Research Programs
More
What are you looking for?
Showing 9 of 133 Publications in Consumer Welfare Standard
Presentations & Interviews ICLE Senior Scholar Joshua Wright participated in the FTC’s Hearing #3: Multi-Sided Platforms, Labor Markets, and Potential Competition on the panel, Do the U.S. and . . .
ICLE Senior Scholar Joshua Wright participated in the FTC’s Hearing #3: Multi-Sided Platforms, Labor Markets, and Potential Competition on the panel, Do the U.S. and Europe Treat Competition Cases Involving Platforms Differently? Read the full transcript here. Video of the event is embedded below.
Written Testimonies & Filings FTC Hearings on Competition & Consumer Protection in the 21 st Century. Comments of the International Center for Law & Economics: Antitrust Principles and Evidence-Based Antitrust Under the Consumer Welfare Standard. Hearing #1 (Sep. 13, 2018). Submitted October 14, 2018.
Since the original Pitofsky hearings at the dawn of the Internet era, much has fundamentally changed in the way the firms do businesses. Yet, despite these rapid and fundamental shifts in technology and behavior, we still face many of the same policy challenges as existed twenty-plus years ago. Innovation always yields both costs and benefits, meaning that some firms will face adverse effects as the environment in which they developed their business changes. Unfortunately, some antitrust observers use this reality as an opportunity to advocate for problematic changes in the underlying law.
Yet, in the face of these changes, time-tested antitrust principles become even more important, and the focus of enforcers and lawmakers should be in favor or maintaining and strengthening the existing consumer welfare standard. It is a standard rooted in testable, empirical realities, and is designed to lead to reproducible outcomes that redound to the benefit of consumers. These comments explore a number of important areas, including:
By combining lessons from the history of antitrust policy and contemporary economics, this analysis elucidates the key issues faced by the antitrust enforcers as they consider the future of antitrust policy. To date, no better alternative has been proposed, and enforcement agencies should tread lightly when considering alterations that would undermine the solid foundations of antitrust law. The unfortunate outcome of many calls to reform would be to return antitrust law to an era of politicized enforcement, lower consumer welfare, and greater uncertainty for firms operating in the economy.
Click here to read the full comments.
Regulatory Comments ICLE submitted Comments to the Federal Communications Commission in Opposition to Petitions to Deny the T-Mobile-Sprint Merger. ICLE's comments argue that the petitions to deny fail to provide any compelling reason to adopt a presumption against this merger. To the contrary, there are good reasons to think that this transaction will benefit consumers and the economy.
Yesterday, ICLE submitted Comments to the Federal Communications Commission in Opposition to Petitions to Deny the T-Mobile-Sprint Merger. ICLE’s comments argue that the petitions to deny fail to provide any compelling reason to adopt a presumption against this merger. To the contrary, there are good reasons to think that this transaction will benefit consumers and the economy. The complete comments can be found here.
The conventional wisdom in opposition to the T-Mobile/Sprint merger has it that a competitive mobile market requires 4 national providers. But there are no economic grounds for this assertion; it’s basically an arbitrary number, offered up in order to squelch any further concentration in the industry.
As ICLE scholars discuss in these comments, increased concentration is not necessarily good or bad in itself–it depends on the circumstances. Increases in market concentration in the US mobile industry have historically been accompanied by dramatic increases in quality and reductions in price. And there are compelling reasons to believe that the merger of T-Mobile and Sprint will continue this trend.
A proper assessment of this transaction requires the Commission to account for the specific characteristics of the markets affected by the merger—including, most importantly, the dynamic, fast-moving nature of competition and the importance of high fixed costs of production and economies of scale. This is particularly important given the potential for the transaction to facilitate the launch of a competitive, national 5G network.
Opponents claim this merger takes us from four to three national carriers. But in terms of future investment in general, and the roll-out of 5G in particular, it does not; a better characterization is that it takes us from two to three national carriers investing to build out next-generation networks.
In the past, the capital expenditures made by AT&T and Verizon have dwarfed those of T-Mobile and Sprint. But New T-Mobile would be in a far better position to make the kinds of large-scale investments necessary to develop a nationwide 5G network. As a result, it is likely that both the urban-rural digital divide and the rich-poor digital divide will decline following the merger. And this investment will drive competition with AT&T and Verizon, leading to innovation, improving service and–over time–lowering the cost of access.
Indeed, the potential benefits of the deal—including wider access to, and more timely deployment of, high-speed wireless data at lower cost, as well as a host of other innovations—are considerable. In order to ensure that such consumer benefits can be realized, it is crucial that the proposed merger not be thwarted by regulators inappropriately focused on short-term, static effects.
Written Testimonies & Filings FTC Hearings on Competition & Consumer Protection in the 21st Century. Comments of the International Center for Law & Economics: The Rise of Neo-Brandeisian Competition Policy: Populism and Political Power and the Threat to Economically Grounded, Evidence-Based. Competition Law and Consumer Protection Regulation. Submitted August 20, 2018.
In 1995, then-FTC-Chairman Pitofsky convened a set of hearings — the Global Competition and Innovation hearings (“Pitofsky Hearings”) — aimed at investigating the implications for antitrust law, economics, and policy of “increasing globalization and rapid innovation.”2 As the Pitofsky Hearings report noted:
These changes create new possibilities and raise new problems for consumers, businesses, and government agencies. It is in everyone’s interest that government understand these developments in order to make sure that the marketplace continues to work competitively for businesses and consumers.
Two decades later — a near eternity in Internet time — the same changes are proceeding apace, and the need for greater understanding remains; arguably, it is even more acute today.
By the 1990s, the global marketplace had already grown dramatically, and technology startups were beginning to test new regulatory and legal fault lines. Today we face an even-more-tightly integrated world market, along with the intensification of international tariff disputes, the creative imposition of non-tariff trade barriers (including antitrust enforcement), and the increased brazenness of politicized industrial policy implementation that expanded global competition brings.
Meanwhile, several of the tech companies that were at most fledglings (if they existed at all) in 1995 have grown to become some of the most highly valued companies in the world. Their success — and the dramatic evolution of the world economy it has brought about — has engendered a new wave of hand wringing over firm size, industry structure, the social consequences of economic and technological change, and the proper role of antitrust and consumer protection law in addressing them.
Chairman Simon and the Commission should be commended for undertaking these hearings. Greater understanding of the antitrust and consumer protection implications of significant economic developments is always welcome. In particular, there remains much about the welfare implications of competition policy decisions surrounding innovation that we still don’t understand.
Yet, while some of the business, economic, and legal specifics are novel, important, and worthy of investigation, the core policy issues we face today are nothing new, and they weren’t new even in the 1990s. The innovation that drives economic growth, while generally beneficial, nonetheless inevitably causes adverse effects for some businesses and/or the interests of some social commentators, and this has resulted in attempts to politicize antitrust in order to protect those businesses and/or social interests. What is troubling is how little we seem to remember of what we do know, even as slightly different versions of the same antitrust debates continue to recur.
Fundamentally, what we know is this: First, unless and until a demonstrably better alternative is offered (and none has been, either today or over the course of antitrust’s 100-year history), the consumer welfare standard — warts and all — is the appropriate touchstone for antitrust enforcement and adjudication. Whether specific firm conduct or enforcement decisions promote consumer welfare is, of course, always up for discussion. But that antitrust law, enforcement decisions, and policy should not intentionally incorporate or be informed by inherently idiosyncratic and inevitably politicized public policy preferences is beyond doubt.
Second, competition and consumer protection policy should be economically grounded and evidence-based. Similarly, decisions regarding policy changes should be based on rigorous, economically robust, and constantly tested empirical knowledge. But it is insufficient to point to even well-supported empirical claims regarding aggregated market effects or specific case outcomes as the basis for (often-dramatic) policy prescriptions. Rather, decisions regarding competition and consumer protection policy must be undertaken with a robust understanding of the institutional structures and agency processes by which they are implemented.
Arguments abound that we should ratchet up antitrust and consumer protection enforcement in various ways in order to tackle hot-button issues like excessive concentration, insufficient privacy protection, fake-news, wealth inequality, and the like. But few of them rest on solid empirical evidence, and fewer still (if any) seriously address whether or how defects in policy and enforcement decisionmaking processes may have led to the claimed problems and whether or how altering those processes would correct them. Such arguments should not simply be ignored, but nor should they be taken seriously unless and until they are rigorously supported by economic, empirical, and institutional analysis.
TOTM Last week, I objected to Senator Warner relying on the flawed AOL/Time Warner merger conditions as a template for tech regulatory policy, but there is a much deeper problem contained in his proposals.
Last week, I objected to Senator Warner relying on the flawed AOL/Time Warner merger conditions as a template for tech regulatory policy, but there is a much deeper problem contained in his proposals. Although he does not explicitly say “big is bad” when discussing competition issues, the thrust of much of what he recommends would serve to erode the power of larger firms in favor of smaller firms without offering a justification for why this would result in a superior state of affairs. And he makes these recommendations without respect to whether those firms actually engage in conduct that is harmful to consumers.
Read the full piece here.
TOTM What to make of the decision by the European Commission alleging that Google has engaged in anticompetitive behavior? In this post, Julian Morris contrasts the European Commission’s (EC) approach to competition policy with US antitrust, briefly explores the history of smartphones and discusses the ruling.
What to make of Wednesday’s decision by the European Commission alleging that Google has engaged in anticompetitive behavior? In this post, I contrast the European Commission’s (EC) approach to competition policy with US antitrust, briefly explore the history of smartphones and then discuss the ruling.
TOTM The urge to treat antitrust as a legal Swiss Army knife capable of correcting all manner of social and economic ills is apparently difficult for some to resist. Conflating size with market power, and market power with political power, many recent calls for regulation of industry — and the tech industry in particular — are framed in antitrust terms.
Following is the (slightly expanded and edited) text of my remarks from the panel, Antitrust and the Tech Industry: What Is at Stake?, hosted last Thursday by CCIA. Bruce Hoffman (keynote), Bill Kovacic, Nicolas Petit, and Christine Caffarra also spoke. If we’re lucky Bruce will post his remarks on the FTC website; they were very good.
TOTM A panelist brought up an interesting tongue-in-cheek observation about the rising populist antitrust movement at a Heritage antitrust event this week. To the extent that . . .
A panelist brought up an interesting tongue-in-cheek observation about the rising populist antitrust movement at a Heritage antitrust event this week. To the extent that the new populist antitrust movement is broadly concerned about effects on labor and wage depression, then, in principle, it should also be friendly to cartels. Although counterintuitive, employees have long supported and benefited from cartels, because cartels generally afford both job security and higher wages than competitive firms. And, of course, labor itself has long sought the protection of cartels – in the form of unions – to secure the same benefits.
Popular Media by Jonathan Jacobson, partner & Ryan Maddock, associate, Wilson Sonsini Goodrich & Rosati Excluding the much talked about Section 5 policy statement, Commissioner Wright’s tenure at the FTC was . . .
by Jonathan Jacobson, partner & Ryan Maddock, associate, Wilson Sonsini Goodrich & Rosati
Excluding the much talked about Section 5 policy statement, Commissioner Wright’s tenure at the FTC was highlighted by his numerous dissents. If there is one unifying theme in those dissents it is his insistence that rigorous economic analysis be at the very core of all the Commission’s decisions. This theme was perhaps most evident in his decision to dissent in the Ardaugh/Saint-Gobain and Sysco/US Foods mergers, two cases that presented interesting questions about how the Commission and courts should balance a merger’s likely anticompetitive effects with its procompetitive efficiencies.
In April of 2014 the Commission announced that it had accepted a consent decree in Ardaugh/Saint-Gobain that remedied its competitive concerns related to the merger of the second and third largest firms in the market for “glass containers sold to beer and wine distributors in the United States.” The majority, which consisted of Commissioners Ramirez, Ohlhausen, and Brill, argued that the merger would lead to both coordinated and unilateral anticompetitive effects in the market and further stated that “the parties put forward insufficient evidence showing that the level of synergies that could be substantiated and verified would outweigh the clear evidence of consumer harm.” Commissioner Wright, who was the lone dissenter, strongly disagreed with the majority’s conclusions and found that the merger’s cognizable efficiencies were “up to six times greater than any likely unilateral price effect,” and thus the merger should have been approved without requiring a remedy.
Commissioner Wright also used his Ardaugh dissent to discuss whether the merging parties and Commission face asymmetric burdens of proof regarding competitive effects. Specifically, Commissioner Wright asked whether the “merging parties [must] overcome a greater burden of proof on efficiencies in practice than does the FTC to satisfy its prima facie burden of establishing anticompetitive effects?” Commissioner Wright stated that the Commission has acknowledged that in theory the burdens of proof should be uniform; however, he argued that the only way the majority could have found that the Ardaugh/Saint-Gobain merger would generate almost no cognizable efficiencies is by applying asymmetric burdens. He explained that the majority’s approach “embraces probabilistic prediction, estimation, presumption, and simulation of anticompetitive effects on the one hand but requires efficiencies to be proven on the other.”
Commissioner Wright, who was joined by Commissioner Ohlhausen, also dissented from the Commission’s decision to challenge the Sysco/US Foods merger. While the Commissioners did not issue a formal dissent because of the FTC’s then pending litigation, Commissioner Wright tweeted that he had “no reason to believe the proposed Sysco/US Foods transaction violated the Clayton Act.” The lack of a formal dissent makes it challenging to ascertain all of Commissioner Wright’s objections, but a reading of the Commission’s administrative complaint provides insight on his likely positions. For example, Commissioner Wright undoubtedly disagreed with the complaint’s treatment the parties’ proffered efficiencies:
Extraordinary Merger-specific efficiencies are necessary to outweigh the Merger’s likely significant harm to competition in the relevant markets. Respondents cannot demonstrate cognizable efficiencies that would be sufficient to rebut the strong presumption and evidence that the Merger likely would substantially lessen competition in the relevant markets.
Commissioner Wright’s Ardaugh dissent makes it clear that he does not believe that the balancing of anticompetitive effects and efficiencies should be an afterthought to the agency’s merger analysis, which is how the majority’s complaint appears to treat it. This case likely represents another instance where Commissioner Wright believed that the majority of commissioners applied asymmetric burdens of proof when balancing the merger’s competitive effects.
Commissioner Wright is not the first person to ask whether current merger analysis favors anticompetitive effects over efficiencies; however, that does not detract from the question’s importance. His views reflect a belief shared by others that antitrust policy should be based on an aggregate welfare standard, rather than the consumer welfare standard that the agencies and the courts have for the most applied over the past few decades. In Commissioner Wright’s view, by applying asymmetric burdens–which is functionally the same as discounting efficiencies–antitrust agencies could harm both total welfare and consumers by increasing the chance that a procompetitive merger might be blocked. It stands in contrast to the majority view that a merger that raises prices requires efficiencies, specific to the merger, of a magnitude sufficient to defeat any increase in consumer prices–and that, because the efficiency information is in the hands of the proponents, shifting the burden to them is appropriate.
While his tenure at the FTC has come to an end, expect to continue to see Commissioner Wright at the front and center of this and many other important antitrust issues.
