Antitrust Theory Meets the Real World: Empirical Shortfalls of the New Conventional Wisdom on Competition Policy
Abstract
For at least half a century, antitrust enforcement and jurisprudence have extensively adopted economic methods and substantially replaced structuralist approaches with a focus on consumer welfare, balancing tests, and error-cost principles. New and increasingly popular schools of thought seek to refashion competition law by discounting economic methods, expanding policy objectives to encompass redistributive and other non-economic concerns, adopting categorical prohibitions, and relaxing error-cost constraints. The rise of this interventionist approach has coincided with a “transmission pipeline” through which emergent theories of anticompetitive harm, based on theoretical models, preliminary findings, or narrow evidence developed in the scholarly literature, are adopted expansively by advocates and regulators who pursue enforcement actions with significant consequences. Examining theories of patent holdup, killer acquisitions, kill zones, and default effects, this paper shows that competition agencies in the US, EU, and other major jurisdictions have relied on at least four liability theories with contestable or weak empirical or theoretical foundations. This “rush to intervene” endangers rule-of-law values and, without meaningful balancing tests, can yield market outcomes that harm the consumers and entrants that antitrust law seeks to protect. The alternative trajectory of common ownership theory, which elicited robust scholarly critique and largely failed to translate into enforcement action, suggests that, especially in industries without political salience, the transmission mechanism from academia to policy sometimes functions well to filter out insufficiently demonstrated theories of anticompetitive harm.
Read the full piece at SSRN.