After a lot of anticipation from Supreme Court watchers, the Murthy v. Missouri opinion has finally been released. As the oral argument suggested, standing was the issue for the Court, who in a 6-3 decision written by Justice Amy Coney Barrett ruled that none of the plaintiffs had standing, due to a lack of traceability and redressability of the alleged injuries. The result: challenging backdoor censorship just got a lot harder.

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As former antitrust enforcers and alumni of the Federal Trade Commission (“FTC”), we are pleased to submit these comments to the FTC and Department of Justice’s Antitrust Division (“DOJ”) (collectively, “Agencies”) in response to your Request for Information on Corporate Consolidation Through Serial Acquisitions and Roll-Up Strategies (“RFI”).  We have devoted significant portions of our careers to protecting consumers and competition and we continue to care deeply about the Agencies and their mission.  Moreover, we agree that mergers and acquisitions merit further study and applaud the Agencies for tackling these issues.

We write to suggest several ways in which the Agencies might adjust and supplement the RFI to build confidence in its objectivity and comprehensiveness.  As written, the RFI creates an appearance that the Agencies are mainly seeking negative information about acquisitions, rather than seeking to learn about their benefits to competition as well as their potential harms, and that the Agencies are seeking information about ideological topics untethered from their mission.  Such an approach could distort the Agencies’ perspective, degrade public confidence, and ultimately lead the Agencies to challenge pro-competitive or competitively neutral acquisitions.

I. The Agencies Should Issue a Supplemental RFI to Inquire into the Pro-Competitive Aspects of Serial Acquisitions

As they have in the past, the Agencies should examine mergers and acquisitions in an objective fashion.  In recent years, for example, the Agencies themselves have recognized that mergers “are one means by which firms can improve their ability to compete.”[1]  In one paper, from 2020, the FTC’s staff examined a large potash merger and concluded that the “evidence does not indicate that the firms were able to impose an anticompetitive price increase in the wake of the merger.”[2]  Another retrospective from 2009, into hospital mergers, found mixed results; one merger resulted in higher prices, the other did not.[3]  Finally, a retrospective into grocery mergers found that “mergers in highly concentrated markets are most frequently associated with price increases, while mergers in less concentrated markets are most often associated with price decreases.”[4]  In each instance, the Agencies examined the markets and acquisitions objectively.

The current RFI, however, suggests that the Agencies have already concluded that “serial acquisitions” harm competition.  Although several questions take a neutral approach, many of them solicit negative information about acquisitions, and not one asks about any benefits. For example, Question 2(c) asks whether serial acquisitions encourage “actual or attempted coordination or collusion between competitors” and Question 3 posits nine subparts about ways in which an acquirer might harm competition, including tying and refusals to deal.  By contrast, the RFI includes no questions that solicit information about possible pro-competitive benefits from acquisitions; at most, Question 4 asks the public to identify “claimed” business objectives and whether they came to pass.

Accordingly, we suggest that the Agencies supplement the RFI with additional questions that solicit information about the benefits of serial acquisitions.  Below is proposed Question 6, mirroring existing Question 3:

Proposed Question 6

Serial Acquisition Business Practices (Part 2): If you identified serial acquisitions in the preceding questions, please share whether the acquisitions affected the relevant market in in any of the following ways:

1. A reduction in price for consumers, either by the acquirer, its competitors, or both;

2. An increase in output, either by the acquirer, its competitors, or both;

3. An increase in product offerings, including new varieties of products or products offered at different price points, either from the acquirer, its competitors, or both;

4. An increase in product quality, either from the acquirer, its competitors, or both;

5. An increase in investment, financing, or innovation, as measured by patent filings or any other metric, either by the acquirer, its competitors, or both;

6. An increase in efficiency (e.g., lower unit costs), either by the acquirer, its competitors, or both;

7. Any other market effects that show the benefits of the acquisitions; and

8. Any other market effects that show that the acquisitions were competitively neutral in terms of their effect on price, quality, variety, investment, or any other metric.

At a minimum, the addition of these questions, or something similar, would build public confidence that the Agencies are approaching the topic in an objective manner.

Moreover, the answers also could yield valuable, current information about the benefits of acquisitions — and thereby improve the Agencies’ ability to develop better enforcement actions.  In the past, of course, the Agencies have stated that “the vast majority of mergers are either procompetitive and enhance consumer welfare or are competitively benign”[5] and that “[m]ergers are one means by which firms can improve their ability to compete.”[6]  In a policy statement from just a few years ago, the FTC agreed that mergers can promote innovation:

[I]n dynamic sectors characterized by high R&D costs, firms with broad scale and scope may have unique incentives and capabilities to invest in innovation.  For example, where a firm can exploit synergies across product lines or earn returns on research and development projects across multiple geographies, it may have greater incentives to make investments in such projects than firms with more limited operations.[7]

Many other studies agree that mergers can promote competition and innovation.  The Antitrust Modernization Commission,[8] antitrust treatises,[9] and a recent, comprehensive literature survey[10] all have found that mergers can and do advance procompetitive business objectives.  Another recent study found that mergers resulted in more patent applications and investment in research and development. [11]  In the biopharmaceutical industry, for instance, the Congressional Budget Office agreed that “The acquisition of a small company by a larger one can create efficiencies that might increase the combined value of the firms by allowing drug companies of different sizes … to specialize in activities in which they have a comparative advantage.”[12]  Numerous recent court decisions also find that mergers can create integration efficiencies that ultimately promote competition and benefit consumers.[13]

II. The Agencies Should Explain or Withdraw Certain Questions that Create an Appearance of Focusing on Ideological Issues Unrelated to Their Statutory Mission

Within the RFI, certain questions may create an appearance that the Agencies are interested in ideological issues unrelated to their statutory mission.  For example, Question 2(d) and its subparts inquire into labor topics unrelated to the rare phenomenon of a labor monopsony, such as “Have workers been reclassified (i.e., from employees to independent contractors) or outsourced to/from third-party providers?” and questions about “work conditions” and “employment stability.”  It is not obvious how any of these questions relate to the Agencies’ statutory mission or historical practice. The RFI cites no statutory provisions or cases, and we are unaware of any, in which a court has found that issues of worker classification, work conditions, or employment stability had any relevance to a merger analysis.

Similarly, Question 5 asks a series of questions about private equity and the role that investors play in managing an acquired company.  Again, the RFI cites no statutory provisions or cases, and we are unaware of any, in which a court has found that the identity of a purchaser as a private equity firm has any relevance to a merger analysis, except to the extent that the firm may own other companies in the same market.

For these reasons, we recommend that the Agencies withdraw these questions or explain their relevance to the antitrust laws and this inquiry.  By narrowing the RFI to topics that relate directly to the antitrust laws and merger analysis, and that have grounding in the statutory language and historical precedent, the Agencies would gather more useful information and would increase public confidence in the necessity and utility of this inquiry.

***

As former enforcers, we strongly support the Agencies’ mission and the importance of vigorous enforcement.  We hope that our suggestions will help the Agencies to improve the quality and utility of the information that they receive in response to this RFI.

Thank you for your attention to these comments.

[1] OECD, Conglomerate Effects of Mergers – Note by the United States to the Organisation for Economic Co-operation and Development (June 4, 2020) at 5, https://www.ftc.gov/system/files/attachments/us-submissions-oecd-2010-present-other-international-competition-fora/oecd-conglomerate_mergers_us_submission.pdf.

[2] See Kreisle, Bureau of Economics, Price Effects from the Merger of Agricultural Fertilizer Manufacturers Agrium and PotashCorp (July 2020), https://www.ftc.gov/system/files/documents/reports/price-effects-merger-agricultural-fertilizer-manufacturers-agrium-potashcorp/working_paper_345.pdf.

[3] See Haas-Wilson and Garmon, Bureau of Economics, Two Hospital Mergers on Chicago’s North Shore: A Retrospective Study (Jan. 2009), at https://www.ftc.gov/sites/default/files/documents/reports/two-hospital-mergers-chicago%E2%80%99s-north-shore-retrospective-study/wp294_0.pdf.

[4] See Hosken et al, Bureau of Economics, Do Retail Mergers Affect Competition? Evidence from Grocery Retailing (Dec. 2012), https://www.ftc.gov/sites/default/files/documents/reports/do-retail-mergers-affect-competition%C2%A0-evidence-grocery-retailing/wp313.pdf.

[5] Statement of Ass’t Att’y Gen. Christine Varney, Merger Guidelines Workshops, Third Annual Georgetown Law Global Antitrust Enforcement Symposium (Sept. 22, 2009).

[6] OECD, Conglomerate Effects of Mergers – Note by the United States to the Organisation for Economic Co-operation and Development (June 4, 2020) at 5, https://www.ftc.gov/system/files/attachments/us-submissions-oecd-2010-present-other-international-competition-fora/oecd-conglomerate_mergers_us_submission.pdf.

[7] Id. at 8.

[8] E.g., Antitrust Modernization Commission Report 57-60, at https://govinfo.library.unt.edu/amc/report_recommendation/amc_final_report.pdf.

[9] 4A Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law ¶ 10A-1 (5th ed. 2021).

[10] U.S. Chamber, Evidence of Efficiencies in Consummated Mergers (June 1, 2023), at https://www.uschamber.com/assets/documents/20230601-Merger-Efficiencies-White-Paper.pdf.

[11] U.S. Chamber, Mergers, Industries, and Innovation: Evidence from R&D Expenditures and Patent Applications (Feb. 2023), at https://www.uschamber.com/finance/antitrust/mergers-industries-and-innovation-evidence-from-r-d-expenditure-and-patent-applications.

[12]CBO, Research and Development in the Pharmaceutical Industry (Apr. 2021), at https://www.cbo.gov/publication/57126 . .

[13] Microsoft, 2023 WL 4443412, at *11 (citations omitted).  See also U.S. v. Booz Allen Hamilton, Case 1:22-cv-01603-CCB, at 8 n.13 (D. Md. Oct. 17, 2022); Nat’l Fuel Gas Supply Corp. v. FERC, 468 F.3d 831, 840 (D.C. Cir. 2006) (“[V]ertical integration creates efficiencies for consumers”).

This essay began as a response to claims that the argument that Chevron encourages congressional inaction has been refuted by the best available evidence. That Chevron causes such inaction is one of the arguments made by petitioners in Loper Bright. Leading scholars reject the argument. For instance, Chris Walker has called it one of the “least persuasive points” made at oral argument and Jim Speta has called it “empirically untrue.” Last year, Nicholas Bednar had a very good essay at Notice & Comment arguing that whether Chevron in fact has this effect is an empirical question. He went on to review literature related to (his framing of) this question and concluded by finding that the claim is unsupported and suggesting that its proponents lack candor.

Read the full piece here.

Margrethe Vestager, the European Union’s commissioner for competition, posits that competition law has not addressed “the structural entrenchment of companies holding market power”, and that sweeping regulations like the European Union’s Digital Markets Act (DMA) are therefore justified (By invitation, June 3rd). She compares the case-by-case approach of competition enforcement to “playing a never-ending game of whack-a-mole”. However, enforcement is often slow and complex, especially in the kinds of “abuse of dominance” cases that have been brought against large online platforms. This deliberate pace is necessary, as the companies’ business models and the consequences of their behaviour are themselves complex.

Read the full piece here.

We, the undersigned organizations and individuals, are writing to express our serious concerns about SB 1047, the Safe and Secure Innovation for Frontier Artificial Intelligence Systems Act. We believe that the bill, as currently written, would have severe unintended consequences that could stifle innovation, harm California’s economy, and undermine America’s global leadership in AI.

Our main concerns with SB 1047 are as follows:

1. The application of the precautionary principle, codified as a “limited duty exemption,” would require developers to guarantee that their models cannot be misused for various harmful purposes, even before training begins. Given the general-purpose nature of AI technology, this is an unreasonable and impractical standard that could expose developers to criminal and civil liability for actions beyond their control.
2. The bill’s compliance requirements, including implementing safety guidance from multiple sources and paying fees to fund the Frontier Model Division, would be expensive and time-consuming for many AI companies. This could drive businesses out of California and discourage new startups from forming. Given California’s current budget deficit and the state’s reliance upon capital gains taxation, even a marginal shift of AI startups to other states could be deleterious to the state government’s fiscal position.
3. The bill’s definition of a “covered model”–models trained with more than 10^26 floating-point operations at a cost above $100 million-will create confusion, encourage an adversarial relationship between the Frontier Model Division and AI developers, and interfere with industry dynamics in unpredictable ways. First, it is not always straightforward to say what a training run for a model costs. Second, the Frontier Model Division will have an incentive to investigate AI companies’ finances and other records to ensure they are not training covered models, which will create another burden for developers. Finally, it penalizes companies based on the size of their investment in AI: if one company trains a model above the threshold, they will be regulated in perpetuity. Yet because compute costs fall rapidly, a competitor could train a model six months later and be subject to no regulation at all. This is nonsensical.
4. The bill’s combination of the precautionary principle and liability (both criminal and civil) is incompatible with the way open-source software has been developed and distributed for decades. While this bill would not ban any existing open-source model, it constitutes a gradual legislated phasing out of open-source AI near today’s frontier.

These restrictions on open-source AI models would undermine a key driver of innovation and collaboration in the field. The vast majority of stakeholders, including large tech companies, startups, the broader business community, academia, and civil society organizations like the Center for American Progress, have voiced support for open-source AI development. Open-source AI has also thus far played an essential role in interpretability and safety research; by limiting access to future open-source models, this bill could undermine progress in those vital fields.

We believe that SB 1047, if enacted in its current form, would have a chilling effect on AI research and development in California and potentially across the United States. It could slow down progress in a field that holds immense promise for advancing scientific understanding, improving medicine, and driving economic growth.

While we share the goal of ensuring that AI is developed and deployed responsibly, we urge you to reconsider the approach taken in SB 1047. The bill is also broadly inconsistent with the legislative direction suggested by the United States Senate’s Bipartisan Working Group on AI; if SB 1047 passes, California likely would be an unfortunate outlier in the broader context of American policy stances toward AI. In conclusion, we respectfully request that you either make substantial changes to SB 1047 to address the concerns outlined above or withdraw the bill entirely. We stand ready to work with you to find a path forward that promotes innovation while also ensuring the safe and responsible development of AI technology.

Sincerely,

Neil Chilson, Head of AI Policy,, Abundance Institute

Kristian Stout, Director of Innovation Policy, International Center for Law & Economics

Lisa B. Nelson, CEO, ALEC Action

Logan Kolas, Director of Technology Policy, American Consumer Institute

Daniel Castro, Director, Center for Data Innovation

Taylor Barkley, Director of Public Policy, Abundance Institute

Adam Thierer, Resident Senior Fellow, Technology & Innovation, R Street Institute

Vance Ginn, Ph.D., Former Chief Economist, White House Office of Management and Budget

Jessica Melugin, Director, Center for Technology and Innovation, Competitive Enterprise Institute

Nathan Leamer, Executive Director, Digital First Project

Abstract

Competition benefits consumers, not just through lower prices and better quality, but also by protecting them against fraudulent practices. Clear-eyed government regulation can promote competition and consumer protection by stomping out fraudulent and deceptive practices as well as facilitating the flow of accurate, easy-to-understand information. But what happens when the government is the source of bad information and uses that to promote specious claims that competition has “failed”? In the case of the Consumer Financial Protection Bureau, another round of misleading economic analysis is being used to justify further intrusions on market competition that could confuse consumers and lead to worse regulation.

Read the full piece here.

Abstract

A February report from the Committee on Digital Competition Law (CDCL) recommended special competition rules for digital markets in India. It was accompanied by a draft Digital Competition Act (DCA) that is virtually identical to the European Union’s Digital Markets Act (DMA). Since it entered into force early last month, the DMA has imposed strict preemptive rules on so-called digital “gatekeepers,” a cohort of mostly American tech giants like Google, Amazon, Apple, Meta, and Microsoft.

Read the full piece here.