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Abstract

Over the past ten years, administrative law scholarship has increasingly focused on interactions between multiple agencies. As part of this trend, most scholars have called for policymakers to combine multiple agencies, rather than rely on a single agency, to solve policy problems. The literature in this area espouses the benefits of shared regulatory space. But very little of this scholarship addresses when shared jurisdiction is problematic. This is particularly concerning when an agency opts into or cedes oversight authority to another agency at will, with little regard for whether the second agency is an appropriate regulator. The case of cell-cultured (or lab-grown) meat presents one such example. In 2018, both the U.S. Food and Drug Administration and the U.S. Department of Agriculture separately announced that regulating cell-cultured meat fell under their sole purview, to the exclusion of the other agency. After much back-and-forth, the agencies issued a joint statement announcing a shared system of regulatory oversight.

This Article argues that the FDA should not have ceded any of its regulatory authority to the USDA because joint regulation of cell-cultured meat, as between the FDA and USDA, is both inappropriate and unnecessary. USDA involvement is inappropriate because the Department suffers from a mixed mandate problem. Not only is the Department tasked with maximizing agricultural industry profits (and minimizing losses), but it is also tasked with nourishing Americans (and improving nutrition and health). In the case of cell-cultured meat, these two goals are diametrically opposed. Further, USDA involvement is inappropriate given the Department’s purview, as set by Congress, and its concomitant expertise. As it relates to meat, the USDA exists specifically to monitor the safety and sanitation of the nation’s farms, slaughterhouses, and meat processing and packaging plants. Consequently, all the Department’s meat-related regulations and expertise are in these areas. USDA involvement in the regulation of cell-cultured meat is also unnecessary because it is redundant. Accordingly, this Article’s analysis belies the notion that all agency collaboration is good collaboration.

Executive Summary

In contrast to its stated aims to promote a Digital Single Market across the European Union, the proposed Digital Markets Act (DMA) could serve to fragment Europe’s legal framework even further, largely due to overlaps with competition law. This paper provides an analytical overview of areas where conflicts would inevitably arise from dual application of the DMA and European and national-level antitrust rules. It counsels full centralization of the DMA’s enforcement at the EU level to avoid further fragmentation, as well as constraining the law’s scope by limiting its application to a few large platform ecosystems.

Introduction

The Digital Markets Act (DMA) has entered the last and decisive stage of its approval process. With the Council of Europe having reached consensus on its general approach[1] and the European Parliament having adopted amendments,[2] the DMA proposal has moved into the inter-institutional negotiations known as the so-called “trilogue.”

The DMA has spurred a lively debate since it initially was proposed by the European Commission in December 2020.[3] This deliberative process has touched on all the proposal’s features, including its aims and scope, the regulations and rule-based approach it would adopt, and the measure’s institutional design. However, given the positions expressed by the Council and the Parliament, the rationale for DMA intervention and the proposal’s relationship with antitrust law remain relevant topics for exploration.

The DMA is grounded explicitly on the notion that competition law alone is insufficient to effectively address the challenges and systemic problems posed by the digital platform economy. Indeed, the scope of antitrust is limited to certain instances of market power (e.g., dominance on specific markets) and of anti-competitive behavior.[4] Further, its enforcement occurs ex post and requires extensive investigation on a case-by-case basis of what are often very complex sets of facts.[5] Moreover, it may not effectively address the challenges to well-functioning markets posed by the conduct of gatekeepers, who are not necessarily dominant in competition-law terms.[6] As a result, proposals such as the DMA invoke regulatory intervention to complement traditional antitrust rules by introducing a set of ex ante obligations for online platforms designated as gatekeepers. This also allows enforcers to dispense with the laborious process of defining relevant markets, proving dominance, and measuring market effects.

The DMA’s framers declare that the law aims to protect different legal interests than antitrust rules do. That is, rather than seeking to protect undistorted competition on any given market, the DMA look to ensure that markets where gatekeepers are present remain contestable and fair, independent from the actual, likely, or presumed effects of the conduct of a given gatekeeper.[7] Accordingly, the relevant legal basis for the DMA is found not in Article 103 of the Treaty on the Functioning of the European Union (TFEU), which is intended to implement antitrust rules pursuant to Articles 101 and 102 TFEU, but rather in Article 114 TFEU, covering “Common Rules on Competition, Taxation and Approximation of Laws.” Further, from an institutional-design perspective, the DMA opts for centralized implementation and enforcement at the EU level, rather than the traditional decentralized or parallel antitrust enforcement at the national level.

Because the intent of the DMA is to serve as a complementary regulatory scheme, traditional antitrust rules will remain applicable. However, those rules would not alleviate the obligations imposed on gatekeepers under the forthcoming DMA regulations and, particularly, efforts to make the DMA’s application uniform and effective.[8]

Despite claims that the DMA is not an instrument of competition law[9] and thus would not affect how antitrust rules apply in digital markets, the forthcoming regime appears to blur the line between regulation and antitrust by mixing their respective features and goals. Indeed, the DMA shares the same aims and protects the same legal interests as competition law.[10] Further, its list of prohibitions is effectively a synopsis of past and ongoing antitrust cases.[11] Therefore, the proposal can be described as a sector-specific competition law,[12] or a shift toward a more regulatory approach to competition law—one that is designed to allow assessments to be made more quickly and through a more simplified process.[13]

Acknowledging the continuum between competition law and the DMA, the European Competition Network (ECN) and some EU member states (self-anointed “friends of an effective DMA”) have proposed empowering national competition authorities (NCAs) to enforce DMA obligations.[14] Under this approach, while the European Commission would remain primarily responsible for enforcing the DMA and would have sole jurisdiction for designating gatekeepers or granting exemptions, NCAs would be permitted to enforce the DMA’s obligations and to use investigative and monitoring powers at their own initiative. According to supporters of this approach, the concurrent competence of the Commission and NCAs is needed to avoid the risks of conflicting decisions or remedies that would undermine the effectiveness and coherence of both the DMA and antitrust law (and, ultimately, the integrity of the internal market.)[15]

These risks have been heightened by the fact that Germany (one of the “friends of an effective DMA”) subsequently empowered its NCA, the Bundeskartellamt, to intervene at an early stage in cases where it finds that competition is threatened by large digital companies—in essence, granting the agency a regulatory tool that is functionally equivalent to the DMA.[16] Further, several member states are preparing to apply national rules on relative market power and economic dependence to large digital platforms, with the goal of correcting perceived imbalances of bargaining power between online platforms and business users.[17] As a result of these intersections among the DMA, national and European antitrust rules, and national laws on superior bargaining power, a digital platform may be subject to cumulative proceedings for the very same conduct, facing risks of double (or even triple and quadruple) jeopardy.[18]

The aim of this paper is to guide the reader through the jungle of potentially overlapping rules that will affect European digital markets in the post-DMA world. It attempts to demonstrate that, despite significant concerns about both the DMA’s content and its rationale, full centralization of its enforcement at EU level will likely be needed to reduce fragmentation and ensure harmonized implementation of the rules. Frictions with competition law would be further confined by narrowing the DMA’s scope to ecosystem-related issues, thereby limiting its application to the few large platforms that are able to orchestrate an ecosystem.

The paper is structured as follows. Section II analyzes the intersection between the DMA and competition law. Section III examines the DMA’s enforcement structure and the solutions advanced to safeguard cooperation and coordination with member states. Section IV illustrates the arguments supporting full centralization of DMA enforcement and the need to narrow its scope. Section V concludes.

Read the full white paper here.

[1] Proposal for a Regulation of the European Parliament and of the Council on Contestable and Fair Markets on the Digital Sector (Digital Markets Act) – General Approach, Council of the European Union (Nov. 16, 2021), available at https://data.consilium.europa.eu/doc/document/ST-13801-2021-INIT/en/pdf.

[2] Amendments Adopted on the Proposal for a Regulation of the European Parliament and of the Council on Contestable and Fair Markets in the Digital Sector (Digital Markets Act), European Parliament (Dec. 15, 2021), https://www.europarl.europa.eu/doceo/document/TA-9-2021-12-15_EN.html.

[3] Proposal for a Regulation on Contestable and Fair Markets in the Digital Sector (Digital Markets Act), European Commission (Dec. 15, 2020), available at https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52020PC0842&from=en.

[4] Ibid., Recital 5.

[5] Ibid.

[6] Ibid.

[7] Ibid., Recital 10.

[8] Ibid., Recital 9 and Article 1(5).

[9] Margrethe Vestager, Competition in a Digital Age, speech to the European Internet Forum (Mar. 17, 2021), https://ec.europa.eu/commission/commissioners/2019-2024/vestager/announcements/competition-digital-age_en.

[10] Heike Schweitzer, The Art to Make Gatekeeper Positions Contestable and the Challenge to Know What Is Fair: A Discussion of the Digital Markets Act Proposal, 3 ZEuP 503 (Jun. 11, 2021).

[11] Cristina Caffarra and Fiona Scott Morton, The European Commission Digital Markets Act: A Translation, Vox EU (Jan. 5, 2021), https://voxeu.org/article/european-commission-digital-markets-act-translation.

[12] Nicolas Petit, The Proposed Digital Markets Act (DMA): A Legal and Policy Review, 12 J. Eur. Compet. Law Pract 529 (May 11, 2021).

[13] Marco Cappai and Giuseppe Colangelo, Taming Digital Gatekeepers: The More Regulatory Approach to Antitrust Law, 41 Comput. Law Secur. Rev. 1 (Apr. 9, 2021).

[14] How National Competition Agencies Can Strengthen the DMA, European Competition Network (Jun. 22, 2021), available at https://ec.europa.eu/competition/ecn/DMA_joint_EU_NCAs_paper_21.06.2021.pdf; Strengthening the Digital Markets Act and Its Enforcement, German Federal Ministry for Economic Affairs and Energy, French Ministére de l’Économie, les Finance et de la Relance, Dutch Ministry of Economic Affairs and Climate Policy, (May 27, 2021), available at https://www.bmwi.de/Redaktion/DE/Downloads/XYZ/zweites-gemeinsames-positionspapier-der-friends-of-an-effective-digital-markets-act.pdf?__blob=publicationFile&v=4.

[15] European Competition Network, supra note 14, 6-7.

[16] See Section 19a of the GWB Digitalization Act (Jan. 18, 2021), https://www.bundesrat.de/SharedDocs/beratungsvorgaenge/2021/0001-0100/0038-21.html.

[17] See, e.g., German GWB Digitalization Act, supra note 16; See, also, Belgian Royal Decree of 31 July 2020 Amending Books I and IV of the Code of Economic Law as Concerns the Abuse of Economic Dependence, Belgian Official Gazette (Jul. 19, 2020), http://www.ejustice.just.fgov.be/cgi_loi/change_lg.pl?language=fr&la=F&cn=2019040453&table_name=loi.

[18] Marco Cappai and Giuseppe Colangelo, A Unified Test for the European Ne Bis in Idem Principle: The Case Study of Digital Markets Regulation, SSRN working paper (Oct. 27, 2021), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3951088.

Executive Summary

Worried that competition between firms is lessening, many economists and policymakers have called for a return to the more aggressive competition policies of the 1960s and 1970s and for the breakup or nationalization of large business, such as tech platforms. We argue, on the contrary, that changes in inter-firm competition are significantly driven by the increasing importance of intangible capital: assets like R&D, brands, software, and organizational development. This has several implications:

• It implies that simply dialing up the intensity of competition policy is the wrong response to the growing gap between leaders and laggards; and
• It raises the importance of competition for consumers’ attention.

Finally, we argue that there is a different aspect of the word “competition” that is affected by the shift to intangible capital: competition between individuals. An intangible-rich economy will see an increase in wasteful signaling. Mitigating this rat race should be a policy priority for educators and governments.

Read the full white paper here.

INTRODUCTION

European Union (EU) legislators are considering legislation— the Artificial Intelligence Act (AIA), the original draft of which was published by the European Commission in April 2021[1]—that aims to ensure the safety of AI systems in uses designated as “high risk”. As originally drafted, however, the AIA’s scope was not at all limited to AI; it would instead cover virtually all software. EU governments seem to have realized this problem and are trying to fix the proposal, while some pressure groups have pushed to move the draft in the opposite direction.

The AIA proposal is currently under consideration by specialized committees of the European Parliament. The parliamentary stage began with a long disagreement among the various committees regarding who should have decisive influence over the Parliament’s position on the bill. With that disagreement now resolved, discussions on the legislation’s merits are ongoing.

The purpose of this brief is to inform debate on the proposal’s fundamental features: its scope and the key provisions setting out prohibited AI practices (related to so-called “subliminal techniques” and “social scoring”).

Read the full issue brief here.

[1] Proposal for a Regulation of the European Parliament and of the Council Laying Down Harmonised Rules on Artificial Intelligence (Artificial Intelligence Act) and Amending Certain Union Legislative Acts, European Commission, (Apr. 21, 2021), available at https://perma.cc/RWT9-9D97.

Comments of the International Center for Law & Economics

RE: Impact of Supply Chain Disruptions on Competition in Consumer Goods and Retail

(Docket ID FTC-2021-0068)

Submitted Via Electronic Filing, Feb. 28, 2022

Dear Chair Khan and Commissioners Phillips, Slaughter, & Wilson:

The International Center for Law & Economics (ICLE) is a nonprofit, nonpartisan research center that promotes the use of law & economics methodologies to inform public-policy debates. We believe that intellectually rigorous, data-driven analysis will lead to efficient policy solutions that promote consumer welfare and global economic growth.

The Commission’s investigation of the impact of supply-chain disruptions on competition in consumer goods and retail coincides with recent interest in the topic demonstrated by some lawmakers. In particular, there have been concerns raised that rising concentration and alleged anticompetitive behavior by both suppliers (e.g., meat packers; oil & gas companies) and retailers (e.g., groceries; online retailers) has been the cause of sharp increases in consumer prices. Under this thinking, vigorous antitrust enforcement is an essential tool to stop the scourge of rising prices.

The most obvious problem with this thesis, however, is that while consumer prices have increased sharply this past year, concentration numbers in the relevant markets have been relatively unchanged for years or even decades. The best case that can be mustered for a linkage between concentration and rising consumer prices is that existing market structures may slightly exacerbate short-term price dislocations whose ultimate cause is exogenous supply and demand shocks brought about by the COVID-19 pandemic and government responses to it.

The purpose of antitrust law is to protect competition, not to guarantee low prices, in and of themselves. Indeed, high or rising prices are not an antitrust violation, as these prices may be the result of the undistorted competition that antitrust ultimately protects. It is widely understood that the price system is the most effective means of resource allocation, even when the process itself is painful. There are a host of reasons to expect higher prices in the current environment, but virtually none of the evidence points to anticompetitive conduct as one of them.

Take retail grocery prices, for example. Some have blamed rising grocery prices on market concentration, going so far as to propose breaking up Kroger.[1] But Kroger and its subsidiaries have less than 10% market share, and retail profit margins are generally minuscule: hardly consistent with monopoly exploitation. While 2020 saw grocery net margins approach 3.0%, in 2021, the margins moved closer to their long-run average of around 1.25%.[2] Over the longer term, U.S. consumers have also enjoyed marked improvements in their grocery shopping experience.[3] From 1990 to 2020, the number of items stocked in grocery stores nearly doubled from 16,500 to 31,119. From 1995 to 2020, the average store size grew by 30%.[4]

Moreover, while food prices have risen in recent years, it hasn’t been by appreciably more than overall consumer prices. The U.S. Department of Agriculture’s Economic Research Service (ERS) finds that all-food CPI rose by 7.8% from 2016 to 2020, the same as all-items CPI.[5] The ERS attributes recent sharp price rises to pandemic-related shifts in consumption patterns. In 2020, for example, food-at-home spending accounted for 51.9% of total food expenditures, the first year it has accounted for more than half of food spending since 2008.[6]

Not coincidentally (and inconsistent with a monopoly-exploitation story), price increases haven’t been homogenous. Much of the rise in beef prices, for example, has been driven by price increases of cuts of beef typically consumed at home, while prices of beef cuts typically consumed in restaurants have fallen. These changes have also closely tracked pandemic-related supply-chain disruptions, further suggesting the pandemic and the ensuing government-mandated lockdowns, and not excessive concentration, are to blame.

Some have also proposed reinvigorated enforcement of the Robinson-Patman Act of 1936, including President Joe Biden in his July 2021 Executive Order on Promoting Competition in the American Economy. But it should be noted that the stated intention behind Robinson-Patman—initially passed to protect smaller retailers and counter the perceived market power of then-dominant A&P—was to raise prices. It did this by constraining the kinds of efficiency enhancements that are seen in industries that enjoy economies of scale and network externalities. The largest grocery chains, for example, are vertically integrated. Many have their own logistics divisions that lead to supply-chain stability and lower prices. Breaking them up or constraining them could reduce their efficiency (and thus raise prices).

Reviving such outdated ideas would hurt, not help, consumers. Indeed, competition regulators have an inglorious history of misguided interventions in competitive retail markets. Consider U.S v. Von’s Grocery.[7] The case arose from the U.S. Justice Department’s challenge of the 1960 merger between Von’s and Shopping Bag, in which the combined firm would have had less than 8% of the market. Ignoring the economic environment of the time (the car-induced shift toward supermarkets drawing from a larger geographic area and supplanting small, local stores), the Supreme Court upheld the DOJ’s challenge to “prevent economic concentration” and “keep a large number of small competitors in business.”

There are many possible causes of recent food-price inflation, including increased demand driven by fiscal stimulus; disruptions arising from an unprecedented set of simultaneous supply and demand shocks; the incentive effects of government responses to the COVID-19 pandemic; and an increase in the money supply, among others. There are also any number of concerns arising from the food supply chain that may merit legislative or regulatory attention. It may be important to protect farmers in certain circumstances, or to protect the environment. There may even sometimes be countervailing benefits to regulations that have the effect of increasing prices.

But the specific characteristics of the responses to disruptions from the pandemic are consistent with competitive markets, and antitrust is an entirely inappropriate tool to address economy-wide inflation. Rather, vigorous antitrust enforcement in these markets will not stop the scourge of rising prices.

For a fuller treatment of this topic, we also attach here ICLE’s testimony to the recent hearing by the U.S. House Judiciary Committee’s Antitrust Subcommittee on “Addressing the Effects of Economic Concentration on America’s Food Supply.”[8]

Read the full comments here.

[1] Elizabeth Warren (@SenWarren), Twitter, (Jan 7, 2022, 9:49 AM),  https://twitter.com/senwarren/status/1479465304795324422.

[2] Grocery Stores Industry Profitability, CSIMarket, https://csimarket.com/Industry/industry_Profitability_Ratios.php?ind=1305.

[3] Leonard I. Nakamura, The Measurement of Retail Output and the Retail Revolution, Federal Reserve Bank of Philadelphia, Working Paper No. 97-4, (May 1997), available at https://www.philadelphiafed.org/-/media/frbp/assets/working-papers/1997/wp97-4.pdf.

[4] Supermarket Facts, The Food Industry Association, https://www.fmi.org/our-research/supermarket-facts.

[5] Food price inflation over 2017–2021 slower than only housing and transportation, U.S. Department of Agriculture Economic Research Service, (Feb. 23, 2022), https://www.ers.usda.gov/data-products/chart-gallery/gallery/chart-detail/?chartId=58350.

[6] U.S. food-at-home spending surpasses food-away-from-home spending in 2020, U.S. Department of Agriculture Economic Research Service, (Aug. 20, 2021), https://www.ers.usda.gov/data-products/chart-gallery/gallery/chart-detail/?chartId=58364.

[7] Joshua Wright, Von’s grocery and the concentration-price relationship in grocery retail, 48 UCLA Law Rev. 743-771, (February 2001), https://www.researchgate.net/publication/294851918_Von’s_grocery_and_the_concentration-price_relationship_in_grocery_retail.

[8] Geoffrey A. Manne, Written Testimony of Geoffrey A. Manne, Hearing on “Reviving Competition, Part 5: Addressing the Effects of Economic Concentration on America’s Food Supply,” U.S. House Committee on the Judiciary, Subcommittee on Antitrust, Commercial, and Administrative Law, (Jan. 19, 2022), available at https://docs.house.gov/meetings/JU/JU05/20220119/114345/HHRG-117-JU05-Wstate-ManneG-20220119.pdf.

Background…

Some U.S. lawmakers have pointed the finger at rising concentration and alleged anticompetitive behavior by both suppliers (e.g., meat packers; oil & gas companies) and retailers (e.g., groceries; online retailers) as the cause of recent, sharp increases in consumer prices. They propose vigorous antitrust enforcement as a tool to stop the scourge of rising prices.

But…

While consumer prices have increased sharply in just the past year, concentration numbers in the relevant markets have been relatively unchanged for years or even decades. The best case that can be mustered is that existing market structures may slightly exacerbate short-term price dislocations whose ultimate cause is exogenous supply and demand shocks brought about by the COVID-19 pandemic and government responses to it.

Moreover…

The purpose of antitrust law is to protect competition, not to guarantee low prices in and of themselves. High or rising prices are not an antitrust violation, as they may be the result of the undistorted competition that antitrust ultimately protects, and the price system is the most effective means of resource allocation, even when the process itself is painful. There are a host of reasons to expect higher prices in the current environment, but virtually none of the evidence points to anticompetitive conduct as one of them.

Read the full explainer here.

State legislatures are now tackling consumers’ digital privacy. Given the Internet’s inherently international character, a federal bill setting a national standard for digital privacy would be ideal. Yet, in the absence of federal legislation, state governments are seeking to address consumer privacy. Unfortunately, overly broad and burdensome regulatory obligations pose a real and immediate risk to digital innovation. Ensuring a globally robust market requires balancing consumer privacy and legitimate information exchange between consumers and digital-services companies.

The attached guiding principles and legislative checklist from the Reason Foundation and the International Center for Law & Economics seeks to help legislators and stakeholders narrowly tailor state consumer-privacy policy to address concrete consumer harms while preventing disproportionately punitive responses that obstruct market performance.

Read the full checklist here.

Written Testimony of

Geoffrey A. Manne
Founder and President,
International Center for Law & Economics

Hearing on
“Reviving Competition, Part 5: Addressing the Effects of Economic Concentration on America’s Food Supply”

before the
U.S. House of Representatives
Committee on the Judiciary,
Subcommittee on Antitrust, Commercial, and Administrative Law
January 19, 2022

Introduction

There is a wide range of possible explanations for the rise in consumer food prices over the past year: Increased demand driven by fiscal stimulus, disruptions arising from an unprecedented set of simultaneous supply and demand shocks, the incentive effects of government responses to the COVID-19 pandemic, and an increase in the money supply, among others. Each of these factors is interrelated, and each has surely contributed in varying degrees to current headline inflation woes.

What is not a plausible explanation is increased concentration and the exercise of market power in the food supply chain.

Between December 2019 and September 2021, the U.S. money supply (driven primarily by the Federal Reserve’s purchases of Treasuries and mortgage-backed securities), grew by approximately $5.5 trillion—a 36% increase. Likewise, the federal government has approved about $4.5 trillion in pandemic relief and stimulus payments since the beginning of COVID-19. The government also injected a huge amount of money into the economy and added about $5 trillion to the federal debt.

Massive debt spending isn’t inherently inflationary as long as people understand that taxes will increase or spending will decrease to “pay off” the debt. But today it seems that people do not have much of an expectation that taxes will meaningfully increase or that spending will meaningfully decrease. Indeed, the discourse around the administration’s “Build Back Better” legislation gives the impression of a virtually endless spending binge with little additional revenues to offset the spending. This feeds inflation expectations, and expectations can be self-fulfilling.

To make matters worse, the pandemic was not a standard demand-driven recession. Pre-COVID, the U.S. economy was more or less roaring. Unemployment was at its lowest rate in 50 years. Labor force participation among the working age populations was back to pre-Great Recession levels. The Dow Jones Industrial Average was at an all-time high. Americans may have needed relief to get through the pandemic, but the economy did not need any stimulus.

We should also be clear that the current 7% headline inflation rate is a measure of past price- level changes between December 2020 and December 2021. It’s not a measure of the rate at which prices are increasing right now, however. And while the 7% number grabbed all the headlines, the CPI rose at a slower rate in December than it did in November, meaning the monthly inflation rate (as well as the implied annualized inflation rate) actually fell in December. The point is that, problematic as they are for actual consumers, current consumer prices and trends do not provide a sound basis for massive, economy-wide government intervention.

It is hardly surprising that shifting consumption patterns and the post-vaccine re-opening of the economy have led to short-term frictions, such as backlogs at ports, a shortage of truckers, and disruption throughout the supply chain, all of which are associated with important relative price movements. But they aren’t “inflation” in the sense that all prices and wages aren’t increasing together. These shocks are most likely transitory, and higher prices will recede as the supply chain returns to normal. That is, as long as sensible economic and fiscal policies predominate. But in the face of the harsh political realities of the current state of affairs, there is no guarantee that reason will prevail.

Rather than accepting these extremely likely causes of the recent increase in prices, some blame inflation on a widespread pandemic of “greed” and “collusion” by businesses. Wide swaths of American industry have been hit with these allegations, including oil companies, natural gas producers, health care providers, meat packers, and grocery stores.

Critics of American business blame years, if not decades, of so-called “rising concentration.” It’s claimed that the increase in concentration stems from mergers and acquisitions over the years that were blessed by lax antitrust regulators or merely overlooked by overworked agencies. These critics give the impression that in virtually all corners of the American economy lurk sleeper cells of colluding cartels that activated their plans just as the country went into lockdown.

Under this thinking, vigorous antitrust enforcement will punish the colluders and stop the scourge of rising prices. But this thinking is misplaced.

First, antitrust is simply not the proper tool. The purpose of antitrust law in the U.S. is to protect competition, rather than to guarantee low prices in and of themselves. That’s why it is illegal to conspire to raise prices or attempt to monopolize a market. Conversely, this also explains why high or rising prices are not an antitrust violation—because these prices may be the result of the undistorted competition antitrust ultimately protects. Even price gouging during a disaster rarely merits antitrust scrutiny because it’s understood that that is how markets work—especially competitive markets. That is because it is widely understood that the price system is the most effective system for allocating resources, even when the process itself is painful.

Second, and more practically, antitrust enforcement often moves at a glacial pace. Even successful prosecutions of anticompetitive behavior take years to resolve. The DOJ’s investigations of price fixing in the broiler chicken market and the packaged seafood market were announced several years after the alleged collusion began. While the investigations led to guilty pleas and a criminal conviction, they did nothing to reduce prices at the time the conspiracies were active.

All of this is not to say that some producers are not monopolizing a market or conspiring with competitors to raise prices. If they are, there is an important role for an antitrust investigation and enforcement—that is the purpose of our antitrust laws. But even relatively rapid and vigorous antitrust investigations will do little to reduce the prices consumers are paying today, especially if they are the perfectly predictable, if messy, result of market competition in the midst of a global pandemic. As much as some would like antitrust to be the Swiss Army knife of public policy, it is an entirely inappropriate tool to address economy-wide inflation.

At the same time, even within the industries that have seen particularly newsworthy price increases, and which are the subject of today’s hearing, the complex competitive dynamics of those industries offer far more plausible explanations of current prices than do unsubstantiated claims of anticompetitive conduct or collusion. But they don’t offer convenient scapegoats to quell the political consequences of these price increases.

It is difficult not to see the pursuit of a scapegoat in the administration’s focus on concentration and market power as a culprit for today’s higher food prices.

Read the full written testimony here.

The Federal Trade Commission (FTC) appears committed—at least, for the moment—to a path of regulatory overreach. The commission’s Dec. 10 Statement of Regulatory Priorities (SRP) offers, in addition to a periodic review of existing rules and the status of proposed rules in the pipeline, a sneak preview of new “unfair methods of competition” (UMC) and “unfair or deceptive acts or practices” (UDAP) rulemakings that the body will consider developing next year.

Read the full piece here.