] Despite all the technological changes since 1993, Ticketmaster has remained the big name in concert tickets and the complaints have followed it throughout.

Maybe surprisingly for a company that has been called a monopolist for so long, the concerns around the Live Nation merger were rather mundane, in contrast to the-sky-is-falling reaction to many of the mergers mentioned above. David Balto, for example, testified before Congress and argued:

The proposed merger raises serious vertical concerns. By combining a ticketing monopolist with a dominant firm in marquee concert promotion, the merged firm will be able to foreclose competition in both markets, leading to less choice and higher prices…. The proposed merger poses a significant threat to independent concert promotion…. The proposed merger will diminish competition from secondary ticket services which offer the potential for greater rivalry in the ticketing market.[167]

At a 2010 presentation at South by Southwest, DOJ Assistant Attorney General Christine A. Varney noted:

  • “Ticketmaster had maintained a market share of over 80% in the 15 previous years.”
  • “Consolidation has been going on for some time, resulting in economic pressures on local management companies and promoters.”
  • “Entry by new competitors was difficult for reasons of both technology and reputation.”
  • “People view Ticketmaster’s charges, and perhaps all ticketing fees in general, as unfair, too high, inescapable, and confusing.”
  • “Live Nation posed an ‘existential threat’ to Ticketmaster when it launched its own ticketing system.”[168]

Subsequently, of course, critics have laid blame for virtually all perceived problems in concert and sports ticketing at the merger’s feet. In late 2022, a coalition led by the Economic Liberties Project (ELP) launched “Break Up Ticketmaster,” a campaign aimed at pressuring the DOJ to break up the merger, blaming it for “hiking up ticket prices, charging rip-off junk fees, and exploiting artists, independent venues, and fans.”[169] As noted by ELP’s executive director Sarah Miller (now an advisor to Chair Khan at the FTC):

Ticketmaster’s market power over live events is ripping off sports and music fans and undermining the vibrancy and independence of the music industry. With new leadership at the DOJ committed to enforcing the antitrust laws, our new campaign helps connect the voices of fans, artists, and others in the music business who are sick and tired of being at the mercy of Ticketmaster’s monopoly with enforcers who have the power to unwind it.[170]

B.      What Happened?

With the passage of time—13 years and counting—the DOJ’s decision to clear the merger increasingly appears to have been the correct one. While Ticketmaster remains the leading ticketing company, it has failed to materially increase its market share and has not stopped new competitors from entering the market and achieving some measure of success.

At the time of writing, Ticketmaster’s market share appears to be about 70%, although potentially as low 65%,[171] in contrast to the 80% market share the company enjoyed at the time of the merger.[172] Precise estimates are hard to come by and it is, of course, possible that this number would be higher if the relevant market were narrowed to certain key segments. Nevertheless, the big takeaway is that Ticketmaster’s market share is no larger than it was in 2010, and it is probably somewhat smaller.

This shouldn’t be surprising. There is considerable competition in event ticketing, even though Ticketmaster continues to be the largest provider. As Live Nation’s 10-K notes:

We also face significant and increasing competition from companies that sell self-ticketing systems, as well as from venues that choose to integrate self-ticketing systems into their existing operations or acquire primary ticketing service providers. Our competitors include primary ticketing companies such as, AXS, Paciolan, Inc., CTS Eventim AG, Eventbrite, eTix, SeatGeek, Ticketek, See Tickets and Dice; secondary ticketing companies such as StubHub, Vivid Seats, Viagogo and SeatGeek; and many others, including large technology and ecommerce companies that we understand have recently entered or could enter these markets.[173]

Ticketmaster faces important competitors that stand to gain should failures such as the Taylor Swift fiasco repeat themselves. These competitors include the likes of StubHub and SeatGeek—companies that, together, hold an estimated 30% of the market.[174] In fact, SeatGeek entered the market in earnest only after Live Nation’s acquisition of Ticketmaster, dispelling the notion that the merger would make the entry and growth of new rivals impossible.[175] Whatever one thinks of the merger, it clearly is not a story of Live Nation acquiring Ticketmaster and succeeding to dominate the market as a result. Instead, the story is more consistent with Ticketmaster and Live Nation maintaining their positions in a complicated, multi-sided market via the merger.

As in our previous case studies, it is of course conceivable that the market would have become even more competitive without the merger. But while this is a possibility, it reinforces—rather than undermines—the central point of this paper. Predicting the competitive effects of mergers is complicated. That is why we entrust this task to—usually—technically proficient agencies. Popular calls to prohibit mergers because they create even bigger firms fail to capture this reality. Similarly, ongoing attempts by the agencies’ current leadership to move away from this technocratic paradigm toward a more populist approach are fundamentally misguided.

Of course, it is important to highlight the important role that sound remedies—themselves the fruit of even-handed antitrust scrutiny—appear to have played in averting the worst-case scenarios. If Live Nation posed an existential threat, why did the DOJ allow the merger that would remove this threat? The Ticketmaster-Live Nation merger had elements of both a vertical merger and a horizontal merger. The combination of venues and promotion services with ticketing was considered vertical integration in the concert business. Because of Live Nation’s entry into ticketing, the merger was also seen as horizontal. As AAG Varney pointed out:

To be sure, Ticketmaster and Live Nation were strongest at different points in the live music chain, but Live Nation’s foray into ticketing only made clearer that the merger would help to preserve Ticketmaster’s power in the primary ticketing line of its business. Thus, the merger posed a threat to growing competition in primary ticketing.[176]

In light of these concerns, the DOJ required several remedies—both structural and behavioral—from the merging parties. To start, the settlement included several structural remedies to address the DOJ’s concerns, including creating two new competitors to Ticketmaster. Ticketmaster was also required to license its ticketing platform to AEG, another major promoter and owner of venues. In addition, Ticketmaster would be forbidden from servicing AEG venues in the future. This second condition effectively required AEG to have its own ticketing platform or to direct its business to one of Ticketmaster’s competitors. Ticketmaster was also required to divest its Paciolan line of business to Comcast-Spectacor. Paciolan allows venues to host their own primary-ticketing service on their own websites. It was thought that this divestiture would introduce competition against Ticketmaster from the venues themselves.

The settlement also included several behavioral remedies for the next 10 years, or until 2020. Ticketmaster and Live Nation would be expressly prohibited from retaliating against any venue that works with or considers working with another primary-ticketing service. The businesses also would be prohibited from creating mandatory bundles of their services. For example, the merged firm would not be allowed to require that a client accept Live Nation as a promoter in order to access Ticketmaster’s primary-ticketing services, or vice versa. Ticketmaster would either (1) be forbidden from using its ticketing data in its promotion and management business, or (2) must give that information to other managers and promoters.

The vast settlement agreement and list of remedies highlights the ways that technocratic antitrust can protect from the most doomsday scenarios. One complication, however, is that remedies take monitoring and may not ultimately be implemented. In this case, the DOJ accused Live Nation-Ticketmaster of withholding or threatening to withhold concerts from a venue if the venue chose a ticketer other than Ticketmaster. Variety reported that the company was not fined for the action but had agreed to pay the DOJ’s attorney fees.[177] In 2019, the DOJ and the merged company agreed to extend the settlement agreement by another five years.[178]

A final important point is that the failings that surfaced regarding Taylor Swift’s tour appear largely unrelated to Ticketmaster’s dominant market position, and much less to its merger with Live Nation. As mentioned above, Ticketmaster was back in the news after technical issues when sales opened for Taylor Swift’s latest tour. The event is worth studying for what it can tell us about antitrust and what it cannot. According to Ticketmaster, more than 3.5 million fans registered to be able to buy tickets. Historically, around 40% of registered fans ultimately show up to buy tickets. Yet Ticketmaster found it had 3.5 billion total system requests, which was four times the previous peak.[179]

On its face, a bad user experience would not seem to be an antitrust violation, and the Taylor Swift incident does not appear to be at all relevant to the company’s 2010 settlement with the DOJ. Nonetheless, some have tried to frame a technical glitch—albeit a significant one—into an antitrust offence. For example, Yale economist Florian Ederer argued:[180]

The allegations against Ticketmaster are that it abused its dominant market position by underinvesting in site stability and customer service. Thus, rather than causing harm to consumers by charging exorbitant prices, Ticketmaster is alleged to have caused harm by providing inferior quality—which it could not have done had it faced credible competitors.

It’s a bit of a stretch to connect the dots between the Taylor Swift ticketing fiasco and a merger that occurred more than a decade earlier. The Taylor Swift concerts were going to sell out, regardless of the issues that Ticketmaster experienced. That’s just what happens when there are vastly more people who want to buy tickets than there are tickets available. We need to understand the realities of the business.

At the same time, it is nearly impossible to plan for big, unexpected traffic. For example, in 2018, Amazon’s website experienced a major service disruption due to an unexpectedly large influx of traffic on “Prime Day.”[181] Two facts make the Prime Day crash even more surprising. First, Amazon is the best in the world at handling web traffic at scale. Their main profit-making unit, Amazon Web Services, was born out of the company’s success at handling web traffic. Part of their business includes consulting on how to scale information-technology services.[182] Yet despite Amazon’s technological capabilities and economic incentive to keep its website up and running, the website still went down for more than an hour. Second, each second the website was down on Prime Day decreased sales on that day. The feedback was immediate.

Finally, it is worth noting that the link between market concentration and investment is even less clear than that between concentration and prices.[183] For example, the effect that market structure might exert on innovation—one type of investment—has been subjected to significant theoretical and empirical scrutiny, and the jury is mostly still out.[184] In other words, even if Ticketmaster’s merger with Live Nation increased both firms’ market position, empirical economic research offers little reason to believe that this would affect the reliability of the Ticketmaster platform.

In short, antitrust is not a Swiss Army knife to be used to solve whatever complaints society might have about how companies run their operations. As much as people hate Ticketmaster and as much as Taylor Swift fans want to shake their fists at the company’s bungled tour rollout, that fiasco was not an antitrust violation. Whatever one concludes about the effects of the Ticketmaster-Live Nation merger, website issues from the largest traffic they have ever experienced are not evidence of anticompetitive effects.

C.      In Retrospect

Looking at the merger 13 years later, three conclusions rapidly emerge. First, Ticketmaster’s market share does not seem to have materially increased since the merger—it may even have decreased. This tends to vindicate authorities’ decision to clear the deal. Second, this outcome may be due to the complex package of remedies extracted by authorities. This is an important reason to entrust merger review to technocratic agencies and courts, and for authorities to resist calls for tougher merger enforcement based on popular—kitchen table[185]—economics. Finally, the failings that surfaced around Taylor Swift’s tour appear unrelated to the Ticketmaster-Live Nation merger.

More broadly, Ticketmaster’s story is much more complex and nuanced than critics typically recognize. Ticketmaster did not come to dominance with the 2010 merger. In many ways, the story starts in 1991, with the company’s acquisition of Ticketron.[186]

For a short period of time, Ticketron and Computicket were the only two companies competing in the field of computerized ticketing. But Computicket went under in 1970 and Ticketron was left as the only firm in the industry. In 1976, Ticketmaster was founded and quickly grew.

In some ways, Ticketmaster’s story is that of a scrappy upstart trying to compete against the then-monopolist Ticketron. One way Ticketmaster competed successfully was by paying advances to venue owners and promoters, instead of just charging ticket fees.[187] This practice fostered long-term exclusive agreements between Ticketmaster, venues, and promoters. Apparently, this practice was successful.

Contrary to popular belief, concentration at the ticketing level is far from the only parameter that affects the price of event tickets, and some levels of the distribution chain may be (far) less competitive than the one where Ticketmaster operates. Ticketmaster sits at the intersection of a two or three-sided market, as an intermediary among fans, venues, and artists. The other sides of the market will not magically become perfectly competitive if the Ticketmaster-Live Nation merger were to be unwound tomorrow. As Irving Azoff (longtime music-industry executive and former CEO of Ticketmaster) has aptly noted:

“The biggest issue is that demand sometimes exceeds supply for many artists,” he continued. “More people want to see Taylor Swift, Beyoncé, Adele or Garth [Brooks] than there are tickets for sale. There’s not a congressional hearing in the world that fixes the reality that demand exceeds supply. There’s nothing that Ticketmaster, the building, the promoter or the artists can do to fix that.[188]

Indeed, arguably it is the venues’ market power that Ticketmaster’s fees embody, not those of Ticketmaster as ticketing platform. The Ticketmaster model, pioneered by former CEO Fred Rosen (and copied by the entire market today), treats venues as its primary customer. Which makes sense: many venues inherently have market power because there aren’t very many of them. Each major city generally has only one or, at most, a few large-scale venues, which are typically local sporting arenas or stadiums. An artist like Taylor Swift in a city like Minneapolis will perform only at the professional football stadium. If disputes could not be resolved, she could maybe downgrade to the professional baseball stadium, but other professional sports stadiums (e.g., hockey or basketball) are far smaller. Stepping down from the largest venues, the number of options available still does not increase massively. Of course, there is some competition between the biggest arenas in different cities to attract performers. But even then, the competition is limited, and certain cities are surely “must-play” locales for the biggest touring acts.

Meanwhile, although venues may be its primary customers, servicing artists is also important to Live Nation’s success. As a result, Live Nation has continually increased its investment in putting on concerts, to “over $9.6 billion [in 2022 vs. 2019] as Live Nation continues to be the largest financial supporter of musicians.”[189] This latter claim bears out, as the most recent data suggests record label annual A&R spending amounts to only $5.8 billion.[190] Thus, while ticket prices might be rising, it may well be that this increase reflects in substantial part a shift in the basis for artists’ income, with fans presumably paying less for recorded music in exchange.

Indeed, as the primary revenue source for performers has shifted from selling recorded music to selling concert tickets, ticket prices have increased.[191] As the late Princeton economist Alan Krueger identified, the primary source of increasing concert-ticket prices was “the erosion of complementarities between concerts and album sales because of file sharing and CD copying.”[192] The subsequent rise of online streaming and the continued significance of music piracy have only exacerbated this trend.

Artists have a virtual monopoly on tickets for their shows, and their performing schedules (and, of course, the limits of physical time and space) are the primary determinant of the number of tickets available and at what price:

The facts are simple and inarguable. Taylor Swift is playing 52 shows in venues with approximately 2.5 million seats available. As these shows are already being held in football stadiums, the only way to provide more seats is for Swift to add more shows, something Garth Brooks does routinely. Brooks will play two shows a day for as many days as it takes to absorb all the demand in a city before moving on to the next location. Each added stadium show opens another 50,000+ tickets for sale.

Math is both simple and brutal. For Swift’s North American tour there are only 2.5 million seats…. Only one thing brings more seats: adding shows. Only one person can decide to add more shows: Taylor Swift.[193]

While it may be that Ticketmaster-Live Nation could have done a better job managing the ticket sale process for Taylor Swift’s tour, it had no control over the number of tickets for sale. “Demand, it turns out far exceeded available seats. This is not a problem of monopolistic practice, it is one of undersupply.”[194]

Of perhaps greatest importance, particularly for concert tickets, the real action in ticket sales occurs today in the secondary or resale market. There are several reasons for this, but it must be noted at the outset that the presence of a vibrant resale market in which ticket prices are generally higher means, at the very least, that primary ticket sales (including service fees) are not occurring at their highest possible prices.[195] Indeed, because of a combination of promoter, artist, and venue hold-backs, artists’ interest in keeping ticket prices relatively low, fan-club and credit-card pre-sales, and the like, vanishingly few ticket purchasers actually buy tickets on the open, primary market where Ticketmaster is dominant.[196] In the secondary ticket exchange market Ticketmaster is far from dominant; rather, ticketing platforms like StubHub, Vivid Seats, Viagogo, and SeatGeek are the market leaders.[197]

Overall, it seems unlikely that blocking the Ticketmaster-Live Nation merger would suddenly solve the difficult problems that plague this multisided market.


Antitrust enforcement is a difficult job, with many tradeoffs. To some doomsayers, no merger or acquisition is acceptable, and all mergers risk ruining one or more markets. In truth, the picture is much murkier. This retrospective examined the predictions and the aftermath for a set of mergers over the past 20 years. One major takeaway is that we should be skeptical of kneejerk projections of doom, whether from activists, competition scholars, or media pundits.

Against this backdrop, we find that calls to tighten antitrust merger enforcement to assuage popular concerns about corporate consolidation have little merit. The same is true of the FTC and DOJ’s joint repudiation of the most recent (2010) merger guidelines and their ongoing effort to revise the guidelines, almost certainly in ways to facilitate more aggressive merger enforcement. In both cases, the underlying assumption is that today’s technocratic approach to merger enforcement has failed consumers by allowing monopolies to consolidate and thrive while regulators are “asleep at the wheel.”[198] These claims are often rooted in anecdotal evidence pertaining to high-profile mergers that, allegedly, marked the turning point in an industry’s shift towards monopoly, or (when pundits are commenting before the fact) suppositions that such deals will have disastrous consequences for consumers.

By reviewing some of these claims, our paper sheds light on their inherent weakness. For all their bombast and intuitive appeal, claims of competition’s demise have little connection to the competitive reality of the concerned markets. Some recent mergers, such as Amazon-Whole Foods, saw a huge number of dire predictions, despite quickly proving to be extremely procompetitive. Others, such as Facebook-Instagram, drew almost no concerns at the time, but are now seen as terrible mistakes on the part of antitrust enforcers. These failed prophecies are not surprising. It is a truism that predicting the future is a difficult task. That is why antitrust enforcers have historically focused on short-term and tangible metrics like prices, quantities, market shares, and barriers to entry, rather than speculative claims that mergers will be the death knell of competition. At the very least, if there is evidence that this relatively restrained approach has failed, it is not to be found in the public pronouncements of neo-Brandeisian scholars and media pundits.

More fundamentally, these claims fail not only because the future is hard to predict, but also because the world is too complex to fit the simple narrative that underpins populist calls for antitrust reform. Most mergers, even the ones we picked as noteworthy, are largely benign but pose a set of tradeoffs. This can be readily observed in the beer mergers which have raised some prices but lowered others, while opening new avenues for craft beer to flourish. In the end, reality failed to match the rhetoric. These ambiguous effects are precisely why evidence-based antitrust enforcement—along with careful remedies that can separate the wheat from the chaff—is as important today as it has ever been.

Unfortunately, our call for regulatory prudence is increasingly contested. As FTC Chair Lina Khan remarked upon the initiation of the merger-guidelines-revision effort in the wake of merger activity allegedly due to lax enforcement, “many Americans historically have lost out, with diminished opportunity, higher prices, lower wages, and lagging innovation… These facts invite us to assess how our merger policy tools can better equip us to… halt this trend.”[199] For the most part this reassessment of “merger policy tools” seems to contemplate a lessening of the role of rigorous economic analysis in exchange for “kitchen table economics” in which “technocratic debates about market mechanisms [give way to] a grassroots discussion about how corporate power has distorted the market in ways that [‘lawyers, activists and ordinary people’] find absurd.”[200]

If there is one thing to take away from our paper, it is that basing merger enforcement on kitchen-table economics—the idiosyncratic preferences of “activists and ordinary people”—would be disastrous. Our retrospective study shows that popular and populist fears about corporate consolidation are often completely untethered from economic reality and wildly erroneous. The less these fears influence antitrust policy, the better.

[1] See, e.g., Lina Khan, The New Brandeis Movement: America’s Antimonopoly Debate, 9 J. Eur. Competition L. & Practice 131 (2018); Matt Stoller, How Democrats Killed Their Populist Soul, The Atlantic (Oct. 24, 2016),

[2] See, e.g., Exec. Order No.14, 036, 86 Fed. Reg. 36,987 (Jul. 9, 2021).

[3] Lina M. Khan Sworn in as Chair of the FTC, Fed. Trade Comm’n (Jun. 15, 2021), (noting Khan’s prior role at the Open Markets Institute).

[4] See, e.g., Jonathan Kanter, Assistant Attorney General Jonathan Kanter of the Antitrust Division Testifies Before the Senate Judiciary Committee Hearing on Competition Policy, Antitrust, and Consumer Rights (Sep. 20, 2022) (advocating for statutory reform and increased funding for antitrust enforcement).

[5] Remarks by President Biden at Signing of an Executive Order Promoting Competition in the American Economy, The White House (Jul. 9, 2021).

[6] Id. (In the very same speech, Biden—curiously, if not paradoxically—states that “America is on track. We’re now on track for the highest economic growth in 40 years and among the highest growth records on record”); see also Lina Khan, Chair, Fed. Trade Comm’n, Remarks at Charles River Associates Conference Competition & Regulation in Disrupted Times Brussels, Belgium (Mar. 31, 2022) (quoting President Biden’s remarks with approval); Guy Rolnick, Q & A with FTC Chair Lina Khan: “The Word ‘Efficiency’ Doesn’t Appear Anywhere in the Antitrust Statutes”, ProMarket, (Jun. 3 ,2022), (“the change is being driven by a deep recognition that something has been awry in how we’ve been doing antitrust,” in response to a question about “this takeover of the Khan, Kanter, and Wu partnership over Washington.”).

[7] Phillip E. Areeda & Donald F. Turner, Antitrust Law Vol. V, 1103c (1980) “public policy cannot rationally seek to prevent the realization of more efficient production modes out of the speculative fear that monopoly might result”.

[8] See, e.g., Lina M. Khan, The End of Antitrust History Revisited, 133 Harv. L. Rev. 1655, (2020) (“The fact that antitrust had shed its public appeal in favor of an expert-driven enterprise becoming “less democratic and more technocratic” – was generally seen as further evidence of its success. Today, however, it is clear that what may have appeared as the end of antitrust history proved instead to be a prolonged pause in an enduring clash over the purpose and values of the U.S. antitrust laws.”); See also, Maurice E. Stucke & Marshall Steinbaum, The Effective Competition Standard: A New Standard for Antitrust, 87 U. Chi. L. Rev. 596 (2020) (“If the United States continues with a light-if-any-touch antitrust review of mergers and turns a blind eye to abuses by dominant firms, concentration and crony capitalism will likely increase, competition and our well-being will decrease further, and power and profits will continue to fall into fewer hands…. This trend is reversible if we restore antitrust as a guarantor of effective competition. To tackle today’s market power problem, we offer an effective competition antitrust standard to replace the prevailing consumer welfare standard…”).

[9] FTC Seeks to Block Microsoft Corp.’s Acquisition of Activision Blizzard, Inc., Fed. Trade Comm’n (Dec. 8, 2022),; FTC v. Illumina, Inc., U.S. Dist. LEXIS 75172 (2021); FTC v. Meta Platforms Inc., U.S. Dist. LEXIS 29832 (2023).

[10] FTC v. Meta Platforms, Inc., 3:22-cv-04325, 6 (2022) (complaint).

[11] In the Matter of Illumina, Inc., and Grail, Inc., No. 9401, 6 (complaint).

[12] Statement of Enforcement Principles Regarding “Unfair Methods of Competition” Under Section 5 of the FTC Act, Fed. Trade Comm’n (Aug. 13, 2015),

[13] For a general discussion, see Daniel Gilman & Gus Hurwitz, The FTC’s UMC Policy Statement: Untethered from Consumer Welfare and the Rule of Reason, International Center for Law & Economics (Nov. 16, 2022),

[14] Request for Information on Merger Enforcement, Fed. Trade Comm’n (Jan. 18, 2022),

[15] Assistant Attorney General Jonathan Kanter Delivers Remarks on Modernizing Merger Guidelines, U.S. Dep’t Justice (Jan. 18, 2022), (“And ultimately, that’s what today’s announcement is about: strengthening our joint merger guidelines to meet the challenges and realities of the modern economy.”); See also, Remarks of Chair Lina M. Khan Regarding the Request for Information on Merger Enforcement, Docket No. FTC-2022-0003, Fed. Trade Comm’n (Jan. 18, 2022), (“Keeping with past practice, the DOJ and FTC today are issuing a request for information, identifying key questions and topics on which we are particularly keen to receive public comment. These public comments will be critical for informing our review of the existing guidelines and our process for considering potential revisions and updates.”)

[16] Kanter, id.; see also Federal Trade Commission and Justice Department Seek to Strengthen Enforcement Against Illegal Mergers, Fed. Trade Comm’n (Press Release) (Jan. 18, 2022),

[17] Khan, supra note 15 (quoting Exec. Order No. 14,036, 86 Fed. Reg. 36,987 (Jul. 9, 2021)).

[18] Id. Notably, the evidence posited to support these contentions is far from settled. Indeed, it is not even clear that concentration is increasing. See Brian Albrecht, Is Market Concentration Actually Rising?, Economic Forces (Dec. 8, 2022),

[19] Matt Stoller, Mergers Ruin Everything, BIG (Feb. 4, 2022),

[20] Both agencies have suffered some setbacks already, but numerous cases remain under investigation or in-process, and the U.S. Supreme Court has yet to rule on any of the neo-Brandeisians’ novel theories of harm or established law. For example, the FTC recently declined to appeal the case it lost regarding Meta’s purchase of Within. See, Diane Bartz, U.S. FTC Will Not Appeal Decision Allowing Meta to Purchase VR Content Maker Within, Reuters (Feb. 6, 2023),

[21] Mission and History, American Antitrust Institute, (last accessed Feb. 2, 2023).

[22] Id.

[23] Id.

[24] Rana Foroohar, The Rise of Kitchen Table Economics, Financial Times (Feb. 20, 2023),

[25] That is, FTC Chair Lina Khan, Assistant U.S. Attorney General Jonathan Kanter, and Tim Wu, who served as special assistant to the president for technology and competition policy from 2021 to early 2023, and who is widely considered to have been the architect of President Biden’s July 2021 executive order on competition policy. See, e.g., David McCabe, An Architect of Biden’s Antitrust Push Is Leaving the White House, NY Times (Dec. 30, 2022), (describing Wu’s role at the White House and his status as “one third of a troika—along with Lina Khan at the Federal Trade Commission and Jonathan Kanter at the Justice Department” leading “aggressive” attempts at antitrust reform); Josh Sisco, White House Antitrust Adviser Tim Wu Set to Depart, Politico (Dec. 30, 2022),

[26] See, e.g., Carl Shapiro, Antitrust in a Time of Populism, 61 J. Indus. Org. 714, (2018); Elyse Dorsey, et al., Consumer Welfare and the Rule of Law: The Case Against the New Antitrust Populism, 47 Pepp. L. Rev. 816, (2020).

[27] Joshua D. Wright, et al., Requiem for a Paradox: The Dubious Rise and Inevitable Fall of Hipster Antitrust, 51 Ariz. State L. J. 293, (2019).

[28] Khan, supra note 8.

[29] In addition, the predictions and assessments of the neo-Brandeisians are not always precise, or even sufficiently clear to be susceptible to testing.

[30] The statements comprise, among other things, predictions and concerns about the likely competitive effects of these mergers: namely, competitive disaster.

[31] “Premium natural and organic food markets” is the product market the FTC had identified in challenging a prior transaction involving Whole Foods—that is, its proposed acquisition of Wild Oats. See, FTC v. Whole Foods Market, Inc., Case. No. 1:07-cv-01021 (D. D.C. 2007) (complaint for temporary restraining order and injunction pursuant to Sect. 13(b) of the FTC Act).

[32] Dirk Auer, The Amazon/Whole Foods Overreaction: Antitrust Populism Exposed, Truth on the Market (Aug. 28, 2018),

[33] Albert Foer & Sandeep Vaheesan, The American Antitrust Institute to the U.S. Department of Justice, American Antitrust Institute (Nov. 19, 2014),

[34] Joint Comment of the FTC Staff and the DOJ Antitrust Div. Staff to the California State Assembly Concerning California Assembly Bill 1541, Fed. Trade Comm’n (Mar. 20, 2020),

[35] Id.

[36] Overview of the Merger Retrospective Program in the Bureau of Economics, Fed. Trade Comm’n, (last accessed Feb. 3, 2023).

[37] Joseph Farrell, Paul Pautler, & Michael Vita, Economics at the FTC: Retrospective Merger Analysis with a Focus on Hospitals, 35 Rev. Indus. Org. 369, (2009); For an example of merger reviews regarding non-price effects, see Patrick S. Romano & David Balan, A Retrospective Analysis of the Clinical Quality Effects of the Acquisition of Highland Park Hospital by Evanston Northwestern Healthcare, 18 Int. J. Econ. Bus. 45, (2011).

[38] See, e.g., Christopher Garmon, The Accuracy of Hospital Merger Screening Methods, 48 RAND J. Econ. 1068, (2017) (comparing predictions of screening methods based on pre-merger data with post-merger prices for 28 hospitals); Romano & Balan, id. (clinical quality effects of one merger); Orley Ashenfelter, Daniel Hosken, Michael Vita, & Matthew Weinberg, Retrospective Analysis of Hospital Mergers, 18 Int. J. Econ. Bus. 5, (2011). For a bibliography of merger retrospectives, including but not limited to hospital studies, see Merger Retrospective Studies Bibliography, Fed. Trade Comm’n, (last accessed Mar. 9, 2023).

[39] Lauren Thomas, Don’t Worry, Wal-Mart; Amazon Buying Whole Foods Is Just a ‘Drop in the Bucket’, CNBC (Jun. 21, 2017),

[40] Statement of Federal Trade Commission’s Acting Director of the Bureau of Competition on the Agency’s Review of, Inc.’s Acquisition of Whole Foods Market Inc., Fed. Trade Comm’n (Aug. 23, 2017),

[41] Alex Shephard, How Amazon Is Changing the Whole Concept of Monopoly, The New Republic (Jun. 19, 2017),

[42] Lina Khan, Amazon Bites Off Even More Monopoly Power, NY Times (Jun. 21, 2017),

[43] Auer, supra note 32.

[44] Khan, supra note 42

[45] Washington Bytes, Will Amazon-Whole Foods Survive Antitrust Scrutiny Under Trump?, Forbes (Jul. 3, 2017),

[46] Insider Business, Scott Galloway Says Amazon, Apple, Facebook, And Google should be broken up, YouTube (Dec. 1, 2017),; See also Scott Galloway, Silicon Valley’s Tax-Avoiding, Job-Killing, Soul-Sucking Machine, Esquire (Feb. 8, 2018),

[47] Id.

[48] Matt Day, Amazon Is Still Trying to Digest Whole Foods, Bloomberg (Aug. 31, 2022),; see also Daniel Keyes, Amazon and Whole Foods Have Failed to Upend Grocery, Insider (Jun. 17, 2019),

[49] Amazon’s Share of US eCommerce Sales Hits All-Time High of 56.7% in 2021, PYMNTS (Mar. 14, 2022),; other sources suggest Amazon’s share of e-commerce increased from 37% to 50% between 2017 and 2021, see Stephanie Chevalier, Projected Retail E-Commerce GMV Share of Amazon in the United States from 2016 to 2021, Statista (Jul. 27, 2022),

[50] Sujay Seetharaman, The Story of Amazon’s Market Share, Pipe Candy (Oct. 30, 2019),

[51] Thomas Ozbun, Online Grocery Shopping Sales in the United States from 2019 to 2024, Statista (Jan. 27, 2022),

[52] Janie Perri, Instacart and Walmart Lead the Pack in Grocery Delivery Sales, Bloomberg Second Measure (Jul. 20, 2021),

[53] Michele Gelfand, Sarah Gordon, Chengguang Li, Virginia Choi & Piotr Prokopowicz, One Reason Mergers Fail: The Two Cultures Aren’t Compatible, Harvard Business Review (Oct. 2, 2018),; see also Keyes, supra note 48; Lane Gillespie, 5 Years Later: Amazon’s Whole Foods Buy a Study in Hubris and Determination, Bisnow (Jun. 15, 2022),; Brittain Ladd, This Is Why Whole Foods Is Failing, Brittain Ladd (Oct. 7, 2020),

[54] Katie Tarasov, Amazon Bought Whole Foods Five Years Ago for $13.7 Billion. Here’s What’s Changed at the High-End Grocer, CNBC (Aug. 25, 2022),

[55] Steve Watkins, Kroger Rival Amazon Cuts Whole Foods Prices (Video), Biz Journals (Apr. 2, 2019),

[56] Jon Porter, Amazon Opens First Whole Foods Equipped with Cashierless Technology, The Verge (Mar. 1, 2022),

[57] Heather Haddon, Whole Foods Introduces Grocery Pickup for Online Orders, The Wall Street Journal (Aug. 8, 2018),

[58] Tarasov, supra note 54.

[59] Id.

[60] Russell Redman, Kroger Launches Another Pair of Ocado ‘Spoke’ Facilities, Supermarket News (Aug. 23, 2022),

[61] Jonathan Shieber, Target Is Buying Alabama-Based, Same-Day Delivery Service Shipt for $550 Million, TechCrunch (Dec. 13, 2017),

[62] Barbara Messing, Introducing Our Biggest Walmart Grocery Pickup Campaign, Walmart (Jan. 6, 2019),

[63] Hayley Peterson, Walmart Is Offering Same-Day Delivery of Groceries Across the US — Here’s How to Get It for Free, Insider (Mar. 14, 2018),

[64] Khan, supra note 42.

[65] Id.

[66] Kelly Tyko, Walmart Sales Increase 10% as Online Buying Grew 74% During Coronavirus Pandemic, USA Today (May 19, 2020),

[67] Andria Cheng, Two Years After Amazon Deal, Whole Foods Is Still Working to Shed Its ‘Whole Paycheck’ Image, Forbes (Aug. 28, 2019),

[68] Amazon & Prime at Whole Foods Market, Whole Foods Market, (last accessed Jan. 18, 2023).

[69] Vicki Salemi, 7 Amazon Prime Member Benefits You Can Get at Whole Foods, Retail Me Not (Jan. 19, 2023),

[70] Andrew Sun, Walmart Makes Voice Shopping Even More Affordable with New Google Device, Walmart (Oct. 4, 2017),

[71] Erin Caproni, Kroger Expands Home Delivery with Latest Partnership, Biz Journal (Mar. 12, 2018),

[72] Kelly Tyko, Target Launching Same-Day Delivery in First Markets Feb. 1, USA Today (Jan. 25, 2018),

[73] Benjamin Klein, Robert G. Crawford, & Armen A. Alchian, Vertical Integration, Appropriable Rents, and the Competitive Contracting Process, 21 J. L. & Econ. 297, (1978).

[74] Such fears are a common driver of progressive antitrust policy. See Geoffrey Manne & Dirk Auer, Antitrust Dystopia and Antitrust Nostalgia: Alarmist Theories of Harm in Digital Markets and Their Origins, 28 Geo. Mason L. Rev. 1286 (2021) (“Underlying this pessimism is a pervasive assumption that new technologies will somehow undermine the competitiveness of markets, imperil innovation, and entrench dominant technology firms for decades to come. This is a form of antitrust dystopia. For its proponents, the future ushered in by digital platforms will be a bleak one-despite abundant evidence that information technology and competition in technology markets have played significant roles in the positive transformation of society.”).

[75] Statement of Federal Trade Commission’s Acting Director of the Bureau of Competition on the Agency’s Review of, Inc.’s Acquisition of Whole Foods Market Inc., Fed. Trade Comm’n (Aug. 23, 2017),

[76] Albert A. Foer, AAI Warns DOJ that Beer Merger Would Eliminate Competition in the United States, American Antitrust Institute (Nov. 20, 2014),

[77] Albert Foer & Sandeep Vaheesan, The American Antitrust Institute to the U.S. Department of Justice, American Antitrust Institute (Nov. 19, 2014), available at

[78] Executive Order on Promoting Competition in the American Economy, The White House (Jul, 9, 2021),

[79] Competition in the Markets for Beer, Wine, and Spirits, U.S. Treasury Department (Feb. 9, 2022), available at

[80] Id. (Citing Kenneth G. Elzinga & Anthony W. Swisher, The Supreme Court and Beer Mergers: From Pabst/Blatz to the DOJ-FTC Merger Guidelines, 26 Rev. Indus. Org. 245, (2005)).

[81] Industrial Concentration in the United States: 2002-2017, U.S. Chamber of Commerce (Mar. 9, 2022),

[82] Orley C. Ashenfelter, Daniel S. Hosken, & Matthew C. Weinberg, Efficiencies Brewed: Pricing and Consolidation in the US Beer Industry, 46 RAND J. Econ. 328, 332 (2015).

[83] Id.

[84] Ken Heyer, Carl Shapiro, & Jeffrey Wilder, The Year in Review: Economics at the Antitrust Division, 2008-2009, 35 Rev. Indus. Org. 349, (2009).

[85] Ashenfelter, Hosken & Weinberg, supra note 82.

[86] Id.

[87] Id. at 330.

[88] Nathan H. Miller & Matthew C. Weinberg, Understanding the Price Effects of the MillerCoors Joint Venture, 85 Econometrica 1763 (2017).

[89] José Azar & Xabier Barriola, Did the MillerCoors Joint Venture Strengthen the Craft Beer Revolution?, 85 Int’l J. Indus. Org. (2022).

[90] Anthony M. Marino & Ján Zábojník, Merger, Ease of Entry, and Entry Deterrence in a Dynamic Model, 54 J. Indus. Econ. 397 (2006).

[91] Kenneth G. Elzinga & Alexander J. McGlothlin, Has Anheuser-Busch Let the Steam Out of Craft Beer? The Economics of Acquiring Craft Brewers, 60 Rev. Indus. Org. 147 (2022).

[92] Barry C. Lynn, Big Beer, A Moral Market, and Innovation, Harvard Business Review (Dec. 26, 2012),

[93] Id.

[94] Brian Fung & Caitlin Dewey, Justice Department Approves Bayer-Monsanto Merger in Landmark Settlement, The Washington Post (May 29, 2018),

[95] David Evans, The Bayer/Monsanto Digital Farming Licensing Remedy: Structural or Behavioral?, JD Supra (Apr. 4, 2018),

[96] Robert Holly, Weeding Out Competition: Farmers Left Paying Steep Prices As Seed Firms Merge, Illinois Public Media (Dec. 9, 2016),

[97] Amy Klobuchar, Klobuchar, Merkley, Senators Urge DOJ Antitrust Division to Conduct Thorough and Impartial Analysis of Bayer AG Acquisition of Monsanto Company, Klobuchar.Senate (Jul. 21, 2017),

[98] Texas A&M, Effects of Proposed Mergers and Acquisitions Among Biotechnology Firms on Seed Prices, Agricultural & Food Policy Center (Sep. 2016), available at

[99] Pat Mooney, Too Big to Feed, International Panel of Experts on Sustainable Food Systems 82 (Oct. 2017), available at

[100] Id.

[101] EU Antitrust Chief Says “Beware” of Bayer-Monsanto Control of Farm Data, Food & Power Newsletter (Feb. 23, 2018),

[102] Id.

[103] The Food and Drug Administration cites lower pesticide use as an advantage of genetically modified seeds (GMOs). See, Why Do Farmers in the U.S. Grow GMO Crops?, Food & Drug Administration (Feb. 17, 2022),,the%20soil%20to%20control%20weeds; There is evidence, however, that pesticide use has increased with genetically modified crops. See, Charles M. Benbrook, Impacts of Genetically Engineered Crops on Pesticide Use in the U.S. — The First Sixteen Years, 24 Environ. Sci. Eur. 24 (2012),

[104] Erik Stokstad, New Genetically Modified Corn Produces up to 10% More than Similar Types, Science (Nov. 4, 2019),

[105] Liam Proud, Breakingviews – Bayer Investors Get Unwelcome Antitrust Present, Reuters (Apr. 10, 2018),

[106] Angus Liu, Beleaguered Bayer Adds $1.8B to Cost-Cutting Goal Amid COVID-19 Slowdowns, Fierce Pharma (Oct. 1, 2020),

[107] Bayer AG, Google Finance, (accessed Jan. 24, 2023).

[108] Fitbit to Be Acquired by Google, Business Wire (Nov. 1, 2019),

[109] Leah Nylen, Facebook, Google’s Quintet of Antitrust Suits, Politico (Dec. 18, 2020),

[110] Heather Landi, Consumer Groups Warn Google’s Fitbit Buyout Could Harm Data Privacy, Competition, Fierce Healthcare (Jul. 2, 2020),; Consumer and Citizen Groups Have Serious Concerns About Google Fitbit Takeover, NGO Joint Statement (2020), available at


[112] Tommaso Valletti & Cristina Caffarra, Google/Fitbit Review: Privacy IS a Competition Issue, Vox EU (Mar. 4, 2020),

[113] Id., “This deal is coming forward against a background of perceived major deterioration in privacy standards, as competition between data collectors has dwindled and users’ attention is now funneled into very few giant ‘attention brokers.’”

[114] Id., The authors add: “Just as Google today promises that ‘Fitbit health and wellness ‘personal’ data will not be used for Google ads,’ Facebook at the time swore blind they would not exploit WhatsApp data and would monetise the $21 billion by selling emojis—something they actually never did.”

[115] Seven Democratic Senators Urge Caution on Google’s Purchase of Fitbit, Reuters (Jul. 23, 2020),

[116] @GregorySCrawfor, Twitter (Dec. 22, 2020, 5:37 AM),; see also, @GregorySCrawfor, Twitter (Dec. 22, 2020, 5:44 AM), (“More generally, consumers care about how their data is combined and used (even in the aggregate) and the combination of health and non-health data can also be interpreted as a quality-adjusted price increase of using Google’s *existing* services.”).

[117] Ron Amadeo, Google Says It’s Closing the Fitbit Acquisition—Uh, Without DOJ Approval?, ArsTechnica (Jan. 14, 2021), (“1. Google commits not to use any Measured Body Data or Health and Fitness Activity Location Data in or for Google Ads. 2. Google commits to maintain Data Separation. 3. Compliance with the commitments set out in paragraphs 1 and 2 above is to be achieved through a technical structure for data storage consisting of auditable technical and process controls, reflected in the following approach…”).

[118] Sara Fischer, Slow Fade for Google and Meta’s Ad Dominance, Axios (Dec. 20, 2022),

[119] Nicole Farley, Google Search, Network, and YouTube Revenue All Fell in Q4 2022, Search Engine Land (Feb. 3, 2023),

[120] @GregorySCrawfor, Twitter (Dec. 22, 2020, 5:37 AM),

[121] Commission Decision of 17.12.2020 Declaring a Concentration to Be Compatible with the Internal Market and the EEA Agreement (Case M.9660 – Google/Fitbit), European Commission (Dec. 17, 2020), available at (“1. Google commits not to use any Measured Body Data or Health and Fitness Activity Location Data in or for Google Ads. 2. Google commits to maintain Data Separation. 3. Compliance with the commitments set out in paragraphs 1 and 2 above is to be achieved through a technical structure for data storage consisting of auditable technical and process controls, reflected in the following approach…”); see also, Mergers: Commission Clears Acquisition of Fitbit by Google, Subject to Conditions, European Commission (Dec. 17, 2020), (“Google will not use for Google Ads the health and wellness data collected from wrist-worn wearable devices and other Fitbit devices of users in the EEA, including search advertising, display advertising, and advertising intermediation products. This refers also to data collected via sensors (including GPS) as well as manually inserted data.”).

[122] Amadeo, supra note 117.

[123] Fitbit Privacy Policy, Fitbit (Sep. 16, 2022),

[124] Id.

[125] What Should I Know About “Fitbit by Google”?, Fitbit, (last accessed Mar. 10, 2023).

[126] Note, however, that according to the Fitbit privacy policy, insurers themselves may share that information with Google if they provide Fitbit devices to their insureds. Id. (“We receive this information from you, your device, your use of the Services, your coach if you use our Live Coaching Services, third parties (like the other services you have connected to your Fitbit account, or your employer or insurance company if they offer you Fitbit Services as an employee or customer), and as otherwise described in this policy.”)

[127] Infographic: Smartwatch Market | Q1 2022, Counterpoint (Jun. 10, 2022),

[128] Andrew Wooden, The Smartwatch Market Hit Record Levels in 2021, (Mar. 14, 2022),

[129] Introducing Amazon Halo and Amazon Halo Band—A New Service that Helps Customers Improve Their Health and Wellness, Amazon (Aug. 27, 2020),

[130] Ted Kritsonis, Amazon Halo View Review: A Lightweight Fitness Tracker Tied to a Deeper App, Android Police (Oct. 20, 2022),

[131] Pixel Watch, Wikipedia (last visited Mar. 15, 2023),

[132] Id.

[133] David Pierce, Google Thinks Smartwatches Are the Future Again—Are You Buying It?, The Verge (Oct. 6, 2022), (emphasis added).

[134] Smartwatches: Regulatory Trends, Verdict (Jul. 20, 2020),

[135] Although it is commonly bandied about to describe the Instagram acquisition because of its pejorative connotation, the term “killer acquisition” is decidedly inapt given the ongoing maintenance and enormous success of Instagram following the acquisition.

[136] Mikah Roberts, Killer Acquisitions and the Death of Competition in the Digital Economy, 24 Tenn. J. Bus. L. 61 (2022).

[137] Geoffrey A. Manne, Samuel Bowman, & Dirk Auer, Technology Mergers and the Market of Corporate Control, 86 Missouri L. Rev. 1047, 1118 (2021) (“At the very least, this raises the prospect of an alternative story in which Facebook’s acquisition of Instagram was mostly about improving both firms’ products. This story is consistent with the tremendous growth of both Facebook and Instagram since the acquisition.”); John M. Yun, Potential Competition, Nascent Competitors, and Killer Acquisitions, 18 The Glob. Antitrust Inst. Rep. On The Digit. Econ. 652, 652–53 (2020),

[138] Om Malik, Here Is Why Facebook Bought Instagram, GIGAoM (Apr. 9, 2012),

[139] Roberta Kwok, A Wave of Acquisitions May Have Shielded Big Tech from Competition, Yale Insights (Mar. 7, 2023),

[140] Charles Arthur, Instagram and Facebook: The Next Tech Bubble?, The Guardian (Apr. 10, 2012),; see also, John Gapper, Facebook Is Scared of the Internet, Financial Times (Apr. 11, 2012),

[141] Amanda Michel & Amanda Holpuch, Why Did Facebook Buy Instagram for a Whopping $1bn?, The Guardian (Apr. 9, 2012),

[142] See, e.g., Case No. COMP/M.7217 Facebook/WhatsApp, 2014 O.J. (L 24) 1; see also, Anticipated Acquisition by Facebook Inc. of Instagram Inc., ME/5525/12 (OFT Aug. 22, 2012); see also, S. Dixon, Number of Instagram Users Worldwide from 2020 to 2025, Statista (Feb. 15, 2023),,percent%20of%20global%20internet%20users.

[143] See Collen Cunningham, et al., Killer Acquisitions, 129 J. Pol. Econ. 649 (2021).

[144] See, Investigation of Competition in Digital Markets, Majority Staff Report and Recommendations (Oct. 2020),

[145] Fed. Trade Comm’n v. Facebook, No 1:20-cv03590, 2021 WL 2643627. (Dec. 9, 2020) (Complaint for Injunctive and other Equitable Relief), available at ook_ftc_ddc_complaint2020_12_09.pdf; see also, State of New York, et al. v. Facebook, 1:20-CV-03589 (Dec. 3, 2020) (Complaint), available at ok_states_ddc_complaint2020_12_09.pdf.

[146] Regina Balana, Facebook’s Merger Is Causing Privacy Concerns Among Regulators, Tech Times (Jan. 28, 2019),

[147] See, generally, Steven C. Salop, Potential Competition and Antitrust Analysis: Monopoly Profits Exceed Duopoly Profits, Geo. Univ. L. Ctr. 7 (2021), (emphasis added).

[148] Unlocking Digital Competition, OGL 98 (Mar. 2019), available at

[149] Valletti & Caffarra, supra note 112.

[150] Andrew Hutchinson, New Report Highlights the Decline of Facebook and IG, as TikTok Becomes the New Home of Entertainment, Social Media Today (Sep. 12, 2022),

[151] Id.

[152] Id.

[153] TikTok Users Worldwide (2020-2025), Insider Intelligence (Jan. 19, 2023),

[154] Sam Anderson, ‘TikTok Will 100% Kill Instagram’: Social Experts on Influencers and Authenticity, The Drum (Jun. 1, 2022),; see also, Juxtaposed Ideas, Meta Platforms vs. ByteDance: The Impact of TikTok on Instagram, Seeking Alpha (Feb. 10, 2022),; Cal Newport, TikTok and the Fall of the Social-Media Giants, New Yorker (Jul. 28, 2022),

[155] Drew Harwell, How TikTok Ate the Internet, Washington Post (Oct. 14, 2022),

[156] Meta Platforms, Inc. (META), Yahoo! Finance,; see also, Abram Brown, Meta Stock Falls Over 20% After Metaverse Project Loses over $10 Billion in 2021, Forbes (Feb. 2, 2022),

[157] Robert W. Crandall & Thomas W. Hazlett, Antitrust in the Information Economy: Digital Platform Mergers, J. Law & Econ. (forthcoming).

[158] See Amended Complaint, FTC v. Facebook, Inc., Case No.: 1:20-cv-03590-JEB (D.D.C. Sep. 8, 2021)

[159] David McCabe & Ben Sisario, Justice Dept. Is Said to Investigate Ticketmaster’s Parent Company, NY Times (Jan. 24, 2023),

[160] @AOC, Twitter (Nov. 15, 2022, 7:35 PM),

[161] See, e.g., William M. Landes & Richard A. Posner, Market Power in Antitrust Cases, Harv. L. Rev. 495 (1981). (“Section 7 of the Clayton Act also requires proof of market power; in fact, the main purpose of section 7 is to limit mergers that increase market power.”)

[162] See Alan J. Meese & Barak D. Richman, A Careful Examination of the Live Nation-Ticketmaster Merger, William & Mary Law School Research Paper No. 09-41 (Nov. 2009) at 93-104, available at

[163] See, e.g., David Segal, Calling Almost Everyone’s Tune, NY Times (Apr. 24, 2010),

[164] Id.

[165] Variety Staff, Ticked Over Tix, Buyers Take ‘Master to Task, Variety (Aug. 10, 1993),

[166] Id. (emphasis added).

[167] David Balto, The Ticketmaster-Live Nation Merger: What Does It Mean for Consumers and the Future of the Concert Business?, CAP Action (Feb. 24, 2009),

[168] Christine A. Varney, The Ticketmaster/Live Nation Merger Review and Consent Decree in Perspective, U.S. Justice Department (Mar. 18, 2010),

[169] Break Up Ticketmaster (last visited, Mar. 18, 2023),

[170] Press Release, New Campaign Launches to Break Up Ticketmaster, Economic Liberties Project (Oct. 19, 2022),

[171] Anna Edgerton & Leah Nylen, Senators Blast Ticketmaster ‘Monopoly’ for Taylor Swift Woes, Bloomberg (Jan. 24, 2023),

[172] See, e.g., Daniel CH, Ticketmaster Revenue and Growth Statistics (2023), SignHouse, (last visited, Mar. 21, 2023); Emily Lorsch, Why Live Nation and Ticketmaster Dominate the Live Entertainment Industry, CNBC (Jan. 25, 2023),; Gabriel Smith, Ticketmaster and Live Nation Were Not Supposed to Create a Monopoly. Here’s Why Music Fans, Lawmakers, and Taylor Swift Are Fed up with the Ticketing Platforms, Fortune (Jan. 27, 2023),

[173] Live Nation Entertainment, Inc., Annual Report (Form 10-K) (Feb. 23, 2023) at 9.

[174] Id. See also, Jonathan Briskman, Top Ticketing Apps in the U.S. for Q1 2019 by Downloads, SensorTower (Jun. 2019),; Adam Blacker, Ticketmaster Is the Ticket Master, Apptopia (May 9, 2019),

[175] SeatGeek, Wikipedia, (last visited Mar. 21, 2023).

[176] Id.

[177] Jem Aswad, Live Nation Settles With Dept. of Justice Over Ticketmaster Merger, Variety (Dec. 19, 2019),

[178] Justice Department Will Move to Significantly Modify and Extend Consent Decree with Live Nation/Ticketmaster, U.S. Justice Department (Dec. 19, 2019),

[179] Ben Sisario & Madison Malone Kircher, Ticketmaster Cancels Sale of Taylor Swift Tickets After Snags, The New York Times (Nov. 17, 2022),

[180] Florian Ederer, Did Ticketmaster’s Market Dominance Fuel the Chaos for Swifties?, Yale Insights (Nov. 23, 2022),

[181] Dennis Green, Amazon’s Likely Multimillion-Dollar Disaster on Prime Day Proved It’s Not Immune from Embarrassment, Business Insider (Dec. 14, 2018),

[182] AWS Well-Architected, Amazon, (last accessed Mar. 10, 2023).

[183] For an introductory discussion of the latter, see Brian Albrecht, Econ 101 Ignores 50 Years of Economic Science, Economic Forces (Mar. 16, 2023),

[184] Richard Gilbert surveys the econometric literature concerning the effect of industry structure on innovation. See Richard Gilbert, Innovation Matters: Competition Policy for the High-Technology Economy 116 (2020). He concludes that the relationship between both is indeterminate. See id. (“Table 6.1 summarizes the conclusions from these interindustry studies for the effects of competition and industry structure on innovation. Unfortunately, these studies do not reach a consensus, other than to note that innovation effects can differ dramatically for firms that are at different levels of technological sophistication. Although some studies find a positive relationship between measures of innovation and competition (alternatively, a negative relationship between innovation and industry concentration), others find that the relationship exhibits an inverted-U, with the largest effects at moderate levels of industry concentration or competition, and at least one study reports a negative relationship between competition (measured by Chinese import penetration) and innovation (measured by citation-weighted patents and R&D investment). One consistent finding is that an increase in competition has less of a beneficial effect, and may have a negative effect, on innovation incentives for firms that are far behind the industry technological frontier.”); see also Ronald L. Goettler & Brett R. Gordon, Does AMD Spur Intel to Innovate More?, 119 J. Pol. Econ. 1141, 1141 (2011) (“Consistent with Schumpeter, we find that the rate of innovation in product quality would be 4.2 percent higher without AMD present, though higher prices would reduce consumer surplus by $12 billion per year. Comparative statics illustrate the role of product durability and provide implications of the model for other industries.”); Mitsuru Igami, Estimating the Innovator’s Dilemma: Structural Analysis of Creative Destruction in the Hard Disk Drive Industry, 1981–1998, 125 J. Pol. Econ. 798, 798 (2017) (“The results suggest that despite strong preemptive motives and a substantial cost advantage over entrants, cannibalization makes incumbents reluctant to innovate, which can explain at least 57 percent of the incumbent-entrant innovation gap.”); Elena Patel & Nathan Seegert, Does Market Power Encourage or Discourage Investment? Evidence From the Hospital Market, 63 J.L. Econ. 667, 667 (2020) (“We find a negative relationship between competition and investment. In particular, hospitals in concentrated markets increased investment by 5.1 percent ($2.5 million) more than firms in competitive markets in response to tax incentives. Further, firms’ investment responses monotonically increased with market concentration.”).

[185] See Foroohar, supra note 24.

[186] Paul Farhi, Competitor to Acquire Ticketron, The Washington Post (Feb. 28, 1991),

189 See, e.g., Peter Tschmuck, The Economics of Music 113 (2021).

[188] Peter Larsen, Garth Brooks, industry pros blame resellers, not Ticketmaster, for problems, Los Angeles Daily News (Feb. 22, 2023), (emphasis added).

[189] Live Nation Entertainment Reports Fourth Quarter & Full Year 2022 Results, LiveNationEntertainment,com (last visited March 21, 2023),

[190] Industry Data, (last visited March 21, 2023),

[191] See, e.g., Lucas Shaw, Concerts Are More Expensive Than Ever, and Fans Keep Paying Up, Bloomberg (Sep. 10, 2019),

[192] Alan B. Krueger, The Economics of Real Superstars: The Market for Rock Concerts in the Material World, 23 J. Labor Econ. 1, 1 (2005). See also id. at 25-26 (“Each band has some monopoly power because of its unique sound and style. So my hypothesis is that, in the past, when greater concert attendance translated into greater artists’ record sales, artists had an incentive to price their tickets below the pro?t-maximizing price for concerts alone. New technology that allows many potential customers to obtain recorded music without purchasing a record has severed the link between the two products. As a result, concerts are being priced more like single-market monopoly products.”).

[193] Eric Fuller, Shoot First, Aim Later. The United States Senate Attacks Event Ticketing, Forbes (Jan. 25, 2023), (emphasis added).

[194] Id.

[195] See Michael Clements, Event Ticket Sales: Market Characteristics and Consumer Protection Issues, U.S. Government Accountability Office, GAO-18-347 (Apr. 12, 2018) at 12-14, available at (collecting economic studies).

[196] New York State Attorney General Eric Schneiderman, Obstructed View: What’s Blocking New Yorkers from Getting Tickets (Jan. 28, 2016) at 11-15, available at (“Indeed, for many of the top shows, less than 25% of tickets were actually released to the general public in an initial public on-sale.”).

[197] See, e.g., Drew Gainor, Secondary Ticket Market Share Analysis, Automatiq (Jul. 28, 2021),

[198] Luiz Blanquez, Strong Winds of Change in the Antitrust World in Europe and the United States: Big Tech Under Cross Fire, The Antitrust Attorney Blog (Mar. 14, 2021),

[199] Khan, supra note 15.

[200] Foroohar, supra note 24.

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Antitrust & Consumer Protection

Platforms Are the New Organizational Paradigm

Scholarship Introduction Business organizations can take many forms, from founder-led to multidivisional multinationals to emerging IT-enabled platforms. The prevailing organizational form in business is neither set . . .


Business organizations can take many forms, from founder-led to multidivisional multinationals to emerging IT-enabled platforms. The prevailing organizational form in business is neither set in stone nor decided upon by fad. It is largely a result of the technological and economic conditions of the time. There were no large U.S. corporations before the emergence of the railroad because the production system neither required nor enabled scale, which corporations are designed to manage. When rail and industrial production technologies evolved after the Civil War, large corporations became the norm. Justice Louis Brandeis and other opponents of these new corporations sought to squelch them in their infancy, preferring a prior economy dominated by owner-led, small and mid-sized firms. Even with the passage of the Sherman Act, their opposition was largely stillborn; the benefits of the corporation were simply too vast. However, had the Brandeisians succeeded in their quest to turn back time, America would not be the global economic leader it is today.

We are potentially at a similar transformative point in history, with digital technologies enabling the rise of a new kind of productive organization: the platform. Digital platforms, not just in the information sector, have the potential to transform many industries for the better: raising productivity, improving quality and consumer choice, and reducing prices. But just as there was significant opposition against the transition to the corporate economy, today there is significant opposition to the platform economy, although this time not among the populace, but rather among the elites: activists, public intellectuals and academics, and elected officials of both parties. If their attempts to roll back the “platformization” of the U.S. economy succeed, the economic costs to the nation and to consumers would be considerable and long-lasting.

This report assesses the past two major changes in corporate form, and the public and government responses to them. It then examines the prospect and potential benefits of the “platformization” of the economy, as well as current opposition. Finally, it discusses the variety of policy approaches proposed to address platform governance and why most will lead to more harm than good.

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Antitrust & Consumer Protection

Comments on Murmann and Vogt ‘A Capabilities Framework for Dynamic Competition Assessing the Relative Chances of Incumbents, Start-ups, and Diversifying Entrants’

Scholarship Abstract Murmann and Vogt’s (2022) analysis of the automobile industry using a capabilities framework that integrates both dynamic and ordinary capabilities supports an informative table . . .


Murmann and Vogt’s (2022) analysis of the automobile industry using a capabilities framework that integrates both dynamic and ordinary capabilities supports an informative table which sets out the major relevant capabilities that incumbents, start-ups, and diversifying entrants would need to develop or access via contract or other arrangement (see Murmann and Vogt, 2022, Table 3). Jiang and Lu (2022) have further discussed new industry paradigms which they suggest will greatly challenge – and perhaps overwhelm automotive industry incumbents. We believe that their insights can be taken a step further by focusing on two areas: first, the greatly increased availability of outsourced manufacturing driven by the shift to electric vehicle (‘EV’) powertrains; and second, the ongoing transformation of the driver and passenger experience that is driven by software–user experience software integrated with networked consumer service ecosystems.

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Antitrust & Consumer Protection

Complexity-Minded Antitrust

Scholarship Abstract Complexity science permeates the policy spectrum but not antitrust. This is unfortunate. Complexity science provides a high-resolution screen on the empirical realities of markets. . . .


Complexity science permeates the policy spectrum but not antitrust. This is unfortunate. Complexity science provides a high-resolution screen on the empirical realities of markets. And it enables a rich understanding of competition, beyond the reductionist descriptions of markets and firms proposed by neoclassical models and their contemporary neo-Brandeisian critique. New insights arise from the key teachings of complexity science, like feedback loops and the role of uncertainty. The present article lays down the building blocks of a complexity-minded antitrust method.

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Antitrust & Consumer Protection

Turning Back the Clock: Structural Presumptions in Merger Analyses and Revised Merger Guidelines

Scholarship Introduction Since 1950, when Congress closed a loophole in Section 7 of the Clayton Act, the federal antitrust agencies have investigated actively, and prosecuted diligently, . . .


Since 1950, when Congress closed a loophole in Section 7 of the Clayton Act, the federal antitrust agencies have investigated actively, and prosecuted diligently, mergers the government believed could be anti-competitive. In 1976, the Clayton Act was amended to require notification of many mergers to the agencies before consummation, allowing the government to sue to stop these mergers before they occur. Throughout the decades, merger review has become an elaborate, expensive process consuming vast resources; involving the merging parties, their attorneys, various experts, and those in the government; and rarely ending in judicial proceedings. The large majority of mergers the government opposed were either abandoned or settled with agreements requiring asset divestitures before consummation.

Prospective merger screening at the federal antitrust agencies has evolved, using advances in theoretical and empirical economics, to deemphasize structural tests in favor of an effects-based analysis. The agencies’ merger guidelines have changed with this evolution in economic knowledge and agency practice. The goal of guideline changes has been to increase the predictability and accuracy of the agencies’ merger screening, thereby decreasing the social costs of merger enforcement.

Strident critics of modern antitrust law, including merger policy, hold each key competition job in the administration of Pres. Joseph R. Biden Jr., including heads of both the Federal Trade Commission (FTC) and the Antitrust Division of the U.S. Department of Justice. President Biden recently decried modern antitrust law and policy as a 40-year “experiment failed.”To correct these “mistakes,” the antitrust agencies plan to replace the 2010 Horizontal Merger Guidelines and the 2020 Vertical Merger Guidelines (already withdrawn by the FTC) with a new enforcement approach.

Periodic revisions to the merger guidelines ensure that they reflect current agency practice, recent legal developments, and sound antitrust policy. Given the current administration’s desire to alter significantly how the agencies analyze mergers, changes to the guidelines are necessary to ensure that they accurately describe the new agency practice. It is less clear, however, whether the planned changes to antitrust enforcement and guidelines will reflect current law or sound antitrust policy. Although the precise nature, including the operational details, of the new guidelines is unknown at this writing, the agencies not only have made their disdain for the guidelines of the past 40 years known, but also have expressed their affinity for the pre-1980 merger law that modern guidelines have repudiated. Both their request for comment on the guidelines, one year ago, and a recent speech from FTC Chair Lina Khan show this affinity. The request relied almost entirely on pre-1980 law; Chair Khan’s speech was even more explicit.

In September 2022 at Fordham Law School, FTC Chair Khan discussed her work on revising the merger guidelines and stressed “fidelity to the law” as a guiding principle. She claims that, starting in the 1980s, the antitrust agencies “began straying” by sidestepping “controlling precedent and the statutory text, including the 1950 amendments” through “administrative fiat.” The law to which Chair Khan refers relied on strict structural presumptions to proscribe mergers. As shown here, merger law then did much more, reflecting a populist animus against mergers. The result was an era when the only consistency in the cases, as Justice Potter Stewart famously remarked, was that “the Government always wins.” The case law was incoherent, illogical, and, most important, anti-consumer, condemning bigness for its own sake, even when the mergers were not especially large or in concentrated markets.

In her speech, Chair Khan also notes that a post–World War II FTC study showing growing industrial concentration was “cited extensively by Congress as evidence of the danger to the American economy in unchecked corporate expansions through mergers” and was a “major driver in the passage of the 1950 amendment.” David Cicilline, then Chairman of the House Judiciary Committee’s Antitrust, Commercial, and Administrative Law Subcommittee and a leading critic of recent antitrust enforcement, also cites the same historical evidence. Yet, the FTC study showing growing concentration as a result of merger activity was methodologically flawed and wrong on the facts. Scholars convincingly demonstrated the flaws in the study and its conclusions, and shortly thereafter the authors of this FTC study on concentration even conceded it was wrong. Concentration was in fact not growing, from mergers or otherwise, and may actually have been decreasing. The problems with this study were known shortly before Congress passed the 1950 amendments. The courts obviously were wrong to rely on this discredited study in the 1960s, and one is more puzzled still that the current administration finds it useful to approvingly cite a flawed and discredited study today.

Critics of antitrust enforcement since 1980 also cite newer studies that show increasing industry concentration and claim that this increase is associated with increases in aggregate markups and decreased competition. This evidence has the same flaws as the discredited evidence used to support the structural approach to merger control from the 1960s that the Biden administration admires. Industrial organization economists have repeatedly shown that reliable inferences about the competitive dynamics in antitrust markets cannot be derived from measures of concentration or correlations between concentration and aggregate markups. These advances in theoretical and empirical economics undermined the economic core of the structural approach and eventually caused the agencies under both political parties to abandon that approach to merger control. Surely, new evidence with the same flaws cannot support a return to structural antitrust.

To provide background on the issues and show the fallacy in returning to reliance on strong and simple structural presumptions, section II begins with a brief description of the economic evolution of the effects-based approach contained in the 2010 U.S. Horizontal Merger Guidelines and 2020 U.S. Vertical Merger Guidelines. Section III then examines the flawed economic evidence cited to support returning to strong structural presumptions. Section IV next analyzes why the statutory text of the 1950 amendment and the post-1950 merger law do not support turning the clock back to structural presumptions. Section V concludes.

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Antitrust & Consumer Protection

The Microsoft Litigation’s Lessons for United States v. Google

Scholarship Abstract The United States Department of Justice (“DOJ”) and three overlapping groups of states have filed federal antitrust cases alleging Google has monopolized internet search, . . .


The United States Department of Justice (“DOJ”) and three overlapping groups of states have filed federal antitrust cases alleging Google has monopolized internet search, search advertising, internet advertising technologies, and app distribution on Android phones. In this Article, we focus on the DOJ’s claims that Google has used contracts with tech firms that distribute Google’s search services in order to exclude rival search providers and thus to monopolize the markets for search and search advertising—the two sides of Google’s search platform. The primary mechanisms of exclusion, according to the DOJ, are the many contracts Google has used to secure its status as the default search engine at all major search access points. The complaint echoes the DOJ’s claims two decades ago that Microsoft illegally maintained its monopoly in personal computer operating systems by forming exclusionary contracts with distributors of web browsers, and by tying its Internet Explorer browser to Windows. The gist of the case was that Microsoft had used exclusionary tactics to thwart the competitive threat Netscape’s Navigator browser and Sun Microsystems’ Java programming technologies—both forms of “middleware”—posed to the Windows monopoly. In this Article, we argue that the treatment of market definition, exclusionary contracting, causation, and remedies in the D.C. Circuit’s Microsoft decision has important lessons for the Google litigation.

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Antitrust & Consumer Protection