The American Choice and Innovation Online Act (previously called the Platform Anti-Monopoly Act), introduced earlier this summer by U.S. Rep. David Cicilline (D-R.I.), would significantly change the nature of digital platforms and, with them, the internet itself. Taken together, the bill’s provisions would turn platforms into passive intermediaries, undermining many of the features that make them valuable to consumers. This seems likely to remain the case even after potential revisions intended to minimize the bill’s unintended consequences.

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The U.S. economy survived the COVID-19 pandemic and associated government-imposed business shutdowns with a variety of innovations that facilitated online shopping, contactless payments, and reduced use and handling of cash, a known vector of disease transmission.

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ICLE Director of Law & Economics Programs Gus Hurwitz appeared on RFD-TV to discuss the lack of high speed internet access in some rural areas. The full clip is embedded below. 

In recent years, a growing chorus of voices has argued that existing merger rules fail to apprehend competitively significant mergers, either because they fall below existing merger-filing thresholds or because they affect innovation in ways that are purportedly ignored.

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The language of the federal antitrust laws is extremely general. Over more than a century, the federal courts have applied common-law techniques to construe this general language to provide guidance to the private sector as to what does or does not run afoul of the law. The interpretive process has been fraught with some uncertainty, as judicial approaches to antitrust analysis have changed several times over the past century. Nevertheless, until very recently, judges and enforcers had converged toward relying on a consumer welfare standard as the touchstone for antitrust evaluations (see my antitrust primer here, for an overview).

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U.S. and European competition laws diverge in numerous ways that have important real-world effects. Understanding these differences is vital, particularly as lawmakers in the United States, and the rest of the world, consider adopting a more “European” approach to competition.

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Abstract

A growing number of policymakers and scholars are calling for tougher rules to curb corporate acquisitions. But these appeals are premature. There is currently little evidence to suggest that mergers systematically harm consumer welfare. More importantly, scholars fail to identify alternative institutional arrangements that would capture the anticompetitive mergers that evade prosecution without disproportionate false positives and administrative costs. Their proposals thus fail to meet the requirements of the error-cost framework.

Several high-profile academic articles and reports claim to have identified important gaps in current merger enforcement rules, particularly with respect to tech and pharma acquisitions involving nascent and potential competitors—so-called “killer acquisitions” and “kill zones.” As a result of these perceived deficiencies, scholars and enforcers have called for tougher rules, including the introduction of lower merger filing thresholds and substantive changes, such as the inversion of the burden of proof when authorities review mergers and acquisitions in the digital platform industry. Meanwhile, and seemingly in response to the increased political and advocacy pressures around the issue, U.S. antitrust enforcers have recently undertaken several enforcement actions directly targeting such acquisitions.

As this paper discusses, however, these proposals tend to overlook the important tradeoffs that would ensue from attempts to decrease the number of false positives under existing merger rules and thresholds. While merger enforcement ought to be mindful of these possible theories of harm, the theories and evidence are not nearly as robust as many proponents suggest. Most importantly, there is insufficient basis to conclude that the costs of permitting the behavior they identify is greater than the costs would be of increasing enforcement to prohibit it.

Our work draws from two key strands of economic literature that are routinely overlooked (or summarily dismissed) by critics of the status quo. For a start, as Frank Easterbrook argued in his pioneering work on The Limits of Antitrust, antitrust enforcement is anything but costless. In the case of merger enforcement, not only is it expensive for agencies to detect anticompetitive deals, but overbearing rules may deter beneficial merger activity that creates value for consumers. Indeed, not only are most mergers welfare-enhancing, but barriers to merger activity have been shown to significantly, and negatively, affect early company investment.

Second, critics mistake the nature of causality. Scholars routinely surmise that incumbents use mergers to shield themselves from competition. Acquisitions are thus seen as a means of eliminating competition. But this overlooks an important alternative: It is at least plausible that incumbents’ superior managerial or other capabilities make them the ideal purchasers for entrepreneurs and startup investors who are looking to sell. This dynamic is likely to be amplified where the acquirer and acquiree operate in overlapping lines of business. In other words, competitive advantage, and the ability to profitably acquire other firms, might be caused by business acumen rather than anticompetitive behavior.

Thus, significant and high-profile M&A activity involving would-be competitors may be the procompetitive byproduct of a well-managed business, rather than anticompetitive efforts to stifle competition. Critics systematically overlook this possibility. Indeed, Henry Manne’s seminal work on Mergers and Market for Corporate Control—the first to argue that mergers are a means of applying superior management practices to new assets—is almost never cited by contemporary researchers in this space. Our paper attempts to set the record straight.

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Over the past decade and a half, virtually every branch of the federal government has taken steps to weaken the patent system. As reflected in President Joe Biden’s July 2021 executive order, these restraints on patent enforcement are now being coupled with antitrust policies that, in large part, adopt a “big is bad” approach in place of decades of economically grounded case law and agency guidelines.

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Abstract

The New Madison Approach, championed by former Assistant Attorney General Makan Delrahim, sets forth a framework for understanding how antitrust law, patent law, and contract law intersect and interrelate in the field of technology standards. Commentators often conflate these divergent, but complementary, areas of law and seek to substitute one for the other, especially in disputes involving standard essential patents. In doing so, they often arrive at the conclusion that the puzzle is missing some pieces. By recognizing the work that each of these doctrines can and should do, the New Madison Approach solves the puzzle and presents an appealing picture of competition in the innovation age.