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Three Key Questions in the Google Antitrust Case

Popular Media Last Tuesday, the Department of Justice (DOJ) kicked off its first major monopolization trial since the Microsoft case of the late 1990s. The target this . . .

Last Tuesday, the Department of Justice (DOJ) kicked off its first major monopolization trial since the Microsoft case of the late 1990s. The target this time is a Microsoft rival: Google. Google’s ubiquitous search engine competes with Microsoft’s Bing, which powers search engines Yahoo and DuckDuckGo.

Filed in the waning days of the Trump administration, the government’s lawsuit alleges that Google has cemented its monopoly power in general internet search and related search advertising by paying to be the default search engine on various “search access points.” Specifically, Google secures default status by agreeing to share search advertising revenue with web browsers like Mozilla’s Firefox, producers of Android phones and the carriers who service them, and iPhone maker Apple. In the government’s telling, these deals prevent Google’s search rivals from achieving the scale they need to become formidable competitors.

Read the full piece here.

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Antitrust & Consumer Protection

Neo-Brandeisianism’s Democracy Paradox

Scholarship Abstract Neo-Brandeisians, including the current heads of the U.S. antitrust enforcement agencies, have declared contemporary antitrust a failure. Among their chief complaints is that prevailing . . .

Abstract

Neo-Brandeisians, including the current heads of the U.S. antitrust enforcement agencies, have declared contemporary antitrust a failure. Among their chief complaints is that prevailing antitrust doctrine has failed to protect democratic values because it has allowed business enterprises to amass excessive economic power. Such economic power, they assert, breeds undue political power as large firms have the resources to sway policymakers and may thereby thwart majority will. Outside the political realm, Neo-Brandeisians say, massive industrial concentration undermines effective self-governance by rendering citizens beholden as consumers, suppliers, and laborers to a small group of powerful firms. To preserve democratic values, defined both narrowly in terms of actual democratic functioning and broadly in terms of economic self-governance, Neo-Brandeisians press for a fundamental reordering of the antitrust enterprise. Key components of this reordering are (1) abandonment of antitrust’s consumer welfare standard (exemplified by the U.S. Federal Trade Commission’s replacement of its 2015 enforcement policy on unfair methods of competition with a multi-goaled enforcement policy) and (2) a move toward ex ante conduct rules in lieu of enforcement via adjudication under ex post standards (exemplified by the Commission’s recent proposal to ban worker noncompete agreements). The combined effect of these two moves, however, would be to centralize political power, weaken democratic accountability, and reduce individual freedom. Because promotion of democratic values is Neo-Brandeisianism’s reason for being, Neo-Brandeisianism is “a policy at war with itself.”

 

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Antitrust & Consumer Protection

AICOA Is Neither Urgently Needed Nor Good: A Response to Professors Scott Morton, Salop, and Dinielli

TOTM Earlier this month, Professors Fiona Scott Morton, Steve Salop, and David Dinielli penned a letter expressing their “strong support” for the proposed American Innovation and Choice Online . . .

Earlier this month, Professors Fiona Scott Morton, Steve Salop, and David Dinielli penned a letter expressing their “strong support” for the proposed American Innovation and Choice Online Act (AICOA). In the letter, the professors address criticisms of AICOA and urge its approval, despite possible imperfections.

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Antitrust & Consumer Protection

In Apple v Epic, 9th Circuit Should Remember that Antitrust Forbids Enhancing, not Exercising, Market Power

TOTM Every voluntary transaction between a buyer and seller involves the creation of surplus—the difference between the subjective value a buyer attaches to the thing and . . .

Every voluntary transaction between a buyer and seller involves the creation of surplus—the difference between the subjective value a buyer attaches to the thing and the seller’s cost of producing and selling the item. Price and other contract terms determine how that surplus is split between the buyer and seller.

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Antitrust & Consumer Protection

Bad Blood at the FTC

TOTM John Carreyrou’s marvelous book Bad Blood chronicles the rise and fall of Theranos, the one-time Silicon Valley darling that was revealed to be a house . . .

John Carreyrou’s marvelous book Bad Blood chronicles the rise and fall of Theranos, the one-time Silicon Valley darling that was revealed to be a house of cards. Theranos’s Svengali-like founder, Elizabeth Holmes, convinced scores of savvy business people (mainly older men) that her company was developing a machine that could detect all manner of maladies from a small quantity of a patient’s blood. Turns out it was a fraud.

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Antitrust & Consumer Protection

Lambert & Sykuta Comment to FTC on Common Ownership

TOTM The Federal Trade Commission will soon hold hearings on Competition and Consumer Protection in the 21st Century.  The topics to be considered include...

The Federal Trade Commission will soon hold hearings on Competition and Consumer Protection in the 21st Century.  The topics to be considered include…

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Antitrust & Consumer Protection

Lowering the Barriers to Entry to the Common Ownership Debate

TOTM One of the hottest topics in antitrust these days is institutional investors’ common ownership of the stock of competing firms. Large investment companies like BlackRock, Vanguard, State . . .

One of the hottest topics in antitrust these days is institutional investors’ common ownership of the stock of competing firms. Large investment companies like BlackRock, Vanguard, State Street, and Fidelity offer index and actively managed mutual funds that are invested in thousands of companies. In many concentrated industries, these institutional investors are “intra-industry diversified,” meaning that they hold stakes in all the significant competitors within the industry.

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Antitrust & Consumer Protection

Correcting the Federalist Society Review’s Mischaracterization of How to Regulate

TOTM Ours is not an age of nuance.  It’s an age of tribalism, of teams—“Yer either fer us or agin’ us!”  Perhaps I should have been less surprised, then, when I read the unfavorable review of my book How to Regulate in, of all places, the Federalist Society Review.

Ours is not an age of nuance.  It’s an age of tribalism, of teams—“Yer either fer us or agin’ us!”  Perhaps I should have been less surprised, then, when I read the unfavorable review of my book How to Regulate in, of all places, the Federalist Society Review.

Read the full piece here.

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Antitrust & Consumer Protection

Dear Antitrusters: Bias Is Ubiquitous. Stick to the Merits.

A recent tweet by Lina Khan, discussing yesterday’s American Express decision, exemplifies an unfortunate trend in contemporary antitrust discourse.  Khan wrote: The economists cited by the Second Circuit (whose . . .

A recent tweet by Lina Khan, discussing yesterday’s American Express decision, exemplifies an unfortunate trend in contemporary antitrust discourse.  Khan wrote:

The economists cited by the Second Circuit (whose opinion SCOTUS affirms) for the analysis of ‘two-sided’ [markets] all had financial links to the credit card sector, as we point out in FN 4 [link to amicus brief].

Her implicit point—made more explicitly in the linked brief, which referred to the economists’ studies as “industry-funded”—was that economic analysis should be discounted if the author has ever received compensation from a firm that might benefit from the proffered analysis.

There are two problems with this reasoning.  First, it’s fallacious.  An ad hominem argument, one addressed “to the person” rather than to the substance of the person’s claims, is a fallacy of irrelevance, sometimes known as a genetic fallacy.  Biased people may make truthful claims, just as unbiased people may get things wrong.  An idea’s “genetics” are irrelevant.  One should assess the substance of the actual idea, not the identity of its proponent.

Second, the reasoning ignores that virtually everyone is biased in some way.  In the antitrust world, those claiming that we should discount the findings and theories of industry-connected experts urging antitrust modesty often stand to gain from having a “bigger” antitrust.

In the common ownership debate about which Mike Sykuta and I have recently been blogging, proponents of common ownership restrictions have routinely written off contrary studies by suggesting bias on the part of the studies’ authors.  All the while, they have ignored their own biases:  If their proposed policies are implemented, their expertise becomes exceedingly valuable to plaintiff lawyers and to industry participants seeking to traverse a new legal minefield.

At the end of our recent paper, The Case for Doing Nothing About Institutional Investors’ Common Ownership of Small Stakes in Competing Firms, Mike and I wrote, “Such regulatory modesty will prove disappointing to those with a personal interest in having highly complex antitrust doctrines that are aggressively enforced.”  I had initially included a snarky footnote, but Mike, who is far nicer than I, convinced me to remove it.

I’ll reproduce it here in the hopes of reducing the incidence of antitrust ad hominem.

Professor Elhauge has repeatedly discounted criticisms of the common ownership studies by suggesting that critics are biased.  See, e.g., Elhauge, supra note 26, at 1 (observing that “objections to my analysis have been raised in various articles, some funded by institutional investors with large horizontal shareholdings”); id. at 3 (“My analysis of executive compensation has been critiqued in a paper by economic consultants O’Brien and Waehrer that was funded by the Investment Company Institute, which represents institutional investors and was headed for the last three years by the CEO of Vanguard.”); Elhauge, supra note 124, at 3 (observing that airline and banking studies “have been critiqued in other articles, some funded by the sort of institutional investors that have large horizontal shareholdings”); id. at 17 (“The Investment Company Institute, an association of institutional investors that for the preceding three years was headed by the CEO of Vanguard, has funded a couple of papers to critique the empirical study showing an adverse link between horizontal shareholding and airline prices.”); id. (observing that co-authors of critique “both have significant experience in the airline industry because they consulted either for the airlines or the DOJ on airline mergers that were approved notwithstanding high levels of horizontal shareholding”); id. at 19 (“The Investment Company Institute has responded by funding a second critique of the airline study.”); id. at 23-24 (“Even to the extent that such studies are not directly funded by industry, when an industry has been viewed as benign for a long time, confirmation bias is a powerful force that will incline many to interpret any data to find no adverse effects.”).  He fails, however, to acknowledge his own bias.  As a professor of antitrust law at one of the nation’s most prestigious law schools, he has an interest in having antitrust be as big and complicated as possible: The more complex the doctrine, and the broader its reach, the more valuable a preeminent antitrust professor’s expertise becomes.  This is not to suggest that one should discount the assertions of Professor Elhauge or other proponents of restrictions on common ownership.  It is simply to observe that bias is unavoidable and that the best approach is therefore to evaluate claims according to their substance, not according to who is asserting them.

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Antitrust & Consumer Protection