Spotlight

I. Introduction

We thank the U.S. Justice Department (DOJ) and Federal Trade Commission (FTC) for the opportunity to offer comments regarding eliminating or reducing anticompetitive regulations. The DOJ seeks comments on the “elimination of anticompetitive state and federal laws and regulations that undermine free market competition and harm consumers, workers, and businesses,” with a focus on “unnecessary laws and regulations that raise the highest barriers to competition.”[1] The FTC has asked which federal regulations hinder free-market competition by promoting monopolies, creating entry barriers, restricting competition, imposing excessive licensure or accreditation requirements, burdening procurement processes, or otherwise distorting market dynamics.[2]

We write in support of these twin endeavors. As we note below, they build on agency expertise in the enforcement of competition law, as well as pertinent economic research. They also build on both agencies’ experience and staff expertise in competition advocacy with federal and state policymakers, and with economic research that directly informs such advocacy. Moreover, the long-recognized effectiveness of FTC and DOJ competition advocacy is highly likely to be enhanced by President Donald Trump’s April 9 “Executive Order on Reducing Anticompetitive Regulatory Barriers.”^[3] Because both agencies indicated they will coordinate their review of submitted comments, we are submitting a combined set of comments for these matters.

The International Center for Law & Economics (ICLE) is a nonprofit, nonpartisan research center whose core mission is to promote the application of law & economics methodologies to inform public-policy discussion. Our work focuses on developing intellectually rigorous, data-driven analyses to foster efficient policy solutions that enhance consumer welfare and global economic growth.

In this introductory section, we discuss the legal roots of competition advocacy in the Anglo-American anti-monopoly tradition and, in particular, the oft-overlooked observation that government is frequently the source of monopoly power. We also discuss the considerable experience and expertise the agencies can bring to bear in identifying, analyzing, and ultimately ameliorating undue government-established market power. In subsequent sections, we identify categories of regulations that raise competition concerns, as well as specific regulations that may be ripe for procompetitive reform. Throughout, we recognize that procompetitive regulatory reform implicates rules that are ripe for amendment as well as rescission.

A. The Forgotten Strand of the Anti-Monopoly Tradition in Anglo-American Law

Admirers of the late Supreme Court Justice Louis Brandeis and other antitrust populists often trace the history of American anti-monopoly sentiments from the Founding Era through the Progressive Era’s passage of laws to fight the scourge of 19th-century monopolists. Unfortunately, this framing leaves little room for disagreements about economic theory or evidence. One is either anti-monopoly or pro-monopoly, anti-corporate power or pro-corporate power.

This story also muddles the dominant anti-monopoly strain from English common law, which continued well into the late 19th century and was opposed specifically to government-granted monopoly.[4] By contrast, many of today’s “anti-monopolists” focus myopically on alleged monopolies that often benefit consumers, while largely ignoring monopoly power granted by government. The FTC and DOJ do well to refocus on anti-competitive regulations in these public inquiries.

Scholars like Timothy Sandefur of the Goldwater Institute have written about the right to earn a living that arose out of English common law and was inherited by the United States.[5] This anti-monopoly stance was aimed at government-granted privileges, not at successful business ventures that gained significant size or scale.

For instance, 1602’s Darcy v. Allein, better known as the “Case of Monopolies,” dealt with a “patent” originally granted by Queen Elizabeth I in 1576 to Ralph Bowes, and later bought by Edward Darcy, to make and sell playing cards. Darcy did not innovate playing cards; he merely had permission to be the sole purveyor. Thomas Allein, who attempted to sell playing cards he created, was sued for violating Darcy’s exclusive rights. Darcy’s monopoly ultimately was held to be invalid by the court, which refused to convict Allein.

Edward Coke, who argued on behalf of the patent in Darcy v. Allen, wrote that the case stood for the proposition that:

All trades, as well mechanical as others, which prevent idleness (the bane of the commonwealth) and exercise men and youth in labour, for the maintenance of themselves and their families, and for the increase of their substance, to serve the Queen when occasion shall require, are profitable for the commonwealth, and therefore the grant to the plaintiff to have the sole making of them is against the common law, and the benefit and liberty of the subject.[6]

In essence, Coke’s argument was more closely linked to a “right to work” than to market structures, business efficiency, or firm conduct.

The courts largely resisted royal monopolies in 17th century England, finding such grants to violate the common law. For instance, in The Case of the Tailors of Ipswich, the court cited Darcy and found:

…at the common law, no man could be prohibited from working in any lawful trade, for the law abhors idleness, the mother of all evil… especially in young men, who ought in their youth, (which is their seed time) to learn lawful sciences and trades, which are profitable to the commonwealth, and whereof they might reap the fruit in their old age, for idle in youth, poor in age; and therefore the common law abhors all monopolies, which prohibit any from working in any lawful trade.[7]

The principles enunciated in these cases were eventually codified in the Statute of Monopolies, which prohibited the crown from granting monopolies in most circumstances.[8] This was especially the case where the monopoly prevented the right to otherwise lawful work.

American law largely inherited the English common-law system. It also inherited the anti-monopoly tradition the common law embodied. The founding generation of American lawyers were trained on Edward Coke’s commentary in “The Institutes of the Laws of England,” wherein he strongly opposed government-granted monopolies.[9]

This sentiment can be found in the 1641 Massachusetts Body of Liberties, which stated: “No monopolies shall be granted or allowed amongst us, but of such new Inventions that are profitable to the Countrie, and that for a short time.”[10] In fact, the Boston Tea Party itself was, in part, a protest of the monopoly granted to the East India Co., which included a special refund from duties by Parliament that no other tea importers enjoyed.[11]

This anti-monopoly tradition can also be seen in the debates at the Constitutional Convention.[12] A proposal to give the federal government power to grant “charters of incorporation” was voted down on fears it could lead to monopolies.[13] Thomas Jefferson, George Mason, and several Anti-Federalists expressed concerns about the new national government’s ability to grant monopolies, arguing that an anti-monopoly clause should be added to the Constitution.[14] For example, in a letter to Thomas Jefferson, James Madison concluded, “With regard to Monopolies they are justly classed among the greatest nuisances in Governments which establish them.”[15] Six states wanted to include provisions that would ban monopolies and grants of special privileges in the Constitution.[16]

The American anti-monopoly tradition remained largely an anti-government tradition throughout much of the 19th century, rearing its head in debates about the Bank of the United States,[17] publicly funded internal improvements,[18] and government-granted monopolies over bridges[19] and the seas.[20] Pamphleteer Lysander Spooner even tried to start a rival to the U.S. Post Office by appealing to the strong American impulse against monopoly.[21]

Coinciding with the Industrial Revolution, liberalization of corporate law made it easier for private persons to organize firms that were not simply grants of exclusive monopoly. But discontent with industrialization and other social changes contributed to the birth of a populist movement, and later to progressives like Brandeis, who focused on private combinations and corporate power, rather than government-granted privileges. This is the strand of anti-monopoly sentiment that continues to dominate the rhetoric today.

Modern anti-monopoly advocates have largely forgotten the lessons of the long Anglo-American tradition that found government often to be the source of monopoly power. Indeed, American law privileges government’s ability to grant favors to businesses through licensing, the tax code, subsidies, and even regulation. The state-action doctrine from Parker v. Brown[22] shields anticompetitive state policies from federal antitrust scrutiny. It does so very generally when the policies in question are those of the state acting in its role “as sovereign” (paradigmatically, in legislation duly enacted by state legislators) and, subject to conditions, when the anticompetitive policies are those of lesser state actors. And subject to limited exceptions, the Noerr-Pennington doctrine[23] protects the rights of industry groups to petition the government to pass anticompetitive laws and regulations.

As a result, government is still often used to harm competition, with no remedy outside of the political process that created the monopoly. Antitrust law is used instead to target businesses built by serving consumers well in the marketplace. In the limit, and not infrequently, putatively consumer protection regulations exemplify the sort of rent-seeking described by George Stigler, Sam Peltzman, and others in the “economic theory of regulation” developed in the 1970s.[24] Recovering this foundational anti-monopoly tradition would help focus the FTC and DOJ on some of the most pernicious and durable examples of anticompetitive conduct: state and federal regulation.

B. Building on Historic Competition Advocacy

As noted in the FTC’s call for comments, “[a]ppropriately tailored economic regulations can play an important role in ensuring that markets function efficiently.” Regulations can, for example, address likely or demonstrated market failure; ^[25] and they can, in principle, be well-tailored to do so. At the same time, there is a strong economic basis for believing that many government regulations tend to reduce consumer welfare. As one paper from veterans of the FTC put it:

The economic theory of regulation (“ETR”) posits that because of relatively high organizational and transaction costs, consumers will be disadvantaged relative to businesses in securing favorable regulation. This situation tends to result in regulations—such as unauthorized practice of law rules or per se prohibitions on sales-below-cost—that protect certain industries from competition at the expense of consumers. Competition advocacy helps solve consumers’ collective action problem by acting within the political system to advocate for regulations that do not restrict competition unless there is a compelling consumer protection rationale for imposing such costs on citizens. Furthermore, advocacy can be the most efficient means to pursue the FTC’s mission, and when antitrust immunities are likely to render the FTC impotent to wage ex post challenges to anticompetitive conduct, advocacy may be the only tool to carry out the FTC’s mission.[26]

All levels of government are subject to these perverse incentives, but federalism has allowed states and localities in particular to become laboratories of anticompetitive regulations. Moreover, as former FTC Commissioner and Acting Chair Maureen Ohlhausen pointed out, government-imposed (or shielded) restraints on competition can prove “more durable than any private conduct could be.”^[27]

Both the FTC and DOJ have a nearly half-century-long history of engaging with anticompetitive state and federal regulations.[28] In the FTC’s case, that engagement has, since the agency’s establishment, been part of the commission’s statutory mission under Section 6 of the FTC Act.^[29] The breadth of such engagement is suggested by the account of “policy R&D,” as it is described in a 2009 report by then-FTC Chairman William Kovacic. Policy R&D by both the FTC and the DOJ comprises not just enforcement matters^[30] and the submission of amicus briefs,^[31] but diverse economic and policy research studies and reports,^[32] workshops,^[33] and communications with state and federal policymakers in the form of testimony,^[34] formal comments to regulatory proceedings,^[35] and correspondence submitted by the agencies, both separately^[36] and jointly.^[37]

Throughout, the agencies have recognized that procompetitive regulatory reform may sometimes involve the wholesale repeal or rescission of regulations or specific regulatory provisions that are substantially anticompetitive in their effect. It also may sometimes involve amendments that lower excessive regulatory costs or more narrowly and efficiently tailor regulations to meet legitimate regulatory goals, while minimizing undue competitive costs.

The depth and breadth of FTC and DOJ policy R&D efforts should provide a firm foundation for new efforts to combat anticompetitive regulation, not least because of the developed institutional resources available to the agencies, including staff expertise and, on certain topics, applicable research and policy analyses. At the same time, neither the issues nor the tools deployed in prior agency competition advocacy need constrain the identification of new issues and tools with which to promote competition. Both agencies should use all the tools at their disposal to combat anticompetitive regulations.

What follows are descriptions of a number of regulations at either the state or federal level that could be targeted for competition advocacy by the FTC and DOJ. Some are in areas the agencies have already identified as priorities, or even engaged in the past. Others are regulations the agencies themselves have promulgated or practices they follow. All are worthy of deeper investigation.

II. Certificates of Convenience and Necessity: The Quintessential Anticompetitive Entry Barrier

Certificates of convenience and necessity (CCNs) represent one of the most formidable government-imposed barriers to market entry across numerous federally regulated industries.[38] Sometimes called certificates of public convenience and necessity (CPCNs), CCNs are formal authorizations that permit companies to initiate operations or construct facilities in specific geographic areas, effectively create government-sanctioned monopolies or oligopolies that undermine basic economic principles of competition. They are commonly required for private firms to provide various utilities—such as electric, gas, and water services—but may also be required to provide various services deemed to be common carriers. The antitrust agencies have considerable experience with health-care-facilities regulations such as certificates of need (CONs)^[39] and certificates of public advantage (COPAs),^[40] which may also be considered CCN-type regulations.

While CCNs are ostensibly designed to serve the public interest by ensuring service quality and reliability, or by managing unproductive “arms race” scenarios, proponents have long maintained that such regulations are needed to prevent “unnecessary and wasteful competition.”^[41] CCNs may have diverse effects, but they inevitably comprise barriers to entry and expansion that protect incumbent firms at the expense of consumers, innovation, and economic efficiency.

With certain species of CCNs, evidence of countervailing consumer-protection benefits may be minor, thin, or simply unavailing. That is, some CCN regulations and many specific CCN provisions are explicitly designed to stifle or eliminate competition. Not incidentally, regulatory processes for granting CCNs may be designed to give incumbents a voice in managing the entry or expansion of their actual or potential competitors. That is, they exemplify what Maureen Ohlhausen and Gregory Luib termed “brother, may I” regulations.^[42]

A. CCNs Are Anticompetitive by Design

The historical roots of CCNs trace to the late 19th and early 20th Centuries, coinciding with industries once perceived as “natural monopolies.” The Interstate Commerce Commission, established in 1887, provided the regulatory model that was subsequently expanded during the New Deal Era. When utilities, transportation, and telecommunications were considered “natural” monopolies, CCNs were seen as necessary to foster cost efficiencies by exploiting the single provider’s economies of scale. With the entry of competing firms, it was argued that such economies could not be achieved. In competitive industries, it was claimed that CCNs would staunch “ruinous” competition.[43] For example, trucking and airlines were subject to strict common-carrier regulation and CCNs over the first half of the 20^th century, when firms complained of excessive or “wasteful” competition.[44]

Beginning in the 1970s, significant deregulation was undertaken in sectors like railroads, airlines, trucking, and telecommunications, driven by a growing consensus that traditional economic regulation, including CCNs, often failed to serve the public interest. Research, including by the FTC,[45] concluded the deregulation of these sectors generally led to increased competition, lower prices, and greater consumer choice. Yet despite this clear evidence, CCNs and CCN-like regulations persist in many sectors, including natural-gas pipelines, broadcasting, telecommunications, and—at the state level—health-care facilities.

B. CCNs Erect Anticompetitive Entry Barriers

From an economic perspective, CCNs create substantial inefficiencies by shielding incumbents from competitive pressures that would otherwise drive cost minimization and productivity improvements. As Greg Mankiw notes in his economics textbook: “The fundamental cause of monopoly is barriers to entry.”[46] Government-mandated CCNs represent perhaps the steepest of such barriers.

Firms protected by CCNs have fewer incentives to operate efficiently. They operate with the expectation that they can pass higher costs on to captive consumers, because they know competing entrants who might otherwise offer lower prices will be slowed or halted from entry. Moreover, when entry barriers are high, regulators may tolerate some degree of inefficiency on the part of incumbents, recognizing the challenges of operating in a capital-intensive industry.[47] The resulting operational slack and inflated prices constitute a deadweight loss to the economy and a direct financial burden on consumers and downstream businesses.

The vague “public interest, convenience, and necessity” standard grants regulators excessive discretion, creating conditions ripe for regulatory capture. As Paul Krugman and Robin Wells observe in their economics textbook: “For a profitable monopoly to persist, something must keep others from going into the same business.”[48] In this case, that “something” is the captured CCN process itself. Incumbent firms, with concentrated interests in regulatory outcomes and substantial resources, can effectively influence regulatory agencies to protect their market positions. The resulting regulations serve industry interests, rather than broader public welfare, while perpetuating anticompetitive structures that primarily benefit established players.

The application process for CCNs systematically disadvantages new market entrants, while benefiting incumbents. Applicants face substantial fees, specialized legal and engineering requirements, and significant compliance burdens that disproportionately affect smaller businesses that lack the resources and regulatory experience of established firms. The anticompetitive effects are even more pronounced when incumbent firms are “grandfathered” and do not (and have not) faced the same CCN burdens.

C. CCNs’ Anticompetitive Effects

CCNs’ central requirement to demonstrate “public convenience and necessity” often becomes an insurmountable hurdle, as applicants must prove existing services are inadequate. This task is made nearly impossible when incumbents can exercise a “competitor’s veto” to oppose new entry by asserting that the market is already adequately served.[49] While traditional regulation seeks—or at least hopes—to avoid regulatory capture, CCN regulations that provide for a “competitor’s veto” are explicitly designed for regulatory capture.

Innovation suffers significantly under CCN regimes. By protecting incumbents from price competition and the threat of disruptive innovation, these entry barriers slow technological progress and delay the adoption of efficiency-enhancing advancements. Secure in their regulated positions, incumbents lack strong incentives to invest in research and development, or to adopt potentially costly innovations.[50] This technological stagnation represents a significant opportunity cost for the economy and undermines long-term productivity growth that would otherwise benefit consumers through improved services and lower prices.

The common justification that CCNs ensure safety and reliability or preserve national security fails under scrutiny. Direct safety regulations implemented by specialized agencies like the Pipeline and Hazardous Materials Safety Administration or the Federal Aviation Administration provide more targeted and less anticompetitive means of achieving these goals without restricting market entry. These agencies can mandate specific safety standards, operational procedures, and insurance requirements applicable to all market participants without barring potentially safer or more reliable new firms. The interagency Committee on Foreign Investment in the United States (CFIUS) provides robust mechanisms to vet foreign-investment and supply-chain risks. Competition itself can drive safety improvements, as firms strive to differentiate themselves and avoid costly failures.

D. Recommendation: Eliminate Federal and State CCNs

FTC Commissioner Mark Meador recently noted, quoting James Madison, “Monopolies are sacrifices of the many to the few. Where the power is in the few it is natural for them to sacrifice the many to their own partialities and corruptions.”[51] The persistence of CCNs represents a triumph of special interests over consumer welfare—a regulatory anachronism that undermines the very public interest it purports to protect.

Eliminating federal CCN requirements would align regulatory policy with sound economic principles by removing artificial barriers to entry and allowing markets to function more efficiently. The evidence from deregulated sectors demonstrates that competition typically leads to lower prices, greater innovation, and improved service quality. Rather than protecting firms from competition, federal regulation should focus on addressing genuine market failures through targeted interventions that preserve competitive dynamics, while ensuring essential public-interest objectives are met.

Toward that end, we recommend the federal government eliminate all CCN laws and regulations regarding entry, exit, or the transfer of assets, including:

• 15 U.S.C. 717, regarding the construction, extension, or abandonment of natural-gas facilities; and
• 47 U.S.C. 214, regarding the extension of telecommunications lines or discontinuance of service.

In addition, in comments submitted to the Federal Communications Commission (FCC), ICLE noted that, in today’s digital environment, almost none of the legacy ownership restrictions established by Section 202(h) of the Telecommunications Act of 1996 are needed.[52] In fact, as de-facto CCN-like barriers to entry, they are more likely to stifle competition, rather than foster it.

State-level CCN regimes often exhibit even more pronounced anticompetitive effects than their federal counterparts. The narrower geographic scope of state regulations creates particularly problematic entry barriers in industries that would benefit from economies of scale across multiple jurisdictions. This fragmentation forces potential competitors to navigate a patchwork of inconsistent requirements across different states, dramatically increasing compliance costs and regulatory uncertainty. Small state regulatory agencies frequently lack the resources, specialized expertise, and political insulation of federal counterparts, making them particularly susceptible to capture by well-resourced local incumbent monopolists, who can deploy superior legal and lobbying resources. The resulting regulatory asymmetry creates a virtually impenetrable moat around established firms operating within state boundaries.

Moreover, state-level CCNs often incorporate explicit “protection from competition” provisions that would be politically untenable at the federal level, directly enshrining incumbent protection into regulatory standards. For example, several states require new entrants to demonstrate not only that a service is needed, but that it won’t materially affect existing providers’ revenues—effectively codifying prevention of competition as a regulatory goal. For example, Matthew Mitchell reports:

In all but 6 [of 35] CON states, incumbent providers are allowed to participate in the process and object to the application of a would-be competitor. Opposition can trigger an expensive and time-consuming process with hearings that are akin to legal proceedings. Incumbents may drop their objections after the applicant agrees not to encroach on the territory of the incumbent, a type of territorial collusion that would be a per se violation of the Sherman Antitrust Act were it not facilitated by the state.[53]

This problem is compounded by reduced media scrutiny and public attention at the state level, allowing anticompetitive regulatory decisions to escape meaningful oversight. The collective impact of these state-specific barriers creates significant interstate-commerce inefficiencies, as firms that could efficiently serve multiple regions are prevented from expanding across artificial bureaucratic boundaries, fragmenting what would otherwise be integrated national or regional markets into inefficient local monopolies protected by state regulatory barriers.

We urge the agencies to advocate for the elimination of CCNs at the state level, including those relating to:

• Health care and related facilities, including hospitals, nursing homes, ambulatory centers, mental and behavioral-health facilities, and substance-use-disorder treatment centers;
• Intrastate transportation, including passenger, freight, and the moving of household goods;
• Taxicabs and transportation network companies; and
• Electricity transmission.

III. Occupational Licensing

Occupational regulations—especially occupational-licensing regulations—have been an area of longstanding concern for both the FTC and DOJ.^[54] Occupational licensing is the most common and, in most instances, the most burdensome form of occupational regulation.^[55] Licensing generally requires that individuals obtain government permission to work in a particular profession.^[56] Commonly imposed at the state level, “[i]n a licensing system, boards sanctioned by the state typically set entry requirements, enact rules governing conduct, and discipline individuals for rule violations.”^[57] In many professional-services markets, licensure requirements have become a significant impediment to free-market competition, imposing substantial costs on consumers, workers, and businesses alike. For one thing:

professional licensure works as a barrier to entry when it works at all. That is not necessarily a bad thing: not all barriers to entry are substantial or durable, much less excessive or unlawful, and it does not follow from the very nature of licensure that it necessarily is anticompetitive, fails to provide consumer benefits, or fails, on balance, to be cost-justified. On the other hand, any particular licensing regime or provision may evidence any or all of those failings.^[58]

Licensing often is justified as a means to protect public health and safety.^[59] However, a growing body of evidence suggests that many licensing regimes create unnecessary barriers to entry, restrict competition, and primarily serve the interests of incumbent practitioners, rather than the public. In some instances, they do so where some licensing restriction may be justified to address market failure, but where specific entry or supervision requirements far exceed any demonstrable consumer-protection benefits. In other cases, whole occupations are unduly restricted by the imposition of licensure requirements where no credible defense of licensure exists.^[60] In addition, because state-level licensure regimes often lack interstate reciprocity, licensing can impede the efficient allocation of skilled labor to meet consumer demand across state lines.

A. Occupational Licensing Is Anticompetitive by Design

Occupational licensing can serve legitimate purposes in certain professions where consumer and public safety are paramount.[61] The challenge, however, lies in distinguishing between licensing that serves essential public-safety functions, such as for medical professionals or airline pilots, and regulations that may inadvertently restrict competition without commensurate consumer benefits. As noted above, that may be a challenge for entire licensing codes for certain occupations, or it may be a challenge for specific licensing requirements even when some form of licensure serves an important consumer protection purpose. When licensing requirements are excessive relative to the actual risks involved, they can add undue costs to training, limit entry into the professions to excess, allow incumbents to maintain higher prices, and reduce consumer access to professional services.

Licensing laws create substantial barriers for aspiring professionals.^[62] These can include costly and time-consuming educational prerequisites, extensive training hours, expensive examination fees, and vague “good moral character” clauses. As noted by the Mercatus Center, “incumbent providers may use licensure to limit competition. By limiting supply and raising prices, these rules allow incumbent providers to earn artificially high profits.”[63] This directly contravenes the principles of a free market, where competition should drive efficiency and innovation.

B. Occupational Licensing’s Anticompetitive Effects

Licensing artificially constrains the number of practitioners by making it more difficult and expensive to enter a profession.^[64] The FTC has itself acknowledged that occupational licensing “inherently restricts entry into a profession and limits the number of workers,” which “can restrain competition.”[65] This reduced supply not only limits consumer choice, but can also stifle innovation in service delivery, as incumbents face less pressure to adapt and improve.[66]

The anticompetitive effects of occupational licensing translate directly into tangible harms for consumers, primarily through higher prices and reduced access to services, without a consistent corresponding increase in quality.[67] These increased costs are borne by all consumers but disproportionately affect low-income households.[68]

Workers—especially those seeking entry-level positions, changing careers, or relocating—bear significant burdens imposed by occupational licensing.[69] In this way, licensing requirements function as a direct barrier to employment. Estimates suggest that occupational licensing results in millions fewer jobs nationwide—a 2015 study estimated 2.85 million lost jobs annually.[70] Individuals who cannot afford the time or money for required training and fees, or who cannot pass exams that may not be relevant to job performance, are excluded from their chosen fields. Because licensing requirements vary significantly between states and often lack reciprocity, workers find it difficult and costly to move and continue practicing their profession. This impedes the efficient allocation of labor and creates hardship for those who need to relocate.[71]

The current landscape of occupational licensing in the United States extends far beyond what is necessary to protect public health and safety. Instead, it frequently serves as a tool to limit competition, raise prices, restrict worker mobility, and stifle economic dynamism. The harms to consumers, workers, and businesses are substantial and well-documented, with estimated annual costs to the U.S. economy in the hundreds of billions of dollars due to misallocated resources and lost jobs.

C. Recommendation: Eliminate or Scale Back Occupational-Licensing Laws

To foster a more competitive and dynamic economy, we recommend a fundamental overhaul of occupational-licensing regimes. Rather than viewing all occupational licensing as inherently problematic, policymakers should evaluate each profession’s licensing requirements based on evidence of genuine public risk and consumer-protection needs. The goal should be to ensure that licensing serves its intended protective function without creating unnecessary barriers that stifle beneficial competition and innovation in the marketplace. Specifically, we urge the DOJ and FTC to encourage and support the following reforms at the federal and state levels:

• Eliminate unnecessary licenses: States should systematically review existing licenses and repeal those that do not address a clearly identified and significant threat to public health or safety that cannot be mitigated by less-restrictive means. Many occupations currently licensed in some states are safely practiced without licenses in others, demonstrating the lack of necessity.
• Adopt a “least-restrictive regulation” approach: Before imposing or renewing licensing, policymakers should be required to demonstrate that no less-restrictive alternative—such as market competition, voluntary private certification, bonding, registration, or inspections—would suffice to protect consumers.
• Narrowly tailor remaining licenses: Where licensing is deemed essential, requirements should be strictly limited to those directly related to protecting public health and safety. This includes aligning training and education requirements with demonstrable risks, evaluating the benefits of reducing those risks against the costs of licensing requirements, and eliminating overly burdensome or irrelevant mandates.
• Enhance interstate mobility: States should be strongly encouraged to adopt universal license recognition or enter into interstate compacts for licensed occupations in order to allow qualified workers to practice across state lines without undergoing duplicative and costly re-licensing procedures.
• Scrutinize the role of licensing boards: Oversight of licensing boards is crucial, particularly when they are dominated by active market participants who may have incentive to limit competition. Independent review and accountability mechanisms should be strengthened.

By significantly reducing and reforming occupational licensing, we can unlock substantial economic benefits, enhance consumer welfare, expand opportunities for American workers, and create a more vibrant and competitive marketplace.

IV. Legalized Cartels and Antitrust Exemptions and Immunities

Federal antitrust law rests on economic principles that promote consumer welfare, allocative efficiency, and dynamic competition. The Sherman Antitrust Act, Clayton Act, and Federal Trade Commission Act collectively embody the policy judgment that competitive markets deliver optimal economic outcomes.

Yet paradoxically, Congress and courts have carved out numerous sector-specific antitrust exemptions that permit precisely the anticompetitive conduct these laws were designed to prevent. These include agricultural cooperatives (Capper-Volstead Act), agricultural marketing orders, export trade associations, and professional sports leagues. These exemptions represent market distortions that generate substantial deadweight losses, misallocate resources, privilege rent seeking over productive activity, and create negative externalities across the broader economy. Their continuation reflects not economic rationality but regulatory capture and path dependency.

The economic costs of these exemptions manifest in three primary dimensions: (1) consumer harm through higher prices and reduced output; (2) labor-market distortions that suppress wages and limit mobility; and (3) dynamic inefficiency through reduced innovation and entrepreneurship. Each exemption allows conduct that would otherwise constitute per-se violations of antitrust law, including price fixing, output restrictions, and market-allocation schemes.

In its final report in 2007, the Antitrust Modernization Commission recommended a re-evaluation, if not elimination, of antitrust exemptions. The commission concluded that traditionally exempt industries likely do not need the antitrust immunities of the past:

57. Statutory immunities from the antitrust laws should be disfavored. They should be granted rarely, and only where, and for so long as, a clear case has been made that the conduct in question would subject the actors to antitrust liability and is necessary to satisfy a specific societal goal that trumps the benefit of a free market to consumers and the U.S. economy in general.[72]

The American Bar Association Section of Antitrust Law recommended a four-part test to determine when exemptions are appropriate:

First, Congress should grant antitrust exemptions and immunities rarely and only after rigorous consideration of the impact of the proposed exemption or immunity on consumer welfare. Second, Congress should only grant those exemptions and immunities that are drafted narrowly, so that competition is reduced only to the minimum extent necessary to achieve the intended goal. Third, Congress should enact antitrust exemptions and immunities only when the proposed exemption or immunity achieves a Congressional goal that significantly outweighs the aims of the antitrust laws in a particular situation. Finally, the Section proposes that no exemption or immunity should be granted or renewed unless it contains a sunset provision.[73]

The Antitrust Modernization Commission identified numerous antitrust exemptions spanning a wide range of industries.[74] Each of these exemptions should be evaluated for reform or elimination.

Statutory exemptions from the antitrust laws:

• Agricultural Marketing Agreement Act, 7 U.S.C. §§ 608b–608c;[75]
• Anti-Hog-Cholera Serum and Hog-Cholera Virus Act, 7 U.S.C. § 852;
• Capper-Volstead Act, 7 U.S.C. §§ 291–92;
• Charitable Donation Antitrust Immunity Act, 15 U.S.C. §§ 37–37a;
• Defense Production Act exemption, 50 U.S.C. app. § 2158;
• Export Trading Company Act, 15 U.S.C. §§ 4001–21;
• Fishermen’s Collective Marketing Act, 15 U.S.C. §§ 521–22;
• Health Care Quality Improvement Act, 42 U.S.C. §§ 11101–52;
• Labor exemptions (statutory and non-statutory), 15 U.S.C. § 17; 29 U.S.C. §§ 52, 101–15, 151–69; (and common law);
• Local Government Antitrust Act, 15 U.S.C. §§ 34–36;
• Medical resident matching program exemption, 15 U.S.C. § 37b;
• National Cooperative Research and Production Act, 15 U.S.C. §§ 4301–06;
• Need-Based Educational Aid Act, 15 U.S.C. § 1 note;
• Newspaper Preservation Act, 15 U.S.C. §§ 1801–04;
• Non-profit agricultural cooperatives exemption, 15 U.S.C. § 17;
• Small Business Act exemption, 15 U.S.C. §§ 638(d), 640;
• Soft Drink Interbrand Competition Act, 15 U.S.C. §§ 3501–03;
• Sports Broadcasting Act, 15 U.S.C. §§ 1291–95;
• Standard Setting Development Organization Advancement Act, 15 U.S.C. §§ 4301–05, 4301 note;
• Webb-Pomerene Export Act, 15 U.S.C. §§ 61–66

Statutory exemptions created as part of a regulatory regime:

• Air-transportation exemption, 49 U.S.C. §§ 41308–09, 42111
• McCarran-Ferguson Act, 15 U.S.C. §§ 1011–15
• Motor-transportation exemption, 49 U.S.C. §§ 13703, 14302–03
• Natural Gas Policy Act exemption, 15 U.S.C. § 3364(e)
• Railroad-transportation exemption, 49 U.S.C. §§ 10706, 11321(a)
• Shipping Act, 46 U.S.C. app. §§ 1701–19

Judicially created exemptions

• Baseball exemption
• Filed-rate/Keogh doctrine
• Noerr-Pennington immunity
• State action doctrine

While rolling back existing exemptions and immunities should be an administration priority, we urge the DOJ and FTC to be vigilant against attempts to expand these provisions. In the years since the Antitrust Modernization Commission’s report, several bills have been introduced to exempt sectors or business activities from antitrust enforcement, including:

• Credit Card Fair Fee Act of 2008, H.R. 5546, 110^th (2008). Would create a broad immunity under the antitrust laws for merchants and issuers jointly to negotiate interchange fees and terms of access to a credit- and/or debit-card network above a certain size.[76]
• Quality Health Care Coalition Act of 2011, H.R. 1409, 112^th (2011); Community Pharmacy Fairness Act of 2011, H.R. 1839, 112^th Cong. (2011); and Preserving Our Hometown Independent Pharmacies Act of 2011, 112^th Cong. (2011). Would permit health-care providers to negotiate collectively with insurers and group-health plans.[77]
• Journalism Competition and Preservation Act of 2019, H.R. 2054, 116^th (2019); and Journalism Competition and Preservation Act of 2021, H.R. 1735, 117^th Cong. (2021). Would provide a safe harbor from antitrust laws for publishers to negotiate collectively with internet platforms.[78]
• Protect the BALL Act of 2024, H.R. 8304, 118^th (2024). Would provide schools, conferences, and associations immunity from coordinating on student-athlete compensation.

As John Roberti, Kelse Moen, and Jana Steenholdt noted in their submission to a DOJ roundtable, “The consensus view now holds that consumers benefit most when competitors freely compete, and that economic regulation is better suited to preserving a competitive marketplace than to structuring the market around deliberately anticompetitive cartels.”[79] To preserve competitive marketplaces, Congress and the courts should be skeptical of industry pleas to continue or expand antitrust exemptions and immunities. Carl Sagan popularized the expression “extraordinary claims require extraordinary evidence.”[80] In regulation, the corollary is “extraordinary demands require extraordinary evidence.” Antitrust exemptions and immunities should be treated as extraordinary demands that require extraordinary evidence demonstrating that the benefits of such proposals exceed the costs, and that the policy goals cannot be achieved with a more targeted approach that does not compromise competition policy.

V. State Action and Sovereign Immunity

While antitrust law is aimed at private anticompetitive conduct, it often allows governmental entities—as well as private entities given the imprimatur of government actors—to engage in similarly anticompetitive conduct, due to several doctrines. The FTC and DOJ should do more to clarify these doctrines through strategic litigation and amicus briefs.

State-action immunity and the Noerr-Pennington doctrine often encourage private cartels to lobby for government regulation or licensure through boards they end up controlling in order to become immune from antitrust scrutiny. As referenced above, occupational licensing and certificate-of-need laws are major examples of incumbents essentially controlling the level of competition in a particular market.

A. Clarifying the Boundaries of State-Action Immunity

The FTC has consistently sought to clarify and constrain the boundaries of the state-action immunity doctrine, which exempts certain anticompetitive actions from federal antitrust scrutiny if they are genuinely undertaken as part of state policy, rather than private conduct. The Supreme Court has established two essential criteria to limit misuse of this immunity: first, the anticompetitive policy must be clearly articulated and affirmatively expressed as state policy; second, it must be actively supervised by the state itself.[81]

For instance, in FTC v. Phoebe Putney Health Sys.,[82] the Court addressed the “clear articulation” part of the test. There, the court held that the Hospital Authority of Albany-Dougherty County, which was a public authority with power to act in the marketplace, was not clearly authorized to make acquisitions that would substantially lessen competition. The Court found:

Grants of general corporate power that allow substate governmental entities to participate in a competitive marketplace should be, can be, and typically are used in ways that raise no federal antitrust concerns… Thus, while the Law does allow the Authority to acquire hospitals, it does not clearly articulate and affirmatively express a state policy empowering the Authority to make acquisitions of existing hospitals that will substantially lessen competition.[83]

In North Carolina Dental Board v. FTC,[84] the Court considered the “active supervision” element. There, the Court held that, when market participants control a regulatory board, a politically accountable government actor must actively supervise its actions. This is important, because “established ethical standards may blend with private anticompetitive motives in a way difficult even for market participants to discern… In consequence, active market participants cannot be allowed to regulate their own markets free from antitrust accountability.”[85]

The FTC and DOJ should also continue to make sure that government entities acting in the marketplace do not abuse their positions beyond what immunities allow. [86]

B. The Problem of State-Owned Enterprises

State-owned enterprises (SOEs) may also be immune from antitrust scrutiny due to the state-action doctrine or sovereign immunity. This is particularly problematic, as such enterprises have different incentives than privately owned businesses acting in the marketplace. Most notably, while a private business must pass the profit-and-loss test, SOEs often are not subject to the same constraints.

This difference may manifest through setting up legal SOE monopolies against which no other firm can compete; exempting SOEs from otherwise generally applicable laws; extending explicit subsidies to SOEs, whether in the form of taxpayer-financed appropriations or government-backed bonds (which the government explicitly or implicitly promises to repay, if necessary); or cross-subsidies from other government-owned monopoly businesses. Therefore, SOEs do not need to maximize profits, and can pursue other goals. SOEs may even provide ostensibly high-quality products and services at what are often below-market prices—perhaps one of the few instances where a predatory pricing scheme can actually occur.

Due to the lack of ordinary market principles governing their behavior, SOEs arguably have greater incentive to abuse their positions in the marketplace than private entities. As David E.M. Sappington and J. Gregory Sidak put it:

[W]hen an SOE values an expanded scale of operation in addition to profit, it will be less concerned than its private, profit-maximizing counterpart with the extra costs associated with increased output. Consequently, even though an SOE may value the profit that its anticompetitive activities can generate less highly than does a private profit-maximizing firm, the SOE may still find it optimal to pursue aggressively anticompetitive activities that expand its own output and revenue. To illustrate, the SOE might set the price it charges for a product below its marginal cost of production, particularly if the product is one for which demand increases substantially as price declines. If prohibitions on below-cost pricing are in effect, an SOE may have a strong incentive to understate its marginal cost of production or to over-invest in fixed operating costs so as to reduce variable operating costs. A public enterprise may also often have stronger incentives than a private, profit-maximizing firm to raise its rivals’ cost and to undertake activities designed to exclude competitors from the market because these activities can expand the scale and scope of the SOE’s operations.[87]

The FTC and DOJ should do more to clarify (or ask Congress to clarify) the extent of SOEs’ immunities from antitrust scrutiny.

C. Case Study: TVA and Local Power Companies

In a 2022 letter to then-Assistant U.S. Attorney General Jonathan Kanter, Sen. Mike Lee (R-Utah) put forth the argument that the DOJ should take action to address abuses of the pole-attachment process by local power companies (LPCs) regulated by the Tennessee Valley Authority (TVA).[88] His concern was that such abuses threaten to slow broadband deployment, especially to rural areas served by the TVA and the LPCs.[89] Among the abuses he details are:

• Delaying or refusing to negotiate pole-attachment agreements with competitive broadband-service providers, including when a TVA LPC provides broadband service (itself or through a joint-venture agreement) or is interested in doing so;
• Initially refusing to negotiate pole-attachment agreements that would enable competitive broadband-service providers to obtain permits in sufficient time to meet federal grant deadlines;
• Refusing to review pole-attachment applications on a scale or at the pace necessary to complete broadband projects in a timeframe required by federal grant programs;
• Refusing to follow the standard industry practice of approving a contractor to process pole-access applications in a timely manner when the utility’s staff is insufficient to do the work, even when the broadband-service provider is willing to pay the entire bill for the contractor; and

1. Refusing to process pole-attachment applications at all, and failing to respond to provider outreach regarding the processing of applications for months on end.[90]

Normally, the federal government is immune from lawsuit under the ancient doctrine of sovereign immunity, except where explicitly waived by statute. The TVA is a wholly owned corporate agency and instrumentality of the federal government. Thus, federal courts have typically found that the TVA and other federal entities operating in the marketplace are exempt from antitrust.[91] This is despite the fact that the TVA’s enabling statute states: “Except as otherwise specifically provided in this chapter, the Corporation… may sue and be sued in its corporate name.”[92]

There is nothing in the chapter that actually says the agency can’t be sued for antitrust violations. The older cases finding the TVA exempt from antitrust are likely to be found wrongly decided under the logic of the Supreme Court’s most recent case dealing with the TVA’s immunity. In 2019, the Court took up Thacker v. TVA,[93] which asked whether the TVA was immune from lawsuits for negligence. The Court rejected the lower court’s reasoning that the TVA was immune for torts arising from its “discretionary functions,” substituting a new test as to whether the TVA was acting pursuant to its governmental function or a commercial function. As the Court stated:

Under the clause—and consistent with our precedents construing similar ones—the TVA is subject to suits challenging any of its commercial activities. The law thus places the TVA in the same position as a private corporation supplying electricity. But the TVA might have immunity from suits contesting one of its governmental activities, of a kind not typically carried out by private parties.[94]

The Court also gave examples to help distinguish the two:

When the TVA exercises the power of eminent domain, taking landowners’ property for public purposes, no one would confuse it for a private company. So too when the TVA exercises its law enforcement powers to arrest individuals. But in other operations—and over the years, a growing number—the TVA acts like any other company producing and supplying electric power. It is an accident of history, not a difference in function, that explains why most Tennesseans get their electricity from a public enterprise and most Virginians get theirs from a private one. Whatever their ownership structures, the two companies do basically the same things to deliver power to customers.[95]

The test to be applied, therefore, is “whether the conduct alleged to be negligent is governmental or commercial in nature… if the conduct is commercial—the kind of thing any power company might do—the TVA cannot invoke sovereign immunity.”[96] Here, that arguably means that, when the TVA is acting pursuant to its commercial function, it should not receive immunity from antitrust suit.

On the other hand, Congress gave the TVA broad ratemaking authority and contractual powers. One federal court (previous to Thacker) rejected an antitrust challenge to the TVA’s ratemaking formula because it was a “valid governmental action and [therefore] exempt from the antitrust laws of the United States.”[97]

As noted above, some LPCs have entered the municipal-broadband market and function as competitors to private broadband companies who want to attach to poles owned by LPCs. Thus, even though competition economics would suggest that LPCs would have a greater incentive to raise rivals’ costs by charging a monopoly price, the TVA would likely argue that it is acting in its governmental function when it sets those rates.[98] If courts agree, then antitrust law would not be able to reach that problem.

Consistent with the Court’s reasoning in Thacker, however, courts could find that antitrust law reaches agreements between wholesalers (like the TVA) and retailers (like the LPCs) to charge certain rates for pole attachments to competitors in an adjacent market. This would arguably be an example of the TVA acting as any other power generator would, pursuant to its commercial function, through some type of price-maintenance agreement. As it stands, it isn’t clear which way the courts would go.

Even if the commercial versus governmental distinction is clarified with respect to the TVA, there is a further wrinkle as it relates to antitrust scrutiny of LPCs. This concerns how the TVA’s actions interact with state-action immunity in antitrust law. When it comes to municipalities, the Supreme Court altered the “active supervision” requirement: “Once it is clear that state authorization exists, there is no need to require the State to supervise actively the municipality’s execution of what is a properly delegated function.”[99]

The Court has, however, also left open the possibility of an exception to state-action immunity when government entities function as market participants.[100] In one case dealing with a local municipally owned power plant in Louisiana, the Supreme Court did not grant broad immunity from antitrust laws, in part because:

Every business enterprise, public or private, operates its business in furtherance of its own goals. In the case of a municipally owned utility, that goal is likely to be, broadly speaking, the benefit of its citizens. But the economic choices made by public corporations in the conduct of their business affairs, designed as they are to assure maximum benefits for the community constituency, are not inherently more likely to comport with the broader interest of national economic well-being than are those of private corporations acting in furtherance of the interests of the organization and its shareholders.[101]

While there are a few cases that apply this distinction in lower federal courts,[102] there is no Supreme Court caselaw determining how to differentiate when, for the purposes of state-action immunity, municipal corporations function as market participants versus when they act as government entities. Jarod Bona and Luke Wake have proposed applying a test similar to the one the courts use in dormant Commerce Clause cases.[103] The distinction made by the Supreme Court in Thacker and discussed above may also be applicable.

Government-owned LPCs are creatures of states or municipalities. As such, they would certainly argue they are immune from antitrust scrutiny, even when they refuse to deal with private broadband providers with whom they compete while withholding a critical input (i.e., the ability to attach to their poles). But there are two problems with this argument.

First, it seems unlikely that the LPCs could argue that they are acting pursuant to a clearly articulated policy of displacing competition when they refuse to deal with broadband providers. As Sen. Lee pointed out in his letter, there are state laws that would impose a duty to deal on reasonable and nondiscriminatory terms, but for any exemptions to that authority due to the TVA.[104] For instance, North Carolina and Kentucky require all pole owners not subject to FCC Section 224 authority to offer nondiscriminatory pole access.[105]

On the other hand, they could appeal to the TVA’s contract authority,[106] in addition to the TVA’s stated policy that its purpose is “to provide for the … industrial development” of the Tennessee Valley.[107] But even if this grants the TVA authority to regulate rates for pole attachments, it doesn’t mean the TVA has enunciated an articulable policy of displacing competition in refusing to deal with broadband providers. It also would appear contrary to the purpose of promoting industrial development to forestall broadband deployment in the Tennessee Valley simply because LPCs that also offer municipal-broadband systems don’t want that competition. In other words, their refusal to deal is not protected by an appeal to any articulable policy to displace competition, either by a state or the TVA.

Second, under the caselaw that does exist, government-owned LPCs are market participants that should not receive antitrust immunity. For instance, in one case, a private arena owner challenged under antitrust law an exclusive contract between a municipal-arena owner and LiveNation.[108] The court held that state-action immunity was “less justified,” because the municipality’s “entertainment contracts” reflected “commercial market activity,” not “regulatory activity.”[109] Here, the LPCs’ actions as both power companies and municipal-broadband providers reflect commercial-market activity more than regulatory activity. They shouldn’t be able to claim immunity from antitrust for this refusal to deal, any more than a private broadband provider could.

D. Recommendation: Subject the TVA and Government-Owned LPCs to Antitrust Law

In sum, the FTC or DOJ should strongly consider litigation (or supporting litigation with amicus briefs) arguing the TVA (and similarly situated federal corporations) is not exempt from antitrust scrutiny when it acts pursuant to a commercial function, including when it sets anticompetitive rates for pole attachments that would slow broadband buildout. This clearly affects the market for access to LPC-owned utility poles.

Moreover, the LPCs’ anticompetitive refusal to deal appears to be separate from the rates set by the TVA pursuant to its ratemaking authority or contractual powers. The LPCs themselves should be subject to antitrust law. The FTC or DOJ should try to get clarity that LPCs are not immune from antitrust scrutiny through strategic litigation, arguing for a market-participant exception to state-action immunity. This could also apply to municipally owned enterprises outside of the TVA context.

VI. Prevailing Wages

Prevailing-wage laws and project labor agreements (PLAs) represent significant regulatory interventions in construction labor markets that substantially distort competition, inflate costs, and create artificial barriers to market entry. These regulations—including the federal Davis-Bacon Act (1931),[110] state “Little Davis-Bacon” acts,[111] and government-mandated PLAs—fundamentally alter market dynamics by imposing wage floors and labor terms that would not emerge under competitive conditions.

The Davis-Bacon Act requires contractors on federally funded construction projects exceeding $2,000 to pay locally “prevailing” wages and benefits, while state variants impose similar requirements at different thresholds. PLAs are pre-hire collective-bargaining agreements that establish employment terms on construction projects, often mandating union-scale wages, benefits, and work rules. These regulatory mechanisms prevent price competition in labor markets, restrict market entry, and concentrate benefits among a subset of market participants at the expense of consumers, taxpayers, and excluded businesses.

A. Prevailing Wage’s Anticompetitive Roots

The Davis-Bacon Act’s historical origins reveal its fundamentally anticompetitive design. Enacted during the Great Depression, the law was explicitly created to protect unionized white construction workers from competition from non-unionized Black and immigrant laborers. Rep. Robert Bacon (R-N.Y.) introduced the legislation after a contractor from Alabama employed Black workers on a federal hospital project in his district. Congressional debate records document clear racial and protectionist motivations, with representatives expressing concerns about “cheap colored labor” and “southern contractors employing low-paid colored mechanics.”[112]

The policy’s origin as a mechanism to shield incumbent firms and workers from competition continues to shape the law’s modern effects. While explicitly discriminatory language has disappeared, the regulatory framework still operates to protect established market participants (predominantly unionized contractors) from competition from firms employing different business models and wage structures.[113] As the U.S. Court of Federal Claims recently recognized in MVL USA Inc. v. United States, requirements like PLA mandates violate competition principles by excluding qualified bidders based on their unwillingness to adopt a particular labor model, regardless of their capacity to perform the work effectively.[114]

B. Wage-Determination Mechanisms: Methodological Flaws and Market Distortions

The wage-determination process under prevailing-wage laws is fundamentally flawed and systematically produces results that distort market signals. The U.S. Government Accountability Office (GAO) has, over decades, raised concerns about the U.S. Labor Department’s (DOL) wage-survey methodology, data quality, lack of verification of submitted wage data, and the infrequency of wage updates in some areas. For example, a 1994 GAO review noted that the quality of data the DOL used remained a concern, due to varying contractor response rates and the lack of data verification.[115] A 1979 GAO report, which recommended the repeal of the Davis-Bacon Act, stated that DOL procedures “provided no assurance that the rates actually prevail for workers on similar private construction projects in the locality.”[116] In 2011, the GAO concluded: “Labor cannot determine whether its wage determinations accurately reflect prevailing wages because it does not currently calculate response rates or analyze survey nonrespondents.”[117]

This wage-determination methodology transforms the “prevailing wage” from a passive observation of market conditions into an active intervention that establishes an artificial price floor for labor—often above the wage rate in a competitive market. For example, the Beacon Hill Institute found Davis-Bacon wages to be 20.2% above local market averages.[118] Rather than reflecting local labor-market conditions, the result is a government-imposed wage structure that privileges certain business models (typically, union-affiliated), while disadvantaging others that might otherwise compete effectively through different labor-cost structures.

C. Prevailing Wage’s Anticompetitive Effects

Prevailing-wage laws and PLA mandates significantly restrict competition in public-construction markets by creating substantial barriers to entry for many contractors. By mandating artificially high wages, these laws immediately disadvantage contractors whose business models depend on market-determined labor rates. Small, non-union contractors typically operate with lower overhead and different cost structures that allow them to compete effectively in open markets. Mandated wage floors eliminate this competitive advantage.

In addition, compliance with prevailing-wage laws imposes substantial administrative costs that disproportionately affect small businesses. Contractors must submit weekly certified payrolls, meticulously track employee hours across numerous job classifications, and maintain extensive records. These requirements create fixed compliance costs that larger firms can more easily absorb but that present significant barriers for smaller competitors.

PLA mandates typically require adherence to union work rules, staffing ratios, and hiring practices that may conflict with non-union contractors’ established operational models. The RAND Corp.’s study of Los Angeles’ Proposition HHH housing projects found that developers deliberately altered project sizes to fall below PLA-applicability thresholds, demonstrating the significant burden these requirements impose.[119]

The cumulative effect of these barriers is a reduction in the number and diversity of bidders on public-construction projects. While some studies claim prevailing-wage laws do not reduce bid competition, this conclusion contradicts both economic logic and survey evidence. Surveys by the Associated Builders and Contractors show that a large percentage of contractors are deterred from bidding on prevailing-wage projects; one survey found that 75% of respondents said such laws would make them less likely to bid on public projects in their communities.[120]

This reduced competition is particularly pronounced among non-union, small, and minority-owned businesses, which constitute the majority of construction firms nationally. The MVL USA case provides judicial confirmation of this anticompetitive effect, with the court finding that PLA requirements unlawfully restricted competition by excluding responsible contractors based not on their capabilities, but on their unwillingness to adopt a particular labor model.[121]

D. Recommendations

Eliminating prevailing-wage laws and PLA mandates would allow construction labor markets to function according to the same competitive principles that drive efficiency and innovation throughout the economy. In a deregulated environment, labor compensation would be determined by the interactions of supply and demand, reflecting workers’ productivity, skills, and local economic conditions. This would allow for more efficient allocation of labor resources and more accurate price signals. In addition, a broader range of contractors—including non-union, small, and minority-owned businesses—would be able to compete effectively for public projects based on their efficiency, quality, and value proposition, rather than their ability to navigate complex regulatory regimes. Moreover, with lower overall project costs, more public construction would be feasible within existing budgets, creating additional employment opportunities.

Critics argue that eliminating these regulations would lead to reduced construction quality and safety. But these concerns can be addressed through more direct and efficient mechanisms. Quality can be ensured through stringent performance specifications, robust inspection protocols, and appropriate performance-bonding requirements. Worker safety is better protected through targeted safety regulations (such as Occupational Safety and Health Administration standards) rather than indirectly through wage mandates.

VII. Energy Transmission

FERC Order No. 1000, implemented in 2011, aimed to foster competition in electric-transmission development by removing federal rights of first refusal (ROFRs) for incumbent utilities, and by establishing new frameworks for transmission planning and cost allocation. Despite these well-intentioned goals, almost a decade and a half of evidence demonstrates that Order No. 1000 has failed to deliver its promised benefits. It has instead created significant market distortions that harm consumers, businesses, and the broader economy.

The DOJ and FTC should advocate for eliminating or substantially modifying FERC Order No. 1000 to better align regulatory frameworks with the economic realities and operational characteristics of electricity-transmission markets.

A. The Contradiction at Order No. 1000’s Core

Order No. 1000 embodies a fundamental contradiction; it attempts to achieve competitive outcomes through centralized planning and prescriptive regulation. This approach conflicts with basic economic principles about information aggregation and incentive structures in markets.

The order attempts to engineer competition by mandating regional-planning processes, requiring the consideration of public-policy requirements, establishing interregional coordination, removing federal ROFRs, and imposing complex cost-allocation methodologies. These mechanisms have, however, proven inadequate, as demonstrated by the minimal impact of competitive bidding.^[122]

B. The Central-Planning Problem: Information Deficiencies and Misaligned Incentives

Order No. 1000’s centralized-planning approach suffers from what the economist Friedrich A. Hayek terms the “knowledge problem.”^[123] Regional-planning authorities simply cannot aggregate the dispersed, local knowledge necessary to make optimal transmission investment decisions. Transmission needs are influenced by constantly changing generation patterns, demand fluctuations, technological developments, and site-specific constraints that centralized planners cannot effectively process.

Evidence confirms this theoretical concern. In the Midcontinent Independent System Operator (MISO), only nine out of 2,174 approved projects over a five-year period were specifically designated to meet regional system needs.^[124] Instead of substantive regional planning, the process has often devolved into a “paper compliance exercise.”^[125]

Additionally, planners operating under Order No. 1000 are not subject to the profit-and-loss signals that discipline decisionmaking in markets. This creates a disconnect between planning decisions and economic efficiency. The result has been inefficient investment patterns: overbuilding of certain types of transmission (often local projects) and underbuilding of others (typically, larger regional or interregional lines essential for market integration).^[126]

C. Federal ROFR Removal: Undermined by State Barriers and Exemptions

While Order No. 1000 eliminated federal ROFR provisions, it allowed states to enact their own ROFR laws, and numerous states have chosen to do so. These state-level provisions—ostensibly aimed at promoting efficiency and reliability in transmission development by recognizing existing operational expertise and established infrastructure—have served as a workaround to Order No. 1000’s limitations. Additionally, Order No. 1000 included exemptions for projects that address “immediate reliability needs” and for certain system upgrades—measures intended to streamline the response to urgent system requirements.[127] But the resulting combination of federal rules, state ROFR statutes, and these exemptions has created a complex regulatory landscape, potentially increasing transaction costs and uncertainty for all market participants, including new entrants. At the same time, to the extent that Order No. 1000 was aimed at increasing “competition,” this background complexity has frustrated even the meager benefits it hoped to achieve.

D. ‘Competition’ Under Order No. 1000: Perverse Incentives and Failed Outcomes

The “competition” fostered by Order No. 1000 is not competition in a traditional market sense. Rather, it is competition for a regulated monopoly franchise: the right to build and operate a rate-regulated asset whose costs are ultimately borne by captive ratepayers. This structure creates perverse incentives that undermine genuine efficiency.

Empirical evidence demonstrates these failures. Multiple analyses show that “competitive” solicitations have frequently been associated with substantial project delays—in some cases, adding as many as 1,000 days to development timelines—and significant cost escalations.^[128] One study found that two-thirds of competitively bid projects exceeded their initial cost estimates, with final costs averaging at least 59% more than the winning bid amounts.^[129]

While some projects have come in on or under budget, others have come in considerably over budget.^[130] For example, the Artificial Island project was 61% under budget and Suncrest was 29% under budget, but the Ten West Link project was 30% over budget, Estrella was 22% over budget, Harry Allen-Eldorado was 42% over budget, and Miguel was 45% over budget.^[131] Overall, there was an average cost increase of 6% under a “competitive” bidding model^[132] (and may be as high as 12%, depending on how certain baseline amounts are factored in).^[133]

Cost caps, which are often proposed in competitive bids, have not fully protected customers from the risk of cost increases, calling into question their enforceability and efficacy.^[134] Economic theory suggests that competition fosters innovation and efficiency, but the competitive-procurement process under Order No. 1000 does not create “textbook competition” and does not fundamentally alter the transmission market; it simply replaces one monopoly with another.^[135] The type of dynamic gains from innovation often associated with competition are unlikely to emerge as a result of Order No. 1000’s competitive-solicitation policy.^[136]

This outcome is predictable. Developers have incentives to submit unrealistically low bids to win projects, knowing that cost caps may prove illusory and subject to renegotiation. This environment leads to a “winner’s curse,” under which the most aggressive—rather than the most capable—bidder prevails. This is hardly the market discipline that FERC intended to foster.

Furthermore, the requirement to run solicitations under Order No. 1000’s “competition” requirements has been shown to induce delays in transmission development by adding significant time and red tape.[137] This results from protracted solicitation processes, project re-scoping challenges, and administrative burdens.[138] The process also encourages frivolous and costly litigation.[139]

While “competition for the market”—as opposed to competition within the market—can function effectively under certain conditions, it proves problematic in electricity transmission. Because transmission projects remain subject to regulatory oversight and regulated rate structures, the competitive process devolves into a contest primarily based on unenforceable promises of cost containment and delivery timelines. Unlike true competitive markets, where firms bear the full consequences of cost overruns or delays, transmission developers under Order No. 1000 often shift these risks onto captive ratepayers, weakening incentives for genuine efficiency.

Moreover, the requirements imposed by Order No. 1000 can thwart necessary collaboration among transmission planners and owners. Previously, collaboration among utilities was the norm for developing transmission networks.[140] Now, competitive processes impede information, such as local knowledge about routes and costs. Because this information is competitively valuable, the process creates a disincentive to share such information with regional planners and stakeholders.[141] Indeed, the introduction of pseudo-competition into transmission development raises the specter of antitrust law, which can explicitly discourage many collaborative frameworks among competitors:

Antitrust policies can strictly bar certain communications and collaboration. Communications between competitors in competitive markets are illegal in order to prevent collusion or other activities that can raise prices. In the transmission space, which is generally a regulated industry, the application of standard antitrust rules on collaboration are vague at best, but conservative entities may wish to avoid any antitrust legal risk by erring on the side of reducing communication. For example, it is standard practice today for electric industry trade associations to have antitrust policies that include… communication-restricting guidelines.[142]

Thus, in effect, the electric-transmission industry receives none of the benefits of free-market competition under Order No. 1000, but is hamstrung by the same legal requirements imposed to combat allegedly unfair competition.

Further compounding these competition concerns is that current regulatory structures may inadvertently inhibit beneficial vertical integration, particularly between transmission and generation segments. In certain contexts, vertical integration can yield substantial operational efficiencies—such as better-coordinated planning and reduced transaction costs—that enhance consumer welfare. Regulatory barriers or overly stringent separation requirements can deny ratepayers these potential efficiencies, thereby exacerbating, rather than alleviating, competition-related inefficiencies.

E. Distorting Investment Through Flawed Cost Allocation

Order No. 1000 mandates that costs for new transmission facilities be allocated in a manner “roughly commensurate” with estimated benefits. This principle, however, is undermined by its inherent vagueness and FERC’s delegation of defining “benefits” to individual planning regions.^[143]

This delegation has resulted in inconsistent definitions across regions, creating uncertainty for developers and opportunities for strategic behavior.^[144] Vague cost-allocation rules inevitably distort investment signals. If beneficiaries are not accurately identified, economically inefficient projects might gain support, as costs are diffused across many ratepayers. Conversely, beneficial projects may be opposed if entities fear being allocated costs that exceed their actual gains.

The principle of cost causation—that costs should be borne by those who cause them to be incurred, or who directly benefit—is nominally embraced by Order No. 1000, but undermined in practice. When “benefits” are broadly attributed without clear linkage to specific users, costs tend to be socialized, severing the crucial connection between use and payment. This dulls market participants’ incentives to make efficient decisions regarding their use of the transmission system.

F. Recommendations

The cumulative effect of Order No. 1000’s flawed planning mandates, compromised competitive processes, and distortive cost-allocation mechanisms is tangible harm across the economy. In particular, consumers face higher electricity costs. The Brattle Group calculated in 2018 that genuine competitive processes could lead to cost savings of up to 40%, with customers saving $8 billion over five years.^[145] These projected savings have largely failed to materialize. With transmission spending growing from $15 billion in 2005 to nearly $40 billion annually, the foregone benefits are substantial.^[146]

We recommend repealing or substantially modifying Order No. 1000. The does not mean abandoning the goal of efficient transmission development. Rather, it represents a shift toward regulatory approaches that better align with market principles that focus on outcomes, not processes. Instead of prescribing detailed planning mechanisms, regulation should define desired outcomes (reliability, economic efficiency, non-discriminatory access) and allow market participants flexibility to achieve them.

VIII. Anticompetitive Cy-Pres Practices

The cy-pres (“next best”) doctrine permits funds from cash settlements in class actions to be directed to third parties—typically, charitable organizations with missions ostensibly related to the lawsuit’s claims—rather than to class members themselves. While traditionally used for residual funds that remained after compensation attempts, cy pres has increasingly been employed as a primary distribution mechanism when class members are deemed hard to identify, or when per-member compensation would be minimal.

In 2009, the DOJ Civil Rights Division adopted a policy of directing leftover settlement funds—those not distributed to direct victims—toward third-party charities.[147] This marked a significant shift, as prior to this, such cy-pres distributions were rare in federal government settlements. The policy was intended to ensure that unclaimed funds from civil-rights settlements were used to benefit communities or causes related to the underlying case, rather than reverting to the U.S. Treasury or remaining undistributed. Since then, the government’s policy has flip flopped with each change in administration, with the first Trump administration rescinding the guidance,[148] the Biden administration reinstating it,[149] and the second Trump administration again rescinding it.[150]

Judge Richard Posner has observed that, when there is “no indirect benefit to the class from the defendant’s giving the money to someone else,” the cy-pres remedy in the litigation context becomes “purely punitive.”[151] In addition to the punitive aspect of the cy-pres remedy, the practice is anticompetitive in that it bestows a windfall to some organizations, conferring an anticompetitive advantage vis-à-vis competing organizations.

Cy-pres awards function as non-market subsidies that bypass normal competitive processes. Recipient organizations gain funds without incurring the marketing, outreach, or compliance costs typical in nonprofit fundraising. This creates artificial price advantages in the “market” for charitable dollars. That is because cy-pres funds flow to organizations based on litigation outcomes, rather than donor preferences or demonstrated effectiveness.

The Google Location History settlement is widely considered one of the most outrageous examples of cy-pres abuse, as explained by the Hamilton Lincoln Law Institute:

The underlying lawsuit alleges Google violated the privacy rights of its users by misinforming them that it was not tracking users locations when they turned off Google’s “Location History” feature in their account settings. The parties reached a $62 million settlement but claim that actually distributing those funds to class members–i.e., the Google users actually harmed according to the lawsuit–was infeasible. Instead, they propose giving the class nothing for the release of their claims to sue Google and distributing the cash proceeds effectively as grants to third-party advocacy groups through cy pres. Many of the proposed recipient groups have pre-existing relationships with either class counsel or Google.[152]

A. Cy-Pres Practice’s Anticompetitive Effects

Cy-pres payments to third parties displace donations that might otherwise go to organizations competing for similar causes. A nonprofit receiving cy-pres funds gains capacity to undercut competitors on service delivery or advocacy without demonstrating superior value. Newer or smaller nonprofits face heightened entry barriers when established institutions receive litigation-driven funding streams unrelated to merit. The GWU Law Center example shows how cy pres can entrench incumbent organizations.

One class action settlement in an antitrust case, for example, included an award of $5.1 million of unclaimed antitrust settlement funds to the George Washington University School of Law (“GWU Law”) to create a “Center for Competition Law.” Not coincidentally, the lead plaintiffs’ lawyer was a GWU Law alumnus. The National Law Journal called this result one of the most criticized cy pres awards in recent years. The diversion of funds to an organization in which class counsel has such a personal interest arguably runs counter to class counsel’s duty to “fairly and adequately protect the interests of the class.[153]

When funds are directed by courts or attorneys, rather than by the class members themselves, the resulting allocation fails to reflect actual consumer preferences. Moreover, by providing a windfall to third-party nonprofits, the allocation fails to reflect donor (and potential donor) preferences, distorting the fundraising market. In both cases, cy-pres practices present a form of centralized resource allocation that replaces market-based decisions with judicial fiat. Organizations receiving cy-pres windfalls can expand operations, hire additional staff, or launch new initiatives without demonstrating market demand. This artificial growth comes at the expense of potentially more efficient or responsive organizations that lack access to the cy-pres funding stream, thereby stifling competition among nonprofits.

The availability of cy-pres funds encourages nonprofits to divert resources toward cultivating relationships with class counsel, judges, and potential defendants, rather than toward improving their core services or demonstrating impact to donors. This creates significant deadweight loss and economic friction.

B. Compelled ‘Charitable’ Speech

Cy-pres distributions effectively force class members to “donate” to organizations they may not support. This raises serious concerns when recipient organizations engage in advocacy or pursue political agendas.

For example, in Hawes v. Macy’s Inc., the court rejected a settlement partly because the proposed cy-pres recipient, Public Interest Research Group (PIRG), was unsuitable. Indeed, its work was completely unrelated to the bed-sheet-labeling issues in the lawsuit.[154] PIRG focuses primarily on environmental issues, product safety, and political advocacy, rather than consumer mislabeling concerns—making it impossible to justify as the “next best use” for settlement funds. Even PIRG’s promise to use the funds for relevant consumer education failed to address the fundamental problem that money given to the organization would effectively support its broader unrelated activities, such as global warming, energy, health, and “democracy & government.”[155] In addition, the court noted that “PIRG uses portions of its funds to donate to other organizations—organizations whose missions are even a further cry from any issues this suit presents,” including the People’s Action Institute, which advocates for socialized medicine; Environment America, which seeks to ban plastic; and Onward Together, a PAC that supports progressive candidates in their runs for offices across the country.[156]

This compelled funding of third-party speech represents both a consumer-welfare loss and a distortion of the charitable marketplace. It artificially increases resources for certain advocacy positions without donor choice.

C. Recommendation: End Cy-Pres Payments to Third Parties

We recommend the DOJ and FTC work together to limit anticompetitive cy-pres distributions and end the administration-to-administration flip flopping regarding the practice. This should include issuing joint enforcement guidelines clarifying that cy-pres remedies are disfavored and will not be pursued by the agencies due to their competitive-distortion effects, and establishing strict conditions where cy pres might be acceptable (e.g., only after exhaustive direct-distribution efforts).

In addition, the agencies should consider rulemaking within their statutory authority to restrict cy pres in cases involving federal antitrust or consumer-protection laws. These guidelines and rulemaking should be supported by workshops that bring together economists, legal scholars, and nonprofit-sector experts to document competitive harms from cy pres and empirical research on how cy-pres distributions affect nonprofit competition.

We recommend the agencies file strategic amicus briefs in key class-action cases arguing that cy-pres distributions distort competition in nonprofit markets. They should challenge settlements with cy-pres provisions during Tunney Act reviews, highlighting their anticompetitive effects.

By deploying these coordinated approaches, the DOJ and FTC can effectively curtail cy-pres practices that undermine competitive markets and redirect settlement funds to their rightful recipients—the consumers and businesses directly harmed by anticompetitive conduct.

IX. Recommendations for DOJ and FTC Rules, Guidelines, and Enforcement Actions

We recommend that the DOJ and FTC undertake reforms needed to restore antitrust enforcement to economically sound principles and to remedy regulatory overreach that has undermined both competition and consumer welfare. The Biden administration’s departure from the consumer-welfare standard, exemplified by failed merger challenges like FTC v. Meta/Within and expansive theories of “innovation foreclosure,” has created legal uncertainty, while chilling legitimate business conduct. Simultaneously, regulatory initiatives like the blanket ban on noncompete agreements and dramatically expanded Hart-Scott-Rodino filing requirements have imposed substantial compliance costs that disproportionately burden smaller firms. This has, paradoxically, created barriers to the very competition these policies purport to protect.

Beyond traditional antitrust concerns, the FTC’s enforcement approach in data security and children’s privacy has produced similarly anticompetitive effects through regulatory uncertainty and asymmetric compliance burdens. The agency’s “common law” of data security, developed through coercive settlement practices, rather than adversarial adjudication, provides insufficient guidance, while favoring incumbents who can better absorb investigation costs. Similarly, the expansion of the Children’s Online Privacy Protection Act’s (COPPA) definition of personal information to include persistent identifiers has demonstrably reduced children’s online content by 18%, while concentrating market power among larger content creators who can survive without targeted advertising revenue. These enforcement patterns reveal how well-intentioned regulatory initiatives can themselves become anticompetitive regulations when they abandon economic rigor in favor of structural presumptions and speculative theories of harm.

A. Refocus on the Consumer Welfare Standard

Almost from its inception, U.S. antitrust enforcement has centered largely on the consumer welfare standard (CWS), focusing on price and output effects as the principal indicators of competitive harm. While the CWS is often attributed to the influence of the Chicago School, it was applied in court decisions long before it extended its influence in the 1970s.[157]

Recently, however, the FTC and DOJ have signaled a sharp departure from this paradigm. Particularly under President Joe Biden’s appointees—such as former FTC Chair Lina Khan and former Assistant U.S. Attorney General Jonathan Kanter—antitrust policy was shifted to encompass such broader concerns as innovation, fair competition for workers and small businesses, and the structural risks of concentrated market power, even when prices and output were not affected directly.[158]

This reorientation has manifested in several enforcement actions and policy revisions. Notably, the FTC and DOJ withdrew the 2020 Vertical Merger Guidelines, citing an overreliance on efficiencies and a narrow focus on price. Merger challenges such as FTC v. Meta/Within and DOJ v. UnitedHealth/Change Healthcare have advanced theories of harm centered on potential competition and “innovation foreclosure,” respectively, without sound evidence of harm to competition or consumers. The courts, however, have rejected these government theories as too speculative.[159] These and other enforcement efforts were codified in the 2023 Merger Guidelines, which further de-emphasized efficiencies and emphasized risks to labor markets, nascent competition, and “platform entrenchment.”[160]

As antitrust scholar Herbert Hovenkamp has observed, however, the FTC and DOJ will have a better chance to prevail in litigation in cases where its theories of harm are articulated in economic terms consistent with the CWS: higher prices, reduced market output, or concrete threats to innovation.[161] As explained by Lazar Radic and Nicolas Petit:

The CWS narrows the risk of discretionary antitrust standards like the protection of competition or the competitive process. First, the CWS reduces the type 1 error of false conviction in regard to industries or practices where straight reductions in competition (like collusion, monopolization, or mergers) do not translate into social welfare losses.

(…)

Second, the CWS reduces the type 2 error of false acquittal when straight limitations of competition are too costly to observe.[162]

Moreover, this shift in enforcement philosophy has raised concerns that an overemphasis on structural harms or the fate of individual firms could erode the longstanding distinction between protecting competition and protecting competitors.[163] As reaffirmed in numerous court decisions, antitrust law is designed to preserve the competitive process, not to insulate firms from vigorous rivalry or the consequences of market dynamics.[164] If agencies adopt a posture that penalizes firm conduct solely because it disadvantages less-efficient or less-innovative rivals, they risk undermining this foundational principle and chilling legitimate competition. Paradoxically, antitrust law would be hindering rather than fostering competition.

B. Rescind the FTC’s Noncompete-Agreements Rule

Approved in May 2024, the FTC final rule banning noncompete agreements (NCAs)[165] purportedly protects workers, but could hinder incentives to hire and train workers. To be sure, there are cases in which noncompete agreements raise legitimate policy concerns. But there are also contexts in which they can serve a useful procompetitive function. An absolute ban across all industries and occupations is overly broad, particularly one that applies to senior executives.

The rule is also economically unsound. The empirical evidence the FTC cites in its notice of proposed rulemaking (NPRM) is incomplete, inconclusive and, in many instances, methodologically flawed. As explained in our comment submission to the NPRM, the literature on NCA enforceability yields mixed results: while some studies suggest NCAs may depress wages or reduce mobility in certain contexts, others show positive effects, especially for higher-skilled workers.[166]

In particular, studies find that NCAs can increase employee wages when disclosed prior to hiring, and that enforceability is associated with increased firm-sponsored training. This suggests that NCAs help mitigate hold-up problems and encourage investment in human capital.[167] Think, for instance, of a consultancy firm. Old partners would have little incentive to share knowledge, methodologies, and other firm goodwill with younger partners and associates if the latter could leave and open a new shop the next day. A noncompete clause bans competition in the short term, but fosters information sharing that allows for greater output and competition in the mid- and long-term. A categorical ban fails to account for these procompetitive benefits and wrongly assumes that alternative mechanisms like nondisclosure agreements (NDAs) or fixed-term contracts can substitute for NCAs with equal efficacy.[168]

Moreover, the FTC’s experience with NCAs does not justify a regulatory ban. The agency has brought only a handful of enforcement actions involving NCAs, all resolved through settlements without admissions of liability or findings of law.[169] These cases provide no clear judicial precedent establishing NCAs as violations of Section 5 of the FTC Act.[170] Historically, NCAs have been governed by state contract law under a rule-of-reason approach that considers their reasonableness in scope, duration, and necessity to protect legitimate business interests. The commission’s blanket ban—without regard to industry, wage level, or market power—would upend this longstanding legal tradition and intrudes upon an area of regulation traditionally left to the states.[171]

Finally, the economic and administrative burdens of enforcing the rule are substantial. According to the FTC’s own estimates, the rule would apply to nearly 30 million U.S. workers.[172] Yet the agency has neither the resources nor the institutional expertise to administer this regulatory regime effectively. As our comments point out, the initial NPRM lacked even a cursory analysis of the resources that would be required for effective implementation and enforcement of the rule.[173] A wiser course would be to continue using existing antitrust tools to challenge NCAs in cases where they demonstrably harm competition, while supporting further research and state-level experimentation, rather than imposing a premature national ban.

C. Review and Revise HSR Rules and Form

On Oct. 10, 2024, the FTC finalized significant updates to the Hart-Scott-Rodino (HSR) Form and Instructions. On Nov. 12, 2024, the new HSR rules were published in the Federal Register.[174] While the final rule is a vast improvement over what was proposed in 2023, they still impose excessive costs on merging parties, and warrant an extensive review. The FTC may have had the best intention to improve and modernize the merger-review process, but the revised rules have introduced substantial burdens that may hinder efficient dealmaking without commensurate benefits to antitrust enforcement.

One of the primary concerns is the significant increase in time and resources required to prepare HSR filings. The FTC estimates that the average time to complete an HSR filing has risen by 68 hours, bringing the total to approximately 105 hours per-filing. For complex transactions involving overlapping products or supply relationships, the burden can reach up to 121 hours.[175] This escalation in preparation time translates to greater legal and administrative costs for companies, potentially deterring beneficial mergers and acquisitions—most of which do not pose any risks to competition.

Moreover, the updated rules mandate the disclosure of extensive information, including detailed narratives on transaction rationale, supply-chain relationships, and customer data.[176] Such requirements may not only be onerous but also risk exposing sensitive business information. While such information may be useful to assess a transaction’s impact on competition, it is not typically useful during the initial phase of the merger procedure, and can be requested in those cases where it is more likely to be pertinent.

Importantly, the resource implications for the FTC and DOJ themselves must also be considered. With limited personnel and time, the agencies cannot realistically conduct in-depth reviews of every transaction flagged under the updated requirements. By compelling enforcers to sift through increasingly lengthy and complex filings, the revised rules risk diluting focus and delaying review of transactions that truly raise red flags. Streamlining the process—particularly by eliminating or limiting mandatory narratives for transactions with no horizontal overlaps—would allow agencies to better allocate their scarce investigative resources toward deals with a higher likelihood of competitive harm.

In light of these issues, it is imperative to reconsider the 2020 HSR rule updates. Reforms should aim to balance the need for thorough antitrust review with the practical realities of business transactions. Streamlining disclosure requirements and reducing unnecessary procedural hurdles can help ensure that the HSR process effectively protects competition without imposing undue burdens on merging parties.

D. Review and Revise Horizontal Merger Guidelines

FTC Chair Andrew Ferguson announced[177] earlier this year that the DOJ and FTC’s joint 2023 Merger Guidelines will serve as the framework for the agency’s merger-review analysis. While we acknowledge that there could be reasonable arguments against rescinding the guidelines—such as promoting regulatory stability or conserving agency resources—we respectfully recommend initiating a serious evaluation of their impact on enforcement outcomes and market dynamics.

The 2023 Merger Guidelines represented a radical departure from established antitrust consensus, abandoning decades of consumer-welfare principles, while echoing the anti-economic, anti-competitive agenda of the neo-Brandeisian movement. True continuity for the FTC would mean upholding sound economic principles and protecting consumers, not embracing a document designed to dismantle them. Chair Ferguson has rightly noted that the Biden-era FTC initiated a “four-year regulatory assault on American businesses” and “hindered economic growth and increased costs to the American consumer.”[178]

ICLE has previously outlined policy and legal concerns with the 2023 Merger Guidelines in regulatory comments to the agencies. The 2023 Merger Guidelines overemphasize structural presumptions and do not adequately consider the potential benefits of mergers. Moreover, they fail to provide clear guidance on how to distinguish between harmful and beneficial mergers, making it difficult for businesses and practitioners to navigate the regulatory landscape.[179]

The 2010 Guidelines, for instance, expressly identified mergers that are “unlikely to have adverse competitive effects and ordinarily require no further analysis”; namely, those involving increases in the Herfindahl-Hirschman Index (HHI) of less than 100 and those resulting in an HHI less than 1,500. This provides a much more helpful “safe harbor” to business and practitioners. The 2023 Merger Guidelines do not identify any such mergers, whether under the 2010 thresholds or otherwise.[180]

The current merger guidelines are generally averse to growth through strategic acquisitions. They include presumptions that significantly increase the possibility of blocking pro-competitive mergers, ignoring the literature that finds that, in general, mergers (particularly vertical mergers) are pro-competitive.[181] The 2023 Merger Guidelines also appear to rest on the presumption that any increase in market concentration is inherently harmful to consumers.

But economic theory and empirical research in industrial organization and trade economics recognize that market concentration can often be the result of vigorous competition, not its absence. Indeed, the literature examining trends in competition consistently finds that greater competitive pressure can lead to higher levels of concentration, as more-efficient firms gain market share. As Chad Syverson aptly summarizes:

Many empirical studies in varied settings have found that greater substitutability/competition—resulting from, say, reductions in trade, transport, or search costs—shifts activity away from smaller, higher-cost producers and toward larger, lower-cost producers… [We] demonstrate that search cost reductions reallocate market share toward lower-cost and larger sellers, increasing market concentration even as margins fall. It is not an exaggeration to say that there are scores, perhaps hundreds, of such studies. [182]

This, of course, does not imply that every increase in concentration is pro-competitive. Instead, it simply means that a previous trend toward concentration need not be anticompetitive in any way, as the guidelines assume.

There is a distinction between “binding” and “persuasive” authority in the context of agency guidelines. While not legally binding, the merger guidelines can still influence court decisions and therefore have the potential to harm markets beyond the agencies’ action. We respectfully urge the FTC and DOJ to reconsider the use of this misguided foundation for merger review and would recommend that the agencies instead reinstate the 2010 Horizontal-Merger Guidelines as the most expeditious means to ensure continuity of antitrust principles that have guided courts and enforcement agencies for decades.

E. Develop a Real Section 5 Common Law of Data Security

Under Section 5 of the FTC Act, the FTC has developed what some have called a “common law” of data security through complaints and consent decrees.[183] Unfortunately, this common law bears little resemblance to the legal principles developed over centuries by judges analyzing real disputes between private parties.[184] It instead reflects a process whereby the government has been able to leverage its immense power as prosecutor and judge to strong arm companies into 20-year consent decrees with no admission of guilt.

The problem with such an approach is that it does little to give fair notice to market participants about what “reasonable” data security entails.[185] Such regulatory uncertainty has strong anticompetitive effects, as smaller businesses and startups are likely much less able to invest in regulatory-compliance lawyers than are larger businesses and incumbents. The process of investigations and prosecution can bankrupt even those businesses who eventually win when they get in front of an Article III court, such as what happened with LabMD.

1. The LabMD Case: A cautionary tale

LabMD was a small diagnostics laboratory in the business of providing cancer-screening services to patients. As part of this business—and as required by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and its implementing regulations—LabMD retained patient data, including personally identifiable information (PII).[186]

In 2008, Tiversa, a “cyberintelligence” company that employed custom algorithms to exploit peer-to-peer (P2P) network vulnerabilities, downloaded from the computer of a LabMD employee a file, dubbed the “1718 file,” that contained PII of approximately 9,300 LabMD patients.[187] Shortly thereafter, Tiversa engaged in what LabMD has characterized (in our opinion, fairly) as a shakedown to induce LabMD to pay Tiversa for “remediation” services.[188] LabMD refused and fixed the P2P vulnerability itself.[189]

Following some fairly questionable interactions between the FTC and Tiversa,[190] LabMD came under investigation by the agency for more than three years. In its enforcement complaint, the FTC ultimately alleged two separate security incidents: the downloading of the 1718 file by Tiversa, and the mysterious exposure of a cache of “day sheets” allegedly originating from LabMD that were discovered in Sacramento, California.[191] The FTC alleged that each incident was caused by LabMD’s “failure to employ ‘reasonable and appropriate’ measures to prevent unauthorized access to personal data,” and “caused, or is likely to cause, substantial harm to consumers . . . constitut[ing] an unfair practice under Section 5(a) of the Federal Trade Commission Act . . . .”[192]

The FTC brought the complaint before one of its administrative law judges (ALJ), who ruled against the commission in his initial determination—holding, among other things, that the term “likely” means “having a high probability of occurring or being true,” and that the FTC failed to demonstrate that LabMD’s conduct had a high probability of injuring consumers.[193]

The ALJ put down a critical marker in the case—one that provided some definition to the FTC’s data-security standard by demarcating those instances in which the commission may exercise its authority to prevent harms that are actually likely to occur from those that are purely speculative. Unsurprisingly, the FTC voted to overturn the ALJ’s decision in LabMD—finding, among other things:

• That “a practice may be [likely to cause substantial injury] if the magnitude of the potential injury is large, even if the likelihood of the injury occurring is low;”
• That the FTC established that LabMD’s conduct in fact “caused or was likely to cause” injury as required by Section 5(n) of the FTC Act;
• That substantiality “does not require precise quantification. What is important is obtaining an overall understanding of the level of risk and harm to which consumers are exposed;” and
• That “the analysis the Commission has consistently employed in its data security actions, which is encapsulated in the concept of ‘reasonable’ data security” encompasses the “cost-benefit analysis” required by the act’s unfairness test.[194]

In actuality, however, the commission’s manufactured “reasonableness” standard—which, as its name suggests, purports to evaluate data-security practices under a negligence-like framework—amounts in effect to a rule of strict liability for any company that collects personally identifiable data.

When LabMD appealed the case to the 11th U.S. Circuit Court of Appeals, the court ruled against the FTC.[195] The court found it particularly important that there was no true standard for determining “reasonable” data security in its “common law” of complaints and consent decrees. The court stated:

The Commission must find the standards of unfairness it enforces in “clear and well established” policies that are expressed in the Constitution, statutes, or the common law. The Commission’s decision in this case does not explicitly cite the source of the standard of unfairness it used in holding that LabMD’s failure to implement and maintain a reasonably designed data-security program constituted an unfair act or practice. It is apparent to us, though, that the source is the common law of negligence.[196]

The FTC did, on Jan. 6, 2020, announce that it would have “New and improved FTC data security orders.”[197] While the new orders do list more specific requirements to help explain what the FTC believes is a “comprehensive data security program,” there is still no legal analysis in either the orders or the complaints that would give companies fair notice of what the law requires. Furthermore, nothing about the underlying FTC process has changed, which means there is still enormous pressure for companies to settle rather than litigate the contours of what “reasonable” data-security practices look like. Thus, orders and complaints continue to do little to nothing to remedy the problems that plague the commission’s data-security enforcement program.

2. The need for Article III court enforcement

The FTC should reform how it enforces its authority under Section 5 by committing to using Article III courts for enforcement actions, rather than its own Part 3 process with internal ALJs, which they can appeal and then rule against.

The FTC’s process is quite different than the institution of the common law. The incentives of the administrative-complaint process put relatively more pressure on companies to settle data-security actions brought by the FTC, relative to private litigants. This is because the FTC can use its investigatory powers as a public enforcer to bypass the normal discovery process to which private litigants are subject, and over which independent judges have authority.

In a private court action, plaintiffs can’t engage in discovery unless their complaint survives a motion to dismiss from the defendant. Discovery costs remain a major driver of settlements, so this important judicial review is necessary to make sure there is actually a harm present before putting those costs on defendants.

Furthermore, the FTC can also bring cases in a Part III adjudicatory process, which starts in front of an ALJ but is then appealable to the FTC itself. Former Commissioner Joshua Wright noted in 2013 that “in the past nearly twenty years… after the administrative decision was appealed to the Commission, the Commission ruled in favor of FTC staff. In other words, in 100 percent of cases where the ALJ ruled in favor of the FTC, the Commission affirmed; and in 100 percent of the cases in which the ALJ ruled against the FTC, the Commission reversed.”[198] In other words, the FTC nearly always rules in favor of itself on appeal if the ALJ finds there is no case, as it did in LabMD. The combination of investigation costs before any complaint at all, and the high likelihood of losing through several stages of litigation, makes the intelligent business decision to simply agree to a consent decree.

The results of this asymmetrical process show the FTC has not really been building a common law. Not only does nearly every company targeted for investigation settle, but the FTC’s data-security orders tend to be nearly identical from case-to-case, reflecting the standards of the FTC’s Safeguards Rule. Since the orders were giving nearly identical—and, as LabMD found, vague—remedies in each case, it cannot be said that a common law developed over time.

Without caselaw on the facts necessary to establish substantial injury, “unreasonable” data-security practices, and causation, there will continue to be more questions than answers about what the law requires. And without changes to the process, the FTC will continue to be able to strong arm companies into consent decrees. This will continue to harm smaller businesses like LabMD, who simply can’t afford the same level of investment in regulatory compliance as bigger companies to guess at the FTC’s desired standard, nor survive being the target of an FTC Section 5 investigation under such vagueness.

F. Review of COPPA Rules

The FTC recently released its final COPPA Rule.[199] The rule has continued down a path that was started in 2013, whereby persistent identifiers are by themselves considered “personal information” subject to “verifiable parental consent.” The result is that less children’s content has been created, along with a growing concentration on the supply side of content creation for children. This is an anticompetitive rule that has, on net, harmed children’s welfare.

The Children’s Online Privacy Protection Act (COPPA) sought to strike a balance in protecting children, without harming the utility of the internet for children. As Sen. Richard Bryan (D-Nev.) put it when he laid out the purpose of COPPA:

The goals of this legislation are: (1) to enhance parental involvement in a child’s online activities in order to protect the privacy of children in the online environment; (2) to enhance parental involvement to help protect the safety of children in online fora such as chatrooms, home pages, and pen-pal services in which children may make public postings of identifying information; (3) to maintain the security of personally identifiable information of children collected online; and (4) to protect children’s privacy by limiting the collection of personal information from children without parental consent. The legislation accomplishes these goals in a manner that preserves the interactivity of children’s experience on the Internet and preserves children’s access to information in this rich and valuable medium.[200]

In other words, COPPA was designed to protect children from online threats by promoting parental involvement in ways that also preserve a rich and vibrant marketplace for children’s content online. Consequently, the pre-2013 COPPA Rule did not define personal information to include persistent identifiers standing alone. These persistent identifiers are critical for the targeted advertising that funds the interactive online platforms and the creation of children’s content that the legislation was designed to preserve.

1. Economic Framework: Transaction costs and market effects

In the context of the COPPA Rule, website operators and online services create incredible value for their users, but they also can, at times, impose negative externalities relevant to children who use their services. In the absence of transaction costs, it would not matter whether operators must obtain verifiable parental consent before collecting, using, or disclosing personal information, or whether the initial burden is placed on parents and children to avoid the harms associated with such collection, use, or disclosure.

But given that there are transaction costs involved in obtaining (and giving) verifiable parental consent, it matters how the law defines personal information (which serves as a proxy for a property right, in economist Ronald Coase’s famous framing). If personal information is defined too broadly and the transaction costs for providers to gain verifiable parental consent are too high, the result may be that the social benefits of children’s internet use will be lost, as platform operators restrict access beyond the optimum level.

Despite the FTC’s best efforts under the COPPA Rule, the transaction costs associated with obtaining verifiable parental consent continue to be sufficiently high as to prevent most operators from seeking that consent for persistent identifiers. As a result, the supply curve for children’s online content shifts left, as the marginal cost of monetizing it increases. The cost is driven upward by the higher compliance costs of obtaining verifiable parental consent before serving targeted advertising. This supply shift means that less online content will be created for children.

2. Empirical Evidence: The YouTube case study

These results are not speculative at this point. Scholars who have studied the issue have found the YouTube settlement, made pursuant to the 2013 amendments, has resulted in less child-directed online content due to creators’ inability to monetize that content through targeted advertising. In their working paper “COPPAcalypse? The YouTube Settlement’s Impact on Kids Content,”[201] Garrett Johnson, Tesary Lin, James C. Cooper, & Liang Zhong summarized the issue as follows:

The Children’s Online Privacy Protection Act (COPPA) prohibits operators of online services directed at children under 13 from collecting personal information without obtaining verifiable parental consent. In 2013, the FTC amended the COPPA rules so that the definition of personal information includes “persistent identifier that can be used to recognize a user over time and across different Web sites or online services,” such as a “customer number held in a cookie… or unique device identifier.” Because obtaining verifiable parental consent for free online services is difficult and rarely cost justified, COPPA acts as a de facto ban on the collection of personal information—and hence personalized advertising—by providers of free child-directed content.

On September 4, 2019, YouTube entered a consent agreement with the FTC to settle charges that it had violated COPPA. The FTC’s allegations focused on YouTube’s practice of serving personalized advertising on child-directed content without obtaining verifiable parental consent… As part of the settlement, YouTube also agreed to identify child-directed content and to stop collecting personal information from MFK content viewers. Beginning January 1, 2020 (hereinafter, the post-settlement period), YouTube required channel owners producing MFK content to designate either their entire channel or specific videos on their channel as MFK. YouTube augmented these self-designations with an automated classifier to identify content directed at children. The automated classifier looks for content that includes, for instance, child actors, child characters, games, toys, songs, and stories that children like. Between the announcement and implementation of the settlement (hereinafter, the announcement period), YouTube provided content creators details on its compliance plan. The FTC also provided legal guidance, explaining that MFK content creators could face civil penalties of up to $42,530 per video if they fail to self-designate and YouTube’s classifier fails to correctly identify their content as MFK.[202]

The results for children’s online content were catastrophic, resulting in 18% less content produced by child-directed content creators, as more content creators focused on non-child-directed content that could still be monetized. There was also less investment in the quality of child-directed content, with the proportion of original content falling by 11% and user content ratings falling by 10%. Views of child-directed channels fell by 20%.[203]

Importantly, for this proceeding, the competitive effects of this change should also be noted:

Consistent with our content creation results, we see larger relative reductions in both views and subscriptions among channels with fewer baseline subscribers. The asymmetric impact is more pronounced on the demand side, such that we see no significant change in views for top-quartile channels. This result is consistent with the effect of deactivating platform personalization: the platform can no longer pair users with long-tail content that matches their interests.[204]

In other words, the YouTube enforcement, pursuant to the change in the definition of personal information, has been extremely harmful to the supply of children-directed content online, but it also has led to greater concentration among suppliers of content creation. It is difficult to break into this market without the ability to fully monetize content, but it becomes nearly impossible when the algorithm is no longer able to match a creator to potential viewers.

The FTC should reconsider the COPPA Rule, specifically the provisions that include standalone persistent identifiers in the definition of “personal information.”

X. Conclusion

We have outlined numerous federal and state laws, regulations, and agency practices that, despite often-laudable intentions, function as significant barriers to competition, ultimately harming consumers, workers, and businesses. From certificates of convenience and necessity that entrench monopolies to occupational-licensing rules that stifle entry and innovation, government-imposed restrictions frequently serve to protect incumbent interests rather than the public.

Our analysis extends to legalized cartels operating under antitrust exemptions, the problematic application of state-action immunity, distortionary prevailing-wage laws, the failed competitive experiment of FERC Order No. 1000, and anticompetitive cy-pres practices. Our recommendations aim to dismantle or reform these unnecessary barriers and reorient regulatory and enforcement priorities toward sound economic principles and the consumer welfare standard. This includes specific calls to eliminate or scale back CCNs and occupational licensing, and to reevaluate and curtail antitrust exemptions.

Furthermore, we urge the DOJ and FTC to refine their own rules and enforcement actions by rescinding the overly broad noncompete-agreement rule; reviewing and revising HSR rules and merger guidelines to reduce undue burdens and align with pro-competitive goals; and developing a more transparent and predictable approach to data security and children’s privacy enforcement.

By addressing the areas identified in our comments, the DOJ and FTC can build upon their historic roles in competition advocacy and foster an environment in which innovation, efficiency, and consumer choice can flourish. The overarching goal should be to ensure that markets are driven by genuine competition, not by anticompetitive regulations that privilege the few at the expense of the many. Such reforms are crucial to enhance consumer welfare and promote robust economic growth.

The DOJ and FTC have important roles to play in ensuring government entities don’t harm competition. Through their advocacy efforts, the agencies should focus on making sure the law itself doesn’t become “legal plunder.”[205]

[1] Press Release, Justice Department Launches Anticompetitive Regulations Task Force, U.S. Dep. Justice (Mar. 27, 2025), available at https://downloads.regulations.gov/ATR-2025-0001-0002/content.pdf.

[2] Request for Public Comment Regarding Reducing Anti-Competitive Regulatory Barriers, Fed. Trade Comm’n. (Apr. 13, 2025), available at https://downloads.regulations.gov/FTC-2025-0028-0001/content.pdf.

^[3] Donald J. Trump, Executive Order 14267, Reducing Anticompetitive Regulatory Barriers, White House (Apr. 9, 2025), https://www.presidency.ucsb.edu/documents/executive-order-14267-reducing-anti-competitive-regulatory-barriers.

[4] See Steven G. Calabresi & Larissa C. Leibowitz, Monopolies and the Constitution: A History of Crony Capitalism, 36 Harvard J. L. & Pol’y 983, 984 (2013) (“The original meaning of the word ‘monopoly’ was an exclusive grant of power from the government—in the form of a ‘license’ or ‘patent’—to work in a particular trade or to sell a specific good.”).

[5] See, e.g., Timothy Sandefur, The Right to Earn a Living: Economic Freedom and the Law (2010); Timothy Sandefur, The Common Law Right to Earn a Living, 7(1) Independent Rev. 69 (2002), available at https://www.independent.org/pdf/tir/tir_07_1_sandefur.pdf.

[6] The Case of Monopolies, Trinity Term 44 Elizabeth I, in the Court of King’s Bench (1602), https://oll-resources.s3.us-east-2.amazonaws.com/oll3/store/titles/911/0462-01_LFeBk.pdf#page=488 (emphasis added).

[7] The Case of the Tailors of Habits & of Ipswich, Michaelmas Term, 12 Jame I, In the Court of the King’s Bench (1614), https://oll-resources.s3.us-east-2.amazonaws.com/oll3/store/titles/911/0462-01_LFeBk.pdf#page=483 (emphasis added).

[8] Statue of Monopolies (1623).

[9] Edward Coke, The Institutes of the Laws of England, in The Selected Writing and Speeches of Sir Edward Coke 851-52, vol. 2 (Steve Sheppar, ed. 2003) (“[I]f a graunt be made to any man, to have the sole making of Cards, or the sole dealing with any other trade, that graunt is against the liberty, and freedome of the Subject, that before did, or lawfully might have used that trade, and consequently against this great Charter. Generally all monpolies are against this great Charter, because they are against he liberty and feedome of the Subject, and against the Law of the Land.”).

[10] Massachusetts Body of Liberties (1641), https://oll.libertyfund.org/pages/1641-massachusetts-body-of-liberties.

[11] For more see Boston Tea Party, Wikipedia, https://en.wikipedia.org/wiki/Boston_Tea_Party (last accessed May 19, 2025); see also, The Tea Act, Boston Tea Party Sh. Mus. (n.d.), https://www.bostonteapartyship.com/the-tea-act (last accessed May 21, 2025).

[12] See Calabresi & Leibowitz, supra note 4, at 1009.

[13] See id. at 1011.

[14] See id. at 1009-10.

[15] Letter from James Madison to Thomas Jefferson n. 7 (Oct. 17, 1788), https://founders.archives.gov/documents/Jefferson/01-14-02-0018.

[16] See Calabresi & Leibowitz, supra note 3, at 1013.

[17] See President Jackson’s Veto Message Regarding the Bank of the United States, Avalon Proj. (Jul. 10, 1832), https://avalon.law.yale.edu/19th_century/ajveto01.asp.

[18] See Internal improvements, Wikipedia, https://en.wikipedia.org/wiki/Internal_improvements (last accessed May 19, 2025) (noting “While the Federalist strand of republicanism defended internal improvements as agents of the ‘general welfare’ or ‘public good’, another strand unraveled from the republican tapestry to denounce such schemes as ‘corruption’, taxing the many to benefit the few. Critics of internal improvement schemes did not have to dig deep under the veneer of ‘public good’ to uncover self-interest.”).

[19] See Proprietors of Charles River Bridge v. Proprietors of Warren Bridge, 36 U.S. 420, 545-46 (1837) (“[I]t would present a singular spectacle, if, while the courts in England are restraining, within the strictest limits, the spirit of monopoly, and exclusive privileges in nature of monopolies, and confining corporations to the privileges plainly given to them in their charter; the courts of this country should be found enlarging these privileges by implication; and construing a statute more unfavourably to the public, and to the rights of the community, than would be done in a like case in an English court of justice.”).

[20] See Gibbons v. Ogden, 22 U.S. 1 (1824) (deciding whether a state license allowing for monopoly on steamboat navigation could stop a federal licensee from competing in the same waters, with the Court ruling in favor of the federal government’s right to regulate interstate commerce in navigable waters).

[21] See Lysander Spooner on Why Government Monopolies like the Post Office Are Inherently Inefficient (1844), Lib. Fund,  https://oll.libertyfund.org/quotes/541 (last accessed May 19, 2025) (“Universal experience attests that government establishments cannot keep pace with private enterprise in matters of business — (and the transmission of letters is a mere matter of business.) Private enterprise has always the most active physical powers, and the most ingenious mental ones. It is constantly increasing its speed, and simplifying and cheapening its operations. But government functionaries, secure in the enjoyment of warm nests, large salaries, official honors and power, and presidential smiles — all of which they are sure of so long as they are the partisans of the President — feel few quickening impulses to labor, and are altogether too independent and dignified personages to move at the speed that commercial interests require. They take office to enjoy its honors and emoluments, not to get their living by the sweat of their brows.”).

[22] 317 U.S. 341 (1943).

[23] See, e.g., Easter Railroad Presidents Conference v. Noerr Motor Freight Inc., 365 U.S. 127 (1961); United Mine Workers v. Pennington, 381 U.S. 657 (1965).

[24] See, e.g., George J. Stigler, The Theory of Economic Regulation, 2 Bell J. Econ. 3 (1971); Sam Peltzman, Toward a More General Theory of Regulation, 19 J. Law & Econ. 211 (1976). For a brief overview, see Daniel J. Gilman, Advocacy, in SAGE Encyclopedia of Political Behavior 8 (Fathali M. Moghaddam, ed. 2017). For more recent investigations along these lines, see John M. Vernon, Joseph E. Harrington Jr., & W. Kip Viscusi, Economics of Regulation and Antitrust (3d. ed. 2000).

^[25] See, e.g., Carolyn Cox & Susan Foster, The Costs and Benefits of Occupational Regulation, Fed. Trade Comm’n (1990), available at https://www.ftc.gov/system/files/documents/reports/costs-benefits-occupational-regulation/cox_foster_-_occupational_licensing.pdf; Cf. Hayne E. Leland, Quacks, Lemons, and Licensing: A Theory of Minimum Quality Standards, 87 J. POL. ECON. 1328, 1329 (1979).

 

[26] James C. Cooper, Paul A. Paulter, & Todd J. Zywicki, Theory and Practice of Competition Advocacy at the FTC, 72 Antitrust L.J. 1091, 1092 (2005). See also DOJ Press Release, supra note 1 (“Regulatory capture is a well-studied phenomenon in which agencies become ‘captured’ by special interests and big businesses, rather than serving the interests of the American people. But when regulations serve the few and impose undue burdens on small businesses, private enterprise, and entrepreneurs, they also harm competition and ultimately hurt American consumers, workers, and businesses. For example, regulations can increase compliance costs, preventing businesses from competing on a level playing field with powerful corporations. Regulations can also discourage or even intentionally prohibit small businesses and new products from entering markets and lowering prices for American families. In contrast, eliminating unnecessary anticompetitive regulations makes it easier for businesses to compete. More competition empowers the American people — not government regulators — to drive economic progress and innovation. When every American has a fair opportunity to enjoy the benefits of competitive free markets, every American has an opportunity to realize the American dream.”).

^[27] Maureen K. Ohlhausen, An Ounce of Antitrust Prevention Is Worth a Pound of Consumer Welfare: The Importance of Competition Advocacy and Premerger Notification (11^th Annual Competition Day, Fiscalia Nacional Economica, Santiago, Chile, Nov. 5, 2013).

[28] For an overview, see Cooper, Pautler, & Zywicki, supra note 25. For additional treatment of the history and substance of FTC competition advocacy, see William E. Kovacic, Fed. Trade Comm’n, The Federal Trade Commission at 100: Into Our 2nd Century The Continuing Pursuit of Better Practices 91-99 (Jan. 2009), available at https://www.ftc.gov/sites/default/files/documents/public_statements/federal-trade-commission-100-our-second-century/ftc100rpt.pdf; Maureen K. Ohlhausen, Identifying, Challenging, and Assigning Political Responsibility for State Regulation Restricting Competition, 2 Comp. Pol’y Int. 151 (2006); Andrew I. Gavil, The FTC’s Study and Advocacy Authority in Its Second Century: A Look Ahead, 83 Geo. Wash. L. Rev. 1902 (2016); Arnold C. Celnicker, The Federal Trade Commission’s Competition and Consumer Advocacy Program, 33 St. Louis U. L.J. 379 (1988-89); Gilman, supra note 24.

^[29] See, e.g., 15 U.S.C. § 46(f) (publication of information; reports).

^[30] See, e.g., Fed. Trade Comm’n v. Phoebe Putney Health Sys. Inc., 568 U.S. 216 (2013).

^[31] Legal Library: Amicus Briefs, Fed. Trade Comm’n, https://www.ftc.gov/legal-library/browse/amicus-briefs (last accessed May 21, 2025).

^[32] See, e.g., Research in the Bureau of Economics, Fed. Trade Comm’n, https://www.ftc.gov/about-ftc/bureaus-offices/bureau-economics/research-bureau-economics (last accessed May 21, 2025); see also Paul A. Pautler, A History of the FTC Bureau of Economics, Am. Antitrust Inst. (2015), available at https://www.antitrustinstitute.org/wp-content/uploads/2018/08/FTC-Bureau-of-Economics-History_0.pdf. For additional policy studies, see, e.g., Broadband Connectivity Competition Policy: An FTC Staff Report, Fed. Trade Comm’n (2007), available at https://www.ftc.gov/sites/default/files/documents/reports/broadband-connectivity-competition-policy/v070000report.pdf.

^[33] See, e.g., Public Workshop on Promoting Competition in Labor Markets, U.S. Dep. Justice (Dec. 6, 2021), https://www.justice.gov/atr/event/public-workshop-promoting-competition-labor-markets (regarding joint FTC/DOJ workshop held Dec. 6-7, 2021); FTC Roundtable: The Effects of Occupational Licensure on Competition, Consumers, and the Workforce: Empirical Research and Results, Fed. Trade Comm’n (Nov. 7, 2017), https://www.ftc.gov/news-events/events/2017/11/effects-occupational-licensure-competition-consumers-workforce-empirical-research-results.

^[34] See, e.g., Maureen K. Ohlhausen, Prepared Statement of the Federal Trade Commission on Competition and Occupational Licensure Before the Subcomm. on Regulatory Reform, Commercial, and Antitrust Law of the H. Comm. on the Judiciary, Fed. Trade Comm’n (115^th Cong., Sep. 12, 2017), available at https://www.ftc.gov/system/files/documents/public_statements/1253073/house_testimony_licensing_and_rbi_act_sept_2017_vote.pdf; Statement of the Federal Trade Commission to the Alaska Senate Committee on Health & Social Services on Certificate of Need Laws and SB 1, Fed. Trade Comm’n (2019), available at https://www.ftc.gov/system/files/documents/advocacy_documents/statement-federal-trade-commission-alaska-senate-committee-health-social-services-certificate-need/v0800007_commission_testimoney_re_alaska_senate_committee_032719.pdf.

^[35] See, e.g., FTC Staff Letter to Department of Health and Human Services Concerning the 21st Century Cures Act: Interoperability, Information Blocking and the ONC Health IT Certification Program Rule, Fed. Trade Comm’n (Mar. 2020), available at https://www.ftc.gov/system/files/documents/advocacy_documents/ftc-staff-letter-department-health-human-services-concerning-21st-century-cures-act-interoperability/v190002hhsinfoblockingletter.pdf; FTC Staff Comment Before the Massachusetts Department of Public Health Concerning Proposed Regulation of Limited Service Clinics, Fed. Trade Comm’n (Oct. 2007), available at http://www.ftc.gov/os/2007/10/v070015massclinic.pdf.

^[36] Advocacy work, including letters, comments, and testimony by the FTC and its staff can be found at Legal Library: Advocacy Filings, Fed. Trade Comm’n, https://www.ftc.gov/legal-library/browse/advocacy-filings (last accessed May 21, 2025).

^[37] For examples of joint FTC/DOJ advocacies, see, e.g., Joint Statement of the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice on Certificate-of-Need Laws and South Carolina House Bill 3250, U.S. Dep. Justice (Jan. 11, 2016), https://www.justice.gov/atr/file/812606/download; Fed. Trade Comm’n & Dept. Justice Comment to Gov. Jennifer M. Granholm Concerning Michigan H.B. 4416 to Impose Certain Minimum Requirements on Real Estate Brokers, Fed. Trade Comm’n (2007), https://www.ftc.gov/legal-library/browse/advocacy-filings/ftc-department-justice-comment-governor-jennifer-m-grahholm-concerning-michigan-hb-4416-impose.

[38] CCNs may also be classified as certificates of public convenience and necessity (CPCNs) or certificates of need (CONs).

^[39] See, e.g., Joint Statement of the Fed. Trade Comm’n and the Antitrust Div. of the U.S. Dep’t Justice Regarding Certificate-of-Need (CON) Laws and Alaska Senate Bill 62, Which Would Repeal Alaska’s CON Program, Fed. Trade Comm’n (2017), available at https://www.ftc.gov/system/files/documents/advocacy_documents/joint-statement-federal-trade-commission-antitrust-division-us-department-justice-regarding/v170006_ftc-doj_comment_on_alaska_senate_bill_re_state_con_law.pdf; Joint Statement of the Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice on Certificate-of-Need Laws and South Carolina House Bill 3250, U.S. Dep. Justice (Jan. 11, 2016), https://www.justice.gov/atr/file/812606/download.

^[40] See generally, FTC Policy Perspectives on Certificates of Public Advantage: Staff Policy Paper, Fed. Trade Comm’n (Aug. 15, 2022), available at https://www.ftc.gov/system/files/ftc_gov/pdf/COPA_Policy_Paper.pdf.

^[41] Irston R. Barnes, Economics of Public Utility Regulation (1942), 229 (“The requirement of a certificate of convenience and necessity may enable the commission to prevent the needless multiplication of companies serving the same territory, and at the same time to avoid a wasteful duplication of capital facilities, thus keeping the investment at the lowest figure consonant with satisfactory service. By protecting the utility from unnecessary competition, the risks inherent in utility investments are reduced and the cost of capital is thereby kept as low as the conditions of the investment market permit.”)

^[42] Maureen K. Ohlhausen & Gregory P. Luib, Brother, May I?: The Challenge of Competitor Control over Market Entry, 4 J. Antitrust Enforcement 111 (2016) (discussing CONs, as well as occupational regulations as examples of “brother may I” regulations).

[43] For a discussion of the theory of “ruinous competition,” see Herbert Hovenkamp, The Antitrust Enterprise: Principle and Execution, 311 (2005).

[44] For example, the chair of American Airlines wrote in 1947: “There is need for reasonable competition, but there is a limit to reasonable competition and there is such a thing as wasteful competition.” C. R. Smith, Air Transportation, Its Status, Trend and Prospect, 14 J. Air L. & Com. 150, 154 (1947). See also Stephen Breyer, Regulation and Its Reform (1982) 222, 240.

[45] For a list of FTC research supporting deregulation, see Letter from C. Steven Baker, Dir., FTC Chicago Regional Office to Glen McKay, Ass’t Dir., Tennessee Comptroller of the Treasury, Fed. Trade Comm’n (Jun. 28, 1990), available at https://www.ftc.gov/sites/default/files/documents/advocacy_documents/ftc-staff-comment-tennessee-comptroller-treasury-concerning-trucking-regulation/v900042.pdf (“The staff of the FTC has studied the deregulation of trucking and the benefits resulting from an increased reliance on market forces at both the federal and state levels. In addition, the Bureau of Economics of the FTC has published a report on trucking deregulation. The Bureau of Economics has published additional studies concerning the effects of regulating the entry of competitors into other industries.”)

[46] N. Gregory Mankiw, Principles of Economics 312 (4^th ed., 2007).

[47] Joseph D. Kearney & Thomas W. Merrill, The Great Transformation of Regulated Industries Law, 98 Colum. L. Rev. 1323, 1401 (Oct. 1998) (noting “cost-of-service rate regulation creates an incentive for utilities to make excessive capital investments in order to boost their rate of return” and “extensive cross-subsidies that characterize regulation of natural monopolies are inherently inefficient”).

[48] Paul Krugman & Robin Wells, Economics 289 (4^th ed., 2015).

[49] Timothy Sandefur, State Competitor’s Veto Laws and the Right to Earn a Living: Some Paths to Federal Reform, 38 Harv. J. L. & Pub. Pol’y 1009 (2015) (“Because CPCN laws enable established firms to file an objection that triggers the hearing requirement-a barrier to entry that in practice is often insurmountable to the applicant-these laws have sometimes been called ‘the Competitor’s Veto.’ Like the more famous ‘Heckler’s Veto’ in First Amendment jurisprudence, which enables an audience member to silence a speaker whose message he or she does not want to hear, the ‘Competitor’s Veto’ enables existing firms to disallow their potential competition.”)

[50] See, e.g., J. R. Hicks, Annual Survey of Economic Theory: The Theory of Monopoly, 3 Econometrica 1, 8 (1935) (“It seems not at all unlikely that people in monopolistic positions will very often be people with sharply rising subjective costs; if this is so, they are likely to exploit their advantage much more by not bothering to get very near the position of maximum profit, than by straining themselves to get very close to it. The best of all monopoly profits is a quiet life.”)

[51] Mark R. Meador, Antitrust Policy for the Conservative, Fed. Trade Comm’n (May 1, 2025), available at https://www.ftc.gov/system/files/ftc_gov/pdf/antitrust-policy-for-the-conservative-meador.pdf, citing Letter from James Madison to Thomas Jefferson (Oct. 17, 1788), https://founders.archives.gov/documents/Jefferson/01-14-02-0018.

[52] Comments of International Center for Law & Economics, In Re: Delete, Delete, Delete (FCC GN Docket No. 25-133, Apr. 11, 2025), https://www.fcc.gov/ecfs/document/10411193772947/1.

[53] Matthew D. Mitchell, Certificate of Need Laws in Health Care: Past, Present, and Future, 61 Inquiry 1, 4 (2024).

^[54] Many of the FTC’s efforts to combat anticompetitive restrictions on occupations are described or linked on the agency’s webpage for the Economic Liberty Task Force, formed in 2017 by then-Acting Chair Maureen K. Ohlhausen. See Economic Liberty, Fed. Trade Comm’n, https://www.ftc.gov/policy/advocacy-research/advocacy/economic-liberty (last accessed May 21, 2025); see also Maureen K. Ohlhausen, Advancing Economic Liberty (Remarks at George Mason Law Reviews 20^th Annual Antitrust Symposium, Feb. 23, 2017), available at https://www.ftc.gov/system/files/documents/public_statements/1098513/ohlhausen_-_advancing_economic_liberty_2-23-17.pdf.

^[55] See, e.g., Cox & Foster, supra note 25, at 3; see also Morris M. Kleiner, Occupational Licensing, 14 J. Econ. Perspectives 189 (2000).

^[56] Cox & Foster, id.; Kleiner, id.

^[57] Cox & Foster, id. at 3.

^[58] Daniel J. Gilman & Julie Fairman, Antitrust and the Future of Nursing: Federal Competition Policy and the Scope of Practice, 24 Health Matrix 143, 163 (2014).

^[59] As a report from staff at the FTC’s Bureau of Economics explains, well-designed licensing requirements can be an efficient response to several types of potential market failure—addressing, e.g., substantial and durable information asymmetries between professionals and consumers; agency problems; and when externalities are striking. See Cox & Foster, supra note 23, at 5-11. Such concerns may be especially pressing in cases where consumer health, safety, or financial well-being are at stake.

^[60] For example, FTC competition advocacy has addressed, inter alia, licensing restrictions on casket sales and interior design. See, e.g., Letter from Thomas B. Carter, FTC, to Hon. O.H. Harris, Chairman, Senate Economic Development Comm. State of Texas, Fed. Trade Comm’n (May 3, 1989), available at https://www.ftc.gov/sites/default/files/documents/advocacy_documents/ftc-staff-comment-hon.o.h.harris-concerning-texas-s.b.454-license-interior-designers/v890045.pdf (regarding proposal to establish licensure requirements on interior designers); St. Joseph Abbey v. Castille, 5^th Cir. 2011, Amicus Curiae Brief on Behalf of the United States Federal Trade Commission in Support of Neither Party, Fed. Trade Comm’n (Dec. 16, 2011), available at https://www.ftc.gov/sites/default/files/documents/amicus_briefs/st.joseph-abbey-et-al.v.castille-et-al./111216stjosephamicusbrief.pdf (regarding Louisiana state licensing restrictions on casket sales).

[61] See Cox & Foster, supra note 23, at 5-11; Kathy Sanchez, Elyse Smith Pohl, & Lisa Knepper, Too Many Licenses?, Inst. Justice (Feb. 24, 2022), https://ij.org/report/too-many-licenses (“Occupational and professional associations initiated at least 83% of sunrise reviews, while consumer advocates were behind just 4%.” A sunrise review is a process used by state legislatures to evaluate the potential impact of proposed new occupational regulations before they are enacted.).

^[62] See, e.g., Kleiner, supra note 55 (“The most generally held view on the economics of occupational licensing is that it restricts the supply of labor to the occupation and thereby drives up the price of labor as well as of services rendered.”).

[63] Patrick A. McLaughlin, Matthew D. Mitchell, & Anne Philpot, The Effects of Occupational Licensure on Competition, Consumers, and the Workforce, at 3, Mercat. Ctr. (Nov. 2017), available at https://www.mercatus.org/system/files/mclaughlin_mitchell_and_philpot_-_mop_-_the_effects_of_occupational_licensure_comments_for_the_ftc_-_v1.pdf.

^[64] Kleiner, supra note 55.

[65] Policy Perspectives: Options to Enhance Occupational License Portability, at 1, Fed. Trade Comm’n (Sep. 2018), available at https://www.ftc.gov/system/files/documents/reports/options-enhance-occupational-license-portability/license_portability_policy_paper_0.pdf [hereinafter “FTC Policy Perspectives”].

[66] See Occupational Licensing: A Framework for Policymakers, U.S. Dep. Treas. Off. Econ. Policy, Counc. Econ. Advis., & U.S. Dep. Labor (Jul. 2015), available at https://obamawhitehouse.archives.gov/sites/default/files/docs/licensing_report_final_nonembargo.pdf.

[67] Id. at 14 (“[T]he evidence on licensing’s effects on prices is unequivocal: many studies find that more restrictive licensing laws lead to higher prices for consumers. In 9 of the 11 studies we reviewed… significantly higher prices accompanied stricter licensing” and “Stricter licensing was associated with quality improvements in only 2 out of the 12 studies reviewed.”). See also Morris M. Kleiner, Reforming Occupational Licensing Policies, at 6, Brook. Inst. (Mar. 2015), available at https://www.brookings.edu/wp-content/uploads/2016/06/THP_KleinerDiscPaper_final.pdf (“There is little evidence to show that the licensing of many different occupations has improved the quality of services received by consumers, although in many cases it has increased prices and limited economic output.”)

[68] Matthew D. Mitchell, Policy Spotlight: Occupational Licensing and the Poor and Disadvantaged, at 1, Mercat. Ctr. (Sep. 2017), https://www.mercatus.org/media/65091/download?attachment (“licensing laws hit the poor twice—once in the form of limiting job opportunities and then again in the form of higher prices”).

[69] FTC Policy Perspectives, supra note 61, at iv (“Based on recent studies, the burdens of excessive occupational licensing—especially for entry- and mid-level jobs—may fall disproportionately on our nation’s most economically disadvantaged citizens.”)

[70] Kleiner, supra note 67, at 6. See also Christos A. Makridis & Patrick A. McLaughlin, Re-Evaluating the Labor Market Effects of Occupational Licensing: Longitudinal Evidence Across States, 12 Humanit. Soc. Sci. Commun. 240 (2025) (reporting a finding that a 10% rise in state occupational regulatory restrictions is associated with a 4% decrease in employment).

[71] FTC Policy Perspectives, supra note 61, at 25 (“A key barrier imposed by licensing is the inability of qualified professionals licensed by one state to work in another state. There is little justification for the burdensome, costly, and redundant licensing processes that many states impose on qualified, licensed, out-of-state applicants. Such requirements likely inhibit multistate practice and delay or even prevent licensees from working in their occupations upon relocation to a new state.”)

[72] Antitrust Modernization Commission, Report and Recommendations 20 (Apr. 2007), available at https://govinfo.library.unt.edu/amc/report_recommendation/amc_final_report.pdf; see also Findings and Recommendations of the Antitrust Modernization Commission: Hearing Before the Antitrust Task Force of the Comm. on the Judiciary, 110^th Cong., 110-23 (May 8, 2007) (statement of Deborah Garza, chair, Antitrust Modernization Commission), available at https://www.congress.gov/110/chrg/CHRG-110hhrg35243/CHRG-110hhrg35243.pdf (“[R]ecognizing how difficult it can be to take away an immunity that has been granted, we decided rather than to attack specific immunities and exemptions, to try to offer you all a framework that you might be able to use in considering whether to adopt immunities and exemptions in the future, but also to use in considering perhaps the repeal of existing exemptions.”)

[73] ABA Section of Antitrust Law, Federal Statutory Exemptions from Antitrust Law 217 (2007).

[74] Antitrust Modernization Commission, Report and Recommendations, supra note 68, Annex A.

[75] See also Darren Filson, Edward Keen, Eric Fruits, &Thomas Borcherding, Market Power and Cartel Formation: Theory and an Empirical Test, 44 J. L. Econ. 465 (2001).

[76] See Letter from Keith B. Nelson, Principal Deputy Assistant Attorney Gen., U.S. Dep’t of Justice, to Lamar Smith, Ranking Member, H. Comm. on the Judiciary, U.S. Dep. Justice (Jun. 23, 2008), available at https://www.justice.gov/archive/ola/views-letters/110-2/06-23-08-hr5546-credit-card-fair-fee-act.pdf (arguing in opposition to the Credit Card Fair Fee Act of 2008, noting “the bill seeks to counter perceived market power on the part of large credit card networks by establishing market power on the part of merchants negotiating with those networks.”).

[77] See Letter from Richard M. Steuer, Chair, Section of Antitrust Law, to the House Judiciary Committee, “Re: H.R. 1409, H.R. 1839, and H.R. 1946: Antitrust Exemptions to Legalize Collusion Among Health Care Providers”, Am. Bar Assoc. (Oct. 20, 2011), available at https://www.americanbar.org/content/dam/aba/administrative/antitrust_law/v3/at_comments_20111020.pdf (“The evidence is that provider cartels lead to higher reimbursement rates and higher insurance premiums for consumers. This result is just as likely in those markets in which payor market power is a genuine problem, as in markets in which payors lack market power: legalized collusion can introduce bilateral monopoly. Where a market is dominated on each side by a powerful seller and a powerful purchaser, there is little incentive to reduce prices for consumers.” [emphasis in original, citations omitted]).

[78] See Alden Abbott, Congress Should Not Legalize a News Media Cartel, Truth Mark. (Mar. 16, 2021), https://truthonthemarket.com/2021/03/16/congress-should-not-legalize-a-news-media-cartel (concluding the bills “would specifically authorize hard-core price fixing”) (citing John Yun, News Media Cartels are Bad News for Consumers, Competition Pol’y Int’l (Apr. 15, 2019), https://www.pymnts.com/cpi-posts/news-media-cartels-are-bad-news-for-consumers (H.R. 2054 “expressly allows price fixing.”)).

[79] John Roberti, Kelse Moen, & Jana Steenholdt, The Role and Relevance of Exemptions and Immunities in U.S. Antitrust Law (Dep’t of Justice Roundtable Discussion Series on Competition & Deregulation 2018), available at https://www.govinfo.gov/content/pkg/GOVPUB-J-PURL-gpo114204/pdf/GOVPUB-J-PURL-gpo114204.pdf.

[80] Patrizio E Tressoldi, Extraordinary Claims Require Extraordinary Evidence: The Case of Non-Local Perception, a Classical and Bayesian Review of Evidences, 2 Front. Psychol. 117 (2011).

[81] See California Retail Liquor Dealers Ass’n v. Midcal Aluminum Inc., 445 U.S. 97, 105 (1980) (internal quotation marks omitted).

[82] 568 U.S. 216 (2013).

[83] Id. at 228.

[84] 574 U.S. 494 (2015).

[85] Id. at 505.

[86] Much of the rest of this section is adapted from Ben Sperry, Geoffrey A. Manne, & Kristian Stout, The Role of Antitrust and Pole-Attachment Oversight in TVA Broadband Deployment, Int’l. Ctr. Law Econ. (Aug. 2, 2023), available at https://laweconcenter.org/wp-content/uploads/2023/08/TVA-Pole-Attachments-Issue-Brief.pdf.

[87] David E.M. Sappington & J. Gregory Sidak, Competition Law for State-Owned Enterprises, 71 Antitrust L.J. 479, 499 (2003).

[88] See Mike O’Rielly (@MPORielly), X.com (Jul. 17, 2023), https://x.com/MPORielly/status/1680963879331938310 [Lee Letter].

[89] Broadband Assessment Report, Tenn. Val. Auth. (Dec. 2022), https://www.tva.com/energy/technology-innovation/connected-communities/broadband-assessment-report.

[90] See Lee Letter, supra note 84, at 1-2.

[91] See, e.g., Webster Cty. Coal v. Tennessee Valley Authority, 476 F.Supp. 529 (W.D. Ky. 1979) (finding the TVA is exempt from antitrust law); Sea-Land Serv. Inc. v. Alaska R.R., 659 F.2d 243 (D.C. Cir. 1981), cert. denied, 455 U.S. 919 (1982) (finding the Alaska Railroad exempt from antitrust law).

[92] 16 U.S.C. §831c(b).

[93] 139 S. Ct. 1435 (2019).

[94] Id. at 1439.

[95] Id. at 1443-44.

[96] Id. at 1444.

[97] City of Loudon v. TVA, 585 F.Supp. 83, 87 (E.D. Tenn. Jan. 30, 1984).

[98] The TVA could also argue that the rate formula it sets for pole attachments is subject to the filed-rate doctrine and thus exempt from antitrust scrutiny. The filed-rate doctrine does not allow courts to second guess agency determinations of rates. See Keogh v. Chicago & Northwest Railway Co., 260 U.S. 156 (1922). While the original case on the filed-rate doctrine dealt with the literal situation of regulated entities filing regulator-approved rates, courts have extended the doctrine to other situations where a regulator uses its authority to set rates. Cf. Wortman v. All Nippon Airways, 854 F.3d 606, 611 (9th Cir. 2017) (“While the filed rate doctrine initially grew out of circumstances in which common carriers filed rates that a federal agency then directly approved, we have applied the doctrine in contexts beyond this paradigmatic scheme.”) The TVA’s unique situation is that there is no clear statutory ratemaking authority over pole attachments, but they have asserted the ability to do so under their contract powers, raising the same issue of whether this is a governmental function or market function. See TVA Determination of Regulation on Pole Attachments 2 (Jan. 22, 2016), available at https://tva-azr-eastus-cdn-ep-tvawcm-prd.azureedge.net/cdn-tvawcma/docs/default-source/about-tva/guidelinesreports/determination-on-regulation-of-pole-attachments-7-12-2023.pdf. Even if the filed-rate doctrine applies, however, it would not prevent a DOJ enforcement action aimed at an injunction or declaratory relief—just treble damages sought by a private litigant. See Keogh, 260 U.S. at 162 (“[T]he fact that these rates had been approved by the Commission would not, it seems, bar proceedings by the Government.”).

[99] Town of Hallie v. City of Eau Claire, 471 U.S. 34, 47 (1985).

[100] See, e.g., City of Columbia v. Omni Outdoor Advertising Inc., 499 U.S. 365, 379 (1991) (“We reiterate that, with the possible market participant exception, any action that qualifies as state action is ‘ipso facto… exempt from the operation of the antitrust laws…’”); FTC v. Phoebe Putney Health Systems Inc., 568 U.S. 216, 226 n.4 (“An amicus curiae contends that we should recognize and apply a ‘market participant’ exception to state-action immunity because Georgia’s hospital authorities engage in proprietary activities… Because this argument was not raised by the parties or passed on by the lower courts, we do not consider it.”).

[101] City of Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 403 (1978).

[102] See, e.g., Edinboro Coll. Park Apartments v. Edinboro Univ. Found., 850 F.3d 567 (3d Cir. 2017); VIBO Corp. v. Conway, 669 F.3d 675 (6th Cir. 2012); Freedom Holdings Inc. v. Cuomo, 624 F.3d 38 (2d Cir. 2010); Hedgecock v. Blackwell Land Co., 52 F.3d 333 (9th Cir. 1995).

[103] See Jarod M. Bona & Luke A. Wake, The Market-Participant Exception to State-Action Immunity from Antitrust Liability, 23 J. Antitrust & Unfair Comp. L. Section of the State Bar of CA., Vol. 1 (Spring 2014), available at https://www.theantitrustattorney.com/files/2014/05/Market-Participant-Exception-Article.pdf.

[104] See Lee Letter, supra note 84, at 2.

[105] Id. at n.4; N.C. Gen. Stat. § 62-350(a) (requiring all pole owners to offer non-discriminatory pole access); 807 Ky. Admin. Regs. 5:015 § 2(1) (same).

[106] 16 U.S.C. § 831i (“Board is authorized to include in any contract for the sale of power such terms and conditions, including resale rate schedules, and to provide for such rules and regulations as in its judgment may be necessary or desirable for carrying out the purposes of this Act”).

[107] 16 U.S.C. § 831.

[108] See Delta Turner Ltd. v. Grand Rapids-Kent County Convention/Arena Authority, 600 F.Supp.2d 920 (W.D. Mich. 2009).

[109] Id. at 929.

[110] 40 U.S.C. 3141-3148.

[111] Dollar Threshold Amount for Contract Coverage, U.S. Dep. Labor (Jan. 1, 2023), https://www.dol.gov/agencies/whd/state/prevailing-wages.

[112] David Bernstein, The Davis-Bacon Act: Vestige of Jim Crow, 13 Nat’l. Black L.J. 276, 285, 286 (1994).

[113] Prevailing Wages: Frequently Asked Questions, Cent. Am. Prog. (Dec. 22, 2020), https://www.americanprogress.org/article/prevailing-wages-frequently-asked-questions (“Strong prevailing wage laws prevent low-road contractors from undermining higher standards that workers attain through collective bargaining. Indeed, prevailing wage laws tend to be particularly important for protecting market rates in areas with strong unions.”).

[114] MVL USA Inc. v. United States, No. 24-1057 (Fed. Cl. 2025).

[115] GAO/HEHS-94-95R, Davis-Bacon Act, U.S. Gen. Account. Off. (1994), available at https://www.gao.gov/assets/hehs-94-95r.pdf.

[116] Oversight Hearing on the Davis-Bacon Act, Hearings Before the Subcomm. on Labor Standards of the House Committee of Labor and Education, 96^th Cong. 1 (1979) (testimony of Elmer B. Staats, Comptroller General of the United States), available at https://downloads.regulations.gov/WHD-2022-0001-0028/content.pdf.

[117] GAO-11-152, Davis-Bacon Act: Methodological Changes Needed to Improve Wage Survey, U.S. Gov. Account. Off. (2011), available at https://www.gao.gov/assets/gao-11-152.pdf.

[118] William F. Burke & David G. Tuerck, The Federal Davis-Bacon Act: Mismeasuring the Prevailing Wage, Beac. Hills Inst. (May 16, 2022), available at https://web.archive.org/web/20221220162927/https://www.beaconhill.org/BHIStudies/2022/FINAL-BHI-DBA-2022-05-16.pdf.

[119] Jason M. Ward, The Effects of Project Labor Agreements on the Production of Affordable Housing, RAND Corp. (2025), available at https://www.rand.org/content/dam/rand/pubs/research_reports/RRA1300/RRA1362-1/RAND_RRA1362-1.pdf.

[120] ABC Prevailing Wage/Davis-Bacon Act Survey, Assoc. Build. Contract. (Mar. 3, 2021), https://www.abc.org/Portals/1/News%20Releases/ABC%20National%202021%20Survey%20on%20Prevailing%20Wage%20Davis%20Bacon%20Policies%20FINAL.pdf?ver=2021-03-03-102740-943.

[121] MVL USA, supra note 110 (“market research consistently show[s] project labor agreements would ‘reduce adequate competition at a fair and reasonable price’ for the solicitations”).

[122] Josiah Neeley, Right of First Refusal Laws for Electric Transmission Are Anti-Competitive in Interstate Commerce, R Str. Inst. (Jun. 24, 2021), https://www.rstreet.org/research/right-of-first-refusal-laws-for-electric-transmission-are-anti-competitive-in-interstate-commerce (“Since the order went into effect, only 3 percent of new transmission investment in the United States has been subject to competition.”); see also Johannes Pfeifenberger, Judy Chang, & Akarsh Sheilendranath, Transmission Solutions: Potential Cost Savings Offered by Competitive Planning Processes, Brattle Group (Nov. 13, 2018), available at https://www.brattle.com/wp-content/uploads/2021/05/14880_brattle_competitive_transmission_naruc_11-13-18.pdf (“the scope of competition has been limited to only 2% of total U.S. transmission investments over the last 5 years”).

[123] F. A. Hayek, The Use of Knowledge in Society, 35 Amer. Econ. R. 519 (1945).

[124] Plan for the Grid We Need, Not the Grid We Have, Sustain. FERC Proj. (Oct. 13, 2021), https://sustainableferc.org/plan-for-the-grid-we-need-not-the-grid-we-have.

[125] Id.

[126] Devin Hartman, FERC Hath Spoken, R Str. Inst. (May 14, 2024), https://www.rstreet.org/commentary/ferc-hath-spoken-transmission (“The overbuilt local projects undermined development of regional projects with superior economies of scale. The economic projects under Order 1000 had an impressive benefit-cost track record; the problem was that inferior projects often crowded them out.”).

[127] Fred Ashton, FERC Dims the Lights on Competition, Am. Action Forum (Aug. 30, 2022), https://www.americanactionforum.org/insight/ferc-dims-the-lights-on-competition (“Order 1000 did not appreciably increase competition as intended, as the order’s many loopholes were exploited to insulate incumbent firms from competition and undercut its intent.”).

[128] See Competitive Transmission: Experience To-Date Shows Order No. 1000 Solicitations Fail to Show Benefits, Concentric Energy Advis. (Aug. 2022), at 1, available at https://ceadvisors.com/wp-content/uploads/2024/10/Competitive-Transmission-Experience-To-Date-Shows-Order-No.-1000-Solicitations-Fail-to-Show-Benefits.pdf (“Competitive solicitations added as many as 1000 days to the development of transmission projects, and many experienced cost escalations, further questioning the value of competitive solicitations.”).

[129] Supplemental Comments of Developers Advocating Transmission Advancements, Building for the Future Through Electric Regional Transmission Planning and Cost Allocation and Generator Interconnection, Docket No. RM21-17-000; Transmission Planning and Cost Management, Docket No. AD22-8-000; Joint Federal-State Task Force on Electric Transmission, Docket No. AD21-15-000 (Dec. 15, 2023), available at https://dailyenergyinsider.com/wp-content/uploads/2024/01/FERC-white-paper-12.15.23.pdf (“Updated cost information also shows that competitively developed projects exceed the cost expectations in winning bids by 59-66% on average.”)

[130] Id.

[131] Supplemental Comments of Developers Advocating Transmission Advancements, Federal Energy Regulatory Commission Docket No, RM21-17-000 at 6, https://elibrary.ferc.gov/eLibrary/filelist?accession_number=20231215-5048&optimized=false.

[132] Id.

[133] Id. at 7.

[134] Concentric Energy Advisors, supra note 124, at 11 (discussing how cost caps in the Ten West Link transmission project failed to adequately protect customers from cost overruns).

[135] Id. at 4 ; Affidavit of Dr. Carl R. Peterson, Federal Energy Regulatory Commission Docket No. RM21-17-000 at 12-13(2022), available at https://web.archive.org/web/20240523195203/https://ceadvisors.com/wp-content/uploads/2022/10/Peterson-Affidavit_Final.pdf.

[136] Id. at 14-15

[137] See Recent Experience with Competitive Transmission Projects and Solicitations, Dev. Advocating Transm. Adv. (DATA) Coalit. (2025), available at https://www.modernizethegrid.com/wp-content/uploads/2025/02/DATA-Whitepaper-2024_2-5-25_vF_edit.pdf

[138] Peterson, supra note 131, at 15.

[139] See, e.g., Recent Experience with Competitive Transmission Projects and Solicitations, supra note 133 at 18-20.

[140] Rob Gramlich, Richard Doying, & Zach Zimmerman, Fostering Collaboration Would Help Build Needed Transmission, at 42, Grid Strateg. (Feb. 2024), available at https://gridstrategiesllc.com/wp-content/uploads/2024/02/GS_WIRES-Collaborative-Planning.pdf.

[141] Id. at 41-42.

[142] Id. at 42.

[143] Richard L. Roberts, Analysis of FERC Order No. 1000, Steptoe LLP (Aug. 3, 2011), https://www.steptoe.com/en/news-publications/analysis-of-ferc-order-no-1000.html (“FERC provides very little guidance on how it expects benefits to be defined and calculated and the methods that would satisfy the six standards.”)

[144] Scott Madden, FERC Order No. 1000: Five Years On, Scott Madden Manag. Consult. (Jun. 2016), at 5, available at https://www.scottmadden.com/content/uploads/2018/08/FERC-Order-No.-1000-Five-Years-On.pdf (“Not surprisingly, this has led to divergent definitions of benefits across regions, with CAISO socializing the cost of all competitive transmission, while PJM has specific methods to quantify and allocate benefits of different types of projects. Each region has established thresholds for cost allocation (and competition) based on its view of how costs and benefits accrue to various stakeholders.”).

[145] Johannes P. Pfeifenberger, Judy Chang, Akarsh Sheilendranath, J. Michael Hagerty, Simon Levin, & Wren Jiang, Cost Savings Offered by Competition in Electric Transmission: Experience to Date and the Potential for Additional Customer Value, Brattle Group (Apr. 2019), available at https://etccoalition.wpengine.com/wp-content/uploads/Brattle-Report-Cost-Savings-Offered-by-Competition-in-Electric-Transmission.pdf.

[146] Neeley, supra note 118.

[147] Alison Somin & Frank Garrison, DOJ’s Proposed Third-Party Settlement Payment Rule Is Ripe for Abuse, The Hill (Aug. 8, 2022), https://thehill.com/opinion/judiciary/3588678-dojs-proposed-third-party-settlement-payment-rule-is-ripe-for-abuse.

[148] Memorandum from Jeff Sessions, U.S. Atty’ Gen. re: Prohibition on Settlement Payments to Third Parties, U.S. Dep. Justice (Jun. 7, 2017), https://www.justice.gov/archives/opa/press-release/file/971826/dl.

[149] Memorandum from Merrick Garland, U.S. Att’y Gen. re: Guidelines and Limitations for Settlement Agreements Involving Payments to Non-governmental Third Parties, U.S. Dep. Justice (May 5, 2022), available at https://www.justice.gov/d9/pages/attachments/2022/05/05/02._ag_guidlines_and_limitations_memorandum_0.pdf.

[150] Memorandum from Pam Bondi, U.S. Att’y Gen. re: Reinstating the Prohibition on Improper Third-Party Settlements, U.S. Dep. Justice (Feb. 5, 2025), https://www.justice.gov/ag/media/1388536/dl?inline.

[151] Mirfasihi v. Fleet Mortg. Corp., 356 F.3d 781, 784 (7th Cir. 2004).

[152] In re Google Location History Litigation, Hamilt. Linc. Law Inst. (Mar. 4, 2024), https://hlli.org/in-re-google-location-history-litigation.

[153] John H. Beisner, Jessica Davidson Miller, & Jordan M. Schwartz, Cy Pres: A Not So Charitable Contribution to Class Action Practice, U.S. Chamber Inst. for Leg. Reform (2010), available at https://instituteforlegalreform.com/wp-content/uploads/2020/10/cypres_0.pdf.

[154] Hawes v. Macy’s Inc., No. 1:17-CV-754, 2023 WL 8811499, 2023 U.S. Dist. LEXIS 226617 42 (S.D. Ohio Dec. 20, 2023).

[155] Id. at 43.

[156] Id.

[157] See Herbert Hovenkamp, Did “Consumer Welfare” Change Antitrust?, SSRN (Feb. 1, 2025), at 3, https://ssrn.com/abstract=5117989. (“The other version, which is the one commonly accepted today, looks more explicitly at the welfare of consumers, who are almost always benefitted by lower prices, higher output, or unrestrained innovation. That is the same standard that antitrust courts have applied in hundreds of federal court decisions, and long before it was associated with any conception of economic ‘welfare.’ Further, as this paper shows, it did not change even a little when the language of consumer welfare entered antitrust analysis in the 1970s.”); see also Lazar Radic & Nicolas Petit, The Superiority of the Consumer Welfare Standard, SSRN (Dec. 15, 2024), at 15, https://ssrn.com/abstract=5065469 (“At the dawn of the 20th century, in the progressive era, US courts had already started to read the Sherman Act as a Congressional demand to safeguard the supreme good of economic competition. In interpreting this act, the justices asked themselves questions about consumer welfare. As early as 1904, the Supreme Court’s opinion in Northern Securities stated that the Sherman Act addresses an ‘economic question,’ that is, how to optimize ‘public convenience’ and ‘general welfare.’ Subsequently, concerns about consumers and prices typical of the CWS were quick to emerge, at least nominally, in the Supreme Court’s case law. Decisions like Central Lumber v South Dakota in 1912, Chicago Board of Trade in 1918, or US Steel in 192033 talked of ‘consumers interest,’ ‘power over price,’ and ‘raising prices to consumers.’”).

[158] See, e.g., Jonathan Kanter, Remarks at New York City Bar Association’s Milton Handler Lecture, U.S. Dep. Justice (May 18, 2022), https://www.justice.gov/archives/opa/speech/assistant-attorney-general-jonathan-kanter-delivers-remarks-new-york-city-bar-association (“Three aspects of the consumer welfare standard have been the most problematic. First, there are some versions that assert the antitrust laws were never intended to protect our democracy from corporate power, or to promote choice and opportunity for individuals and small businesses. In this view, the antitrust laws are meant to promote wealth and output, but do nothing for the liberty of our nation.”).

[159] In FTC v. Meta/Within, the Court pointed out that “To the extent the FTC implies that—based solely on the objective evidence of Meta’s resources and its excitement for VR fitness—it would have inevitably found and implemented some unspecified means to enter the market, the Court finds such a theory to be impermissibly speculative.” (Emphasis ours). FTC v. Meta Platforms Inc., No. 5:22-cv-04325-EJD, 2023 WL 2346238 (N.D. Cal. Feb. 3, 2023). See also UnitedHealth Grp. Inc. v. United States, No. 1:22-cv-00481, 2022 WL 4365867 (D.D.C. Sept. 19, 2022).

[160] See Part IX.D, infra.

[161] Herbert Hovenkamp, Antitrust Policy After Biden, ProMarket (Sep. 16, 2024),  https://www.promarket.org/2024/09/16/antitrust-policy-after-biden.

[162] Radic & Petit, supra note 153Error! Bookmark not defined., at 25.

[163] See Fred Ashton, Why the Consumer Welfare Standard Is the Backbone of Antitrust Policy, Am. Action Forum (Oct. 6, 2022), https://www.americanactionforum.org/insight/why-the-consumer-welfare-standard-is-the-backbone-of-antitrust-policy (“Proponents argue that antitrust enforcement agencies should look beyond the effects business practices have on consumers and instead use antitrust policy to promote other social goals, including mitigating depressed employee wages, minimizing inequality, limiting harms to competitors, and preventing the rise of big firms that have amassed political power. In other words, this movement calls for a “fairness” standard–but fairness is subjective. Fairness cannot be measured using economic tools and data. Replacing the consumer welfare standard with one of fairness threatens to worsen economic outcomes for consumers and risks slowing innovation and economic growth.”).

[164] See Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 224 (1993) (“It is axiomatic that the antitrust laws were passed for ‘the protection of competition, not competitors.’”).

[165] See Non-Compete Clause Rule, 89 Fed Reg. 38342 (May. 7, 2024), available at https://www.govinfo.gov/content/pkg/FR-2024-05-07/pdf/2024-09171.pdf.

[166] Comments of International Center for Law & Economics, In Re: Non-Compete Clause Rulemaking, Matter No. P201200, Int’l. Ctr. Law Econ. (Apr. 19, 2023), at 11-18, available at https://laweconcenter.org/wp-content/uploads/2023/04/ICLE-Noncompete-NPRM-Comments-final.pdf.

[167] Evan Starr, Consider This: Wages, Training, and the Enforceability of Covenants Not to Compete, 72 Indus. & Labor Rel. Rev. 783 (2019).

[168] ICLE Comments, supra note 162, at 52–58.

[169] Id. at 60.

[170] Id. at 61-62.

[171] Id. at 74-75.

[172] Id. at 68-70.

[173] Id. at 68.

[174] As Published Final Rule on Premerger Notification; Reporting and Waiting Period Requirements, Fed. Trade Comm’n (Nov. 12, 2024), https://www.federalregister.gov/documents/2024/11/12/2024-25024/premerger-notification-reporting-and-waiting-period-requirements.

[175]Finally the Final HSR Rules: Key Takeaways from the New HSR Pre-Merger Notification Form, White & Case (Jan. 10, 2025), https://www.whitecase.com/insight-alert/finally-final-hsr-rules-key-takeaways-new-hsr-pre-merger-notification-form.

[176] Id.

[177]FTC Chairman Andrew N. Ferguson Announces that the FTC and DOJ’s Joint 2023 Merger Guidelines Are in Effect, Fed. Trade Comm’n (Feb. 18, 2025), https://www.ftc.gov/news-events/news/press-releases/2025/02/ftc-chairman-andrew-n-ferguson-announces-ftc-dojs-joint-2023-merger-guidelines-are-effect.

[178] Dissenting Statement of Commissioner Andrew N. Ferguson Regarding the Unfair or Deceptive Fees Rulemaking Matter Number R207011, Fed. Trade Comm’n (Dec. 17, 2024), available at https://www.ftc.gov/system/files/ftc_gov/pdf/ferguson-junk-fees-dissent.pdf. In his dissent, Ferguson cites a congressional staff report that found the Biden-Harris Administration had imposed an estimated $1.7 trillion in cumulative regulatory costs on the economy. See Majority Staff of H. Comm. on Oversight and Accountability, 118th Cong., Death by a Thousand Regulations: The Biden-Harris Administration’s Campaign to Bury America in Red Tape (Sept. 25, 2024).

[179] See Comments of International Center for Law & Economics on the FTC & DOJ Draft Merger Guidelines, Docket No. FTC-2023-0043-0001, Int’l. Ctr. Law Econ. (Sep. 18, 2023), https://www.regulations.gov/comment/FTC-2023-0043-1555.

[180] Id. at 6.

[181] Id. at 41-44.

[182] Chad Syverson, Macroeconomics and Market Power: Context, Implications, and Open Questions 33 J. Econ. Persp. 23, 27 (2019).

[183] See, e.g., Daniel Solove & Woodrow Hartzog, The FTC and the New Common Law of Privacy, 114 Colum L. Rev. 583 (2014).

[184] See, e.g., Geoffrey A. Manne & Ben Sperry, FTC Process and the Misguided Notion of an FTC “Common Law” of Data Security, Int’l. Ctr. Law Econ (2014), https://laweconcenter.org/resources/ftc-process-misguided-notion-ftc-common-law-data-security.

[185] See Kristian Stout & Geoffrey A. Manne, When “Reasonable” Isn’t: The FTC’s Standard-less Data Security Standard, 15 J.L. Econ. Pol’y 67 (2019).

[186] Brief of Petitioner at 2, LabMD Inc. v. FTC, 894 F.3d 1221 (11th Cir. 2018) (No. 16-16270).

[187] Id. at 3.

[188] Id.

[189] Id. at 2-3.

[190] See Staff of H. Comm.. on Oversight and Gov’t Reform, 113th Cong., Tiversa, Inc.: White Knight or Hi-Tech Protection Racket? 5-7 (Jan. 2, 2015).

[191] Initial Decision at 2, In re LabMD Inc., 160 F.T.C. No. 9357, 2015 WL 7575033 (Nov. 13, 2015) [hereinafter ALJ LabMD Initial Decision].

[192] Brief of Complainant at 5, LabMD Inc., 160 F.T.C. No. 9357, 2015 WL 7575033 (Nov. 13, 2015).

[193] ALJ LabMD Initial Decision, supra note 187, at 42 (The day sheets were ultimately excluded from evidence because the FTC couldn’t prove whether the documents had ever been digital records, nor could it prove how the day sheets made their way out of LabMD and to Sacramento.).

[194] LabMD Inc., Docket No. C-9357 at 4 (F.T.C. July 29, 2016), overruled by LabMD Inc. v. FTC, 894 F.3d 1221 (11th Cir. 2018).

[195] See LabMD Inc., 894 F.3d at 1237.

[196] Id. at 1231.

[197] Andrew Smith, New and Improved FTC Data Security Orders: Better Guidance for Companies, Better Protection for Consumers, FTC Business Blog (Jan. 6, 2020), https://www.ftc.gov/business-guidance/blog/2020/01/new-and-improved-ftc-data-security-orders-better-guidance-companies-better-protection-consumers. The rest of this subsection is adapted from Ben Sperry, The FTC Still Has a Long Way to Go on its “Common Law” of Data Security, Truth Mark. (Feb. 27, 2020), https://truthonthemarket.com/2020/02/27/the-ftc-still-has-a-long-way-to-go-on-its-common-law-of-data-security.

[198] Joshua Wright, Recalibrating Section 5: A Response to the CPI Symposium, CPI Antitrust Chron. (Nov. 2013), at 4, available at https://www.ftc.gov/sites/default/files/documents/public_statements/recalibrating-section-5-response-cpi-symposium/1311section5.pdf.

[199] See Children’s Online Privacy Protection Rule, 90 Fed. Reg. 16918 (Apr. 22, 2025).

[200] 144 Cong. Rec. 11657 (1998) (Statement of Sen. Richard Bryan), available at https://www.congress.gov/crec/1998/10/07/CREC-1998-10-07.pdf#page=303.

[201] Garrett A. Johnson, Tesary Lin, James C. Cooper, & Liang Zhong, COPPAcalypse? The YouTube Settlement’s Impact on Kids Content, SSRN (Mar. 14, 2024), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4430334.

[202] Id. at 7-8.

[203] See id. 2-3.

[204] Id. at 3.

[205] See Frédéric Bastiat, The Law (1850).

INTERESTS OF AMICI CURIAE

Amici are eighteen scholars of antitrust law and economics at leading universities and research institutions across the United States. Their names, titles, and academic affiliations are listed in the Appendix. All possess expertise in, and collectively have conducted extensive research on, antitrust law and economics, including the competitive dynamics of digital markets and the appropriate scope of antitrust remedies.

Amici have an interest in ensuring that antitrust law promotes the public interest by remaining grounded in sensible rules informed by sound economic analysis. That includes ensuring that any remedy in this case promotes consumer welfare and competition without unduly punishing success or undermining innovation. We file this brief to assist the Court in evaluating the economic and legal implications of the remedies proposed in this case, and to caution against overbroad measures that exceed the proven harms.[1]

SUMMARY OF ARGUMENT

Plaintiffs chose to pursue liability based on inferences drawn from Google’s search-distribution agreements and their purported effect on user choice and rival scale. Having persuaded the Court to premise liability on that basis, Plaintiffs cannot now escape the consequences of their chosen path, including the need for a stronger showing of causation at the remedy phase.

As the D.C. Circuit has observed, “relief should be tailored to fit the wrong creating the occasion for the remedy.” United States v. Microsoft, 253 F.3d 34, 107 (D.C. Cir. 2001) (“Microsoft”). And, as that court also admonished, a court “must base its relief on some clear ‘indication of a significant causal connection between the conduct enjoined or mandated and the violation found directed toward the remedial goal intended.’” Id. at 105 (quoting 3 Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law, ¶ 653b, at 91-92 (1996)). That caution remains even where, as here, courts infer causation of competitive harm in finding liability. Mem. Op., U.S., et al. v. Google LLC, 20-cv-3010, ECF No. 1033 (“Mem. Op.”) at 216 (citing Microsoft, 253 F.3d at 79). In brief, the Circuit Court’s decision on remedies in Microsoft suggests that there is no “edentulous” standard for remedies in cases brought under Section 2 of the Sherman Act.

Courts should take special care to err on the side of restraint in cases where unlawful conduct may have both pro- and anticompetitive effects, and where the magnitude of competitive harm caused by unlawful conduct is difficult to ascertain. Antitrust remedies must address the specific exclusionary conduct proven, not serve as a vehicle to punish the defendant or to implement the speculative industrial organization designs preferred by regulators.

These general principles are ignored in Plaintiffs’ Revised Proposed Final Judgment (ECF No. 1184-1). Most of Plaintiffs’ wide-ranging proposals are untethered from findings of harm and would neither stop nor remediate the conduct found unlawful in the liability phase of this trial. Indeed, most of the proposed remedies appear designed as penalties, rather than remedies—and suboptimal penalties at that. They risk considerable harm to competition, to the quality of Google’s general search engine (GSE) and other products, and to the more than 200 million U.S. consumers who derive benefits from what is “widely recognized as the best GSE available in the United States.” Mem. Op. at 46 ¶ 126.

Instead, the Court should craft relief narrowly tailored to the specific conduct found to be anticompetitive—for example, by prohibiting truly exclusive deals or coercive tying—while avoiding complex, long-running, behavioral remedies or breakups that do not directly address harm cause by the violative conduct. This measured approach aligns with the approach taken by the D.C. Circuit in Microsoft and adopted by the Supreme Court in Verizon Communications, Inc. v. Law Offices of Curtis Trinko, 540 U.S. 398 (2004). The Microsoft and Trinko decisions both counsel caution in imposing burdensome affirmative obligations or structural changes absent a but-for causal nexus to the violation found and the harm caused by it. That approach is sound. Remedies should target specific anticompetitive acts without deterring the competitive process that benefits consumers.

ARGUMENT

I. Remedies Must Address Harm to Competition Caused by Unlawful Conduct

Antitrust remedies in Section 2 cases are not penalties, and neither precedent nor economics contemplates remedies untethered from the conduct found unlawful or the harm caused by that unlawful conduct.

Plaintiffs’ proposed remedies violate these core principles. For a start, they fail to meet the crucial requirement that antitrust remedies should address only the harm caused by anticompetitive conduct. This is particularly true for Plaintiffs’ call to force the divestiture of the Chrome browser—which was developed prior to the agreements at issue here, and became popular by offering a superior product in competition with other browsers. Chrome was not found to be a monopoly asset, and Google’s ownership and operation of Chrome do not depend on any search distribution agreements. Demanding the divestiture of Chrome would not remedy the exclusive search deals at issue. Instead, it would sacrifice both organizational and production efficiencies that benefit millions of consumers.

Moreover, the Court found that Google’s search distribution agreements were exclusionary to the extent they harmed competition by foreclosing rivals. But there was no proof that, “but for” those deals, a competitor would have achieved competitively meaningful scale. A remedy that aims to ensure the success of competing search engines (rather than their ability to compete) would ignore this distinction.

As the D.C. Circuit observed in Microsoft, “relief should be tailored to fit the wrong creating the occasion for the remedy.” Microsoft, 253 F.3d at 107; see also Herbert J. Hovenkamp, Structural Antitrust Relief Against Digital Platforms, 7 J. Law & Innovation 57, 64 (2024) (“the need to get it right—to avoid both under- and over-deterrence—is one of antitrust’s most vexing problems. It is nowhere more pronounced than in the antitrust law of remedies”). To ignore this principle risks doing more harm than good. “Fashioning appropriate equitable antitrust relief requires that courts balance the benefit to competition against the hardship or competitive disadvantage the remedy may cause.” Ginsburg v. InBev NV/SA, 623 F.3d 1229, 1235 (8th Cir. 2010). And this concern is not merely theoretical: The history of antitrust remedies shows that they fail precisely when they over-index on harms and ignore the benefits that may also arise from ambiguous conduct and complex market structures.  See generally Robert W. Crandall & Kenneth G. Elzinga, Injunctive Relief in Sherman Act Monopolization Cases, 21 Res. Law and Econ. 277, 335­37 (2004) (studying effects of behavioral remedies imposed in ten major monopolization cases). “Without a firm grasp of the economic forces that are driving changes in market structure, the DOJ cannot be expected to design ‘relief’ that will result in increased competition, lower prices, and consumer benefits.” Id. at 335.

In economic terms, remedies calibrated to the harm done are efficient because they force firms to internalize the harm that their conduct has caused, creating incentives for firms to avoid such harmful conduct going forward. Where the conduct at issue implicates both benefits and harms—as with the default installation and placement of Google Search (Google’s general search engine or “GSE”) and other desirable apps—the chilling of pro-competitive conduct and consumer benefits make both over- and under-inclusive remedies a concern: limitations (or additions) to the scope or magnitude of the remedy are liable to be inefficient. See generally, Steven Shavell, Strict Liability Versus Negligence, 9 J. Legal Stud. 1 (1980). Remedies for such conduct can, in that regard, be contrasted with penalties for conduct that is unequivocally harmful, where courts and enforcers have little or no concern with overdeterrence. Compare Louis Kaplow, The Optimal Probability and Magnitude of Fines for Acts that Definitely are Undesirable, 12 Int. Rev. Law & Econ. 3 (1992) with Robert Cooter, Prices and Sanctions, 84 Colum. L. Rev. 1523, 1529 (1984).

This is particularly relevant here, as the Court’s finding of liability was based in part on extrapolations regarding the “stickiness” of defaults, rooted in general observations about the behavioral psychology of consumers. While the Court found these sufficient to support liability, both the Court’s findings of fact and the underlying research recognize that most consumers prefer Google Search to available alternatives, regardless of the default option provided. See, e.g., Mem. Op. at 46 (“Google is widely recognized as the best GSE available in the United States.”); id. at 229 (“Google is the dominant GSE [on Windows devices], even though Windows devices come preinstalled with Microsoft’s Edge browser, which defaults to Bing.”). Saddling users with inferior default GSEs will impose costs on hundreds of millions of consumers, either by forcing them to incur the cost of switching back to Google or by steering them to bear the costs of using an inferior GSE.

To impose a remedy based on inferred competitive harm—and, further, one rooted in inferred and non-quantified conclusions about consumer behavior—implies a fundamental cautionary challenge: without more, it is difficult for a court to know whether the remedy will yield benefits that exceed its costs. Where findings rely on complex economic theories, involve conduct with potential efficiencies, or leave uncertainty about the scope and magnitude of competitive harm, broad or radical remedies are inappropriate. See Microsoft, 253 F.3d at 78-80 (“[D]ivestiture is a remedy that is imposed only with great caution, in part because its long-term efficacy is rarely certain. Absent some measure of confidence that there has been an actual loss to competition that needs to be restored, wisdom counsels against adopting radical structural relief.”).

It is for these reasons that “[a] court … must base its relief on some clear ‘indication of a significant causal connection between the conduct enjoined or mandated and the violation found directed toward the remedial goal intended.’” Id. at 105 (quoting Areeda & Hovenkamp at ¶ 653b, 91-92). The Microsoft court’s emphasis on the need to consider “whether plaintiffs have established a sufficient causal connection,” id. at 106, between the anticompetitive conduct and the defendant’s dominance is especially telling given the lower bar set for liability in that case—the “edentulous standard” applied given numerous findings of harm to a “nascent competitor.” Hence, on remand in Microsoft the Court of Appeals directed the District Court to “consider whether plaintiffs have established a sufficient causal connection between Microsoft’s anticompetitive conduct and its dominant position in the [operating system] market…Absent such causation, the antitrust defendant’s unlawful behavior should be remedied by ‘an injunction against continuation of that conduct.’” Id. (quoting Areeda & Hovenkamp at ¶ 650a, 67). To put it another way, there is no “edentulous standard” for remedies in a Section 2 case. Restricting Google’s conduct without convincing evidence that it is the true source of consumer harm is akin to prescribing strong medicine for an ailment that hasn’t been firmly diagnosed: you might kill the fever, or you might kill the patient.

By the same token, courts and enforcers alike should beware nirvana fallacies, as visions of ideal competition may be out of reach—or, in fact, relatively impoverished. See, e.g., A. Douglas Melamed, Afterword: The Purposes of Antitrust Remedies, 76 Antitrust L.J. 359, 368 (2009) (“[R]emedies are hard to get right and, when suboptimal, can undermine antitrust objectives by interfering with markets and prohibiting or deterring procompetitive conduct.”). A court’s task is not to engineer an ideal state of GSE competition, because, as the Supreme Court observed in Trinko, central planning is “a role for which [the courts] are ill-suited.” Trinko, 540 U.S. at 408.

For one thing, the conditions that lead to relatively concentrated markets may persist no matter what the intervention. Neither economics nor precedent suggest that an imagined state of atomistic competition should be preferred to an actual competitive market, even if dominated by a few, or even one, firm. More is not always better—not as measured by standard competition-relevant metrics associated with consumer welfare: price, output, innovation, and quality. Antitrust law recognizes that even monopoly can arise “as a consequence of a superior product, business acumen, or historic accident.” United States v. Grinnell Corp., 384 U.S. 563, 571 (1966). For that reason, antitrust law and, specifically, Section 2, do not condemn monopoly itself. Id. at 570-71.

Moreover, network effects, like scale advantages, are not inherently anticompetitive. In fact, direct network effects arise when the value of a product (or platform) increases as the number of its consumers increase. See generally David S. Evans & Richard Schmalensee, Network Effects: March to the Evidence, not to the Slogans, CPI Antitrust Chronicle (Aug. 2017) (reviewing economic research regarding network effects). Network effects, by definition, confer consumer benefits, and well-tailored remedies must account for those benefits.

The failure of the remedy in the General Motors bus case is instructive. Crandall & Elzinga, supra, at 317-35 (discussing U.S. v. General Motors Corp., Consent Decree, C.C.H Trade Cases ¶ 71,624 (1965)). There, “an attempt to force additional competition among multiple firms into such a small market with large economies of scale proved to be futile.” Id. at 323. Despite comprehensive behavioral remedies aimed not only at prohibiting GM’s allegedly exclusionary conduct, but also at facilitating entry by other firms, competition was stymied by the realities of the market’s scale requirements. Instead, “[t]he consent decree may have facilitated the unsustainable entry [of a new competitor].” Id. at 325 (emphasis added). Even the provisions aimed merely at prohibiting past, allegedly exclusionary conduct failed to account for the benefits of scale: “GM was barred by the decree from entering into long-term exclusive contracts with Greyhound, thereby depriving it of the assured benefits of scale necessary for efficient operation. GM therefore exited from intercity bus manufacturing in 1979.” Id. at 324.

Finally, neither network effects nor scale advantages render markets fundamentally uncontestable. In what are sometimes called “reverse network effects,” the same principles that can lead to growth and concentration can have the opposite effect, as “[e]ach lost customer induces other customers to leave, which induces more to leave.” Evans & Schmalensee, supra, at 3; see also Joseph Farrell & Paul Klemperer, Coordination and Lock-In: Competition with Switching Costs and Network Effects, in Vol. 3 Handbook of Industrial Organization (Mark Armstrong & David E.M. Sappington, eds., 2007) (reviewing literature on network effects and competition and noting that “competition for the market” or “life-cycle competition” can replace ordinary compatible competition). Examples abound. “Myspace demonstrates this perfectly: once users began leaving, network effects operated in reverse, hastening its collapse.” Brian C. Albrecht, Network Effects in FTC v. Meta, Truth on the Market (Apr. 16, 2025), available at  https://truthonthemarket.com/2025/04/16/network-effects-in-ftc-v-meta/.

II. Structural Remedies to Monopolization Claims Are Rightly Disfavored

The difficulties and risks associated with structural remedies in Section 2 cases have been well documented. See, e.g., Hovenkamp, supra, at 64 (“Unnecessary or badly designed breakups can do a great deal of harm, particularly in highly innovative markets. This is doubly true about the breakup of internally developed as opposed to acquired assets.”). History, meanwhile, shows that such breakups rarely yield consumer gains. See generally Robert W. Crandall, The Failure of Structural Remedies in Sherman Act Monopolization Cases, 80 Or. L. Rev. 109 (2001) (assessing the success or failure of the major Section 2 cases ending in divestiture). Indeed, there is “remarkably little evidence that these cases and the relief that emanated from them had a positive effect on competition and consumer welfare.” Id. at 197. The reasons are revealing: the failure to account for rapidly changing market forces; the faulty design of remedies that failed to generate an increase in price competition; erroneous assumptions about the competitive effects of increasing the number of competitors; and the imposition of vertical divestitures that actually increased prices or reduced competition by eliminating competitors from the market. Id. The consistent theme emerging from this history is the profound difficulty courts face in successfully re-engineering complex industries through antitrust remedies. “By and large, the antitrust record of monopoly breakup decrees has not been pretty. The courts certainly have the power to ruin a firm, but coming up with a structural remedy that will actually increase output or improve the welfare of consumers or labor is not easy.” Hovenkamp, supra, at 57.

Plaintiffs propose that “Google must promptly and fully divest Chrome, along with any assets or services necessary to successfully complete the divestiture, to a buyer approved by the Plaintiffs in their sole discretion, subject to terms that the Court and Plaintiffs approve.” ECF No. 1184-1 at 12. Divestiture is often described as the “most drastic” of antitrust remedies. See, e.g., United States v. E. I. du Pont de Nemours & Co., 366 U.S. 316, 326 (1961). Requiring Google to divest Chrome would be a drastic remedy indeed.

Chrome was not found to be a monopoly asset, either lawful or unlawful, and Google’s mere ownership and operation of Chrome does not depend on any search-distribution agreements: Demanding its divestiture would not directly address the exclusive search deals at issue. As this Court has previously recognized, Supreme Court precedent establishes that “related acts must also be ‘unlawful’ or of the ‘same type or class’ in order to warrant injunction,” and does not permit “clearly lawful practices [to] be enjoined simply because they will weaken the antitrust violator’s competitive position.” New York v. Microsoft Corp., 224 F. Supp. 2d 76, 109 (D.D.C. 2002) (citing Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 132-33 (1969)).

While divestiture might benefit a single acquiring competitor, it would do so to the detriment of Chrome’s ongoing development. As a result, the longer-term viability of Chrome might be imperiled. Even if some competitors would benefit from the divesture of Chrome, that remedy would provide no clear benefit to consumers, or to search competition more broadly.

Chrome is much more than a stand-alone piece of software: It is deeply intertwined with Google’s development infrastructure, security and anti-malware tools, and revenue model (search ads and related services). The divestiture of Chrome—and the attendant isolation of Chrome and Google Search—would thus impose technical limitations beyond mere implementation details. The integration of Chrome and Google likely generates real efficiencies in development, distribution, operation, and production. These synergies give Google the incentive and ability to invest heavily in Chrome—funding rapid iteration, security patches, speed improvements, and experimental features like privacy sandboxes. It also allows Chrome to remain free for users while leveraging revenue from Google Search deals. A forced separation would not only incur massive direct costs but could also destroy these efficiencies, potentially leading to a less capable or less secure browser for end-users.

Divestiture would also imperil the ongoing viability of competition in the browser market, especially in conjunction with restrictions on Google payments for default status. See Mem. Op. at 116 ¶ 335 (“Google’s 2021 revenue share payment to Mozilla was over $400 million, or about 80% of Mozilla’s operating budget” and “Mozilla has repeatedly made clear that without these payments, it would not be able to function as it does today”); Gregory J. Werden, Harm to the Competitive Process in the Google Search Case, Mercatus Center Antitrust & Competition Working Paper (Jul. 9, 2024), at 28, available at https://www.mercatus.org/research/working-papers/harm-competitive-process-google-case (“Without the revenue from Google, Mozilla could discontinue support for Firefox, especially if Bing does not greatly improve with its immediate boost in scale.”).

It is for precisely these sorts of reasons that structural remedies are disfavored in Section 2 cases like this one. While structural remedies can potentially be justified in merger cases because “clear demarcations between entities and units [may] still exist, facilitating a structural solution,” the cost and risk of imposing structural remedies in long-established firms is much higher. Thomas O. Barnett, Section 2 Remedies: What to Do After Catching the Tiger by the Tail, 76 Antitrust L.J. 31, 39 (2009). “This difference greatly heightens the risk that a Section 2 structural remedy will create market inefficiencies.” Id.

III. Imposing a Data-Sharing ‘Duty to Deal’ Would Exceed Legal Boundaries and Undermine Innovation

The Supreme Court’s decision in Trinko is the lodestar here. In that case, the Court made clear that antitrust law does not, as a general matter, require a monopolist to aid its competitors by sharing infrastructure or data, warning that such forced sharing “may lessen the incentive for the monopolist, the rival, or both to invest” in valuable innovations. Trinko, 540 U.S. at 408.

Yet Sections VI, VII, and VIII of Plaintiffs’ Revised Proposed Final Judgment describe an astonishing array of mandated information sharing involving large and diverse data sets, data structures, algorithms, models, applications, application programming interfaces (APIs), and other intellectual property. Forcing Google to share proprietary search data, tools, and other intellectual property as proposed would impose an extreme—indeed unprecedented—duty to deal that is at odds with modern antitrust jurisprudence since Trinko.

The resources to be shared with or licensed to competitors “at marginal cost” would include, inter alia, Google’s search index, “scale-dependent data inputs” for search and advertising, user-side data, ad data, training data, data structures, statistical models, apps, APIs, and much more. Proposed Final Judgement (ECF No. 1184-1) §§ VI – VIII. Moreover, mandated sharing would not be confined to extant information resources. Google would also be required to facilitate competitors’ access to, and use of, such resources; and Google would be required to share new information resources, including data and technology, not yet available.

Some of Google’s competitive advantage is related to the scale of its data, and  the Court found that some of that scale advantage has been achieved or maintained by the search default agreements found exclusionary at trial. Plaintiffs appear to conclude that, therefore, any and all present, would-be, and—for periods of five and ten years—future competitors should have ready access to any of Google’s intellectual property that is somehow related to the size, scope, and quality of Google’s information resources and the size of the firm’s installed base of users. That is not relief “tailored to fit the wrong creating the occasion for the remedy.” Microsoft, 253 F.3d at 107.

This kind of compelled-access remedy (a “data-sharing” or “interoperability” mandate) raises serious practical and legal concerns. Forcing a firm to hand over the “source of its advantage” to rivals risks chilling investment and turning courts into regulators of ongoing business relations. Post-Trinko, courts are extremely reluctant to impose any affirmative duty to deal on a monopolist absent limited circumstances not present here. See, e.g., Metronet Services Corp. v. Qwest Corp., 383 F.3d 1124, 1133 (9th Cir. 2004) (explaining that only where the harm at issue is redressable by a remedy that “simply order[s] the defendant to deal with its competitors on the same terms”—manifestly not the case here—can a court potentially escape the remedial ordeals discussed in Trinko).

Indeed, forcing Google to share its search index, real-time search data, or user signals would be even more invasive than the network-sharing obligations at issue in Trinko. Google’s search algorithms and user data are highly proprietary, and the product of billions of dollars of R&D investment over two decades. Notably, the D.C. Circuit’s decision in Massachusetts v. Microsoft Corp. rejected forced, royalty-free sharing of extensive technical information with rivals, and the open-sourcing of Internet Explorer (among other things), precisely because those proposed remedies would have deprived Microsoft of valuable intellectual property. See Massachusetts v. Microsoft Corp., 373 F.3d 1199, 1230-31 (D.C. Cir. 2004) (holding that a “‘royalty-free, non-exclusive perpetual right’ of others to use [Microsoft’s intellectual property] would confiscate much of the value of Microsoft’s investment” and was an “analogous form of structural relief” to divestiture).

At the same time, Plaintiffs’ proposal that copious resources be provided to rivals “at marginal cost” (ECF No. 1184-1 at 15) seems to suppose—erroneously—that all of Google’s fixed costs are sunk costs, ignoring, e.g., billions of dollars in annual investments in research and development, and, indeed, hardware and infrastructure, by both Google and its competitors. The problem of investment incentives is especially significant in industries with high (and ongoing) fixed costs that could not be recouped under the proposed interoperability and sharing requirements. As the Court itself noted, “[b]uilding and maintaining a competitive GSE require an extraordinary upfront capital investment, to the tune of billions of dollars.” Mem. Op. at 157 (emphasis added); see also Id. at 158 (“a world class search engine is at least a $2–4B/year R&D investment”) (quoting UPX266 at 986). And handing Google’s billion-dollar know-how to competitors would dramatically reduce their incentive to pursue their own approaches to search engine innovation. Confiscating the fruits of Google’s investments? would not just impair and disincentivize Google’s ongoing development of its GSE and other assets: It risks chilling innovation industry-wide. See, e.g., Hovenkamp, supra, at 68.

Although limited duties to deal may be imposed under special circumstances “at or near the outer boundary of Section 2 liability,” Trinko, 540 U.S. at 409, an order compelling Google to share—and in some cases reconfigure—such a broad range information resources, and to do so on a long-term basis, would entangle this Court and a hypothetical “technical committee” in perpetual regulation. The diverse and sweeping sharing obligations described in sections VI, VII, and VIII of the Plaintiffs’ Proposed Judgment are not simple, straightforward, or innocuous. Indeed, the technical complexity of ongoing real-time search index exchange dwarfs that of servicing the specific operations support systems that were at issue in Trinko, and would require the court to engage in de facto regulation of, among other things, “compute” costs, APIs, API bandwidth, refresh cycles, error correction, and much more. This is a far cry from a “limited” duty to deal.

Courts are ill-equipped to manage such arrangements. Individually and collectively, the proposed sharing mandates seem tailor-made to illustrate the Supreme Court’s general caution against enforced sharing as they would require “courts to act as central planners, identifying the proper price, quantity, and other terms of dealing—a role for which they are ill-suited.” Trinko, 540 U.S. at 408.

The Court has already acknowledged these concerns in dismissing the Plaintiff States’ SA360 “refusal to deal” claim against Google, finding: “Plaintiff States seek to bypass the ‘no duty to deal’ doctrine entirely. . . . Adjudicating Plaintiff States’ claim would require the court to act as a ‘central planner’. . . grappling with a host of questions that the court is ill-equipped to handle. . . . And those thorny questions foreshadow the challenges the court would face in administering a remedy.” Mem. Op at 268-69.

A. AI Innovation and Other Technological Changes Undermine the Claimed Competitive Benefits of Proposed Data-Sharing Remedies

These difficulties are magnified in markets characterized by rapid technological change. Most of the growth in the tech sector comes “from innovation, not from increased competition under constant technology.” Hovenkamp, supra, at 68. Hence, the rapid pace of innovation, both in and adjacent to the market, “invites extra caution about intervention. While opportunities for harm might be greater, efficiencies and other positive effects are greater as well.” Id.

This Court found that “the advent of artificial intelligence (AI) has not sufficiently eroded barriers to entry—at least not yet.” Mem. Op. at 163. That uncertainty led the Court to discount the competitive significance of AI-powered search in finding liability, as “[n]ew technologies may lower, or even demolish, barriers to entry, but such innovation is meaningful only if it can change the market dynamic in the ‘foreseeable future.’” Id. (quoting Microsoft, 253 F.3d at 55). But that conclusion was based on findings of fact and trial evidence from over a year ago: AI has progressed spectacularly since then. And foreseeability cuts the other way when courts are tasked with fashioning forward-looking remedies to ameliorate harmful conduct. Courts cannot tailor remedies that are to run five or ten years based on what they cannot foresee.

Indeed, courts should evince a special degree of interventional humility given the dynamic nature of the markets at issue, including the rapid pace (and diversity) of innovation in artificial intelligence. As the Court recognized, AI is increasingly important to established GSEs, see Mem. Op. at 40-42, and central to the design of generative-AI-based GSE entrants such as Perplexity, SearchGPT, and Claude (the last of which incorporated a search API just this week, see Introducing Web Search on the Anthropic API (May 7, 2025), available at https://www.anthropic.com/news/web-search-api). Calendar year 2024 saw tremendous gains in AI performance along various dimensions, including rapid gains from open-weight models and smaller models. See generally Stanford Univ. Inst. For Human-Centered Artificial Intelligence, Artificial Intelligence Index Report 2025, at ch. 2, available at https://hai-production.s3.amazonaws.com/files/hai_ai_index_report_2025.pdf. Fundamentally, we do not know what GSEs will look like, or whether GSE’s will comprise a distinct, competition-relevant market, five or ten years hence.

That progress directly implicates questions about the magnitude and likely durability of presumed scale, scope, and quality advantages in existing data sources, as well as the magnitude and likely durability of traditional GSE competitors’ compute advantages. These, in turn, confound the larger question of entry barriers and Plaintiffs’ assertion that access to current Google search data is essential to competition. It is by no means clear what sorts of data might be required for entrants or incumbents to achieve minimum efficient scale as AI continues to improve. And in rapidly changing technology markets, it is a mistake to assume that “the successful way something has been done, and is done today, is the only way to do it, or the only way new entrants can do it and be competitive. … [I]nnovation has never required implementation of the same business model as incumbents, and especially not access to the particular proprietary inputs incumbents have created.” Geoffrey A. Manne & Dirk Auer, Antitrust Dystopia and Antitrust Nostalgia: Alarmist Theories of Harm in Digital Markets and Their Origins, 28 Geo. Mason L. Rev. 1279, 1395-96 (2021).

Note too, that the market definition that played a key role in analyzing market power for liability purposes may be confined to a more limited role at the remedies stage. As the Court observed, sources of data that are useful as GSE production inputs extend well beyond the GSE market itself already. Hence, “Microsoft has partnered with more than 100 providers to obtain structured data, and those partners include information sources like Fandango, Glassdoor, IMDb, Pinterest, Spotify, and more.” Mem. Op. at 20-21¶ 47. By the same token, even if specialized search providers may not be in the relevant market for purposes of assessing liability, they may nevertheless be quite relevant to determining appropriate remedies as their data may be used by GSE competitors. See, e.g. Perplexity: AI Search Disruptor Is Taking a Big Swing with New Shopping Feature, adepto.com (Nov. 19, 2024), available at https://addepto.com/blog/perplexity-ai-search-diruptor-is-taking-a-big-swing-with-new-shopping-feature/ (“Perplexity’s integration with Shopify allows it to tap into a vast network of merchants, enhancing its product offerings while maintaining a user-friendly interface.”).

B. The Proposed Data-Sharing Remedies Also Entail Significant Costs Arising from the Risks to Consumer Privacy and Data Security

The problems inherent in a forced data-sharing remedy are not confined to uncertainties regarding future competitive dynamics; they also implicate very real present-day risks to user privacy.

Plaintiffs’ Proposed Judgment would require Google to “use ordinary course techniques to remove any Personally Identifiable Information” from user-side data in diverse data sets, and disclose, among other things, “a description of what the dataset contains such that it can be reasonably understood by the Qualified Competitors, including but not limited to a description of what the dataset contains, any sampling methodology used to create the dataset, and any anonymization or privacy-enhancing technique that was applied” to each data set.  ECF No. 1184-1 at 17-18. All of that is to be done within six months. Yet Plaintiffs provide no analysis of the implementation that would be required of Google or the direct and indirect compliance costs.   Plaintiffs assure the Court that the mandated sharing provisions they seek have the advantage of “safeguarding personal privacy and security.” Id. at 16. But that assurance is hollow given the remaking of Google’s data usage that would be involved. Google’s internal use of diverse data sets comprising or derived from consumer data—some documented and some deeply embedded in trained models— does not, as a general matter, entail the same privacy and security risks as the sharing of such data with third parties—practices which are not generally part of Google’s business model. Plaintiffs do not address the complexity, cost, or even tractability of the overhaul that data sharing would impose upon Google’s data collection and use practices and, in turn, on Google’s products.

Moreover, no such reworking of Google’s internal data can eliminate the risks to privacy and data security implicated in data sharing with Qualified Competitors, as well as downstream collection, use, and sharing by other third parties. The limited assurances Plaintiffs would require of “Qualified Competitors” and the hypothetical data security standards to be developed by the Technical Committee provide only untested and conclusory assurances that downstream risks to consumers will be minimized. The last thing a remedy should do is inadvertently weaken data security or user privacy protections in the name of helping a competitor.

IV. Trinko Applies to Remedies, Not Just Liability

While modern antitrust litigation sometimes separates liability and remedy phases, the logic underpinning Trinko’s skepticism applies directly to remedies, as it is inherently focused on the practical consequences and administrability of judicial intervention. Indeed, “the difficulty of providing an appropriate antitrust remedy was central to the Trinko Court’s” holding. Barnett, supra, at 33. Furthermore, the procedural separation of liability and remedy in this case, combined with the specific nature of the liability findings, underscores the need for remedial caution.

The Department of Justice has asserted elsewhere that “Trinko addresses antitrust liability, not remedies.” Brief of the United States of America and the Federal Trade Commission as Amici Curiae in Support of Neither Party on Google’s Motion for Stay, Epic Games v. Google, Case No. 24-6274, at 6 (9th Cir., Oct. 26, 2024), available at https://www.justice.gov/atr/media/1375086/dl. Yet the Supreme Court disagrees and, as recently as 2021, relied extensively on Trinko in explaining why courts must be cautious in fashioning antitrust remedies. See Nat’l Collegiate Athletic Ass’n v. Alston, 594 U.S. 69, 102 (2021) (warning about remedies that “could wind up impairing rather than enhancing competition”, impose costs that “exceed efficiencies gained,” and “suppress procompetitive innovation”) (citing Trinko, 540 U.S. at 415).

The concerns animating the Trinko Court—especially the risk of chilling innovation incentives and the institutional limitations of courts acting as “central planners”—are not merely abstract principles relevant only to liability determinations; they are practical challenges implicated by the imposition of certain remedies. Thus, as this Court acknowledged in dismissing Plaintiff State’s SA360 claim, while adjudicating a duty-to-deal claim implicates “a host of questions that the court is ill-equipped to handle,” Mem. Op. at 268, so, too, do “those thorny questions foreshadow the challenges the court would face in administering a remedy.” Mem. Op. at 269 (citing Trinko, 540 U.S. at 415) (emphasis added).

Indeed, the disincentive for a firm to invest in potentially valuable assets or facilities arises most acutely not from a finding of liability per se, but from the subsequent remedial obligation to share those assets with competitors on terms dictated by a court. Similarly, the “central planner” problem identified in Trinko is fundamentally a remedial concern, highlighting the profound difficulties courts face when tasked with designing, implementing, and overseeing complex arrangements of forced cooperation or access.

Plaintiffs chose to pursue liability based significantly on inferences drawn from Google’s search distribution agreements and their purported effect on user choice and rival scale. Having asked the Court to premise liability on that basis, Plaintiffs cannot now escape the consequences of their chosen path. As a result, the scope of permissible remedies is necessarily constrained by the absence of but-for causation linking Google’s search distribution agreements to the foreclosure of competition. None of this changes with the bifurcation of the liability and remedies trials; rather, remedies must remain strictly proportional to, and causally linked with, the specific violations proven in the liability phase.

CONCLUSION

For the reasons set forth above, amici urge the Court to reject the far-reaching remedies of Plaintiffs’ Revised Proposed Final Judgment. Instead, remedies should be narrowly tailored to address the specific conduct found to violate Section 2, and they should be calibrated to remedy harm properly attributed to that conduct without harming competition and consumers.

[1] No counsel for a party to this case authored this brief in whole or in part. No party or counsel for a party contributed money that was intended to fund preparing or submitting the brief, and no person other than amici or amici counsel contributed money that was intended to fund preparing or submitting the brief.

Commissioner Nathan Simington of the Federal Communications Commission (FCC) recently penned an op-ed (together with Gavin Wax, his chief of staff) highlighting a fundamental problem in America’s media landscape: traditional broadcasters operate under strict regulatory constraints, while streaming platforms enjoy virtually unlimited freedom.

Their solution? Expand FCC oversight to include streaming services as “multichannel video programming distributors” (MVPDs), subjecting them to the same rules governing cable and satellite operators.

While Simington correctly diagnoses the regulatory asymmetry plaguing today’s video market, their prescription—more regulation rather than less—risks doubling down on outdated frameworks, rather than modernizing them for the digital age.

Read the full piece here.

The House Energy and Commerce Committee’s recent proposal for a federal moratorium on state-level artificial intelligence regulations represents more than a mere jurisdictional power play—it embodies a fundamentally sound approach to technology governance. As AI continues its rapid evolution across virtually every sector of the economy, the question is not whether regulation will emerge, but whether it will emerge in a form that maximizes social welfare while preserving America’s competitive advantage in this transformative technology.

From a law and economics perspective, the current trajectory toward fragmented state-level AI regulation threatens to impose substantial costs while failing to achieve the consumer protection goals that motivate such regulation. The proposed moratorium offers a strategic pause—what we might call “regulatory forbearance”—that can prevent these inefficiencies while allowing for the development of a more coherent, evidence-based national framework.

Read the full piece here.

Acurious political convergence has been reshaping U.S. antitrust policy. Conservative populists have found common cause with the so-called “neo-Brandeisians” of the left—named for the late Supreme Court Justice Louis Brandeis—in seeking to challenge big business, particularly the tech giants.

While both cohorts’ concerns about concentrated power deserve attention, their shared willingness to abandon the longstanding “consumer welfare standard” that has guided antitrust enforcement for decades threatens to undermine the very market innovations that have driven American prosperity.

Read the full piece here.

When many think about monopolies and unfair business practices, they typically picture large corporations squashing smaller rivals. But there’s another significant culprit restricting competition that gets far less attention: government regulations themselves.

The Trump administration has in recent weeks taken the first steps toward reining in some of these regulations. The U.S. Justice Department (DOJ) and Federal Trade Commission (FTC) have both convened proceedings seeking public input on regulations that harm competition. The requests were so expansive that it would be easy to conclude the agencies were asking for a “wish list.”

Toward that end, the International Center for Law & Economics (ICLE) submitted detailed recommendations revealing how extensively government rules can undermine the markets they’re meant to protect.

This isn’t a new concern. Dating back to English common law and America’s founding era, anti-monopoly traditions were often focused on limiting government-granted exclusive privileges, rather than scrutinizing successful private businesses. Since at least the 1600s, monarchs have granted favored merchants exclusive rights to sell certain goods, creating artificial monopolies that harmed consumers. Today’s regulatory landscape creates similar problems through different mechanisms.

Read the full piece here.

The California Law Revision Commission (CLRC) is currently reviewing proposed amendments to the state’s antitrust statutes, particularly the Cartwright Act. As made clear in a recently published memo, a major goal of the effort is clearly to distance California from the perceived constraints of federal antitrust law that limit liability for single-firm conduct under Section 2 of the Sherman Antitrust Act.

California intends to achieve this by strategically overturning specific U.S. Supreme Court decisions and departing from the error-cost framework that has traditionally shaped federal antitrust analysis. The cumulative effect of California’s proposed amendments—but particularly the section on single-firm conduct—would be to align California antitrust law more closely with EU competition law, where dominant firms must actively give a leg up to competitors (see the International Center for Law & Economics’ comments to the CLRC proceeding here and here,  and ICLE President Geoff Manne’s August 2024 presentation to the commission here).

Read the full piece here.

Our latest guest in Truth on the Market’s “Global Voices Forum” series is Andy Chen, the vice chair and current acting chair of the Taiwan Fair Trade Commission (TFTC). We discuss how the TFTC came to different conclusions than the European Commission on a pair of notable cases against Google, how its unfair conduct and antitrust rules mesh together, and what emerging competition-law issues the commission might tackle next.

Read the full piece here.

Who do you think decides what you see and how you interact on your favorite online service? Most would point to Silicon Valley engineers and product managers tinkering behind the scenes. However, an underappreciated reality is emerging: judges and regulators are increasingly the ones who decide how online platforms operate. The blueprint for tomorrow’s internet is being drawn up in courtrooms and government offices. This should concern us all.

Read the full piece here.

Trade negotiations are often mischaracterized as adversarial contests akin to warfare or chess. (The latter is increasingly invoked in varying degrees: 3d, 4d, and nth degree). Headlines speak of countries “battling” over tariffs or “outmaneuvering” each other in the global marketplace. But while those analogies may be emotionally satisfying and undergird ideological fervor, they fundamentally misunderstand and distort the nature of trade itself.

Read the full piece here.

No, not quite. Frequent readers of my Truth on the Market posts (and I hope that the plural form is not self-delusion) may recall my March musings about “What Changes Might, and Should, a New FTC Majority Bring?” I wondered whether a new Federal Trade Commission (FTC) majority might drop, among other things, the rushed and ill-considered Robinson Patman Act (RPA) case against Pepsi. Just remember, you read it here first.

Read the full piece here.

TL;DR

Background: The U.S. video-content market has undergone a fundamental shift over the past decade, with more and more live sports events now available to fans willing to pay for them.

But… Some are still unhappy with the cost of access and the number of streaming-service and/or pay-TV subscriptions needed to find all the desired games. During a recent U.S. Senate Commerce Committee hearing, several senators suggested modifying the Sports Broadcasting Act (SBA), which protects the major U.S. sports leagues from antitrust scrutiny in negotiations for distribution with network broadcasters, unless more is done to make games available to fans, particularly on those networks. 

However… Regulatory parity would be a better approach, in light of the evolving video marketplace. Either the SBA should be repealed altogether or leagues should be exempt from antitrust scrutiny for negotiations with both  streaming services and  pay-TV channels, in addition to traditional broadcasters. 

KEY TAKEAWAYS

Live Sports Are More Available than Ever to Fans Willing to Pay for Access

At one point, the only way to enjoy live sports was either to have a ticket to watch in-person, or to listen to a local radio broadcast. The advent of television brought sports programming to a much larger audience, but nationally broadcast live sports were limited to a few major “games of the week” and championship series.

The entry of cable and satellite television expanded the sports marketplace much further, especially with the growth of regional sports networks (RSNs) and dedicated sports channels like ESPN and Fox Sports, as well as networks programmed by the major professional leagues and college-sports conferences. Sports fans nonetheless remained limited in accessing live sports events, especially if their favorite team was not local. 

By comparison, in addition to all the previous means of access, the move to online streaming has meant that fans can access nearly all live sports for which they are willing to pay. The options include direct-to-consumer platforms like NBA League Pass, NFL Sunday Ticket, MLB.tv, and NHL.tv, as well as streaming services like ESPN+, Netflix, AppleTV+, Amazon Prime Video, Hulu+Live TV, fuboTV, Peacock, and HBO Max. 

The battle for exclusive live-sports rights is no longer solely between the broadcast networks and pay-TV channels, as streaming options continue to proliferate. Amazon Prime has broadcast Thursday Night Football since 2022, and Netflix even broadcast Christmas NFL games this past season. According to eMarketer, digital-sports viewers surpassed pay-TV viewers for the first time in 2023, with the gap expected to widen over the next few years.

But this doesn’t mean pay-TV and network television are unable to compete. For instance, the National Basketball Association (NBA) is returning to  NBC starting in the 2025-2026 season for many of the nationally televised games that were previously only available through pay-TV on TNT. But the changing market is evident in that case, as well. NBC will also offer games through its Peacock streaming service, and the NBA also struck a deal with Amazon to show games on Prime Video.

Antitrust Law and Sports Leagues

There is a fundamental tension in antitrust law when it comes to sports leagues. Courts have largely looked at sports franchises as independent firms that both coordinate to create a league and compete within it. This has led to various responses to avoid making all league decisions subject to antitrust scrutiny, from the much-maligned baseball exemption, to leagues’ nonstatutory labor exemption for deals resulting from collective bargaining with players’ unions, to statutory exemptions like the Sports Broadcasting Act (SBA), which shields the major sports leagues from antitrust scrutiny when negotiating for “sponsored telecasting.” The SBA defines that term to refer solely to entities who provide free service supported by advertising, like traditional over-the-air network broadcasters.

Over time, as the courts have moved toward examining alleged anticompetitive conduct by sports leagues under the “rule of reason,” distribution agreements between sports leagues and their television (or streaming) partners aren’t necessarily condemned as a restraint of trade. Nonetheless, the recent litigation over NFL Sunday Ticket suggests there remains much uncertainty over these types of deals. 

In the In Re: Sunday Ticket Antitrust Litigation case, U.S. District Court Judge Philip Gutierrez initially denied the NFL’s motion for summary judgment, but later granted its motion for judgment as a matter of law after trial. Of particular importance in the case was expert testimony that assumed live games would be made broadly available to consumers without NFL Sunday Ticket. Judge Gutierrez rejected that assumption as an “ipse dixit opinion untethered to an economic analysis.” The court got it right in the end, but not until after the jury found the NFL liable for $4.7 billion of damages (which could be trebled to more than $14 billion).

Regulatory Parity by Repealing or Reforming the SBA

The SBA may have made sense in an era when network broadcasters had significant market power and major sports leagues were seen as at a disadvantage. But given the massive changes in the video-competition marketplace, it no longer does.  Amid today’s plethora of both pay-TV and streaming options, the sports leagues enjoy important leverage in negotiating carriage deals. At the very least, it no longer  appears beneficial to extend sports leagues’ exemption from antitrust scrutiny solely to deals with network broadcasters.

The SBA’s inherent preference for games to be available for free on over-the-air networks is not the best way to make more live sports available. Competition for the rights to live-sports events from streaming and pay-TV obviously benefits fans as a whole, as they have shown great willingness to pay for access to see more of their favorite teams and players. 

The question of how to achieve regulatory parity remains. One option would be to repeal the SBA altogether. Another would be to extend its protections to negotiations not only for the major sports leagues (the NFL, NBA, MLB, and NHL), but others as well (such as the NCAA, UFC, and MLS), and for pay-TV providers and streaming services to be treated the same as broadcast networks. 

Antitrust law is designed to protect consumers by promoting competition. The fundamental tension between its goals and the necessary coordination inherent in sports leagues—including negotiating league-wide deals for the rights to broadcast live events—will continue to produce uncertainty, even under rule-of-reason analysis.

Perhaps this is a good thing, as it allows private litigants and antitrust authorities to hold sports leagues and big media companies accountable when they exercise market power in a way that harms consumers. On the other hand, there are potentially tremendous benefits to sports fans when league-wide deals are made for broadcast rights. The potential for massive antitrust liability could end up preventing leagues from trying new avenues to make more games available to consumers.

For more on this issue, see Eric Fruits’  “Video Competition in the United States”; Ben Sperry’s “Dynamic Competition Proves There is No Captive Audience”; and ICLE’s comments to the Federal Communications Commission’s “Delete Delete, Delete” proceeding.

On 27 May, Meta plans to begin AI training using public EU user data from Facebook and Instagram. Yesterday, Meta’s lead GDPR regulator, the Irish Data Protection Commission (IDPC) published a statement highlighting the additional safeguards adopted by Meta since the previously paused plan from early 2024. On my reading, the IDPC implies that they do not object to Meta’s current plan, including Meta’s reliance on the “legitimate interest” basis for data processing under the GDPR. Nevertheless, it remains to be seen whether other EU data protection authorities (DPAs) and the courts will take the same approach. Following the IDPC’s statement, the Hamburg authority issued a “hearing letter” which may suggest German officials will try to overrule the Irish DPC to force a more restrictive approach as they have done in the past. There is also an ongoing attempt to secure an injunction in a German court to stop Meta’s 27 May plan. This matters to all AI developers and deployers in the EU, because Meta’s situation is not unique and whatever limitations are imposed on Meta, they can easily become a standard for others.

Read the full piece here.

Charter Communications Inc. and Cox Communications Inc. have announced a plan to merge in a $34.5 billion deal. The transaction would create the nation’s largest cable operator, surpassing Comcast, with approximately 38 million subscribers across 46 states.

Predictably, the proposal triggered concerns about cable-industry consolidation. Yet the reflexive anxiety about “big cable getting bigger” misses the economic realities of today’s communications marketplace.  A regulatory review of this merger deserves a clear-eyed analysis based on sound economic principles, rather than outdated regulatory frameworks or political agendas.

Read the full piece here.

The European Data Protection Board (EDPB), a sort of an EU assembly composed of national data protection authorities, has published draft Guidelines on applying the EU’s primary data protection law (the GDPR) to “blockchain technologies.” The European Crypto Initiative (EUCI) rightly raised an alarm, noting that the Guidelines call for deleting entire blockchains to achieve GDPR compliance. As some of you may know, I work extensively on EU data protection law (see my EUTechReg.com), and I thus thought it would be useful for me to explain why the EDPB document is as problematic. I should also add that the document is still formally a draft subject to consultation, to which everyone can respond.

Read the full piece here.

Patents are property rights that drive innovation, investment, and economic growth, which are especially critical in technology sectors that rely on global standards. Robust, enforceable patent protections have underpinned America’s technological leadership and economic prosperity by ensuring innovators are rewarded for their investments.

These property rights are, however, increasingly threatened by strategic judicial actions from abroad—in particular, the issuance of anti-suit injunctions (ASIs). ASIs are judicial orders that prohibit litigants from initiating or continuing patent-enforcement proceedings in another jurisdiction. They serve as a powerful procedural tool that can prevent parallel litigation in multiple forums simultaneously.

Read the full piece here.

Recent reports indicate that President Donald Trump is urging House Republicans to adopt a “most favored nation” (MFN) policy for Medicaid drug purchasing, linking U.S. prices to the lowest rates paid by other countries. While the goal of reducing Medicaid costs is understandable—particularly amid growing concerns about drug affordability—relying on foreign pricing benchmarks would risk importing the very market distortions that have constrained innovation abroad.

U.S. drug policy must navigate a careful balance: ensuring access and affordability for patients, without undermining the revenue streams that fund medical breakthroughs. Rather than mirroring international price controls—which would only lead to shortages in the long term—policymakers should explore trade-based strategies to address foreign-pricing practices that shift the global burden of pharmaceutical research and development disproportionately onto American consumers, thereby driving up costs for American consumers.

Read the full piece here.

TL;DR

Background: The way Americans consume video content has fundamentally changed. Once dominated by traditional broadcast television, the landscape now teems with streaming services, social-media videos, and online news. In this new world, the rules governing who can own and operate television stations serve to stifle competition. The Federal Communications Commission (FCC) is now considering a sweeping review of these regulations as part of an initiative dubbed “Delete, Delete, Delete.”

But… For decades, the FCC has enforced rules to ensure a diverse media landscape with multiple viewpoints and a focus on local communities. These rules limited how many TV stations one company could own—both nationally and within a local area—on grounds that preventing excessive concentration promotes competition and prevents a few powerful voices from dominating the airwaves. But the rise of digital media has drastically altered the competitive environment. 

However… The FCC’s outdated ownership rules hinder broadcasters’ ability to compete effectively in a market dominated by digital platforms, streaming services, and online content. The regulations impose asymmetric burdens on broadcasters, favoring their largely unregulated digital competitors. While broadcasters must navigate ownership caps, public-interest obligations, and licensing requirements, digital players face few comparable constraints. This regulatory imbalance leaves traditional broadcasters at a structural disadvantage in vying for audiences, talent, and advertising revenue.

KEY TAKEAWAYS

Ending the National Ownership Cap

Under a decades-old FCC rule, no single entity may own television stations that collectively reach more than 39% of U.S. households. In the current market, this national cap restricts broadcast groups’ ability to achieve scale and compete for audiences, advertising dollars, and high-quality programming with much larger digital and streaming companies, who enjoy national and even global reach. The rule was originally designed to prevent any single voice from dominating the airwaves, but in today’s decentralized digital environment, that concern is far less pressing.

Furthermore, empirical evidence suggests the current rules do not promote diversity or localism. Writing for a unanimous U.S. Supreme Court in FCC v. Prometheus (2021), Justice Brett Kavanaugh concluded that the FCC had acted reasonably in determining that its media-ownership rules were no longer needed to serve the agency’s public-interest goals—including viewpoint diversity—given the dramatic changes in the media marketplace. The decision reflects growing judicial recognition that legacy regulatory frameworks may actually inhibit broadcasters’ ability to serve local communities and compete with unregulated online platforms. Revisiting the national cap is a necessary step toward modernizing media policy for a competitive and pluralistic information environment.

Relaxing Local-Ownership Rules

Current FCC rules generally prohibit common ownership of more than one of the four highest-rated TV stations in a given local market. They also ban ownership of more than two stations in any market, regardless of market size or competition. These rigid, across-the-board rules do not reflect the current reality in which broadcasters face intense competition from numerous online-video providers, as well as social media. The FCC’s limits prevent stations from achieving the scale needed to support local services like news and public-affairs programming, and to compete effectively. Moreover, applying the same restrictions to large metropolitan areas and small rural markets alike ignores vast differences in competitive conditions. 

Section 202(h) of the Telecommunications Act of 1996 requires the FCC to review, repeal, or modify ownership rules that are no longer necessary. The FCC should recognize that the entry and growth of digital-video competitors have rendered these local-ownership rules not just unnecessary, but harmful to competition and consumer welfare.

Revisiting Joint Sales Agreements

Joint sales agreements (JSAs) allow one television station to sell advertising time for another station within the same market. Historically, the FCC considered JSAs involving 15% or more of a station’s advertising time as attributable-ownership interests, effectively counting them toward ownership caps. But the FCC reversed this stance in 2017 by eliminating the attribution rule and permitting broader use of JSAs without affecting ownership calculations.

The current “Delete, Delete, Delete” proceeding is an opportunity to further relax the JSA regulations. These agreements provide essential operational efficiencies and support for local journalism, especially in smaller markets. In an era dominated by digital and streaming platforms, such collaborative arrangements could prove vital for traditional broadcasters seeking to remain competitive and financially viable.

Critics of JSAs often argue that they enable de-facto consolidation, potentially reducing viewpoint diversity in local markets. But this concern overlooks the economic realities faced by many small and mid-sized broadcasters, particularly in areas where advertising revenues are thin and operational costs are rising. JSAs can preserve independent voices by enabling stations to remain on the air through shared resources, rather than being forced to shut down or sell outright. Rather than treating JSAs as stealth consolidation, the FCC should recognize them as flexible tools that help sustain pluralism and local content in a highly competitive media ecosystem.

Diversity and Localism Concerns

While deregulation may affect viewpoint diversity and “localism,” ownership limits are a crude and ineffective tool in an era when consumers can access virtually unlimited information sources online.  Rather than achieving viewpoint diversity via ownership restrictions, the FCC should consider targeted programs to support minority and female ownership as more effective alternatives.

“Localism” is the principle that broadcast licensees should serve the needs and interests of their local communities. Critics of relaxing ownership rules argue that deregulation would sacrifice local coverage in favor of regional or national coverage, which is often dominated by larger metropolitan areas.

But despite (or even because of) the current ownership limits, local broadcasters continue to struggle financially. In response to such challenges, broadcast stations often reduce local news coverage.  By contrast, consolidated ownership groups might be better positioned to invest in local news and programming, or to share resources internally.  

Moreover, the rise of digital-only local news outlets suggests that there are already various channels available to meet local-information needs.

For more on this issue, see ICLE’s comments to the FCC’s  “Delete, Delete, Delete” initiative or read the Truth on the Market post “ICLE’s Comments, Comments, Comments Re: Delete, Delete, Delete.”

TL;DR

Background: As various jurisdictions have sought to impose more stringent controls on mergers and acquisitions, one area of growing concern to policymakers and antitrust scholars has been a perceived increase in “serial acquisitions” or “roll-up strategies,” in which a larger company acquires numerous smaller, related companies and merges them into a single entity. Skepticism of serial acquisitions has been particularly evident in Europe, where several jurisdictions have sought to buttress their merger-review procedures in the wake of the European Commission’s unsuccessful Illumina/GRAIL case.  

But… While critics of serial acquisitions argue that existing merger rules fail to apprehend competitively significant mergers that either fall below existing merger-filing thresholds or affect innovation in ways that are allegedly ignored by the current rules, these appeals are premature.

However… There is currently little evidence to suggest that mergers systematically harm consumer welfare. More importantly, proponents of more stringent review of serial acquisitions and roll-up strategies have failed to advance alternative merger-review procedures that would catch additional anticompetitive mergers without disproportionately increasing administrative costs and the number of false positives. 

KEY TAKEAWAYS

A Political Cure in Search of a Problem

In most jurisdictions, antitrust merger procedures are triggered only when both merging parties’ revenue exceeds certain thresholds. This means that deals in which at least one party has limited turnover effectively escape antitrust scrutiny. In many jurisdictions, policymakers are revamping their merger rules to plug this perceived gap.

Several European member states either have already introduced or are currently contemplating “call-in powers” that enable competition authorities and, indirectly, the Commission to continue reviewing below-threshold mergers. During the Biden administration, U.S. antitrust agencies similarly launched a request for information on serial acquisitions and roll-up strategies. Unfortunately, these initiatives ignore the crucial question of whether raising the bar set by existing merger rules would actually benefit consumers.

Serial Acquisitions and Competition Concerns

Many of the activities described as “serial acquisitions” are indistinguishable from ordinary patterns of business growth and consolidation in maturing industries. It’s not clear why a growth strategy executed through multiple small acquisitions should be viewed differently than one reliant on so-called “organic” growth. There is also little evidence that such below-threshold acquisitions harm competition in ways that would warrant changing existing rules and procedures.

Recent research on private-equity acquisition strategies suggest the primary motivations for roll-up strategies are to unlock growth potential in capital-constrained firms and to improve the operational performance of underperforming firms. 

Acquisitions generally match innovators who lack the resources to scale, such as capital or distribution networks, and larger organizations that possess those resources, but lack the incentives to innovate. Such combinations typically benefit both consumers and competition.

Both theoretical and empirical grounds are absent to support the contention that serial acquisitions are any more anticompetitive than the sum of their parts. Such deals do not generally alter the tradeoffs that have led competition enforcers to largely ignore mergers that fall below existing notification thresholds.

Special Scrutiny Would Be Costly

Clamping down on serial acquisitions would risk chilling legitimate, beneficial transactions; imposing disproportionate costs on smaller firms; and misallocating scarce agency resources away from more significant threats to competition. This is particularly concerning, given that the vast majority of mergers are either procompetitive and enhance consumer welfare, or are competitively benign. The literature here is vast, particularly in the case of vertical mergers. 

Even the empirical literature on so-called “killer acquisitions,” such as one frequently cited paper that estimates between 5.3% and 7.4% of pharmaceutical mergers fit that category, does not appear to warrant heightened scrutiny. The literature offers no obvious ways to differentiate, ex ante, anticompetitive deals from the 92.6% to 94.7% that are presumably procompetitive.

Substantial costs could be associated with deterring  anticompetitive transactions below existing revenue thresholds. For instance, overly zealous enforcement may reduce incentives for startup formation and innovation, decrease liquidity in capital markets, sacrifice efficiencies from beneficial consolidation, and reduce competitive pressure on incumbent firms.

A Positive Agenda

Competition agencies should adopt a nuanced, evidence-based, and context-specific approach to serial acquisitions and roll-up strategies. Agencies should build on existing research on mergers, rather than pursue broad new rules or presumptions based on limited evidence. The competitive effects of such acquisitions may vary significantly by industry and geographic market.

In pharmaceuticals, for example, serial acquisitions may be a vital mechanism to bring innovations to market, while in other sectors they might raise more significant or more frequent competitive concerns. Only through rigorous, sector-specific research can the agencies develop a nuanced understanding of these strategies’ competitive effects.

Furthermore, competition agencies should seek to develop more focused and productive requests for information on critically important issues in serial acquisitions. They also should recognize that sound policy reform requires a firm foundation in both research and enforcement experience, along with attention to established precedent.

Moreover, it is important that competition agencies be cautious about drawing general conclusions about entire industries, business models, or methods of acquisition, and more cautious still in condemning them.

Finally, policymakers must consider the tradeoffs inherent in any new reporting requirements or regulatory approaches that effectively increase the number of deals scrutinized by enforcers, while carefully weighing any potential benefits against the burdens imposed on businesses and agency resources.

For more on this issue, see the International Center for Law & Economics’ (ICLE) “Comments to the DOJ Request for Information on Corporate Consolidation Through Serial Acquisitions and Roll-Up Strategies, Docket No. FTC-2024-0028” and its “Comments to Autorité de la Concurrence on Introduction of a Merger-Control Framework for Addressing Below-Threshold Mergers.”

Just as we learn that the European Commission’s “GDPR reform” plan is likely to be a performative window-dressing exercise, the EU General Court again denied direct judicial review of a privacy-fundamentalist guidance document from the European Data Protection Board (EDPB) on “pay or OK.” The EDPB is acting like an unaccountable legislator, issuing theoretically non-binding guidance, which easily becomes the law in action. This occurs even when the guidance extends EU data protection law beyond its intended scope, driven by ideological extremism.

Read the full piece here.

The European Commission’s newly announced fines of €500 million against Apple and €200 million against Meta for alleged violations of its Digital Markets Act undermine key aspects of both online ecosystems. To make matters worse, they are also almost certain to exacerbate tensions with a notoriously trigger-happy U.S. administration.

The commission claims Meta’s “consent or pay” advertising model, which lets users either consent to personalized ads or pay monthly fees starting from €5.99 for an ad-free experience, violates the Digital Markets Act because users are not offered a “truly equivalent and free” alternative to personalized ads.

Read the full piece here.

Last month’s decision by the European Commission fining Apple for breach of the Digital Markets Act’s (DMA) anti-steering provisions was just the latest in a series of EU attempts to open the iOS platform in order make it ostensibly more “fair” and “contestable.”

But what it also made clear is that the Commission is no longer content with regulating Apple’s ecosystem: it wants to remake it, transforming a “walled garden” into a (quasi) public square. As Former European Commissioner for Competition Margrethe Vestager put it, “[one] objective of the DMA [is] to open closed ecosystems to enable competition at all levels.”

Such an outcome would, unfortunately, generate many negative consequences for consumers. While the transformation the European Commission seeks might lower entry barriers for certain competitors in the short term, it also risks undermining user privacy and security; weakening incentives to invest in similar platforms, applications, and devices; and potentially deterring companies from offering services in Europe altogether.

Read the full piece here.

Oregon is the latest state to introduce legislation intended to save “digital journalism providers.” A bill working its way through the Legislative Assembly has attracted the support of mainstream media outlets, such as The Oregonian and Oregon Public Broadcasting. Even Fred Flintstone chimed in, begging the legislature to “Keep Cave News Alive.”

Oregon Senate Bill 686 and its proposed amendments aim to address the financial struggles of news organizations in the digital age by requiring online platforms to engage in arbitration to pay digital-journalism providers or else to donate to the Oregon Civic Information Consortium.

But this approach, often referred to as a “link tax,” is likely to create more problems than it solves. The Legislative Assembly would be wise to let this bill die before it hits the floor.

The core issue with SB 686 is its fundamental misunderstanding of the relationship between online platforms and publishers. This relationship is mutually beneficial: platforms drive valuable traffic to news sites, and news content makes platforms more useful for users. Publishers actively seek to maximize their presence on platforms like Google and Facebook, demonstrating the value they receive from being linked.

Read the full piece here.

INTEREST OF AMICUS CURIAE

The International Center for Law & Economics (“ICLE”)[1] is a nonprofit, non-partisan global research and policy center aimed at building the intellectual foundations for sensible, economically grounded policy. ICLE promotes the use of law and economics to inform policy debates and has longstanding expertise evaluating antitrust law and policy.

ICLE has an interest in ensuring that antitrust law promotes the public interest by remaining grounded in sensible rules informed by sound economic analysis. That includes fostering consistency between antitrust law and other laws that proscribe unfair methods of competition, such as California’s Unfair Competition Law, and advising against far-reaching injunctions that could deteriorate the quality of mobile ecosystems, thereby harming the interests of consumers and app developers.

SUMMARY OF ARGUMENT

The District Court’s Order would enjoin Apple from charging “any commission or fee” on various purchases facilitated by Apple’s platform and in-app purchasing (IAP) mechanism. Epic Games, Inc. v. Apple Inc., No. 4:20-cv-05640-YGR (N.D. Cal. Apr. 30, 2025), ECF No. 1508 (“Order”). The Order claims this is required to prevent Apple from “maintaining an anticompetitive revenue stream,” id. at 75, or “reap[ing] supracompetitive operating margins” or “profits” that are “not tied to the value of its intellectual property, and thus …  anticompetitive.” Id. at 2.

The Order would impose numerous and complex duties to deal that were not identified in the previous injunction and have not been shown necessary to prevent foreclosure. Instead, the Order reflects a maximalist interpretation of the initial injunction—requiring micromanagement of Apple’s platform and dictating that Apple must offer business users free access to its ecosystem.

At the same time, the Order would effectively obviate various of Apple’s legal business practices, including steps Apple might take to protect the integrity and security of its platform and IAP, the privacy and data security of consumers who use the Apple ecosystem, and the value of its intellectual property, all of which were previously identified by this Court as legitimate. See Epic Games, Inc. v. Apple, Inc., 67 F.4th 946, 971 (9th Cir. 2023), cert. denied, 144 S. Ct. 681 (2024).

While the original injunction did not interfere with “Apple’s business justifications [which] focus on other parts of the Apple ecosystem and will not be significantly impacted by the increase of information to and choice for consumers,” Epic Games, Inc. v. Apple Inc., 559 F.Supp.3d 898, 1057 (2021) (“Epic v. Apple”), the Order is premised on an interpretation of the initial injunction that is no longer a “limited measure [that] balances the justification for maintaining a cohesive ecosystem with the public interest….” Id. Rather, it imposes complex, long-running duties to deal that are unsupported by the record and inconsistent with the relevant jurisprudence and the Supreme Court’s repeated caution that antitrust courts are not central planners.

ARGUMENT

I. Antitrust Courts Are Not Central Planners or Price Regulators

The Order’s compelled access remedy raises serious practical and legal concerns. Forcing firms to provide rivals with the “source of their advantage is in some tension with the underlying purpose of antitrust law,” because it risks chilling investment and turning courts into regulators of ongoing business relations. Verizon Comm’ns Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407–408 (2004) (“Trinko”). The Supreme Court has long cautioned against such remedies. See, e.g., Nat’l Collegiate Athletic Ass’n v. Alston, 141 S.Ct. 2141 (2021) (“Alston”); Pac. Bell Tel. Co. v. linkLine Comm’ns, Inc., 555 U.S. 438 (2009) (“linkLine”); Trinko.

The Trinko Court warned against enforced sharing precisely because it would require “courts to act as central planners, identifying the proper price, quantity, and other terms of dealing—a role for which they are ill suited.” Trinko, 540 U.S. at 408. Antitrust law does not generally require a monopolist to aid its competitors by sharing infrastructure or data because such forced sharing “may lessen the incentive for the monopolist, the rival, or both to invest” in valuable innovations. Trinko, 540 U.S. at 408. The linkLine Court clarified that Trinko encompasses pricing obligations like those imposed here, noting that enforcement of such a duty “would require courts simultaneously to police both the wholesale and retail prices” while “aiming at a moving target….”  linkLine, 555 U.S. at 453 (citing Trinko, 540 U.S. at 408).

Courts must be cautious in fashioning remedies that impose such duties, lest they “wind up impairing rather than enhancing competition, impose costs that ‘exceed efficiencies gained,’” and “suppress procompetitive innovation.” Alston, 594 U.S. 69, 102 (2021) (quoting Trinko, 540 U.S. at 415). Compelled-access remedies raise serious practical and legal concerns, as they risk chilling investment, while turning courts into regulators of ongoing business relations.

II. The Order Ignores the Supreme Court’s Repeated Repudiation of Complex and Burdensome Duties to Deal

Such risks plainly are raised by the Order, which enjoins Apple from, inter alia, “[i]mposing any commission or any fee” on linked transactions, Order at 75, notwithstanding that “the Court did not select a rate,” Id. at 58, and that “Apple is entitled to … guard against the uncompensated use of its intellectual property.” Epic v. Apple, 559 F.Supp.3d at 1042. The factual recitations in the Order reveal the uncertainty Apple confronted in identifying a price for linked-out transactions that would comport with the original injunction. See, e.g., Order at 21.

The purported justification for a zero-price requirement is that the District Court had “found that ‘Apple’s 30% commission … allowed it to reap supracompetitive operating margins’ and was not tied to the value of its intellectual property, and thus, was anticompetitive.” Id. at 2. While imposing a specific commission might resolve the uncertainty, the District Court’s analysis highlights the difficulty of administering such duties-to-deal and the arbitrariness of its zero price mandate.

The Order notes that Apple “never correlated the value of its intellectual property to the commission it charges.” Order at 7. But what would such a correlation entail, and why would it be required of Apple? Typically, the price system tests the value of intellectual property. Antitrust law recognizes that even monopoly can arise “as a consequence of a superior product, business acumen, or historic accident.” United States v. Grinnell Corp., 384 U.S. 563, 571 (1966). For that reason, antitrust law does not condemn monopoly itself. Id. at 570–71; see also Trinko, 540 U.S. at 407–08.

It is conceivable that some price could be found exclusionary, foreclosing competition to an extent prohibited by, e.g., Section 2 of the Sherman Act. But given the benefits of Apple’s platform and IAP and the need to maintain incentives for future investment, competition cannot require a rate of zero percent. Apart from a conclusory declaration that a 27% commission for linked purchases is anticompetitive, neither the Order nor Epic v. Apple provides any analysis of a price threshold at which a commission would become exclusionary.

Further, attempting to maximize profits within the confines of an injunction cannot be a violation. Yet the District Court concluded that Apple’s efforts to do so were inherently anticompetitive. See, e.g., Order at 17. This Court has admonished such conflating of  “the desire to maximize profits with an intent to ‘destroy competition itself.’ … [T]he goal of antitrust law is not to force businesses to forego profits or even ‘[t]he opportunity to charge monopoly prices,’ which is ‘what attracts “business acumen” in the first place.’” Fed. Trade Comm’n v. Qualcomm Inc., 969 F.3d 974, 990, 994, fn. 15 (9th Cir. 2020) (internal quotation and citation omitted)) (“Qualcomm”).

Seeking to ground its conclusion that Apple’s compliance efforts were anticompetitive, the District Court contends that summing Apple’s 27% rate and other costs entails that linked-out commission costs would exceed Apple’s 30% IAP commission. It thus finds that Apple’s linked-out commission “forecloses competitive alternatives.” Order at 60 (emphasis in original). The Court bases its conclusion of a violation on a “price squeeze” claim—asserting that, by pricing its own alternative (IAP at 30%) lower than the effective price required by its linked-out commission, Apple effectively eliminates the linked-out option as a competitive alternative.

But “[r]ecognizing price-squeeze claims would require courts simultaneously to police both the wholesale and retail prices to ensure that rival firms are not being squeezed.” linkLine, 555 U.S. at 453. This would compound the enforcement problems inherent in duties to deal because “courts would be aiming at a moving target, since it is the interaction between these two prices that may result in a squeeze.” Id.

The Order exemplifies the problem: the District Court contends that Apple’s linked-out commission violates its prior injunction because of the interaction between Apple’s commission and developers’ other costs. To determine when that interaction effectively forecloses linked-out transactions  thus depends on external payment processing (and other) costs over which Apple has no control—costs that are certain to vary across developers, apps,  and times. It also depends on app developers’ choice of payment processors. For virtually any commission Apple might set, a developer could choose a payment processor with fees that, combined with Apple’s commission, exceed 30%. This moving target precludes Apple’s ability to identify the price that would comply with the Order—precisely the scenario that the linkLine Court found “perhaps most troubling.” Id. at 453.

LinkLine explains why that is untenable: “[H]ow is a judge or jury to determine a ‘fair price?’ Is it the price charged by other suppliers of the primary product? None exist. Is it the price that competition ‘would have set’ were the primary level not monopolized? How can the court determine this price without examining costs and demands, indeed without acting like a rate-setting regulatory agency, the rate-setting proceedings of which often last for several years? Further, how is the court to decide the proper size of the price ‘gap?’ Must it be large enough for all independent competing firms to make a ‘living profit,’ no matter how inefficient they may be? … And how should the court respond when costs or demands change over time, as they inevitably will?” Linkline, 555 U.S. at 454 (internal citation omitted).

These concerns apply in spades when a duty to deal arises from a judicially-ordered injunction, the violation of which threatens criminal contempt. “‘No court should impose a duty to deal that it cannot explain or adequately and reasonably supervise. The problem should be deemed irremedia[ble] by antitrust law when compulsory access requires the court to assume the day-to-day controls characteristic of a regulatory agency.’” LinkLine, 555 U.S. at 453 (quoting Trinko, 540 U.S. at 415).

The District Court’s rationale for what is manifestly rate setting is opaque. Antitrust law does not prohibit supracompetitive pricing in itself; and it recognizes that intellectual property rights are predicated on the promise of supracompetitive pricing, which provide incentives to make fixed-cost investments in research and development. See Trinko, 540 U.S. at 407-08; Qualcomm, 969 F.3d at 994. The District Court’s stipulation of a zero-price commission ignores the difficulty of setting any price that will remedy prior (allegedly exclusionary) conduct, compensate for Apple’s intellectual property, or account for an allegedly anticompetitive price differential (the extent of which is partly determined by the pricing decisions and conduct of non-parties).

III. The Order Is Not Tailored to the Harm Found at Trial

As the D.C. Circuit has observed, “relief should be tailored to fit the wrong creating the occasion for the remedy.” United States v. Microsoft, 253 F.3d 34, 107 (D.C. Cir. 2001) (“Microsoft”); and it “must base its relief on some clear ‘indication of a significant causal connection between the conduct enjoined or mandated and the violation found directed toward the remedial goal intended.’” Id. at 105 (citation omitted).

The District Court insists that its order “require[s] no affirmative action on Apple’s part,” Order at 76, implying that no further findings are required. But this strains credulity. First, the practices enjoined—including the charging of any positive price for linked-out payments—were not found unlawful at trial, and there is no explanation in the Order of how they remediate the finding of a UCL violation. At the same time, there is no practical way for Apple to comply with the Order without undertaking numerous and considerable affirmative actions, or to do so without risk to its IAP, its platform, and the consumers who choose to use them. In addition, the Order goes significantly further than the original injunction: It not only requires that Apple eliminate practices that prevent competition with IAP, but, in effect, requires the creation of a frictionless steering experience for the benefit of competitors—and to do so for free. Order at 75–6.

Remedies should target specific anticompetitive acts without deterring the competitive process that benefits consumers. See, e.g., Microsoft, 253 F.3d at 107; see also Herbert J. Hovenkamp, Structural Antitrust Relief Against Digital Platforms, 7 J. LAW & INNOVATION 57, 64 (2024). To ignore this principle risks doing more harm than good. “Fashioning appropriate equitable antitrust relief requires that courts balance the benefit to competition against the hardship or competitive disadvantage the remedy may cause.” Ginsburg v. InBev NV/SA, 623 F.3d 1229, 1235 (8th Cir. 2010).

The history of antitrust remedies shows that they fail precisely when they overindex on harms and ignore the benefits that may also arise from ambiguous conduct and complex market structures. See generally Robert W. Crandall & Kenneth G. Elzinga, Injunctive Relief in Sherman Act Monopolization Cases, 21 RES. LAW AND ECON. 277, 335–37 (2004) (studying effects of behavioral remedies imposed in ten major monopolization cases). “Without a firm grasp of the economic forces that are driving changes in market structure, [courts] cannot be expected to design ‘relief’ that will result in increased competition, lower prices, and consumer benefits.” Id. at 335.

The Order also ignores the competitive and consumer benefits of Apple’s relatively “closed” distribution model, which allows Apple to curate the App Store’s apps and payment options. For example, categorically and permanently enjoining Apple from excluding “certain categories of apps and developers from obtaining link access” significantly impairs Apple’s ability to protect consumers against fraudulent apps. Prohibiting Apple from placing any restrictions on apps that “pass[] on product details, user details or other information that refers to the user …” ignores the risks to privacy and personal data that such practices can entail. Likewise, prohibiting Apple from requiring “anything other than a neutral message apprising users that they are going to a third-party site” prevents Apple from excluding undesirable or harmful language on its platform. Apple’s App Store guidelines address these concerns by excluding apps that pose data security threats, threaten to impose physical harm on users, or undermine child-safety filters. These rules increase trust between users and previously unknown developers and reduce user fears about payment fraud. Yet the Order does not weigh the costs and benefits of such restrictions or question whether they are necessary to remedy a violation of California law.

There is also a serious risk of freeriding. Rivals could mimic Apple’s curation while undercutting it on price. This would not enhance competition on the merits, but eviscerate it, by eroding Apple’s incentives to enforce such rules. To impose a zero price on linked-out transactions effectively assumes that the appropriate level of curation is itself zero. But that cannot be correct: Apple’s closed business model enables it to maintain a high standard of performance on iOS by excluding apps and payment systems that might impair it, ensuring that unscrupulous developers cannot impose negative externalities on the entire ecosystem.

[1] No counsel for a party contributed to authoring this brief, and no party made a monetary contribution intended to fund the preparation or submission of this brief. See Fed. R. App. P. 29(a)(4)(E).

Introduction

We are grateful for the opportunity to respond to the California Law Revision Commission’s study of antitrust law with these comments on Memorandum 2025-21 on proposed policy options to address single-firm conduct (“the Memorandum”).[1] The International Center for Law & Economics (ICLE) is a nonprofit, nonpartisan global research and policy center based in Portland, Oregon. ICLE was founded with the goal of building the intellectual foundations for sensible, economically grounded policy. ICLE promotes the use of law & economics methodologies to inform public-policy debates, and has longstanding expertise in the evaluation of competition law and policy. ICLE’s interest is to ensure that competition law remains grounded in clear rules, established precedents, a record of evidence, and sound economic analysis.

We appreciate the Commission’s efforts to modernize California’s antitrust laws (the Cartwright Act) and its openness to public input during this process. Our comments address three critical issues raised by the Memorandum’s options for a new single-firm-conduct (SFC) provision, and we urge the Commission to proceed with caution and economic clarity.

As background, the Memorandum outlines three options for a Cartwright Act amendment targeting single-firm monopolistic conduct.

• Option One would mirror the traditional language of Section 2 of the federal Sherman Antitrust Act (prohibiting monopolization and attempts to monopolize) with an added reference to monopsony issues. It would also add interpretive guidance to “untether” California law from restrictive federal precedents.
• Option Two would expand the basic provision by incorporating a broader range of potential harms, and possibly a departure from the conventional rule-of-reason framework.
• Option Three, labeled an “Exclusionary Conduct” provision, represents the most dramatic break from U.S. antitrust norms: it uses novel terminology and defines unlawful single-firm conduct in terms of harm to a firm’s “trading partners” (customers or suppliers), rather than focusing primarily on harm to competition or consumers.

Each option is accompanied by proposed legislative findings and declarations that emphasize the Commission’s intent to distance California law from federal antitrust jurisprudence. Unfortunately, this change of course—particularly the sharp divergence from well-established U.S. antitrust principles—would be counterproductive.

There are important reasons to believe that it would be unwise to untether California antitrust law from U.S. antitrust law’s error-cost framework, effects-based analysis, and consumer welfare standard. Abandoning these principles in favor of a more interventionist (or European-inspired) approach would likely chill innovation and harm consumers in the long run, as we explained in our prior comments to the Commission.[2] These comments further caution against expanding antitrust enforcement to protect “trading partners” (such as suppliers or workers) as a distinct objective. Using antitrust law to shield an idiosyncratic selection of rivals and other trading partners, rather than focusing on protecting competition and consumers, would risk politicizing enforcement and undermining economic efficiency.

Finally, we caution against incorporating monopsony (buyer-power) or novel “dominant buyer” considerations into a single-firm conduct rule, absent a sound empirical and legal framework. There is currently a lack of consensus on such fundamental issues as market definition, competitive effects, and how to balance harms to workers versus consumers.[3] It would therefore be premature to enact sweeping new prohibitions aimed at employer market power or other monopsonistic conduct before these complex economic and policy questions are resolved.

In the sections that follow, we elaborate on each of these points. First, we explain why California should retain alignment with the consumer-welfare-centric, effects-based approach of U.S. antitrust law, rather than adopt a “precautionary” European-styled regime that presumes harm from large firms. Second, we address the issues surrounding monopsony power in labor markets, arguing that regulators should not rush to impose broad new liabilities on single-firm conduct involving labor or other input markets without robust evidence and clear standards. Third, we discuss the dangers of shifting antitrust focus from consumers to “trading partners,” highlighting the potential for politicized enforcement and reduced efficiency. We conclude by urging the Commission to carefully calibrate any reforms so that California’s antitrust law remains a force for consumer welfare and innovation.

I. The Risks of Untethering California Antitrust Law from Established US Antitrust Principles

The Memorandum indicates that California wishes to “free” itself from decades of restrictive jurisprudence by the U.S. federal courts. It would do so by nullifying rulings of the U.S. Supreme Court that limit its ability to find antirust liability[4] and by disavowing the error-cost framework’s preference for false negatives over false positives in antitrust analysis.[5] This is misguided, as there are important reasons why the overenforcement of antitrust laws is likely more harmful than their underenforcement.

Of course, no one believes that markets are perfect, or that antitrust enforcement can never be appropriate. The question is, instead, marginal and comparative: Given the realities of politics, economics, the limits of knowledge, and the errors to which they can lead, which imperfect response is preferable at the margin? Or, phrased slightly differently, should we give California antitrust enforcers and private plaintiffs more room to operate, or should we continue to cabin their operation in careful, economically grounded ways that are aimed squarely at optimizing (not minimizing) the extent of antitrust enforcement?

This may be a question about changes at the margin, but it is far from marginal. It goes to the heart of the market’s role in the modern economy.

While there are many views on this subject, arguments that markets have failed us in ways that more extensive antitrust enforcement would correct are poorly supported.[6] We should certainly continue to look for conditions where market failures of one kind or another may justify intervention, but we should not make policy on the basis of mere speculation. And we should certainly not do so without considering the likelihood and costs of regulatory failure, as well. In order to reliably adopt a sound antitrust policy that might improve upon the status quo (which has evolved over a century of judicial decisions, generally alongside the field’s copious advances in economic understanding), we would need much better information about the functioning of markets and the consequences of regulatory changes than is currently available.

To achieve this, antitrust law and enforcement policy should, above all, continue to adhere to the error-cost framework, which informs antitrust decisionmaking by comparing the relative costs of mistaken intervention with mistaken nonintervention.[7] Specific cases should be addressed as they arise, with an implicit understanding that, particularly in digital markets, precious few generalizable presumptions can be inferred from a prior case. The overall stance should be one of restraint, reflecting the state of our knowledge.[8] We may well be able to identify anticompetitive harms in certain cases, and when we do, we should enforce the current laws. But we should not overestimate our ability to fine-tune market outcomes without causing more harm than benefit.

Allegations that the modern antitrust regime is insufficient take as a given that there is something wrong with antitrust doctrine or its enforcement, and cast about for policy “corrections.” The common flaw with these arguments is that they are not grounded in robust empirical or theoretical support. Indeed, as one of the influential papers that (ironically) is sometimes cited to support claims for more antitrust puts it:

An alternative perspective on the rise of [large firms and increased concentration] is that they reflect a diminution of competition, due to weaker U.S. antitrust enforcement. Our findings on the similarity of trends in the United States and Europe, where antitrust authorities have acted more aggressively on large firms, combined with the fact that the concentrating sectors appear to be growing more productive and innovative, suggests that this is unlikely to be the primary explanation, although it may be important in some industries.[9]

Rather, such claims are little more than hunches that something must be wrong, conscripted to serve a presumptively interventionist agenda. Because they are merely hypotheses about things that could go wrong, they do not determine—and rarely even ask—if heightened antitrust scrutiny and increased antitrust enforcement are actually called for in the first place.

Implicitly shunning the evidence demonstrating that markets have become more, not less, competitive,[10] the Memorandum proposes that California adopt a firm stance in favor of false positives over false negatives—in other words, that it tolerate erroneously condemning procompetitive behavior in exchange for avoiding the risk of erroneously accepting anticompetitive conduct:

The Commission can nullify these principles by asserting in that it favors overdeterrence and need not follow federal law.

The Legislature hereby finds and declares all of the following:

(a) Courts shall liberally interpret California’s antitrust laws to best promote free and fair competition and be mindful that California favors the risk of over-enforcement of antitrust laws over the risk of under-enforcement.[11]

This presupposes that the risk of antitrust underenforcement is greater than the risk of overenforcement. Of course, it is possible that, in some markets, there are harms that are missed for which enforcers should have been better equipped. But advocates of reform have yet to adequately explain much of what we would need to know to make such determinations, let alone to craft the right approach if we did. Antitrust law should be refined based on an empirical demonstration of harms, as well as a careful weighing of those harms against the losses to social welfare that would arise if procompetitive conduct were deterred alongside anticompetitive conduct.

Dramatic new statutes to undo decades of antitrust jurisprudence or reallocate burdens of proof with the stroke of a pen are unjustified. Suggesting that antitrust law should uniformly err on the side of enforcement, when the effect of the conduct at issue on competition is uncertain, would be an unsupported statement of a political preference, not one rooted in sound economics or evidence.

The primary evidence adduced to support the claim that underenforcement (and thus, the risk of Type II errors) is more significant than overenforcement (and thus, the risk of Type I errors) is that there are not enough cases brought and won. But even if this is superficially true, such a conclusion is just as consistent with a belief that the current regime is functioning well as it is with a belief that it is functioning poorly.

At the same time, some critics (including the Memorandum’s authors) contend that a heightened concern for Type I errors stems from a faulty concern that Type 2 errors are not really problematic, as the market itself will correct the situation, which they view as naïve.[12]

But Judge Frank Easterbrook’s famous argument for enforcement restraint is not based on the assertion that markets are perfectly self-correcting. Rather, his claim is that the (undeniable) incentive of new entrants to compete for excess profits in monopolized markets operates to limit the social costs of Type II errors more effectively than the legal system’s ability to correct or ameliorate the costs of Type I errors. The logic is quite simple, and not dependent on the strawman notion of market perfection:

If the court errs by condemning a beneficial practice, the benefits may be lost for good. Any other firm that uses the condemned practice faces sanctions in the name of stare decisis, no matter the benefits. If the court errs by permitting a deleterious practice, though, the welfare loss decreases over time. Monopoly is self-destructive. Monopoly prices eventually attract entry. True, this long run may be a long time coming, with loss to society in the interim. The central purpose of antitrust is to speed up the arrival of the long run. But this should not obscure the point: judicial errors that tolerate baleful practices are self-correcting while erroneous condemnations are not.[13]

Moreover, anticompetitive conduct that is erroneously excused may be subsequently corrected, either by another enforcer, a private litigant, or another jurisdiction. Ongoing anticompetitive behavior will tend to arouse someone’s ire, whether it be competitors, potential competitors, customers, or input suppliers. That means such behavior will be noticed and potentially brought to the attention of enforcers. And for the same reason—identifiable harm—it may also be actionable.

By contrast, procompetitive conduct that does not occur because it is prohibited or deterred by legal action has no constituency and no visible evidence on which to base a case for revision. Nor does a firm improperly deterred from procompetitive conduct have any standing to sue the government for erroneous antitrust enforcement, or the courts for adopting an improper standard. Of course, overenforcement can sometimes be corrected, but the institutional impediments to doing so are formidable.

The claim that concern for Type I errors is overblown further rests on the assertion that “more up-to-date economic analysis” has undermined that position.[14] But that learning is, for the most part, entirely theoretical—constrained to “possibility theorems” divorced from realistic complications and the real institutional settings of decisionmaking. Indeed, the proliferation of such theories may actually increase—rather than decrease—uncertainty by further complicating the analysis, and asking generalist judges to choose from among competing theories without any realistic means to do so.[15]

Unsurprisingly, “[f]or over thirty years, the economics profession has produced numerous models of rational predation. Despite these models and some case evidence consistent with episodes of predation, little of this Post-Chicago School learning has been incorporated into antitrust law.”[16] Nor is it likely that the courts are making an erroneous calculation in the abstract. Evidence of Type I errors is hard to come by. But for a wide swath of conduct called into question by the “post-Chicago School” and other theories, the evidence of systematic problems is virtually nonexistent.[17]

Moreover, contrary to the Memorandum’s implications, U.S. antitrust law has not ignored potentially anticompetitive harm, and courts certainly aren’t blindly deferential to conduct undertaken by large firms. It is impossible to infer from the general “state of the world” or from perceived “wrong” judicial decisions that the current antitrust regime has failed, or that California, in particular, would benefit from a wholesale shift of its antitrust error-cost presumptions.

The Memorandum seeks to overturn these presumptions by nullifying three pillars of U.S. antitrust law: the U.S. Supreme Court’s decisions in Trinko, Amex, and Brooke Group.[18] As we explain in the following subsections, this approach is misguided on both legal and economic grounds.

A. Trinko Prevents Inefficient Free Riding that Risks Chilling Innovation

In dispensing with Trinko, the Memorandum brings the Cartwright Act closer to the EU’s approach to “refusals to deal.” U.S. and EU antitrust laws differ greatly when it comes to refusals to deal, however, and for good reason. While the United States has imposed strenuous limits on enforcement authorities or rivals seeking to bring such cases, EU competition law sets a far lower threshold for liability, thereby facilitating free riding by self-interested parties.

The U.S. approach is firmly rooted in the error-cost framework and, in particular, the conclusion that avoiding Type I (false-positive) errors is more important than avoiding Type II (false-negative) errors. As the Supreme Court held in Trinko:

[Enforced sharing] may lessen the incentive for the monopolist, the rival, or both to invest in those economically beneficial facilities. Enforced sharing also requires antitrust courts to act as central planners, identifying the proper price, quantity, and other terms of dealing—a role for which they are ill suited.[19]

In that case, the Supreme Court was unwilling to extend the reach of Section 2, cabining it to a very narrow set of circumstances:

Aspen Skiing is at or near the outer boundary of §2 liability. The Court there found significance in the defendant’s decision to cease participation in a cooperative venture. The unilateral termination of a voluntary (and thus presumably profitable) course of dealing suggested a willingness to forsake short-term profits to achieve an anticompetitive end.[20]

This highlights two key features of U.S. antitrust law concerning refusals to deal. To start, U.S. antitrust law generally does not apply the “essential facilities” doctrine—indeed, as the Court held in Trinko, “we have never recognized such a doctrine.”[21] Accordingly, in the absence of exceptional facts, upstream monopolists are rarely required to supply their product to downstream rivals, even if that supply is “essential” for effective competition in the downstream market.

As in most areas of antitrust policy, EU competition law is much more interventionist. Refusals to deal are a central theme of EU enforcement efforts, and there is a relatively low threshold for liability.[22] In theory, for a refusal to deal to infringe EU competition law, it must meet a set of fairly stringent conditions: the input must be indispensable, the refusal must eliminate all competition in the downstream market, and there must not be objective reasons that justify the refusal.[23] In practice, however, all of these conditions have been significantly relaxed by EU courts and the Commission’s decisional practice.[24] This is best evidenced by the lower court’s Microsoft ruling. As John Vickers notes:

[T]he Court found easily in favor of the Commission on the IMS Health criteria, which it interpreted surprisingly elastically, and without relying on the special factors emphasized by the Commission. For example, to meet the “new product” condition it was unnecessary to identify a particular new product… thwarted by the refusal to supply but sufficient merely to show limitation of technical development in terms of less incentive for competitors to innovate.[25]

The “coup de grace” to the limiting principles laid down in Bronner was arguably the European Court of Justice’s ruling in Android Auto, in which the court refused to apply Bronner in the context of digital platforms. The court discarded the indispensability criterion and found that mere convenience was sufficient to create an access obligation on the part of the dominant undertaking.[26] In general, but especially after the Android Auto ruling, it is apparent that EU competition law is far less concerned about the potential chilling effect on firms’ investments than is U.S. antitrust law.

The Memorandum’s additional proposal that liability should not turn on whether a defendant treated particular parties differently in exercising exclusionary conduct (including refusal to deal)[27] is a further move away from effects-based analysis and toward the European model. As Einer Elhauge has noted, there is an important distinction between unconditional and discriminatory exclusionary conduct:

Efforts to simply improve a firm’s own efficiency and win sales by selling a better or cheaper product at above-cost prices should enjoy per se legality without any general requirement to share that greater efficiency with rivals. But exclusionary conditions that discriminate on the basis of rivalry by selectively denying property or products to rivals (or buyers who deal with rivals) are not necessary to further ex ante incentives to enhance the monopolist’s efficiency, and should be illegal when they create a marketwide foreclosure that impairs rival efficiency.[28]

By seeking to impose liability, regardless of whether conduct is exercised in a discriminatory fashion, the Memorandum would remove the general protection under U.S. antitrust law for unconditional refusals to deal, and would instead apply the conditional standard to all exclusionary conduct.

B. Amex Correctly Updates Antitrust Law for Two-Sided Markets

In the face of evolving facts, procedural consistency and substantive accuracy require that legal doctrines change. Two-sided markets present novel business arrangements, the competitive dynamics and implications of which are incompletely captured by existing antitrust doctrines. In this context, the Supreme Court’s decision in Amex is uniquely important for the antitrust analysis of firms in the modern platform economy.[29] In a nutshell, Amex held that, in cases involving two-sided markets, plaintiffs must show harm on both sides of the market.

The Memorandum attempts to reverse the Supreme Court’s holding on platform vertical restraints in Amex by positing instead that showing harm on only one side of a multi-sided market suffices to prove antitrust liability.[30] As Greg Werden notes, however, “[a]lleging the relevant market in an antitrust case does not merely identify the portion of the economy most directly affected by the challenged conduct; it identifies the competitive process alleged to be harmed.”[31]

Particularly where novel conduct or novel markets are involved—and the relevant economic relationships are therefore poorly understood—market definition is crucial to determine “what the nature of [the relevant] products is, how they are priced and on what terms they are sold, what levers [a firm] can use to increase its profits, and what competitive constraints affect its ability to do so.”[32] This is the approach the Supreme Court employed in Amex.

The Memorandum’s proposal to overrule Amex in California is deeply misguided. The economics of two-sided markets are such that “there is no meaningful economic relationship between benefits and costs on each side of the market considered alone…. [A]ny analysis of social welfare must account for the pricing level, the pricing structure, and the feasible alternatives for getting all sides on board.”[33] Assessing anticompetitive harm with respect to only one side of a two-sided market will arbitrarily include and exclude various sets of users and transactions, and incorrectly assess the extent and consequences of market power.[34]

Indeed, evidence of a price effect on only one side of a two-sided platform can be consistent with either neutral, anticompetitive, or procompetitive conduct.[35] Only when output is defined to incorporate the two-sidedness of the product, and where price and quality are assessed on both sides of a sufficiently interrelated two-sided platform, is it even possible to distinguish between procompetitive and anticompetitive effects. In fact, “[s]eparating the two markets allows legitimate competitive activities in the market for general purposes to be penalized no matter how output-enhancing such activities may be.”[36]

Notably, while some scholars have opposed the Amex holding that both sides of a two-sided market must be included in the relevant market in order to assess anticompetitive harm, some of these critics appear to note that the problem is not that both sides should not be taken into account at all, but only that they should not be included in the same relevant market (thus, permitting a plaintiff to make out a prima-facie case by showing harm to just one side).[37] The language proposed in the Memorandum, however, would go even further, seemingly permitting a finding of liability based solely on harm to one side of a multi-sided market, regardless of countervailing effects on the other side:

In cases where a defendant’s business is a multi-sided platform, that the defendant’s conduct presents harm to competition on more than one side of the multi-sided platform, or that the harm to competition on one side of the multi-sided platform outweighs any benefits to competition on any other side(s) of the multi-sided platform.[38]

As in the Amex case itself, such an approach would confer benefits on certain platform-business users (in Amex, retailers) at the direct expense of consumers (in Amex, literal consumers of retail goods purchased by credit card).

Adopting such an approach in California—whose economy is significantly dependent on multisided digital-platform firms, including both incumbents and startups—would imperil the state’s economic prospects[39] and exacerbate the incentives for such firms to take jobs, investments, and tax dollars elsewhere.[40]

At a higher level, the Memorandum’s hostility toward the Amex ruling appears to be a function of a more generalized rebuke of vertical integration. According to the Memorandum, federal antitrust law has been distorted by the misguided presumption that vertical arrangements and unilateral conduct are unlikely to harm competition.[41] There are, however, sound empirical reasons why U.S. antitrust law treats vertical restraints more favorably than horizontal ones.

On the one hand, ever since the Supreme Court’s Leegin ruling, even price-related vertical restraints (such as resale price maintenance, or “RPM”) are assessed under the rule of reason in the United States.[42] The previous per-se condemnation of vertical agreements was economically (and, thus, legally) unsustainable. As Patrick Rey and Jean Tirole (hardly the most free market of economists) saw as long ago as 1986: “Another major contribution of the earlier literature on vertical restraints is to have shown that per se illegality of such restraints has no economic foundations.”[43]

While there is theoretical literature (rooted in so-called “possibility theorems”) that suggests firms could engage in anticompetitive vertical conduct, the empirical evidence strongly suggests that, even though firms do impose vertical restraints, it is exceedingly rare that they have net anticompetitive effects. Nor is the relative absence of such evidence for a lack of looking: countless empirical papers have investigated the competitive effects of vertical integration and vertical contractual arrangements and found predominantly procompetitive benefits or, at worst, neutral effects.[44] Accordingly, neither the change of stance toward vertical conduct nor the abandonment of Amex are justified on the basis of empirical evidence.

C. Forfeiting Brooke Group Risks Castigating Procompetitive Conduct

There is a reason why the evidentiary bar for proving predatory pricing is so high: antitrust law encourages high output and low prices. Reflecting a proper reading of the error-costs framework, U.S. antitrust law errs on the side of underenforcement due to a justified concern that castigating low prices may deter precisely the sort of conduct that antitrust law is meant to promote. As such, the standard of proof for predatory pricing—i.e., claims of exclusionary conduct resulting from pricing below cost—is rightly set high. This is, in part, to dissuade self-interested plaintiffs who may look to shield themselves from a more efficient competitor.

In Brooke Group, the Supreme Court thus subjected allegations of predatory pricing to two strict conditions: 1) monopolists must charge prices that are below some measure of their incremental costs; and 2) there must be a realistic prospect that they will be able to recoup these first-period losses.[45] In laying out its approach to predatory pricing, the Supreme Court identified the risk of false positives and the clear cost of such errors to consumers. It therefore particularly stressed the importance of the recoupment requirement because, without recoupment, “predatory pricing produces lower aggregate prices in the market, and consumer welfare is enhanced.”[46]

Accordingly, in the United States, authorities must prove that there are constraints that prevent rival firms from entering the market after the predation scheme, or that the scheme itself would effectively foreclose rivals from entering in the first place.[47] Otherwise, competitors would undercut the predator as soon as it attempts to charge supracompetitive prices to recoup its losses. In such a situation— without, that is, the strong likelihood of recouping the lost revenue from underpricing—the overwhelming weight of economic learning (to say nothing of simple logic) makes clear that predatory pricing is not a rational business strategy.[48] Thus, apparent cases of predatory pricing—in the absence of the likelihood of recoupment—are most likely not, in fact, predatory. Deterring or punishing them would likely actually harm consumers.

Once again, the Memorandum attempts to approximate EU competition law, where the standard applied to predatory pricing is much laxer and therefore more likely to injure consumers. Authorities must prove only that a company has charged a price below its average variable cost, in which case its behavior is presumed to be predatory.[49] Even when a firm imposes prices that are between average variable and average total cost, it can be found guilty of predatory pricing if authorities show that its behavior was part of “a plan to eliminate competition.”[50] Most significantly, in neither case is it necessary for authorities to show that the scheme would allow the monopolist to recoup its losses.[51]

By affirmatively dispensing with the limitations laid down in Brooke Group,[52] the Memorandum effectively recommends that California legislators shift California predatory-pricing law toward the European model. Unfortunately, such a standard has no basis in economic theory or evidence—not even in the “strategic” economic theory that arguably challenges the dominant “Chicago School” understanding of predatory pricing.[53] Indeed, strategic predatory pricing still requires some form of recoupment and the refutation of any convincing business justification offered in response.[54] As Bruce Kobayashi and Tim Muris emphasize, the introduction of new possibility theorems, particularly uncorroborated by rigorous empirical reinforcement, does not necessarily alter the implementation of the error-cost analysis:

While the Post-Chicago School literature on predatory pricing may suggest that rational predatory pricing is theoretically possible, such theories do not show that predatory pricing is a more compelling explanation than the alternative hypothesis of competition on the merits. Because of this literature’s focus on theoretical possibility theorems, little evidence exists regarding the empirical relevance of these theories. Absent specific evidence regarding the plausibility of these theories, the courts… properly ignore such theories.[55]

The case of predatory pricing illustrates a crucial distinction between European and American competition law. The recoupment requirement embodied in U.S. antitrust law essentially differentiates aggressive pricing behavior that improves consumer welfare by leading to overall price decreases from predatory pricing that reduces welfare due to ultimately higher prices. In other words, it is entirely focused on consumer welfare.

The European approach, by contrast, reflects structuralist considerations that are far removed from a concern for consumer welfare. Its underlying fear is that aggressive pricing by dominant companies—even to the benefit of consumers—could, by their very success, engender more concentrated market structures. It is simply presumed that these less-atomistic markets are invariably detrimental to consumers. Both the Tetra Pak and France Télécom cases (and the recent Qualcomm judgment) offer clear illustrations of the European Court of Justice’s reasoning on this point:

[I]t would not be appropriate, in the circumstances of the present case, to require in addition proof that Tetra Pak had a realistic chance of recouping its losses. It must be possible to penalize predatory pricing whenever there is a risk that competitors will be eliminated… The aim pursued, which is to maintain undistorted competition, rules out waiting until such a strategy leads to the actual elimination of competitors.[56]

In short, the European approach leaves much less room for analysis of a pricing scheme’s concrete effects, making it much more prone to false positives than the Brooke Group standard in the United States. It ignores not only the benefits that consumers may derive from lower prices, but also the chilling effect that broad predatory-pricing standards may exert on firms that attempt to attract consumers with aggressive pricing schemes. There is no basis for enshrining such an approach in California law.

II. The Broken Mirror of Monopoly and Monopsony Power

The potential amendments described in the Memorandum suggest that antitrust law has traditionally obviated monopsony power.[57] They also appear to assume that there is no reason to treat monopsony power any differently than monopoly power.[58] Indeed, in many parts of the Memorandum, “monopoly” and “monopsony” are placed on equal footing. For instance, Option One includes the following provision:

Section 16720.1 is added to read: It is unlawful for a person to monopolize or monopsonize, to attempt to monopolize or monopsonize, to maintain a monopoly or monopsony, or to combine or conspire with another person to monopolize or monopsonize, in any part of trade or commerce.[59]

There are, however, important differences between monopoly and monopsony power that militate against their equivalent treatment under antitrust law. Indeed, despite the growing interest among economists, lawyers, and policymakers in the concept of monopsony power—particularly in labor markets—significant empirical and conceptual challenges remain in the use of antitrust law to address labor monopsony.

On the empirical front, the evidence on the extent and impact of labor monopsony is mixed.[60] While some studies have found evidence of labor-market concentration and its effects on wages, these studies often rely on indirect measures that have limited applicability to antitrust cases.[61] More direct estimates of monopsony power are rare, and often rely on stylized economic models that may not capture the complexities of real-world labor markets.[62] Moreover, the economics literature has not reached a clear consensus on the appropriate framework to assess labor-market power in antitrust contexts.[63]

Conceptual challenges also abound. Unlike monopoly (seller power), which directly affects final consumer prices, monopsony power is exerted upstream (e.g., an employer paying lower wages, or a buyer paying lower input prices). This means any assessment of competitive harm must grapple with effects at multiple levels of the supply chain. For instance, if a dominant buyer (like a large employer) uses its power to push wages down, while there is direct harm to workers, downstream consumers might benefit, at least in part, from lower costs (through lower product prices). Traditional antitrust doctrine and existing enforcement tools are not (yet) well-equipped to balance these cross-market effects. In a recent law-review article about monopsony issues and antitrust, ICLE scholars explain:

All supply chains end with final consumers, and antitrust policy must grapple with how to balance effects at different levels of the distribution chain.[64]

As a result, when applying antitrust law to monopsony situations, policymakers must consider the “pass through” of upstream cost savings to downstream prices. This complexity is not present in-run-of-the-mill monopoly cases. There is also no established consensus on how to weigh a dollar of harm to workers against a dollar of benefit to consumers, or how much pass through might be sufficient to offset a monopsony harm. This is an area of ongoing economic debate, which is one reason courts have been cautious in pure labor-monopsony cases.[65]

Defining the relevant labor or input market also poses thorny issues. Defining a labor market involves drawing boundaries around job types, skills, industries, and geographic areas, which can be highly “blurry” and fact-dependent. Is an assembly-line worker at a grocery warehouse in the same market as an assembly-line worker at a car factory? Does a tech engineer in San Francisco compete in the same labor market as one in Los Angeles or Bangalore? These questions illustrate why labor markets do not always map neatly onto product markets, and why antitrust law’s conventional tools may not translate cleanly.

Recent enforcement efforts tend to gloss over the unsettled state of the economics literature on these points. For example, novel market definitions, such as the Federal Trade Commission’s proposed “unionized grocery workers” labor market in a recent merger case, have raised eyebrows about whether such definitions align with economic reality.[66] The fact that agencies are experimenting in this area underscores that methodologies are still in flux.

Crucially, there remains no clear legal standard for how to treat harms to workers or suppliers vis-à-vis consumers under the antitrust laws. Under the prevailing consumer welfare standard, antitrust plaintiffs must typically show that the challenged conduct harms consumers or overall competition, not just that it harms a subset of suppliers or workers. In practice, this has meant that cases purely alleging harm to workers (like wage-fixing or no-poach agreements) often struggle unless they can connect that harm to reduced output or quality in a consumer market.

Indeed, recent criminal cases against naked no-poach agreements have faced difficulties in court, and even civil monopsony cases run into the requirement to demonstrate downstream harm. Some advocates argue that the law should be changed to explicitly recognize harm to workers as sufficient by itself. But doing so would be a major departure from the consumer welfare principle, essentially redefining the goal of antitrust. If California were to outlaw single-firm conduct that harms workers (e.g., wage suppression) without regard to consumer impact, it would need to confront how to trade off these interests. Should a practice that moderately harms workers but greatly benefits consumers be unlawful, or vice versa? There is no consensus on this normative question. The Commission’s Memorandum does not provide an answer, and neither does the academic literature on the topic.

Given these uncertainties, it would be premature to explicitly incorporate monopsony considerations into a new SFC. This is not to say antitrust should ignore labor issues entirely—rather, the state of economic knowledge militates against a rush to condemn conduct based on simplistic models or incomplete evidence. While concerns about labor monopsony are real and worth studying, “they are not supported by empirical and theoretical foundations sufficient to bear the weight of these galvanized efforts” at aggressive enforcement.[67]

The academic literature on the extent of labor-market power is mixed and sometimes contradictory, with estimates of wage-setting power varying widely by industry and methodology.[68] The effects of employer concentration on wages and employment are likewise debated. Some data suggest higher concentrations depress wages but that literature is difficult to interpret. As Steven Berry, Martin Gaynor, and Fiona Scott Morton write:

A main difficulty in [the monopsony power literature] is that most of the existing studies of monopsony and wages follow the structure-conduct-performance paradigm; that is, they argue that greater concentration of employers can be applied to labor markets and then proceed to estimate regressions of wages on measures of concentration. For the same reasons we discussed above, studies like this may provide some interesting descriptions of concentration and wages but are not ultimately informative about whether monopsony power has grown and is depressing wages.[69]

In short, the evidence base is still being developed.

Furthermore, remedies for monopsony are not straightforward. In monopoly cases, a successful suit can result in lower prices for consumers or structural changes that foster competition. In monopsony (e.g., labor) cases, a remedy might involve raising wages. But regulators must ensure that such remedies don’t unintentionally harm downstream consumers or induce other distortions. There’s also the question of whether antitrust is the optimal tool: labor issues can often be addressed by labor-specific regulation (minimum-wage laws, collective-bargaining rights, job-mobility policies like noncompete-clause bans), which may target the problem more directly than antitrust litigation could.

All of this suggests that California should not jump ahead of the evolving research and federal enforcement efforts by embedding unproven monopsony theories into its law. At this juncture, developing better measures of labor-market power, studying specific instances of monopsony harm, refining economic models, and clarifying enforcement priorities would be more productive policy avenues. The inclusion of monopsony or “dominant buyer” language in a single-firm conduct provision should not outpace the empirical and legal consensus. California can play a constructive role in this area by fostering further study and perhaps by testing cautiously in individual cases, rather than by enacting sweeping statutory mandates before the requisite analysis is in place.

III. Protecting ‘Trading Partners’ Instead of Consumers

Protecting “trading partners”—defined as “parties with which the defendant deals, either as a customer or supplier”—has attracted growing interest in antitrust law in recent years.[70] While this approach may reflect legitimate concerns about power imbalances, it risks undermining the coherence, neutrality, and effectiveness of antitrust enforcement centered on the consumer welfare standard.

The consumer welfare standard, long the cornerstone of U.S. antitrust policy, focuses on such economic outcomes as lower prices, higher output, improved quality, and innovation. It offers a relatively objective and administrable framework for courts and agencies.[71] In contrast, protecting trading partners introduces a pluralistic and often conflicting set of aims. Suppliers may benefit from higher input prices, while consumers suffer; protecting business customers may enhance their profits, but at the expense of costs to consumers. These tradeoffs make it difficult to formulate a consistent enforcement standard.

One major risk is the politicization of antitrust law. Antitrust law depends on a stable and principled basis for meaningful and effective enforcement. Broadening its purpose to protect trading partners opens the door to more discretionary and potentially more politicized decisionmaking. Imbuing antitrust with open-ended objectives would risk creating a sort of “meta-legislation” that, as a result, increases the returns to influencing enforcement policy and outcomes. In turn, this raises firms’ incentives to expend their resources on “destructive” rather than “productive” entrepreneurship—i.e., rent seeking.[72]

Another major risk that flows from the politicization of antitrust relates to protecting inefficient firms at the expense of consumer welfare. Pursuing the welfare of firms under the rubric of “trading partner welfare” may provide a lifeline to less-efficient firms, who may be encouraged to acquire through litigation what they could not through competition.[73] But antitrust law is not meant to insulate businesses from competition simply because they are small or disadvantaged—quite the contrary. Under a trading-partner theory, enforcement actions could target practices like aggressive pricing or exclusive dealing—not because they harm competition, but because they harm specific upstream or downstream partners. This would represent a dramatic and unjustified break from established antitrust principles.

Finally, incorporating trading-partner protection into antitrust enforcement risks conflating it with other legal domains better suited to address such concerns. Contract law and regulatory policy already provide avenues to address imbalances in supplier or customer relationships. Antitrust law is “comparatively disadvantaged” to adjudicate questions in these legal domains, especially when such cases involve difficult questions that may prejudice consumer welfare.

To be clear, existing antitrust frameworks that protect consumers are often perfectly adequate to address practices that may also harm trading partners. For instance, the rule-of-reason analysis under antitrust law frequently incorporates considerations on trading partners when consumer harm is also present. Expanding the scope of antitrust to protect trading partners in isolation would dilute its doctrinal rigor and increase the risk of regulatory and judicial overreach.[74]

Reorienting antitrust law around the protection of trading partners may appear appealing when combined with (misguided) perceptions about rising corporate concentration. Besides lacking a solid empirical basis, however, such a shift would destabilize the objective foundation of antitrust enforcement, politicize regulatory discretion, and entangle antitrust with redistributive aims, rather than policing inefficient conduct that harms consumers. A more prudent approach would retain the consumer welfare standard while using complementary policies—such as tax reforms or contract law—to address broader concerns.

IV. Conclusion

ICLE appreciates the opportunity to provide input on the CLRC’s single-firm conduct policy options. In this comment letter, we have articulated three core recommendations:

1. Maintain California’s antitrust alignment with the fundamental U.S. framework—grounded in the consumer welfare standard, effects-based analysis, and error-cost caution—and resist calls to “Europeanize” monopolization law in a way that would diminish innovation and consumer benefits.
2. Be cautious in addressing monopsony or buyer-side dominance in any new statute, acknowledging current economic uncertainties and the need for a clear framework. It is better to proceed incrementally, guided by evidence from both economics and actual cases, than to impose broad prohibitions that could overshoot or conflict with the consumer welfare goal.
3. Refrain from expanding antitrust to protect “trading partners” (suppliers, workers, or other stakeholders) as an end in itself, as this would politicize enforcement, protect less-efficient competitors, and divert antitrust from its pro-consumer mission. Competition, not competitors or contracting parties, should remain the focus of the law.

California’s antitrust laws can and should evolve to address modern economic realities. That evolution must, however, be informed by rigorous analysis and respect for the lessons learned over decades of antitrust enforcement. The consumer welfare standard and error-cost framework are not antiquated relics; they are safeguards that ensure antitrust intervention helps, rather than harms, the public. Departing from them, whether by embracing presumptions of guilt for large firms or by turning antitrust into a multipurpose tool for various interest groups, would risk repeating historical mistakes.

As we have previously observed, “once antitrust is expanded beyond its economic constraints and imbued with political content, it ceases to be a uniquely valuable tool for addressing real economic harms to consumers, and becomes a tool for routing around legislative and judicial constraints,”[75] undermining its legitimacy and effectiveness. We urge the Commission to avoid that path.

[1] Staff Memorandum, 2025-21 Draft Language for Single Firm Conduct Provision, Calif. Law Revis. Comm. (Mar. 24, 2025), available at https://clrc.ca.gov/pub/2025/MM25-21.pdf [hereinafter “Memorandum”].

[2] Geoffrey Manne & Dirk Auer, Against the ‘Europeanization’ of California’s Antitrust Law (Comments of the International Center for Law & Economics on the Single-Firm Conduct Expert Report California Law Revision Commission Study of Antitrust Law, Study B-750, May 7, 2024), available at https://laweconcenter.org/resources/against-the-europeanization-of-californias-antitrust-law.

[3] Geoffrey A. Manne, Brian C. Albrecht, & Dirk Auer, Labor Monopsony and Antitrust Enforcement: A Distorting Mirror, 74 DePaul L. Rev. 1119 (2025).

[4] Memorandum, at 12-13.

[5] Id., at 11.

[6] Among other things, the expert report leading up to the current memorandum argued that antitrust should be used to address alleged policy concerns broader than protecting competition, and should accept reductions in competition to do so. See Antitrust Law — Study B-750, Calif. Law Revis. Comm. at 2, available at http://www.clrc.ca.gov/B750.html (last revised Apr. 26, 2024) (“Nonetheless, these important values [‘broader social and political goals’] can influence the evidentiary standards that the Legislature instructs the courts to apply when handling individual antitrust cases. For example, the California Legislature could instruct the courts to err on the side of enforcement when the effect of the conduct at issue on competition is uncertain.”). But as one of the authors of the expert report has noted elsewhere: “while antitrust enforcement has a vital role to play in keeping markets competitive, antitrust law and antitrust institutions are ill suited to directly address concerns associated with the political power of large corporations or other public policy goals such as income inequality or job creation.” Carl Shapiro, Antitrust in a Time of Populism, 61 Int’l J. Indus. Org. 714, 714 (2018).

[7] Geoffrey A. Manne & Joshua D. Wright, Innovation and the Limits of Antitrust, 6 J. Comp. L. & Econ. 153 (2010).

[8] See Robert W. Crandall & Clifford Winston, Does Antitrust Policy Improve Consumer Welfare? Assessing the Evidence, 17 J. Econ. Persp. 3, 4 (2003) (“[T]he economics profession should conclude that until it can provide some hard evidence that identifies where the antitrust authorities are significantly improving consumer welfare and can explain why some enforcement actions and remedies are helpful and others are not, those authorities would be well advised to prosecute only the most egregious anticompetitive violations.”).

[9] David Autor, David Dorn, Lawrence F. Katz, Christina Patterson, & John Van Reenen, The Fall of the Labor Share and the Rise of Superstar Firms, 135 Q.J. Econ. 645, 651 (2020) (citations omitted) (emphasis added).

[10] See e.g., Sharat Ganapati, Growing Oligopolies, Prices, Output, and Productivity, 13 Am. Econ. J. Micro. 309, 323-24 (2021). (“[C]oncentration increases do not correlate to price hikes and correspond to increased output. This implies that oligopolies are related to an offsetting and positive force—these oligopolies are likely due to technical innovation or scale economies. My data suggest that increases in market concentration are strongly correlated with innovations in productivity”); Chang-Tai Hsieh & Esteban Rossi-Hansberg, The Industrial Revolution in Services, 1 J. Pol. Econ. Macro. 3 (2023). (“Market concentration at the local level has decreased in all US cities, particularly in cities that were initially small. These facts are consistent with the availability of new fixed-cost-intensive technologies that yield lower marginal costs in service sectors. The entry of top service firms into new local markets has led to substantial unmeasured productivity growth, particularly in small markets”); David Berger, Kyle Herkenhoff, & Simon Mongey, Labor Market Power, 112 Am. Econ. Rev. 1147, 1148-49 (2022), (finding that most labor markets are more competitive today than they were in the 1970s).

[11] Memorandum, at 11.

[12] Id.

[13] Frank H. Easterbrook, The Limits of Antitrust, 63 Tex. L. Rev. 1, 2-3 (1984).

[14] Herbert J. Hovenkamp & Fiona Scott Morton, Framing the Chicago School of Antitrust Analysis, 168 U. Penn. L. Rev. 1843, 1849 (2020).

[15] See Geoffrey A. Manne, Error Costs in Digital Markets, in Global Antitrust Report in the Digital Economy (Joshua D. Wright & Douglas H. Ginsburg eds., 2020), available at https://gaidigitalreport.com/wpcontent/uploads/2020/11/Manne-Error-Costs-in-Digital-Markets.pdf.

[16] Bruce H. Kobayashi & Timothy J. Muris, Chicago, Post-Chicago, and Beyond: Time to Let Go of the 20th Century, 78 Antitrust L.J. 147, 166 (2012).

[17] Id. at 166 (“[T]here is very little empirical evidence based on in-depth industry studies that RRC is a significant antitrust problem.”); id. at 148 (“Because of [the Post-Chicago School] literature’s focus on theoretical possibility theorems, little evidence exists regarding the empirical relevance of these theories.”).

[18] Memorandum, at 4, 12.

[19] Verizon Comm. v. Law Offices of Trinko, 540 U.S. 398, 408 (2004)

[20] Trinko, 540 U.S. at 409.

[21] Trinko, 540 U.S. at 411. See also Phillip Areeda, Essential Facilities: An Epithet in Need of Limiting Principles, 58 Antitrust L.J. 841 (1989).

[22] See Joined Cases 6/73 & 7/73, Instituto Chemioterapico Italiano S.p.A. and Commercial Solvents Corporation v. Comm’n, 1974 E.C.R. 223, [1974] 1 C.M.L.R. 309.

[23] See Case C-7/97, Oscar Bronner GmbH & Co. KG v Mediaprint Zeitungs, EU:C:1998:569, §41.

[24] Niamh Dunne, Dispensing with Indispensability, 16 J. C. L. E. 74 (2020).

[25] John Vickers, Competition Policy and Property Rights, 120 Econ. J. 390 (2010).

[26] Case C-233/23 Alphabet Inc. and Others v Autorità Garante della Concorrenza e del Mercato (Android Auto) ECLI:EU:C:2025:110, §40, 52.

[27] Memorandum, at 13.

[28] Einer Elhauge, Defining Better Monopolization Standards, 56 Stan. L. Rev. 253, 343 (2003).

[29] Ohio v. American Express (“Amex”), 138 S. Ct. 2274 (2018).

[30] Memorandum, at 13.

[31] Gregory J. Werden, Why (Ever) Define Markets? An Answer to Professor Kaplow, 78 Antitrust L.J. 729, 741 (2013).

[32] Geoffrey A. Manne, In Defence of the Supreme Court’s ‘Single Market’ Definition in Ohio v. American Express, 7 J. Antitrust Enforcement 104, 106 (2019).

[33] David S. Evans, The Antitrust Economics of Multi-Sided Platform Markets, 20 Yale J. Reg. 325, 355-56 (2003). See also JeanCharles Rochet & Jean Tirole, Platform Competition in Two-Sided Markets, 1 J. Eur. Econ. Ass’n 990, 1018 (2003).

[34] See, e.g., Michal S. Gal & Daniel L. Rubinfeld, The Hidden Cost of Free Goods, 80 Antitrust L.J. 521, 557 (2016)

[35] See, e.g., Brief of Amici Curiae Prof. David S Evans and Prof. Richard Schmalensee in Support of Respondents in Ohio et al. v. American Express Co., No. 16-1454 (Sup. Ct. Jan. 23, 2018), at 21, available at https://www.supremecourt.gov/DocketPDF/16/16-1454/28972/20180123160215215_16-1454%20State%20of%20Ohio%20v%20American%20Express%20Brief%20for%20Amici%20Curiae%20Antitrust%20Law%20in%20Support%20of%20Respondents.pdf (“The first stage of the rule of reason analysis involves determining whether the conduct is anticompetitive. The economic literature on two-sided platforms shows that there is no basis for presuming one could, as a general matter, know the answer to that question without considering both sides of the platform.”).

[36] United States et al. v. Am. Express Co. et al., 838 F.3d 179, 198 (2nd Cir. 2016).

[37] See, e.g., Michael Katz & Jonathan Sallet, Multisided Platforms and Antitrust Enforcement, 127 Yale L.J. 2142, 2161 (2018) (“[I]t is essential to account for any significant feedback effects and possible changes in prices on both sides of a platform when assessing whether a particular firm has substantial market power.”).

[38] Memorandum, at 13.

[39] See Joseph Politano, California Is Losing Tech Jobs, Apricitas Economics (Apr. 14, 2024), https://www.apricitas.io/p/california-is-losing-tech-jobs (“[California’s] GDP fell 2.1% through 2022, the second-biggest drop of any state over that period, driven by a massive deceleration across the information sector. That allowed states like Texas to overtake California in the post-pandemic GDP recovery, creating a gap that California still hasn’t been able to close despite its economic rebound in 2023.”).

[40] Id. (“[T]he Golden State has been bleeding tech jobs over the last year and a half—since August 2022, California has lost 21k jobs in computer systems design & related, 15k in streaming & social networks, 11k in software publishing, and 7k in web search & related—while gaining less than 1k in computing infrastructure & data processing. Since the beginning of COVID, California has added a sum total of only 6k jobs in the tech industry—compared to roughly 570k across the rest of the United States.”).

[41] Memorandum, at 11.

[42] Leegin Creative Leather Prods. Inc. v. PSKS, Inc., 551 U.S. 877 (2007).

[43] Patrick Rey & Jean Tirole, The Logic of Vertical Restraints, 76 Am. Econ. Rev. 921, 937 (1986).

[44] These papers are collected and assessed in several literature reviews, including Global Antitrust Institute, Comment Letter on Federal Trade Commission’s Hearings on Competition and Consumer Protection in the 21st Century, Vertical Mergers (George Mason Law & Econ. Research Paper No. 18-27, Sep. 6, 2018). Even the reviews of such conduct that purport to be critical are only tepidly so. See, e.g., Marissa Beck & Fiona Scott Morton, Evaluating the Evidence on Vertical Mergers 59 Rev. Indus. Org. 273 (2021) (“[M]any vertical mergers are harmless or procompetitive, but that is a far weaker statement than presuming every or even most vertical mergers benefit competition regardless of market structure.”).

[45] Brooke Group Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209, 222-27 (1993).

[46] Id., at 224.

[47] On entry deterrence, see Steven C. Salop, Strategic Entry Deterrence, 69 Am. Econ. Rev. 335 (1979).

[48] See generally John S. McGee, Predatory Pricing Revisited, 23 J. L. Econ 289 (1980).

[49] Case C-62/86, AKZO v Comm’n, EU:C:1991:286, ¶¶ 71-72.

[50] Id. at ¶ 72 (“[P]rices below average total costs, that is to say, fixed costs plus variable costs, but above average variable costs, must be regarded as abusive if they are determined as part of a plan for eliminating a competitor.”).

[51] Case C-333/94 P, Tetra Pak v Comm’n, EU:C:1996:436, ¶ 44. See also, Case C-202/07 P, France Télécom v Comm’n, EU:C:2009:214, ¶ 110.

[52] Memorandum, at 13-14.

[53] Id. at ¶ 107.

[54] Patrick Bolton, Joseph F. Brodley, & Michael H. Riordan, Predatory Pricing: Strategic Theory and Legal Policy, 88 Geo. L. J. 2239 (2000).

[55] Kobayashi & Muris, supra note 16 (emphasis added).

[56] Tetra Pak, supra note 51, at ¶ 44. See also Case T-671/19 Qualcomm, Inc. v European Commission ECLI:EU:T:2024:626 ¶ 441 & 594.

[57] Memorandum, fn. 7.

[58] See, e.g., Memorandum, at 2.

[59] Id. Option Two contains similar wording.

[60] Manne, Albrecht, & Auer, supra note 3, at 1129-1141.

[61] Id. at 1136-1141.

[62] See, e.g. Suresh Naidu, Eric A. Posner, & Glen Weyl, Antitrust Remedies for Labor Market Power, 132 Harv. L. Rev. 536 (2018). See also Douglas O. Staiger, Joanne Spetz, & Ciaran S. Phibbs, Is There Monopsony in the Labor Market? Evidence from a Natural Experiment, 28 J. Lab. Econ. 211 (2010); Arindrajit Dube, Laura Giuliano, & Jonathan Leonard, Fairness and Frictions: The Impact of Unequal Raises on Quit Behavior, 109 Am. Econ. Rev. 620 (2019).

[63] Manne, Albrecht, & Auer, supra note 3, at 1124.

[64] Id. at 1119.

[65] See, e.g., Kartell v. Blue Shield of Mass. Inc., 749 F.2d 922 (1st Cir. 1984); see also Steven C. Salop, Question: What Is the Real and Proper Antitrust Welfare Standard? Answer: The True Consumer Welfare Standard, 22 Loy. Consumer L. Rev. 336, 342–43 (2010) (“However, Judge Breyer treated Blue Cross essentially as an agent for the customers it insured, rather than as an intermediary firm that purchased inputs and sold outputs as a monopolistic reseller. The court apparently assumed (perhaps wrongfully) that Blue Cross would pass on its lower input costs to its customers in the form of lower insurance premiums.”).

[66] Complaint ¶ 8-9, Kroger Co./Albertsons Cos., Inc., FTC Docket No. 9428 (Feb. 26, 2024), https://www.ftc.gov/legal-library/browse/cases-proceedings/krogercompanyalbertsons-companies-inc-matter.

[67] Manne, Albrecht, & Auer, supra note 3, at 1123.

[68] Manne, Albrecht, & Auer, supra note 3, at 1132 (discussing some of the implausible implications of estimates of labor-market power).

[69] Steven Berry, Martin Gaynor, & Fiona Scott Morton, Do Increasing Markups Matter? Lessons from Empirical Industrial Organization, 33 J. Econ. Persps. 44, 57 (2019), http://dx.doi.org/10.13140/RG.2.2.24964.99201 (emphasis added).

[70] Memorandum, at 6. There are also suggestions that “suppliers” include “suppliers of labor,” or workers. In that case, the comments included in the previous section (on monopsony power) apply here as well.

[71] Reiter v. Sonotone Corp., 442 U.S. 330, 343 (1979).

[72] William J. Baumol, Entrepreneurship: Productive, Unproductive, and Destructive, 11 J. Bus. & Ventur. 3 (1996).

[73] Ann P. Bartel & Lacy G. Thomas, Predation through Regulation: The Wage and Profit Effects of the Occupational Safety and Health Administration and the Environmental Protection Agency, 30 J. L. & Econ. 239 (1987).

[74] Carl Shapiro, Antitrust in a Time of Populism, 61 Int. J. Ind. Org. 714 (2018).

[75] Geoffrey Manne, Why US Antitrust Law Should Not Emulate European Competition Policy, 10 (Written Statement from A Comparative Look at Competition Law Approaches to Monopoly and Abuse of Dominance in the US and EU, Hearing of the U.S. Senate Judiciary Subcommittee on Antitrust, Competition Policy, and Consumer Rights, Dec. 19, 2018), available at https://www.judiciary.senate.gov/imo/media/doc/Manne%20Testimony.pdf.

Introduction

We thank the Federal Trade Commission (FTC) for the opportunity to comment on this important topic. This request for information (RFI) allows participants to contribute to the understanding of the nuanced ways that online content moderation operates.^[1]

The International Center for Law & Economics (“ICLE”) is a nonprofit, non-partisan global research and policy center dedicated to building the intellectual foundations for sensible, economically grounded policy. ICLE promotes the use of law & economics methodologies and economic learning to inform policy debates, and has longstanding expertise evaluating law and policy.

ICLE has an interest in ensuring that both First Amendment law and antitrust law promote the public interest by remaining grounded in sensible rules informed by sound economic analysis. ICLE scholars have written extensively on issues related to the regulation of technology platforms and free speech, as well as competition and consumer-protection issues more broadly. As such, we are well-positioned to speak to the legal and economic foundations underlying the factual record sought in this RFI.

Below, we will offer reasons why both the law and underlying economics support limiting how the FTC acts in response to the information gained in this RFI. We do so while acknowledging that a call for diverse public comments is likely the best means at the agency’s disposal to gather preliminary information, and that no subsequent formal economic study or law-enforcement action is implied by such an inquiry.

In Part I, we introduce the First Amendment background to the questions presented in this proceeding. The First Amendment protects the rights of technology platforms and advertisers, as well as individual citizens, to participate in the marketplace of ideas. This necessarily limits FTC action to protect consumers from alleged private “censorship.”

In Part II, we offer an alternative explanation for why technology platforms engage in content moderation, by applying the economics of multisided platforms and considering the market for speech governance. The major platforms’ moderation choices are best explained by the economic incentives to balance users’ speech interests. Part II considers whether platforms’ restrictions on certain users or content are justified or offset by “countervailing benefits to consumers.”^[2]

In Part III, we analyze government pressure campaigns as a departure from the free marketplace of ideas. In particular, we consider the dangers of backdoor censorship, like that alleged against the Biden administration in Murthy v. Missouri, as well as the possibility that government may facilitate collusive behavior in specific cases.

In Part IV, we consider the difficulty of applying non-price-effects analysis to content-moderation decisions under antitrust law. Whether under Section 1 or Section 2 of the Sherman Antitrust Act, balancing various dimensions of quality, as well as the varied interests of users and advertisers, cannot be easily accomplished under antitrust law.

In Part V and VI, we outline the limitations of categorizing alleged private “censorship” as either unfair methods of competition (UMC) or unfair or deceptive acts or practices (UDAP). Using the FTC’s policy statements for each, we consider how these competition and consumer-protection statutes could apply, while making the case that neither tech platforms’ enforcement of moderation policies nor firms’ refusals to advertise on specific tech platforms violates these laws.

I. Platforms and Advertisers’ Rights to Participate in the Marketplace of Ideas[3]

The defense of free speech against government censorship has a long pedigree, with advocates that have included such landmark historical figures as John Stuart Mill and, long before the framing of the Bill of Rights, John Milton.[4] While neither author used the precise phrase, the “marketplace of ideas” metaphor grew out of their defenses of free speech.

Mill, for instance, rested his defense of free speech on four grounds: 1) that censored opinions may be true, 2) that, even if an opinion is in error, it may contain a portion of the truth that requires collision with “adverse opinions” so that further truth may be discovered, 3) that, even if an opinion is true, it needs to be contested in order for those who hold it to understand why it is true, and 4) that, even if it is true, it must be contested for those who hold it to have a true conviction, rather than merely inheriting it.[5] In other words, it is only the interaction of ideas that allows for the truth to win out.

Similarly, in the American context, President Thomas Jefferson in his First Inaugural Address argued in the wake of a divisive election for toleration of divergent political opinions, adding that even those who favor dissolving the union or changing its republican form of government should be left “undisturbed as monuments of the safety with which error of opinion may be tolerated where reason is left free to combat it.”[6]

This metaphor was later picked up by the U.S. Supreme Court—at first, in a dissent by Justice Oliver Wendell Holmes.[7] It eventually became a staple of First Amendment law, and some variation of the phrase has been cited in thousands of federal First Amendment opinions.[8]

To facilitate competition in the marketplace of ideas, the U.S. Constitution staunchly protects the liberty of private actors to determine what speech is acceptable, largely free from government intervention. As the Court put it in Manhattan Cmty. Access Corp. v. Halleck,[9] “[t]he Free Speech Clause of the First Amendment constrains governmental actors and protects private actors . . . .”[10]

Importantly, one way that private actors participate in the marketplace of ideas is through private ordering—by setting speech policies for their own private property. As the Halleck Court stated, “[a] private entity may thus exercise editorial discretion over the speech and speakers in the forum.”[11]

Notably, in Moody v. NetChoice,[12] the Supreme Court expressly considered “whether two state laws regulating social-media platforms and other websites facially violate the First Amendment.”^[13] The Court made clear in that opinion that “the First Amendment offers protection when an entity engaging in expressive activity, including compiling and curating others’ speech, is directed to accommodate messages it would prefer to exclude.”[14] Surveying First Amendment case law on compelled speech, the Court concluded that, at least in the case of social-media platforms’ primary feeds, government efforts that “alter[] the platforms’ choices about the views they will, and will not, convey… interfere with protected speech.”[15] Moreover, “[h]owever imperfect the private marketplace of ideas… a worse proposal [is] the government itself deciding when speech [is] imbalanced, and then coercing speakers to provide more of some views or less of others.”[16]

In other words, technology platforms like social-media companies have a right to engage in editorial discretion as private entities. The moderation decisions these platforms make are protected by the First Amendment from government efforts to rebalance them.

The questions presented by this RFI may help the FTC to get a sense of the scale and diversity of such decisions, and perhaps to learn more about how they are made. But it is crucial that the Commission recognize that alleged political bias in private moderation decisions would not be a permissible government interest for action against the tech platforms.

It is, of course, possible for antitrust to apply to speech platforms. In Associated Press v. United States,[17] for instance, the Supreme Court found that antitrust law clearly applies to the Associated Press—a membership organization of newspaper publishers. But the Court also found that the First Amendment limited antitrust remedies. In Miami Herald Publishing Co. v. Tornillo,[18] the Court noted that:

The Court foresaw the problems relating to government-enforced access as early as its decision in Associated Press v. United States, supra. There it carefully contrasted the private “compulsion to print” called for by the Association’s bylaws with the provisions of the District Court decree against appellants which “does not compel AP or its members to permit publication of anything which their ‘reason’ tells them should not be published.”[19]

Accordingly, the courts have consistently rejected claims that would require tech platforms to carry speech. In Jian Zhang v. Baidu.com,[20] the U.S. District Court for the Southern District of New York found that the application of a New York public-accommodations law to a Chinese search engine that “censored” pro-democracy speech is inconsistent with the right to editorial discretion, stating “there is a strong argument to be made that the First Amendment fully immunizes search-engine results from most, if not all, kinds of civil liability and government regulation.”[21] The court further noted that “the central purpose of a search engine is to retrieve relevant information from the vast universe of data on the Internet and to organize it in a way that would be most helpful to the searcher. In doing so, search engines inevitably make editorial judgments about what information (or kinds of information) to include in the results and how and where to display that information (for example, on the first page of the search results or later).”[22] Other courts have similarly found tech platforms have a right to editorial discretion that limits antitrust claims.[23]

The Commission’s inquiry also appears to encompass characterizing advertisers’ conduct in the wake of the X.com platform’s decision to modify its content-moderation policies as a concerted group boycott or refusal to deal, possibly facilitated by third-party intermediaries. Such a characterization necessitates a careful consideration of First Amendment protections, which may circumscribe regulatory responses to advertiser decisions that are motivated by associational preferences—in this case, preferences regarding the content the platform is disseminating.

In FTC v. Superior Ct. Trail Lawyers Ass’n,[24] the Supreme Court has considered the interaction of antitrust law and the First Amendment in a group-boycott case in which a lawyer’s association joined together to refuse to represent indigent defendants until the District of Columbia government increased their fees.[25] The Court distinguished the case from NAACP v. Claiborne Hardware Co.,[26] arguing that in this case “the undenied objective of [the lawyer association’s] boycott was an economic advantage for those who agreed to participate,”[27] while the black citizens who boycotted white merchants in Claiborne County, Mississippi “sought no special advantage for themselves.”[28] The government may regulate economic activity, but it may not infringe the First Amendment in doing so.

Here, the motivation for advertisers to withdraw from various platforms may be driven by various considerations beyond the mere economic, such that it would be challenging to attribute a motive of consolidating market power. In particular, a reviewing court would likely see an advertiser’s decision not to be associated with content that it finds damaging to its brand to be a legitimate expression of its First Amendment rights. The decision to disassociate from particular content ecosystems could reflect an exercise of expressive choice, or a prudent measure to safeguard intangible reputational assets—activities that may themselves possess First Amendment dimensions.

While preserving brand equity is undeniably intertwined with a firm’s overall economic well-being, it is analytically distinct from a concerted effort to manipulate market conditions in ways traditionally scrutinized under antitrust doctrines. Indeed, decisions to curtail advertising, while potentially serving long-term reputational interests or expressive aims, might concurrently impose immediate opportunity costs or reductions in revenue, to the extent that advertising correlates with product or service sales. Ascertaining the primary impetus behind such conduct—whether predominantly expressive, reputational, or anticompetitively economic in the Trial Lawyers sense—presents a nuanced evidentiary challenge.

In either case, the FTC would confront a formidable challenge if it sought to design remedies in such a case that would comport with existing First Amendment jurisprudence. As surveyed above, governmental compulsion of speech by private entities is generally disfavored. Social-media companies’ creation of expressive products through curation and other moderation decisions, and businesses’ decisions on whether or not to advertise on a particular platform, are both First Amendment-protected activities. Consequently, any remedial measure—whether adjudicated in an antitrust proceeding or pursued via an enforcement action under Section 5 of the FTC Act—that would compel a social-media entity to host specific speech or mandate that businesses to engage in specific advertising, would likely raise substantial First Amendment questions.

II. Content Moderation and the Economics of Multisided Platforms[29]

The RFI’s premise that technology platforms engage in “censorship” invites a critical examination of the term’s conventional application. Censorship most precisely describes governmental restrictions on expression—actions circumscribed by First Amendment doctrines that do not comparably apply to the editorial prerogatives of private entities.[30] Or, to put it another way, the term censorship suggests government suppression of speech, rather than decisions by private actors to selectively favor and disfavor certain speech or speakers, even if those private decisions deny speakers access to their preferred platforms.

Private platforms’ decisions to curate, prioritize, or deprioritize content or speakers—even when such decisions restrict access for some—are more accurately characterized as exercises of editorial discretion, rather than “censorship” in the sense that is relevant to constitutional law. Such discretion is integral to how these platforms define their services, as well as how they cultivate specific user and advertiser environments. Below, we will consider how the economics of multisided platforms—the business model employed by social-media companies—explains the incentives they face.

A. The Economics of Multisided Platforms

As the Supreme Court has recognized, the economics of multisided platforms are now an important component of antitrust law.^[31] A multisided platform serves two or more distinct sets of customers who are, in some way, mutually reliant.[32] Economically, this is defined as an interdependency of demand among the two (or more) customer groups. The platform brings these groups together by setting prices—and, as we will see, non-price attributes—that encourage each side to participate in a way that maximizes platform-wide output. Jean-Charles Rochet and Jean Tirole, who helped to develop the economics of two-sided platforms, offer this definition:

We define a two-sided market as one in which the volume of transactions between end-users depends on the structure and not only on the overall level of the fees charged by the platform. A platform’s usage or variable charges impact the two sides’ willingness to trade once on the platform and, thereby, their net surpluses from potential interactions; the platforms’ membership or fixed charges in turn condition the end-users’ presence on the platform.[33]

A multisided platform’s value is maximized through the interplay of the multiple sides.[34] Platforms have to set prices on each side that balance the interrelated demands.[35] This may mean that one side of the platform ends up cross-subsidizing the other side. In other words, one side may pay a higher price than the other; one side may even pay a monetary price of zero.

A classic example is a nightclub. If there is a queue outside, and the club’s clientele is primarily heterosexual, it is much more likely for young attractive females to be picked out of the line for early entry than for males. Some clubs even host “ladies night,” where female patrons receive discounted or free drinks. In either case, the nightclub chooses to show favoritism to women, even though this would appear to be against their interest under a traditional economic model. But it makes sense in multisided-platform analysis, because the club needs to get two groups of customers to come: men and women. With too few women, there will not be enough men willing to come and spend money. In order to maximize profits, it actually makes sense to discriminate in favor of women in order to attract enough men to the club; the net effect is higher profits by having enough of both sexes.

In summary, multisided platforms differ from traditional firms in that they need to balance the demands of each side, and this may not mean simply charging the highest price to each side. This has important implications for understanding consumer welfare. Charging one side below marginal cost, for instance, would not be an example of predatory pricing if it meant maximizing the value of the platform.

Hence, for example, social-media platforms might independently (unilaterally) offer valuable (and costly) content and services at a monetary price of zero because millions of consumers prefer that price, even if it is ad-supported, and because advertisers prefer to advertise to those millions of people and are glad to pay to reach them. More generally, charging a high price to one side of a platform and offering a lower price to the other side may not be due to platform’s market power, but could be an example of maximizing output across the platform. As will be discussed more below, this also applies to the non-price aspects that platforms must balance, as well.

B. Balancing Speech Interests to Benefit Both Users and Advertisers

For technology platforms that host users’ speech, moderation policies are an especially important non-price aspect of maximizing platform value. Social-media companies generate revenue by acting as intermediaries between users and advertisers. If they fail to serve their users well, those users could abandon the platform.

Users include both producers of speech (i.e., speakers) and consumers of it (i.e., listeners); often, these are the same people. Some tech platforms reward speakers who generate many views with a cut of the platform’s advertising revenue. Needless to say, however, without users, advertisers would have no interest in buying ads. And without advertisers, there is no revenue to be had. Social-media companies thus need to maximize the value of their multisided platform by setting rules that keep users engaged. This could even result in reverse network effects, where the losses on one side of the platform lead to large gains on the other.

As in any other community, “[i]nteractions on multi-sided platforms can involve behavior that some users find offensive.”[36] As a result, “[p]eople may incur costs [from] unwanted exposure to hate speech, pornography, violent images, and other offensive content.”[37] And “[e]ven if they are not exposed to this content, they may dislike being part of a community in which such behavior takes place.”[38]

When it comes to illegal speech and conduct, technology platforms already face a difficult job in moderation, whether they are required by law or encouraged by consumer demand.[39] But even speech that is at the core of First Amendment protection—such as political and ideological speech, as well as religious, scientific, and artistic speech—might be offensive to some listeners and deemed inappropriate for some private fora.

In other words, speech has both benefits and costs for both speakers and listeners.[40] Ultimately, the subjective preferences of consumers—or certain tranches of consumers—determine how those who host speech manage those tradeoffs, which includes questions of how the preferences known to predominate among their installed base of users are to be weighed against those of others who might be attracted to the platform. The nature of what is deemed offensive is obviously context- and listener-dependent, but the parties who are best-suited to set and enforce appropriate speech rules are the property owners themselves, subject to the constraints of the marketplace.

When it comes to speech, an individual’s desire for an audience must be balanced with a prospective audience’s willingness to listen. Marketplace actors who operate speech platforms must strike the proper balance between these desires, lest they lose business. Asking government agents to make categorical decisions for all of society would substitute centralized assessments of the costs and benefits of access to communications for the individual decisions of many actors, including those who open their digital property to third-party speech. As the economist Thomas Sowell has put it, “that different costs and benefits must be balanced does not in itself imply who must balance them?or even that there must be a single balance for all, or a unitary viewpoint (one ‘we’) from which the issue is categorically resolved.”[41]

Rather than incremental decisions on how and under what terms individuals may relate to one another on a particular speech platform, which can evolve over time in response to changes in what individuals find acceptable, government actors can only hand down categorical guidelines through precedential decisions: “you must allow a, b, and c speech” or “you must not allow x, y, and z speech.”

The freedom to experiment and evolve is vital in the social-media sphere, where norms about speech are in constant flux, and vary across both individuals and groups of individuals. Because social-media users often impose negative externalities on other users through their speech, social-media companies must resolve social-cost problems among their users by balancing these speech interests.

In his famous work “The Problem of Social Cost,” the economist Ronald Coase argued that the traditional approach to regulating externalities was misguided, because it overlooked the reciprocal nature of harms.[42] For example, the noise from a factory is a potential cost to the doctor next door who cannot use his office to conduct certain testing, and simultaneously the doctor’s choice to move his office next door is a potential cost to the factory’s ability to use its equipment.

In a world of well-defined property rights and low transaction costs, the initial allocation of a right would not matter, because the parties could bargain to overcome the harm in a beneficial manner—i.e., the factory could pay the doctor for lost income or to set up sound-proof walls, or the doctor could pay the factory to reduce the sound of its machines. But in the real world, where there are often significant transaction costs, who has the initial right matters, because it is unlikely that the right will be deployed to its highest-valued use.

Similarly, on social media, speech that some users find offensive or false may be inoffensive or even patently true to other users. Protecting one group from offensive speech necessarily imposes costs on the group that favors the same speech. There is a reciprocal nature to the harms of speech, much as with other forms of nuisance. Due to transaction costs, it is unlikely that users will be able to effectively bargain to a solution on speech harms.

There is, however, a significant difference between the examples. Unlike the situation of the factory owner and the doctor, social-media users are all using the property of social-media companies. And those companies are well-positioned to balance these varied interests in real time in order to optimize their platform’s value in response to consumer demand.

Social-media companies set rules that keep users sufficiently engaged such that advertisers will pay to reach them. Moreover, social-media platforms must encourage engagement by the right users. To attract advertisers, platforms must ensure that individuals likely to engage with advertisements remain active on the platform. Platforms ensure this optimization by setting and enforcing community rules.

In addition, as with users, advertisers themselves have preferences and means of expression for which platforms must account. Advertisers may threaten to pull ads if they do not like the platform’s speech-governance decisions. For instance, after Elon Musk restored the accounts of X users who had been banned by the company’s prior leadership, major advertisers left the platform.[43]

Assuming tech platforms that host speech desire to reach the broadest possible audience,[44] there are limits on how far they can go in moderation before they ultimately lose users. If moderation policies are truly one-sided and harm one side of the political aisle, those platforms would likely lose users, and therefore ultimately lose advertisers. The platforms’ multisided nature could lead to their implosion if they get content moderation wrong, just as much as it contributes to their growth if they get content moderation right.

For instance, the very sale of what was then known as Twitter to Elon Musk could be seen as a correction in the market for speech governance, as he believed there was a market for a social-media company with less politically biased moderation policies.[45] The fact that Meta has seemingly followed X’s model by moving to community notes to deal with the problem of misinformation—rather than relying primarily on third-party fact checkers—suggests that this may even be the new equilibrium.[46] Striking a proper balance among various speech interests is difficult, which is why it is best to let private actors subject to competition in the marketplace decide.

In sum, the economics of multisided platforms and the problem of speech externalities largely explain why technology platforms that host speech tend to set and enforce moderation policies. In the vast majority of cases, these policies and their enforcement are an attempt to maximize value by benefitting their users, so that they can make money from advertisers. Moreover, marketplace competition appears to be quite effective in combating perceived political bias in content moderation, as the cases of X and now Meta suggest.

III. Government-Led Pressure Campaigns to Censor

Recent examples where governmental entities appear to have compelled or exerted coercive influence over tech platforms to suppress specific speech or speakers align much more directly with established conceptions of censorship. The Commission’s exploration of how governmental persuasion or pressure may have shaped content-moderation frameworks and specific editorial outcomes on those platforms is, therefore, a pertinent line of inquiry. Such indirect state influence on content availability, sometimes characterized as “jawboning” or “backdoor censorship,” presents distinct challenges to First Amendment values and the integrity of public discourse, particularly to the extent that it circumvents established due-process and transparency safeguards. Enhanced visibility into these dynamics would offer a crucial predicate for robust legal analysis and informed policy development.

As we have noted previously, President Donald Trump’s “Executive Order on Restoring Freedom of Speech and Ending Federal Censorship”[47] is “an important step toward restoring the marketplace of ideas online, given that we now have greater knowledge of the extent of federal pressure that was placed on social-media companies to restrict First Amendment-protected speech in the name of combating online misinformation… If courts are unable to reach the problem practically, it is incumbent on the executive branch to limit itself.”[48]

Courts have not, to date, been able to successfully consider covert backdoor-censorship efforts targeted at social-media companies. Government-facilitated collusion to censor is a related claim that could be investigated. Below, we will consider both problems in turn.

A. Murthy, Vullo, and the Dangers of Backdoor Censorship[49]

After much anticipation, Murthy v. Missouri[50] turned out to be a bit of a disappointment for those who hoped the Court would tackle the issue of backdoor online censorship. In a 6-3 decision by Justice Amy Coney Barrett, the Court ruled that none of the plaintiffs had standing, due to a lack of traceability and redressability of the alleged injuries.[51] The result was that challenging backdoor censorship got a lot harder. Ultimately, government efforts to suppress online speech may not be practically challengeable in court unless social-media companies themselves push back with lawsuits against coercion. This is bad for the marketplace of ideas that the First Amendment is supposed to protect.[52]

When it comes to coercion, the Court has now addressed it twice in this term. NRA v. Vullo[53] made clear that the standard for considering such issues comes from Bantam Books.[54] But the coercion efforts in Vullo were very much out in the open—through the front door, if you will. Moreover, the directly harmed entity, the National Rifle Association, was also the plaintiff challenging the action.

Because Murthy was dismissed on standing, we don’t know how the Bantam Books standard applies in the social-media context. The Murthy plaintiffs were individuals who complained that they were censored by the social-media companies as a result of government efforts, as well as states who sued on behalf of themselves and their citizens. The high standing hurdles the Court has put in place would suggest that social-media companies would need to be the plaintiffs in cases alleging coercion. But if the allegations of broad-based coercion are true, then it is unlikely that social-media companies would want to bring such cases, when they necessarily interact with the government on so many fronts. As we noted after analyzing the oral arguments in this case:

If the Court decides to avoid the merits of this case under such a lack-of-standing reasoning, it would allow government agents to engage in egregious censorship activity so long as they did a good job of not creating a record of asking for particular individuals’ speech to be suppressed. The government could do this by calling for entire types of content or viewpoints to be censored without targeting specific people.[55]

Now, it is important to note what the Court is not saying. The Murthy case arose in the preliminary-injunction context, after discovery. This means that more was required to continue to maintain standing than at the motion-to-dismiss stage. As the Court said, “[a]t the preliminary injunction stage, then, the plaintiff must make a ‘clear showing’ that she is ‘likely’ to establish each element of standing… Where, as here, the parties have taken discovery, the plaintiff cannot rest on ‘mere allegations,’ but must instead point to factual evidence.”[56] Thus, as long as a plaintiff can allege facts that would establish traceability to the standards outlined here, they should be able to get to at least discovery to be able to prove it.

But despite this caveat, Murthy nonetheless does significantly restrict the pool of possible plaintiffs in backdoor-censorship cases. Those who have their speech suppressed online will likely not know if it is the independent work of social-media companies or due to government efforts unless some rare event like the “Twitter Files” happens, and the social-media companies let them know. Thus, backdoor censorship could continue without any court review.

This is important, because there are strong reasons to believe the complained-of conduct does violate the Bantam Books/Vullo standard, as found by the district court, the 5th U.S. Circuit Court of Appeals, and the Supreme Court dissent in this case. In fact, the dissent’s outlining of the case against Facebook with respect to Jill Hines merits attention.[57] There, the dissent argues persuasively from the record that the conduct of high-ranking White House officials and the U.S. Surgeon General’s Office violated the First Amendment.

First, because the White House is in charge of the executive branch, including those who could bring antitrust cases, data-privacy enforcement actions, and negotiate international data-transfer rules (as well as propose changes to Section 230), it is “beyond any serious dispute [they] possessed the authority to exert enormous coercive pressure.”[58]

Second, the communications coupled demands with “thinly veiled threats”[59] that became more explicit over time. “The natural interpretation” of these communications was “that the White House might retaliate if the platforms allowed free speech, not if they suppressed it.”[60]  The dissent persuasively argues that this goes far beyond the public bully pulpit:

If these communications represented the exercise of the bully pulpit, then everything that top federal officials say behind closed doors to any private citizen must also represent the exercise of the President’s bully pulpit. That stretches the concept beyond the breaking point.[61]

Third, Facebook clearly acceded to these demands when it changed their policies and enforcement in ways that harmed Jill Hines. Indeed, their internal communications made clear that they didn’t agree with the White House critiques, but went along with their requests nonetheless:

Facebook again took stock of its relationship with the White House after the President’s accusation that it was “killing people.” Internally, Facebook saw little merit in many of the White House’s critiques. One employee labeled the White House’s understanding of misinformation “completely unclear” and speculated that “it’s convenient for them to blame us” “when the vaccination campaign isn’t going as hoped.” Committee Report 473. Nonetheless, Facebook figured that its “current course” of “in effect explaining ourselves more fully, but not shifting on where we draw the lines,” is “a recipe for protracted and increasing acrimony with the [White House].” Id., at 573. “Given the bigger fish we have to fry with the Administration,” such as the EU-U.S. dispute over “data flows,” that did not “seem like a great place” for Facebook-White House relations “to be.” Ibid. So the platform was motivated to “explore some moves that we can make to show that we are trying to be responsive.” Ibid. That brainstorming resulted in the August 2021 rule changes. See supra, at 13, 19–20.[62]

In sum, the First Amendment case against the federal government officials in Murthy appears strong on the merits. But, as noted above, standing complications may doom these types of cases going forward. As the dissent eloquently put it:

The Court, however, shirks [its] duty and thus permits the successful campaign of coercion in this case to stand as an attractive model for future officials who want to control what the people say, hear, and think. That is regrettable. What the officials did in this case was more subtle than the ham-handed censorship found to be unconstitutional in Vullo, but it was no less coercive. And because of the perpetrators’ high positions, it was even more dangerous. It was blatantly unconstitutional, and the country may come to regret the Court’s failure to say so. Officials who read today’s decision together with Vullo will get the message. If a coercive campaign is carried out with enough sophistication, it may get by. That is not a message this Court should send.[63]

B. Government-Facilitated Collusion Is Particularly Dangerous

In Murthy, the original plaintiffs alleged both government coercion and collusion among the social-media companies and government actors to censor. The 5th Circuit and Supreme Court only considered the coercion element to establish state action. But many have recognized that collusion facilitated by government efforts is particularly dangerous, as it diminishes individuals’ ability to “cheat” on the collusive agreement and break down the collusive efforts of the whole.

For instance, in a classic Prisoner’s Dilemma, oligopolists might want to collectively raise their market price and all earn higher profits through collusion. But since explicit agreements to raise prices in this manner are illegal under antitrust law (and would potentially even expose them to criminal penalties), businesses are not likely to look to contract for such efforts. Instead, tacit collusion is the best way to try to accomplish this scheme. But while all parties would benefit from collusion, any individual party would benefit from cheating—lowering its own price and thereby capturing greater market share. This sets up a situation where individual incentives are incompatible with the group. One antitrust scholar went so far as to say that “[i]f explicit collusion is difficult to arrange and hard to enforce if arranged, tacit collusion must be next to impossible.”[64]

On the other hand, when collusion is facilitated by the government, the incentives change. Government agents can assure all participants that they will not be punished for colluding. Moreover, they can even direct the collusion and punish possible defectors. Thus, collusion backed by government power is much more likely to be effective, as it can at least partially solve the Prisoner’s Dilemma.

In Murthy, it was alleged at the district court level that the social-media companies worked together—including through government-funded third-party civil-society organizations—as well as with government agencies to coordinate censorship efforts.[65] The district court noted that “[w]hen a plaintiff establishes ‘the existence of a conspiracy involving state action,’ the government becomes responsible for all constitutional violations committed in furtherance of the conspiracy by a party to the conspiracy.”[66]

Under such an alleged scenario, collusion by social-media companies to censor speech is much more likely to be effective. Under the First Amendment, the government should not be in the business of facilitating censorship.

IV. Antitrust and Political Bias in Moderation Decisions

One way of interpreting allegations of political bias in content-moderation decisions is that tech platforms possess substantial market power that enables them to implement such policies, potentially diminishing product quality, without significant risk of users migrating to alternative platforms. To analyze this concern, it is instructive to examine how antitrust law addresses issues related to product quality. Thus, Section IV.A will explore how antitrust law considers non-price-effects analysis.

The application of antitrust law to complaints centered predominantly on free-speech principles may present notable limitations. The evaluation of tradeoffs inherent in product-quality claims would pose formidable challenges for judicial adjudication where the product quality in question is alleged political bias. Moreover, antitrust law does not prohibit the exploitation of even monopoly power, so long it has been lawfully obtained and maintained.[67] Accordingly, Section IV.B will examine the potential reasons why antitrust actions concerning political bias might face significant hurdles to success.

A. How Antitrust Law Deals with Non-Price Effects Generally

Antitrust law has long recognized that reduced product quality can affect consumers adversely. While most of this analysis has been done in the context of mergers, there are also lessons that can be drawn for monopolization claims.

In the 2010 Horizonal Merger Guidelines, the FTC and U.S. Justice Department (DOJ) stated:

Enhanced market power can also be manifested in non-price terms and conditions that adversely affect customers, including reduced product quality, reduced product variety, reduced service, or diminished innovation. Such non-price effects may coexist with price effects, or can arise in their absence. When the Agencies investigate whether a merger may lead to a substantial lessening of non-price competition, they employ an approach analogous to that used to evaluate price competition.[68]

The FTC considers non-price effects in its merger reviews. For instance, the Bureau of Economics in 2017 released its analysis of the non-price effects of the proposed merger between DraftKings, Inc. and FanDuel Ltd.[69] There, the bureau considered the daily fantasy-sports games that the platforms offered, and whether the quality and innovation of those games would be negatively affected if one of the two competitors was removed from the market. The analysis noted that:

Important sources of competition-driven non-price factors include the quality and variety of existing products, the resources that are expended to improve products, and the provision of complementary services to the product.

Product variety provides clear benefits to consumers by allowing them to find a product- price combination that best satisfies their demand. Variety may be costly for firms to develop, so a reduction in variety that reduces consumer welfare may be profitable for a merged entity. Likewise, the costly provision of complementary services may be reduced due to a merger. In consumer-facing industries, these services frequently take the form of high-quality customer service and/or flexible contract terms. While the specific form and importance of product variety and complementary services vary widely across industries, these factors must be considered in evaluating possible changes to consumer welfare due to a proposed merger.[70]

Antitrust courts have similarly recognized that non-price competition is often just as important as price competition. In United States v. Continental Can Co.,[71] which dealt with a metal-container company’s acquisition of a glass-container company, the Court noted:

[P]rice is only one factor in a user’s choice between one container or the other. That there are price differentials between the two products or that the demand for one is not particularly or immediately responsive to changes in the price of the other are relevant matters but not determinative of the product market issue. Whether a packager will use glass or cans may depend not only on the price of the package but also upon other equally important considerations. The consumer, for example, may begin to prefer one type of container over the other and the manufacturer of baby food cans may therefore find that his problem is the housewife rather than the packer or the price of his cans. This may not be price competition but it is nevertheless meaningful competition between interchangeable containers.[72]

Product quality is one of the primary areas of non-price competition that antitrust law seeks to protect.[73] In the case of single-firm conduct, this would mean considering the anticompetitive nature of product degradation. For instance, a monopoly car manufacturer could, in order to reduce production costs, decide to no longer manufacture cars with Bluetooth capabilities. In the absence of competition, they might have market power to offer this degraded product while continuing to charge the same price to consumers.

Continuing this hypothetical illustrates the interrelated nature of price and non-price competition. If a non-monopolist car manufacturer stopped building vehicles with Bluetooth capabilities without a price decrease, they would lose customers to those manufacturers that offered such a product at the same price. On the other hand, the same car manufacturer may decide that there is unmet demand for cheaper vehicles without Bluetooth capability, and be able to offer a product which does well in a competitive marketplace with the relatively cheaper vehicles. Similarly, a monopolist could reduce product quality, but also decrease the price in a profit-maximizing way if cost savings and consumers preferences would allow for it. An antitrust court would have to determine the tradeoffs between cost savings for consumers and reduced product quality. In other words, the question is whether a monopoly raises the quality-adjusted price.[74]

This trade-off becomes even more complicated when non-price effects must be traded off against one another. In Roland Mach. Co. v. Dresser Indus. Inc.,[75] the 7th U.S. Circuit Court of Appeals reviewed an antitrust case involving a manufacturer’s termination of a dealership agreement with a dealer that no longer intended to sell the manufacturer’s products exclusively. The court noted that, on the one hand, “exclusive dealing leads dealers to promote each manufacturer’s brand more vigorously than would be the case under nonexclusive dealing, the quality-adjusted price to the consumers (where quality includes the information and other services that dealers render to their customers) may be lower with exclusive dealing than without.”[76] But on the other hand, “a collateral effect of exclusive dealing is to slow the pace at which new brands… are introduced.”[77] The tradeoff between more information to consumers and less brands available at the store must be balanced against each other.

Even the process of considering product quality alone can be fraught with difficulty when there is more than one dimension. Product quality could include both function and aesthetics (e.g., a watch’s quality lies both in its ability to tell time and in how nice it looks on one’s wrist). [78] An analysis involving product quality across multiple dimensions involve tradeoffs in consumer welfare between the dimensions. Thus, for example, a smaller watch battery may improve its aesthetics, but also reduce its reliability. Any such analysis would necessarily involve a complex and imprecise comparison of the relative magnitudes of harm and benefit to consumers who prioritize one aspect of quality over another.

B. Applying Non-Price-Effects Analysis to Content Moderation

The apparent tension between established antitrust principles and complaints centered on tech platforms’ alleged political bias may contribute to the notable absence, to date, of successful antitrust cases founded on this theory. While moderation policies and their enforcement by online platforms can be conceptualized as a significant dimension of product quality, substantiating claims that political bias adversely affects the quality of platform moderation from a consumer perspective is likely to present considerable evidentiary and legal challenges.

Thinking through the issue in terms of quality-adjusted price isn’t straightforward. Social-media companies are multisided platforms where users are cross-subsidized by advertisers on the other side of the platform.[79] This results in users having free access to the platform, while advertisers pay to reach them.

Given that social-media platforms are offered to consumers at zero price, antitrust plaintiffs would have to prove that a tech platform offers a lower-quality product when it engages in political bias, and that it does so without offsetting benefits to consumers. But it isn’t clear how this theoretical example would benefit the monopolist financially. The allegation is essentially that tech platforms are so comfortable in their monopoly status that they could engage in politically motivated behavior that makes their product of lesser quality to their users. Even if the platform is a monopolist, it would have to believe that users who are discriminated against will not leave or use the platform less, which would thereby make it less valuable to the advertisers on the other side. It is extremely unlikely that Meta, X, or Google would purposely try to make less money, or that they are indifferent to profit.

Moreover, the complexity inherent to the tradeoffs noted above are even more difficult to assess when different consumer groups have sharply contrasting views of what constitutes indicia of quality along each of these dimensions. With political media, most would prefer to have more of what they want to read available, and less of what they don’t want available, even if it comes at the expense of other consumers’ preferences. There is no easy way to quantify and weigh general consumer welfare where one group’s moderation preferences necessarily come at the expense of another’s.

In this sense, a non-price-effects analysis of political bias would be even more complex than a complaint based on user privacy. All but the most exhibitionistic would prefer more to less privacy, all other things being equal. But when it comes to the algorithm that determines what is seen and in what order, or what is fact checked, or even what is monetized, there is no clear preference that all consumers share.

Platform moderation is not easy. As discussed above, social-media platforms’ goal is to keep users engaged to maximize the platform’s value to advertisers.[80] In order to do that, platforms need to reduce the incidence of low-quality speech that leads to less engagement. Whether this is spam, “hate speech,” misinformation, or any other speech to turns off some contingent of users, platforms are best-positioned to understand how to balance these consumer preferences.

A Section 2 monopolization claim made on the basis of political bias would place an antitrust court in the position of needing to decide whether consumer welfare is harmed when certain content (or content creators) is removed, fact checked, demonetized, or otherwise downgraded by a social-media algorithm. But this is a nearly impossible task; while some consumers may want to see such content, many others may not. Moreover, advertisers may not want to be associated with certain types of content. Thus, there are many reasons a platform may choose to moderate certain types of content that are pro-competitive. Indeed, where consumers and advertisers have highly heterogeneous preferences, conducting a competition analysis is likely impossible. In other words, allowing all First Amendment-protected speech probably does not maximize consumer welfare, if it is even possible.

A Section 2 claim would also prove difficult. Raising prices, by itself, can’t be the basis for Section 2 liability. As the Court stated in Trinko:

The mere possession of monopoly power, and the concomitant charging of monopoly prices, is not only not unlawful; it is an important element of the free-market system. The opportunity to charge monopoly prices—at least for a short period— is what attracts “business acumen” in the first place; it induces risk taking that produces innovation and economic growth. To safeguard the incentive to innovate, the possession of monopoly power will not be found unlawful unless it is accompanied by an element of anticompetitive conduct.[81]

If quality-adjusted price is how antitrust enforcers and courts must consider prices, then reducing a product’s quality in a zero-price market probably effectively counts as a price increase. But without a separate element of anticompetitive conduct, this would be insufficient for an antitrust claim under Section 2 of the Sherman Act.

This RFI also implicates collusion among tech platforms, which could be the basis of a Section 1 theory under the Sherman Act. Allegations have been made that several tech platforms engaged in coordinated actions to the detriment of Parler, a competing social-media company with content-moderation policies often described as more accommodating to conservative viewpoints. These alleged actions reportedly transpired after the platforms suspended the accounts of then-President Trump and a number of other conservative individuals subsequent to the events at the U.S. Capitol on Jan. 6, 2021.[82]

After the events of Jan. 6, Amazon Web Services ceased hosting Parler, which advertised itself as the conservative “free speech” alternative to Twitter (as well as Facebook). At the same time, Twitter and Facebook removed the accounts of President Trump and a number of others for allegedly inciting violence. Parler alleged that there was an agreement between Twitter and AWS to exclude Parler, and that if not for AWS terminating its hosting agreement with them, they would have been poised to continue the growth they had experienced during the run-up to the 2020 election. Parler contended that such growth would be expected to magnified following the removal of President Trump from Twitter and Facebook, which they said would generate an exodus of conservative users and voices to their platform.[83] In particular, Parler alleged that their hosting termination by AWS was “apparently designed to reduce competition in the microblogging services market to the benefit of Twitter” in violation of Section 1 of the Sherman Act.[84]

The district court dismissed the motion for an injunction on this count, stating that “Parler has failed to demonstrate that it is likely to succeed on the merits of a Sherman Act claim… the evidence it has submitted in support of the claim is both dwindingly slight, and disputed by AWS. Importantly Parler has submitted no evidence that AWS and Twitter acted together intentionally—or even at all—in restraint of trade.”[85]

Other courts have come to the same conclusion when presented with bare allegations of Section 2 harm. One such case involved conservative activist Laura Loomer. In Freedom Watch Inc. v. Google Inc.,[86] the U.S. Circuit Court of Appeals for the D.C. Circuit affirmed the district court’s determination that Freedom Watch failed to state a viable claim under the Sherman Act.

To state a § 1 claim, a complainant must plead “enough factual matter (taken as true) to suggest that an agreement was made.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Freedom Watch argues that we should infer an agreement primarily from the Platforms’ parallel behavior, as each company purportedly refused to provide certain services to Freedom Watch. But, as the district court explained, parallel conduct alone cannot support a claim under the Sherman Act. See Freedom Watch, 368 F.Supp.3d at 37 (citing Twombly, 550 U.S. at 556, 127 S.Ct. 1955 (“Without more, parallel conduct does not suggest conspiracy”)). Freedom Watch puts forth two additional factors that it claims suggest conspiracy: that the Platforms are pursuing a revenue-losing strategy and that they are motivated by political goals. But Freedom Watch does not explain why either factor tends to show an unlawful conspiracy, rather than lawful independent action by the different Platforms. See Freedom Watch, 368 F.Supp.3d at 37–38.”).

It is worth considering what might have happened in a similar case were there sufficient facts to survive a motion to dismiss. For instance, during a November 2020 hearing of the U.S. Senate Judiciary Committee, Sen. Josh Hawley (R-Mo.) alleged there was coordination among X, Meta, and Google over certain content-moderation decisions that amounted to anticompetitive collusion. He claimed that:

Facebook censorship teams communicate with their counterparts at Twitter and Google, and then enter those companies’ suggestions for censorship onto the Tasks platform so that Facebook can then follow-up with them and effectively coordinate their censorship efforts.[88]

If Hawley’s allegations were true, this could conceivably constitute a per-se violation of Section 1 of the Sherman Act. The antitrust complaint would be that this was an agreement to reduce product quality by restricting conservative voices.

The first question is whether these coordinated moderation practices would be judged per se illegal or analyzed under the rule of reason. The question is largely one of novelty—i.e., is this conduct so familiar to the courts as harmful to consumer welfare that it can skip further analysis? As the Supreme Court has put it:

…the per se rule is appropriate only after courts have had considerable experience with the type of restraint at issue, and only if courts can predict with confidence that it would be invalidated in all or almost all instances under the rule of reason.[89]

If a court believes the circumstances and allegations are sufficiently unusual that it must consider the particulars of the case and the effects of the tech companies’ behavior on competition before it can rule on that behavior’s legality, then the rule of reason would apply. Only where a court concluded the agreement was a self-evident restriction of output would it consider the behavior to be per se illegal.

The determination would be fact-dependent. If X, Meta, and Google had agreed to share information, but not to coordinate take-downs, that would be far easier to defend; it would be similar to the platforms sharing information about spam or harmful content. Questions may remain as to why it was in the platforms’ interest to share this information with their competitors, assuming each would stand to gain a commercial advantage from having a better moderation system than the others.

A harder case to judge would be one where the platforms did coordinate takedowns, particularly if a service only removed content on the condition that the others did as well. This would be much closer to cartelistic output-restriction. If the moderation decisions made a given platform more appealing to users, why would they not want to remove the content unilaterally?

One possible defense if that the coordination is what makes the take-down useful. If users find it difficult to discern between content removed for being spam and content removed because it is “hate speech” or “misinformation,” the best way to signal that it is the latter may be to remove it in coordination with similar services. This could help to create the “common knowledge” that a removed bit of content has been removed specifically because it is low value, thus giving the platforms’ users and advertisers the signal that they are the right places for them. Alternatively, the decision to coordinate may have more to do with political risk, where the platforms coordinate on grounds that there is safety in numbers. In that case, a defense of the agreement would be more difficult to mount.

On the other hand, common standards are not unusual, even for speech products. For instance, publishers agree on advertising standards (beyond what is required by law) through the Better Business Bureau’s National Advertising Division.[90] Another prominent example of coordination in speech products was the long-standing Comics Code Authority, through which the Comic Magazine Association of America created a set of rules and a Seal of Approval certifying compliance with principles like “criminals shall not be presented so as to be glamorous or to occupy a position which creates a desire for emulation,” “nudity in any form is prohibited, as is indecent exposure,” and “in every instance good shall triumph over evil and the criminal punished for his misdeeds.”[91] Despite the clear agreement among major participants in these sectors of the economy, and a possible reduction in product quality in the eyes of many possible consumers, these coordinated activities have not appeared to receive much antitrust attention.

In sum, while it does seem plausible that an agreement among Google, X, and Meta to remove all conservative speech would be seen as a naked quality-fixing agreement and per se illegal, these companies working together to create and enforce standards that reduce low-quality content would probably require a court to apply rule-of-reason analysis that weighs the agreement’s costs and benefits before condemning it. In such a case, the court would again have to consider the complex tradeoffs among different quality features. Plaintiffs would likely have a difficult time establishing a clear harm to consumer welfare.

Moreover, even in the alleged government-facilitated collusion among tech platforms,[92] antitrust immunities stemming from the state-action or sovereign-immunity doctrines may apply. This would mean that private plaintiffs or public enforcers could be limited in what they can successfully allege against the platforms, if they were indeed acting in accordance with the wishes of government actors.

V. UMC Section 5 Limitations to Policing Alleged Private ‘Censorship’

Section 5 of the FTC Act states that “[u]nfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful.”[93] The jurisprudential framework defining “unfair methods of competition” has evolved primarily through case-law interpretation and administrative guidance. In 2022, the Commission promulgated its “Policy Statement Regarding the Scope of Unfair Methods of Competition Under Section 5 of the Federal Trade Commission Act,”^[94] wherein it articulated an expansive interpretation of its statutory mandate. The policy statement asserts Commission authority to proscribe anticompetitive business practices that extend beyond the traditional boundaries of Sherman and Clayton Act jurisprudence, establishing a more capacious regulatory framework to address market behaviors deemed contrary to principles of fair competition.[95]

But even under an expansive reading of Section 5 UMC authority, the FTC may nonetheless encounter significant challenges to demonstrating that advertiser or tech-platform conduct constitutes a violation of the law. The test for identifying whether conduct is a UMC include, first, a determination that the challenged conduct is a method of competition and, second, that it is unfair.

To constitute a method of competition under the Commission’s analytical framework, the challenged conduct must satisfy two threshold criteria. First, it must represent an affirmative action “undertaken by an actor in the marketplace,”^[96] rather than merely reflecting structural market conditions, such as entry barriers or industry-concentration levels. Second, the conduct must necessarily implicate competitive dynamics. The Commission has indicated that certain behaviors outside traditional antitrust boundaries—including misuse of regulatory processes or violations of generally applicable laws—may satisfy this requirement when they affect competition.[97]

The concept of “unfairness” within the Commission’s Section 5 jurisprudence encompasses conduct that “goes beyond competition on the merits.”^[98] The Commission employs two principal criteria to evaluate whether conduct constitutes impermissible non-meritorious competition: first, whether the conduct is “coercive, exploitative, collusive, abusive, predatory, or involve[s] the use of economic power of a similar nature,” and second, whether it “tend[s] to negatively affect competition conditions.”^[99]

These evaluative criteria operate on a sliding scale within the Commission’s analytical framework, such that compelling evidence of one criterion may diminish the quantum of evidence required for the other.^[100] Significantly, the Commission has clarified that actual anticompetitive harm need not be demonstrated; rather, a tendency to produce negative competitive effects suffices to establish a violation.^[101]

When presented with a prima facie case of an unfair method of competition, the Commission will consider potential justifications, albeit within narrowly circumscribed parameters. The Commission categorically rejects mere pecuniary benefits accruing to the respondent as sufficient justification.^[102] Any proffered justification must be legally cognizable, non-pretextual, and narrowly tailored to minimize competitive harm.^[103] Furthermore, the Commission requires that the asserted benefits manifest in the same market where the competitive harm occurred. Even when these stringent requirements are satisfied, the claimed benefits must outweigh the competitive harm to constitute a valid defense.[104]

Applied to a claim contemplated by the RFI, advertisers deciding not to purchase ads on a particular tech platform may not be a “method of competition.” While the FTC could argue the decision to advertise or abstain from advertising is conduct “undertaken by an actor in the marketplace,” there certainly is little to suggest that such conduct is performed to “implicate competition.” For instance, advertisers that no longer wish to do business with X.com after Elon Musk purchased it and changed its moderation policies may be motivated by protecting brand reputation, rather than specifically harming the market for social media—a market, of course, in which they are not actually engaged. The FTC might be able to argue that the conduct implicates competition indirectly, but UMC claims are usually targeted at acts aimed at harming competitors to the detriment of competition.

The other primary claim seemingly contemplated by the RFI is that tech platforms themselves may be committing a UMC when they enforce their moderation policies. In such a case, the FTC would likely argue that those policies are coercive or abusive to users, or possibly deceptive or the result of economic power. But, as argued above, it is difficult to see how such an action could be sustained if enforcing moderation policies generally benefits their users as a whole. Not only is participating in the marketplace of ideas by creating and enforcing moderation policies protected First Amendment activity, but the tech platforms are best-positioned to balance the interests of their users (and advertisers). The FTC would also need to show that enforcement of these policies harms competition as whole. This would be difficult to establish, given the previously mentioned decisions at Meta and X.com to move toward more speech-protective stances.[105]

VI. UDAP Section 5 Limitations in Policing Alleged Private ‘Censorship’

The RFI suggests that tech platforms may be engaged in unfair or deceptive acts or practices with respect to their moderation policies. But this, again, may be difficult to prove under the relevant case law and policy statements.

A. Moderation Policies that Benefit Consumers Are Not Unfair Acts or Practices

The Commission may not declare an act or practice unlawful “on the grounds that such act or practice is unfair unless the act or practice causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or competition.”[106]

The Commission’s authority to designate consumer practices as “unfair” under Section 5 underwent significant legislative curtailment in the late 1970s, following congressional concerns regarding perceived administrative overreach.[107] In response to congressional scrutiny, the Commission promulgated its “Policy Statement on Unfairness,” which articulated interpretive principles aligned with the statutory parameters subsequently codified at 15 U.S.C. § 45(n).[108]

Under this framework, unjustified consumer injury constitutes the cardinal consideration in consumer-unfairness analysis. To satisfy the statutory threshold, such injury must satisfy three conjunctive elements: it must be (1) substantial, (2) not outweighed by countervailing consumer or competitive benefits, and (3) not reasonably avoidable through consumer action.[109]

The substantiality requirement mandates that actionable harm transcend mere triviality or speculative injury. While economic detriment typically satisfies this criterion, substantial health and safety risks may likewise establish unfairness, whereas subjective or emotional harms generally fall outside the Commission’s enforcement purview.[110]

The Commission’s balancing inquiry acknowledges that “[m]ost business practices entail a mixture of economic and other costs and benefits,”[111] necessitating careful evaluation of offsetting market advantages. Under this calculus, practices are deemed unfair only when “injurious in [their] net effects,”[112] thus requiring the Commission to weigh consumer injury against potential market efficiencies.

Finally, the reasonable-avoidable criterion reflects the Commission’s deference to market self-correction through informed consumer choice. As articulated in the policy statement: “Normally we expect the marketplace to be self-correcting, and we rely on consumer choice—the ability of consumers to make their own private purchasing decision without regulatory intervention—to govern the market.”[113] The Commission’s enforcement authority is thus directed not toward “second-guess[ing] the wisdom of particular consumer decisions, but rather to halt some form of seller behavior the unreasonably creates or takes advantage of an obstacle to the free exercise of consumer decisionmaking.”[114] Paradigmatic examples include information asymmetries that prevent meaningful comparison shopping, coercive service-contract tactics, and fraudulent health claims—all practices that undermine the consumer’s capacity for autonomous market participation.[115]

Here, the Commission may face considerable challenges in demonstrating that the enforcement of content-moderation policies constitutes an “unfair” practice as defined by the applicable statute and the Commission’s policy statement.

For an injury to be substantial, it must be more than “emotional impact or other more subjective types of harm.” Complaints regarding content moderation often emanate from content creators alleging practices such as demonetization or diminished content visibility—sometimes referred to by the colloquial term “shadow banning.” Similarly, users (or “consumers of speech”) may assert that their access to desired content has been unduly restricted.

But even assuming that there is substantial injury, it would likely be difficult to demonstrate that the injury is not outweighed by offsetting consumer or competitive benefits. As explained above, the reason that tech platforms engage in speech moderation is to benefit their users. If they fail to do so, they are subject to losing users to other tech platforms, and possibly losing advertisers who seek that audience, as well. Moreover, competition appears to be working in this market, as several tech platforms have changed their moderation policies in response to perceived changes in consumer demand. FTC action here would “second-guess the wisdom of particular consumer decisions,” contrary to the unfairness policy statement.[116]

Finally, the availability of other, even more potentially speech-protective tech platforms like Parler, Gab, and Truth Social suggest that consumers can, in fact, reasonably avoid moderation policies they don’t like. FTC action in this space is not likely to succeed, even as it would require spending  scarce enforcement resources.

B. Enforcing or Changing Moderation Policies Is Not a Deceptive Act or Practice

The Commission has also issued a “Policy Statement on Deception,”[117] which outlines three elements to prove deception. First, “there must be a representation, omission or practice that is likely to mislead the consumer.”[118] Second, the practice is examined from “the perspective of a consumer [or specific group] acting reasonably in the circumstances.”[119] Third, “the representation, omission, or practice must be a ‘material’ one.”[120]

The FTC must first show a representation, omission, or practice occurred. Express claims of moderation policies would probably be enough. It is less certain whether the lack of a moderation policy would be an “implied claim.” Nonetheless, the FTC should look into exactly what the tech platforms have stated in their moderation policies.

It seems unlikely that published moderation policies would be found to mislead a reasonable consumer. Such policies generally make clear that tech platforms retain the right to remove or otherwise sanction speech that they believe violates them. Even where such policies contain provisions that, read in isolation, appear to promise access to speech as a general matter, a court would need to determine whether such statements are material. While the FTC has often relied on presumptions of materiality from express statements in enforcement actions, it is unclear whether a court would agree that every statement on a service’s website is material.

In summary, tech platforms enforcing published moderation policies would not constitute deception. The FTC should, of course, make sure that this is what the tech platforms are doing. But retaining the discretion to make decisions about what violates a service’s moderation policies doesn’t seem that it could be deceptive. For promises to provide a public forum (or similar language), the question would be whether a reasonable consumer is deceived, or whether such statements are actually material.

A trickier question would be whether changes to moderation policies could be deceptive. A change without notice or that applies retrospectively could be problematic, but the FTC would still need to prove reliance (materiality). A change with notice that only applies prospectively, however, would not be deceptive, as users would know the rules going forward.

Conclusion

This RFI can be a constructive endeavor, undertaken in light of existing precedent governing First Amendment rights, antitrust law, UMC Section 5, and UDAP Section 5 enforcement against private actors engaging in the marketplace of ideas. The FTC would do well to look into the extent to which government actors have influenced moderation decisions, as such interventions are problematic. The underlying economics suggests that tech platforms do, in fact, have good reasons to engage in content moderation, and the FTC should recognize that enforcement actions to counter such moderation could harm consumer welfare.

^[1] Request for Public Comment Regarding Technology Platform Censorship, Fed. Trade Comm’n (Feb. 20, 2025), available at https://www.ftc.gov/system/files/ftc_gov/pdf/P251203CensorshipRFI.pdf [hereinafter “RFI”].

^[2] Id. at 1. In that regard, the Commission might have inquired further about instances in which members of the public have welcomed content-moderation policies that limit unpleasant, obscene, harassing, or otherwise unwanted messages or images.

[3] For more on this subject, see Amicus Brief of International Center for Law & Economics, Moody v. NetChoice, NetChoice v. Paxton, No. 22-277, 22-555, In the Supreme Court of the United States (Dec. 4, 2023), available at https://laweconcenter.org/wp-content/uploads/2023/12/Intl-Ctr-for-Law-and-Econ-Amicus-12.4.231148722.12.pdf; Amicus Brief of International Center for Law & Economics, Murthy v. Missouri, No. 23-411, In the Supreme Court of the United States (Feb. 9, 2024), available at https://laweconcenter.org/wp-content/uploads/2024/02/Murthy-v.-Missouri-Intl-Center-for-Law-Econ.-Am.-Br.-2-9-24-pm-FINAL.pdf.

[4] See, e.g., J.S. Mill, On Liberty, Ch. 2 (1859); John Milton, Areopagitica (1644).

[5] See Mill, supra note 4.

[6] See Thomas Jefferson, First Inaugural Address (Mar. 4, 1801), https://avalon.law.yale.edu/19th_century/jefinau1.asp.

[7] See Abrams v. United States, 250 U.S. 616, 630 (1919), (Justice Oliver Wendell Holmes’ dissent noted that “time has upset many fighting faiths,” and that the “ultimate good desired is better reached by free trade in ideas – that the best test of truth is the power of the thought to get itself accepted in the competition of the market, and that truth is the only ground upon which their wishes safely can be carried out. That at any rate is the theory of our Constitution.”) (emphasis added).

[8] See David Schultz, Marketplace of Ideas, Free Speech Center, https://firstamendment.mtsu.edu/article/marketplace-of-ideas (last updated Jul. 9, 2024).

[9] 139 S. Ct. 1921 (2019).

[10] Id. at 1926.

[11] See id. at 1930.

[12] 144 S. Ct. 2383 (2024).

^[13] Id. at 2393.

[14] Id. at 2401.

[15] Id. at 2405.

[16] Id. at 2403.

[17] 326 U.S. 1 (1945).

[18] 418 U.S. 241 (1974).

[19] Id. at 245.

[20] 10 F. Supp. 3d 433 (S.D. N.Y. Mar. 28, 2014)

[21] Id. at 438.

[22] Id.

[23] See, e.g., E-Ventures Worldwide LLC v. Google Inc., 2017 WL 2210029, at *4 (M.D. Fla. Feb. 8, 2017); Langdon v. Google, Inc., 474 F. Supp. 2d 622, 629-30 (D. Del. 2007).

[24] 493 U.S. 411 (1990).

[25] See id. at 414.

[26] 458 U.S. 886 (1982).

[27] Id. at 426.

[28] Id.

[29] For more, see Ben Sperry, Knowledge and Decisions in the Information Age: The Law & Economics of Misinformation on Social Media, 59 Gonzaga L. Rev. 319, 330-41 (2024); Ben Sperry, An L&E Defense of the First Amendment’s Protection of Private Ordering, Truth Mark. (Apr. 23, 2021), https://laweconcenter.wpengine.com/2021/04/23/an-le-defense-of-the-first-amendments-protection-of-private-ordering.

[30] See Halleck, 139 S. Ct. at 1933 (“[A] private actor is not subject to First Amendment constraints on how it exercises editorial discretion”).

[31] See Ohio v. Am. Express Co., 138 S. Ct. 2274, 2280-81 (2018) (discussing the economics of “two-sided platforms” in relation to credit-card markets); see also Geoffrey A. Manne, In Defence of the Supreme Court’s ‘Single Market’ Definition in Ohio v. American Express, 7 J. Antitrust Enforcement 104 (2019).

[32] See David S. Evans & Richard Schmalensee, Markets with Two-Sided Platforms, 1 Issues in Comp. L. & Pol’y 667, 669 (2008).

[33] Jean-Charles Rochet & Jean Tirole, Two-Sided Markets: A Progress Report, 37 Rand J. Econ. 645, 646 (2006).

[34] See Benjamin Klein et al., Competition in Two-Sided Markets: The Antitrust Economics of Payment Card Interchange Fees, 73 Antitrust L.J. 571, 598 (2006) (“The economic theory of two-sided markets indicates that relative prices on the two sides of the market are independent of the degree of competition faced by a supplier in such a market. While total prices will be influenced by competition, relative prices are determined by optimal balancing of demand on the two sides of the market.”).

[35] See, e.g., David S. Evans, Multisided Platforms, Dynamic Competition, and the Assessment of Market Power for Internet-Based Firms, at 8-9 (Working Paper, Coase-Sandor Institute for Law and Economics at The University of Chicago Law School, Mar. 2016), https://chicagounbound.uchicago.edu/cgi/viewcontent.cgi?article=2468&context=law_and_economics.

[36] David S. Evans, Governing Bad Behavior by Users of Multi-Sided Platforms, 27 Berkeley Tech. L.J. 1201, 1215 (2012).

[37] Id.

[38] Id.

[39] For more on how the tradeoffs work under Section 230 and how the law could be reformed to better balance accountability and speech, see Geoffrey A. Manne, Ben Sperry, & Kristian Stout, Who Moderates the Moderators?: A Law & Economics Approach to Holding Online Platforms Accountable Without Destroying the Internet, 49 Rutgers Computer & Tech L. J. 26 (2022).

[40] See id. at 47-53 (noting Section 230 immunity has protected technology platforms when they have allowed unprotected speech and illegal or tortious conduct, to the detriment of some technology platform users).

[41] Thomas Sowell, Knowledge and Decisions 240 (2d ed. 1996).

[42] See Ronald H. Coase, The Problem of Social Cost, 3 J. L. & Econ. 1 (1960).

[43] See Kate Conger, Tiffany Hsu, & Ryan Mac, Elon Musk’s Twitter Faces Exodus of Advertisers and Executives, N.Y. Times (Nov. 1, 2022); Ryan Mac & Tiffany Hsu, Twitter’s US Ad Sales Plunge 59% as Woes Continue, N.Y. Times (Jun. 5, 2023).

[44] On the other hand, there is a long history of newspapers, magazines, and even cable-news networks with strong editorial biases surviving in the marketplace. The First Amendment also protects this.

[45] See Ben Sperry, The Market for Speech Governance: Free Speech Strikes Back?, Truth Mark. (May 4, 2022), https://truthonthemarket.com/2022/05/04/the-market-for-speech-governance-free-speech-strikes-back.

[46] See Ben Sperry, Meta’s Announcement: The Return of Online Free Speech?, Truth Mark. (Jan. 9, 2025), https://truthonthemarket.com/2025/01/09/metas-announcement-the-return-of-online-free-speech.

[47] See Restoring Freedom of Speech and Ending Federal Censorship, The White House (Jan. 20, 2025), https://www.whitehouse.gov/presidential-actions/2025/01/restoring-freedom-of-speech-and-ending-federal-censorship.

[48] Ben Sperry, Restoring the Marketplace of Ideas: Examining the Executive Order on Ending Federal Censorship, Truth Mark. (Jan. 28, 2025), https://truthonthemarket.com/2025/01/28/restoring-the-marketplace-of-ideas-examining-the-executive-order-on-ending-federal-censorship.

[49] Much of this section is adapted from Ben Sperry, What Does Murthy v. Missouri Mean for Online Speech?, Truth Mark. (Jun. 26, 2024), https://truthonthemarket.com/2024/06/26/what-does-murthy-v-missouri-mean-for-online-speech.

[50] 144 S. Ct. 1972 (2024).

[51] Id. at 1985 (“We begin—and end—with standing. At this stage, neither the individual nor the state plaintiffs have established standing to seek an injunction against any defendant.”). See also id. at 1989-93.

[52] Amicus Brief of the International Center for Law & Economics, Murthy v. Missouri, Feb. 9, 2024, available at https://laweconcenter.org/resources/icle-amicus-to-us-supreme-court-in-murthy-v-missouri/.

[53] 144 S. Ct. 1316 (2024).

[54] Id. at 1322 (quoting Bantam Books, Inc. v. Sullivan, 372 U.S. 58, 57 (1963): “Six decades ago, this Court held that a government entity’s ‘threat of invoking legal sanctions and other means of coercion’ against a third party ‘to achieve the suppression’ of disfavored speech violates the First Amendment… Today, the Court reaffirms what it said then: Government officials cannot attempt to coerce private parties in order to punish or suppress views that the government disfavors.”).

[55] Ben Sperry, Murthy Oral Arguments: Standing, Coercion, and the Difficulty of Stopping Backdoor Government Censorship, Truth Mark. (Mar. 20, 2024), https://truthonthemarket.com/2024/03/20/murthy-oral-arguments-standing-coercion-and-the-difficulty-of-stopping-backdoor-government-censorship.

[56] Murthy, 144 S. Ct. at 1986 (internal citations omitted).

[57] See id. at 2006-15.

[58] Id. at 2011.

[59] Id. at 2012.

[60] Id.

[61] Id. at 2013.

[62] Id. at 2015.

[63] Id. at 1999.

[64] Yale Brozen, Concentration, Mergers, and Public Policy 135 (1982).

[65] See Missouri v. Biden, 680 F.3d 630, 705-06 (W.D. La. Jul. 4, 2023).

[66] Id. at 706 (quoting Armstrong v. Ashely, 60 F.4th 262 (5th Cir. 2023).

[67] See infra discussion of Verizon Commcn’s Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398 (2004).

[68] 2010 Merger Guidelines, sec. 1.

[69] See Matthew Jones, Bruce Kobayashi, & Jason O’Connor, Economics at the FTC: Non-Price Merger Effects and Deceptive Automobile Ads (FTC Working Paper, Dec. 2018), available at https://www.ftc.gov/system/files/documents/reports/economics-ftc-non-price-merger-effects-deceptive-automobile-ads/1812-be-rio.pdf.

[70] Id. at 6.

[71] United States v. Continental Can Co., 378 U.S. 441 (1964).

[72] Id. at 455-56.

[73] See National Soc’y of Prof. Engineers v. United States, 435 U.S. 279, 295 (1978) (“The Sherman Act reflects a legislative judgment that, ultimately, competition will produce not only lower prices but also better goods and services. “The heart of our national economic policy long has been faith in the value of competition.”  Standard Oil Co. v. FTC, 340 U. S. 231,  340 U. S. 248. The assumption that competition is the best method of allocating resources in a free market recognizes that all elements of a bargain – quality, service, safety, and durability – and not just the immediate cost, are favorably affected by the free opportunity to select among alternative offers.”) (emphasis added).

[74] Quality-adjusted price does have a long history in economics, and has been applied in antitrust analysis. See Joshua D. Wright & Douglas H. Ginsburg, The Goals of Antitrust: Welfare Trumps Choice, 81 Fordham L. Rev. 2405, 2410 (2013) (“Quality-adjusted prices have been part of the industrial organization toolkit since the early 1900s. The Bureau of Labor Statistics has used this tool for nearly a century. Furthermore, quality-adjusted prices are frequently used in industrial organization economics and in antitrust analysis.”). See also id. n.31-32.

[75] Roland Mach. Co. v. Dresser Indus. Inc., 749 F.2d 380 (7th Cir. 1984).

[76] Id. at 395.

[77] Id.

[78] This example is adapted from Geoffrey A. Manne & R. Ben Sperry, The Problems and Perils of Bootstrapping Privacy and Data into an Antitrust Framework, CPI Antitrust Chronicle (May 2015), at 3, available at https://laweconcenter.org/wp-content/uploads/2017/09/bootstrapping-privacy.pdf.

[79] See supra Part II.

[80] See supra Part II.

[81] Verizon Commcn’s Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 407 (2004).

[82] See Parler LLC v. Amazon Web Services Inc., 514 F.Supp.3d 1261, 1264 (W.D. Wash. Jan. 21, 2021) (citing Complaint, ¶ 17).

[83] See id. at 1265 (“Parler claims that in response to speculation that the President would move to Parler, there was a mass exodus of users from Twitter to Parler and a 355% increase in installations of Parler’s app.”).

[84] Id. at 1266.

[85] Id.

[86] Freedom Watch Inc. v. Google Inc., 816 Fed. Appx. 497, 500 (D.C. Cir. 2020).

[88] Christiano Lima, Steven Overly, Nick Niedzwiadek, & Leah Nylen, ‘Censorship Teams’ vs ‘Working the Refs’: Key Moments from Today’s Hearing with Tech CEOs, Politico (Nov. 17, 2020), https://www.politico.com/news/2020/11/17/facebook-twitter-senate-tech-hearing-436975, (quoting Sen. Josh Hawley).

[89] Leegin Creative Leather Prods. Inc. v. PSKS Inc., 551 U.S. 877, 886-87 (2007) (citations and internal quotation marks omitted).

[90] See National Advertising Division (NAD), Better Bus. Bur., https://bbbprograms.org/programs/all-programs/national-advertising-division (last visited May 20, 2025).

[91] See Amy Kiste Nyberg, Comics Code History: The Seal of Approval, Comic Book Leg. Def. Fund, http://cbldf.org/comics-code-history-the-seal-of-approval (last visited May 20, 2025); Code of the Comics Magazine Association of America Inc. (Oct. 24, 1954), https://en.wikisource.org/wiki/Comic_book_code_of_1954.

[92] See supra Part III.B.

[93] 15 U.S.C. 45(a)(1).

[94] FTC Policy Statement Regarding the Scope of Unfair Methods of Competition Under Section 5 of the Federal Trade Commission Act, File No. P221202 (Nov. 10, 2022), available at https://www.ftc.gov/system/files/ftc_gov/pdf/P221202Section5PolicyStatement.pdf.

[95] Id. at 1.

[96] Id. at 8.

[97] Id.

[98] Id.

[99] Id. at 9.

[100] Id.

[101] Id. at 9-10.

[102] Id. at 10-12.

[103] Id. at 11.

[104] Id. at 11-12.

[105] See supra notes 45-46  and accompanying text.

[106] 15 U.S.C. 45(n).

[107] See J. Howard Beales, The FTC’s Use of Unfairness Authority: Its Rise, Fall, and Resurrection, Fed. Trade Comm’n (May 30, 2003), https://www.ftc.gov/news-events/news/speeches/ftcs-use-unfairness-authority-its-rise-fall-resurrection.

[108] FTC Policy Statement on Unfairness, appended to International Harvester Co., 104 F.T.C. 949, 1070 (1984), (Dec. 17, 1980), https://www.ftc.gov/legal-library/browse/ftc-policy-statement-unfairness.

[109] Id.

[110] Id.

[111] Id.

[112] Id.

[113] Id.

[114] Id.

[115] Id.

[116] Id.

[117] FTC Policy Statement on Deception, appended to Cliffdale Associates Inc., 103 F.T.C. 110, 174 (1984), (Oct. 14, 1983), available at https://www.ftc.gov/system/files/documents/public_statements/410531/831014deceptionstmt.pdf.

[118] Id. at 1.

[119] Id.

[120] Id.

 

PORTLAND, Ore. (May 15, 2025) — The International Center for Law & Economics (ICLE) submitted an amicus brief today supporting Apple’s request to the 9th U.S. Circuit Court of Appeals for an emergency stay of U.S. District Court Judge Yvonne Gonzalez Rogers’ contempt of court order in the Epic v. Apple case. ICLE President Geoffrey A. Manne offered the following comment regarding the brief:

Judge Gonzalez Rodgers’ order granting Epic’s motion to issue a new injunction against Apple misapplies antitrust principles in a way that will ultimately harm consumers and set problematic legal precedents. It’s worth noting that the injunction is primarily concerned with rectifying a perceived price disparity, rather than with addressing specific contractual restraints that may have distorted competition and hindered innovation within the relevant digital marketplace. Antitrust courts should be fundamentally concerned with preserving market structures and processes that promote economic efficiency and consumer welfare rather than acting as central planners engaged in the direct regulation of prices at the behest of competitors.

The brief highlights two key legal considerations raised by the order:

• Antitrust courts are not price regulators. The order’s zero-price, compelled-access remedy raises serious practical and legal concerns. Forcing a firm to hand over the “source of its advantage” to rivals (without compensation, no less) risks chilling investment and turning courts into ongoing regulators of business relations.
• The new injunction is not directed at the harm found. The court’s first injunction was narrowly tailored to address the specific conduct found to be anticompetitive. The new injunction, by contrast, dramatically broadens the scope of enjoined conduct to include activities (including pricing decisions) not found to be anticompetitive. Except in very narrow circumstances not present here, the Supreme Court has directed lower courts to avoid such complex, long-running behavioral remedies or breakups that do not directly address harm caused by the illegal conduct.

The full brief can be downloaded here. To schedule an interview with Geoffrey or other ICLE scholars about the case, contact Jim Fellinger at [email protected].

About ICLE

The International Center for Law & Economics is a nonprofit, nonpartisan research center working with a roster of more than eighty academic affiliates and research centers from around the globe. ICLE scholars promote the use of law and economics methodologies to inform public policy debates.

I. Introduction

The U.S. pharmaceutical sector is a cornerstone of both the national public-health infrastructure and critical national-security interests. The sector ensures Americans’ access to medicines and underpins significant economic activity through innovation. These comments address the U.S. Commerce Department’s investigation into the national-security impact of the importation of pharmaceuticals and pharmaceutical ingredients pursuant to Section 232 of the Trade Expansion Act of 1962. We argue that, while it is necessary for the federal government to address both supply-chain vulnerabilities and foreign-trade distortions, any resulting policy actions must be phased, thoughtful, and precisely targeted. Crucially, such measures must be implemented in a manner that avoids abrupt disruptions that could inadvertently harm U.S. pharmaceutical innovation, competitiveness, and the very security interests they aim to protect.

A. Trade-Policy Uncertainty Depresses Investment

In order to address legitimate concerns arising from international trade in pharmaceuticals, it is crucial to establish a framework that recognizes the paramount importance of stability and predictability in trade policy. Such stability and predictability are essential to maintaining technological leadership and fostering long-term economic stability, particularly for an innovation-focused economy like the United States. Uncertainty surrounding trade policy can function as a drag on economic performance, independent of the specific policies ultimately enacted.[1]

Studies employing diverse methodologies have found that heightened trade-policy uncertainty (TPU) leads to measurable reductions in investment and overall economic activity.[2] This negative impact is observed at both the firm level, where companies facing greater uncertainty reduce capital accumulation, and at the macroeconomic level, where aggregate investment and GDP growth slow.[3] For example, analysis of the surge in TPU during 2018 indicated a strong negative correlation between industry-level uncertainty and investment, even after controlling for the actual tariffs imposed during that period, isolating the detrimental effect of uncertainty itself.[4] Aggregate economic models predict that shocks to TPU similar in magnitude to those experienced between 2017 and 2018 can depress the level of aggregate investment by 1-2% for roughly a year.[5]

The detrimental effects of TPU extend specifically to innovation, which is a critical driver of technological leadership and central to the pharmaceutical sector. Research indicates that eliminating uncertainty, particularly regarding tariffs, provides a significant boost to innovative activity, as measured by patent applications and R&D expenditures.[6] Uncertainty makes the long-term planning and significant capital outlays associated with pharmaceutical innovation riskier and more difficult, potentially stifling the development and adoption of new therapies and technologies.[7]

The underlying economic mechanism driving these effects relates to the concept of real options. When future trade rules that affect production costs, market access, and consumer demand are unclear, firms perceive an increased value in delaying irreversible investment decisions and waiting for clarity. This “wait-and-see” approach applies to decisions regarding capital investment, hiring, and entry into new export markets. While the choice to delay might appear rational from an individual firm’s perspective, when adopted broadly across the economy, such choices result in suppressed investment, reduced firm entry into international markets and, ultimately, lower overall economic activity and innovation. Therefore, a stable and predictable trade-policy framework is essential not only to avoid the direct costs of harmful protectionist measures but also to mitigate the chilling effect that uncertainty itself casts upon investment, innovation, and long-term economic prosperity, particularly within the vital pharmaceutical industry.

B. Avoid Disruptive Interventions that Threaten Pharmaceutical Innovation

In short, while the U.S. pharmaceutical sector is generally robust, innovative, and capable of meeting the nation’s health and security needs, targeted vulnerabilities related to generic drugs and upstream supply chains must be thoughtfully addressed. Policymakers should carefully avoid broad, disruptive interventions such as sweeping tariffs or aggressive reshoring mandates that would impose substantial economic costs and hinder innovation. Instead, they should adopt a measured, strategic approach that clearly identifies and corrects specific foreign trade distortions—such as intellectual property violations, forced technology transfers, and targeted subsidies—through calibrated responses. This approach will sustain the substantial economic vitality and innovation-driven leadership of the U.S. pharmaceutical industry, thereby genuinely enhancing national security.

II. The Economics of the Pharmaceutical Supply Chain

U.S. demand for pharmaceuticals and related ingredients has followed an upward trajectory, driven by fundamental demographic shifts, including an aging population and the growing prevalence of chronic health conditions. While quantifying the precise increase in demand is complex, the effects are evident in the strain placed upon the supply chain, particularly during periods of crisis.[8]

The supply chain for pharmaceutical components is likewise extraordinarily complex. Active pharmaceutical ingredients (APIs) are the core components of medicines responsible for producing the intended therapeutic effects—the biologically active substances within a drug product.[9]  Key starting materials (KSMs), on the other hand, are the chemical building blocks or intermediates required for the chemical-synthesis process that produces an API.[10] The complexity of the upstream supply chain—involving multiple steps from raw chemicals to KSMs to APIs, before the ultimate production of finished dosage forms (FDFs)—make comprehensive risk assessment and management exceedingly difficult.[11] Technical or economic disruptions that occur at the API or KSM manufacturing and distribution level may therefore have widespread and difficult-to-predict downstream consequences.

Evaluating the U.S. domestic pharmaceutical-production landscape clearly illustrates significant strengths (particularly in innovation and high-value medicines), as well as certain vulnerabilities (primarily in generic-drug production and important precursors). The United States remains a global leader in the research, development, and manufacture of innovative, high-value pharmaceuticals. Reflecting this, a substantial portion of medicines consumed in the United States—reportedly two-thirds, measured by value—are manufactured domestically within a network of more than 1,500 U.S.-based facilities.[12] This highlights the nation’s robust capacity to produce complex and innovative therapies.

This strength in innovative drug production appears, however, to contrast with the situation for many generic drugs and their important precursors. Analyses of U.S. Food and Drug Administration (FDA) data regarding manufacturing facilities suggest a potential reliance on foreign sources, particularly for upstream components. As of 2019, only 26% of facilities manufacturing APIs for U.S. consumption were located within the United States.[13] It is important to note, however, that a significant majority of APIs for innovative and high-value medicines are domestically produced or sourced from closely allied nations, reflecting substantial U.S. strength in these critical areas.

Similarly, only 40% of facilities producing FDFs—the final pills, capsules, or injectables—were domestic.[14] Furthermore, the domestic share of FDF-manufacturing sites fell from 44.05% in 2013 to 40.09% in 2019, suggesting a trend toward greater reliance on foreign production for the final stages of manufacturing for certain products (primarily, many generics).[15] Complementary analysis using drug master files (DMFs)—which often relate to generic-drug components—may point toward a similar reliance on foreign API sources for generics. A 2021 review indicated that only 10% of active API DMFs supplying the U.S. market originated from U.S.-based facilities.[16] The U.S. contribution to new API DMF filings was reportedly around 4% in both 2019 and 2021, possibly indicating limited growth in domestic API capacity relative to foreign competitors in these specific areas.[17]

This apparent bifurcation—strength in high-value innovative drug manufacturing, alongside possible significant foreign reliance for APIs and many generic FDFs—underscores the need for nuanced policy approaches that support domestic innovation, while carefully addressing potential vulnerabilities in important precursor and generic-drug supply chains.

It is crucial, however, to contextualize the nature of this reliance on imports. While facility counts and API-sourcing data point to foreign dependence, a significant majority of U.S. pharmaceutical imports by value originate from Europe. The European Union accounted for 73% of total U.S. pharmaceutical imports in 2023.[18] These imports predominantly consist of high-value finished medicines and complex biologics. Given the strong political, economic, and security alliances between the United States and European nations, reliance on these partners presents a different risk profile than reliance on imports from geostrategic competitors like China would. Therefore, assessments of supply-chain risk must consider not only the volume, but also the source of imports and the geopolitical relationships involved.

Further, the economic factors that have driven some degree of offshoring are particularly potent at the API and KSM stages for generics. Manufacturing these materials often involves large-scale, capital-intensive chemical processes where economies of scale are paramount. Combined with lower labor and regulatory costs—and potential government subsidies in major producing nations—there may be a substantial cost differential relative to domestic production.[19]  This creates powerful economic disincentives to establish or maintain API/KSM production in the United States. The “commoditization loop,”[20] in which price pressures lead to offshoring, underinvestment, and increased shortage risk, applies with even greater force to these upstream components. This explains why domestic API and KSM capacity is generally weaker than FDF capacity. It also suggests that reshoring initiatives would face formidable economic challenges without significant policy interventions or fundamental changes to market structures. Addressing this reality requires a thorough understanding of how U.S. domestic policy contributes to making it less viable to manufacture certain goods at home.

It is also important to recognize that the current global distribution of pharmaceutical production, including the sourcing of certain inputs from abroad, reflects complex economic realities and rational decisions made by firms based on factors like cost, efficiency, and specialization.[21] While addressing supply-chain vulnerabilities is a valid goal, policy interventions designed to encourage changes in these established patterns (such as reshoring initiatives) must be implemented carefully and thoughtfully to avoid unintended consequences and disruptions to the supply of medicines. Understanding the underlying economic drivers is critical to design effective and sustainable policy.

With this as backdrop, this proceeding asks about “the feasibility of increasing domestic capacity for pharmaceuticals and pharmaceutical ingredients to reduce import reliance.”[22]  Indeed, there are risks associated with foreign reliance on pharmaceutical inputs in some cases. But as we discuss below, there are many cases in which economic trade with friendly nations increases overall welfare in the United States. Moreover, attempting to accelerate reshoring of pharmaceutical production in excess of the speed at which private firms can stand up that capacity is likely to exacerbate supply-chain issues, not remedy them.

Trade policy, even when conducted with a focus on national security, needs to be carefully calibrated to allow firms to source and produce necessary pharmaceutical inputs in a wide variety of allied economies. Where there are market distortions present in the economies of trade partners, the correct response in many or most instances is to collaborate with those partners to reduce the distortion, not to severely attenuate or prevent trade altogether.

III. Open Trade, Innovation, and Economic Prosperity

This comment proceeds from two foundational premises regarding international trade. First, open trade conducted on equitable terms generally yields substantial economic benefits for participating nations. Second, when trade relationships become imbalanced due to unfair practices or distortions, effective remedies require careful diagnosis of the specific market distortions at play, allowing for tailored and targeted policy responses, rather than broad and potentially disruptive measures.

Open and competitive trade is a cornerstone of economic prosperity, particularly in innovation-driven sectors such as pharmaceuticals. While there are cases where market distortions can disrupt the gains from otherwise free trade, trade liberalization is generally acknowledged to enhance economic performance by fostering competition within domestic markets.[23] Increased competition compels domestic firms to improve efficiency. This can lead resources to be reallocated from less productive to more productive industries, thereby boosting overall economic output.[24] Furthermore, integrating national economies into the global marketplace through open-trade policies can stimulate foreign and domestic investment, facilitate the transfer and adoption of technological advancements, and expand export opportunities.[25]

A foundational economic principle that justifies the gains from open trade is comparative advantage. This principle posits that nations benefit by specializing in the production of goods and services where they have a relative efficiency advantage over other nations, and then trading for goods where they are relatively less efficient. This specialization allows for a more efficient global allocation of resources, leading to increased overall production and consumption possibilities.

Traditional interpretations often view comparative advantage as stemming from relatively static factors like differences in technology, resource endowments, or labor productivity. But contemporary research, particularly in the context of innovation-driven economies, increasingly emphasizes a more dynamic understanding of comparative advantage.[26] Indeed, trade itself can influence the direction of technological change. By expanding the potential market for certain types of innovation, international trade creates powerful incentives for firms and researchers to direct their efforts toward developing technologies and products suited for global markets.[27] Consequently, a nation might develop a comparative advantage not only in producing certain goods but also in the process of innovation within specific sectors.

This dynamic interplay means that comparative advantage is not merely a static condition that trade helps to exploit; rather, it is partially endogenous, shaped and reshaped over time by trade patterns and the innovations they induce.[28] Empirical estimates suggest that these endogenous adjustments in technology, driven by trade incentives, can account for a substantial portion—perhaps as much as half—of the observed variation in production-based comparative advantage across countries and industries.[29] This understanding reinforces the crucial links among trade openness, specialization, efficiency, innovation, and sustained economic growth. It highlights that openness fosters not just the efficient use of existing capacities but also the development of future economic strengths. While the rise of complex global value chains complicates the measurement of traditional comparative advantage based on gross export data, newer methodologies focusing on trade in value-added sectors confirm the continued relevance of the principle of comparative advantage in driving the diffusion of international production.[30]

The positive effects of trade extend beyond static efficiency gains, which involve optimizing the allocation of existing resources. A significant body of research highlights the dynamic benefits of trade—particularly its role in spurring innovation and technological progress.[31] When firms face increased import competition or gain access to larger export markets through liberalization, they often respond by seeking to boost their capacity for innovation, such as by investing more in research and development, adopting new technologies, and seeking patent protection for their inventions.[32] This process implies that a country’s technological trajectory and productivity growth are not fixed, but rather, can be positively influenced by its trade policies. This dynamic element is crucial to understand how open trade supports prosperity, especially in high-technology fields where continuous innovation is paramount.

But while the broad consensus among economists points to positive relationships among trade openness, reduced trade barriers, and economic welfare, there are nuances that policymakers must observe. The extent and universality of these benefits, particularly for developing nations or specific sectors, remain subjects of ongoing research and debate.[33]  Further, and particularly relevant for this inquiry, there are cases where trading-partner nations may engage in various behaviors that distort trade and provide the basis for adjustments to U.S. trade policy.

IV. When All Else Is Not Equal: The Threat of Foreign Economic Protectionism

While identifying and addressing inefficiencies in the global trading system is a valid policy objective, the current approach may rely too heavily on blunt measures like tariffs. Tariffs may prove ineffective if they fail to account for the less conspicuous nontariff barriers (NTBs) that foreign jurisdictions employ to enact protectionist policies. The strategic value of a U.S.-imposed tariff is largely determined by the specific policy changes sought from the trading partner in exchange for the tariff’s removal. Therefore, a critical element of effective trade policy involves identifying these distorting policies and leveraging potential responses to secure commitments from foreign jurisdictions for their reform.

Protectionist policies—broadly defined as government measures that seek to restrict imports through mechanisms like tariffs, import quotas, subsidies, and various NTBs, such as complex regulations or standards—pose significant risks to international economic stability.[34] By their nature, these policies impede the free flow of goods and services across borders, which can disrupt established international collaborations and intricate global supply chains.

Beyond supply-chain risks, protectionist policies have been long recognized as detrimental to overall economic efficiency and welfare.[35] By shielding domestic industries from international competition, protectionism allows less efficient firms to survive or maintain market share, leading to a misallocation of national resources away from more productive uses.[36] This lack of competitive pressure can dampen incentives for innovation within the protected sectors.

NTBs can impose compliance costs on importers and exporters, which are often passed on to consumers in the form of higher prices.[37] The effect of these trade barriers is twofold. On the one hand, they hurt U.S. firms that want to trade with our foreign partners. On the other, the cumulative effect of reduced competition, higher costs, resource misallocation, and potential trade conflicts is reduced overall economic efficiency, slower economic growth, and diminished national competitiveness for the foreign jurisdiction, as well.[38]

A key challenge in evaluating protectionism is that its costs are often dispersed widely across the economy (e.g., slightly higher prices for all consumers, reduced opportunities for various export firms), while its benefits tend to be concentrated within specific (often politically influential) industries or groups that lobby for protection.[39] This asymmetry can make the less visible aggregate costs harder to weigh against the more apparent concentrated benefits in the political arena.

A. Anticompetitive Market Distortions as Trade Barriers

While we strongly caution against the generalized application of tariffs, due to their inherent economic risks, if policymakers determine that tariffs are unavoidable, it is critical that such measures be narrowly targeted and precisely calibrated to deal with the quantifiable effects of protectionist policies. The concept of anticompetitive market distortions (ACMDs) provides a methodological framework to identify and quantify the specific harms arising from foreign government actions that disadvantage U.S. firms. A disciplined focus on identifying and targeting ACMDs would ensure that tariffs and other trade sanctions are used strictly as targeted corrective measures, rather than broad protectionist tools.

In essence, ACMDs are a way of understanding government actions that harm economic welfare by undermining competition. As defined by Shanker Singham, an ACMD is characterized as a government intervention in the economy that (1) substantially lessens competition, (2) cannot be justified by an overriding legitimate public-policy objective (such as correcting a clearly defined market failure or ensuring public health and safety), and (3) empowers certain private interests or entities to obtain or retain artificial competitive advantages over their rivals.[40]

This definition distinguishes ACMDs from several other types of government actions. Unlike legitimate regulations designed to achieve welfare-enhancing social goals, ACMDs lack such justification and primarily serve to skew the competitive landscape in favor of specific players.[41]  They also differ from private anticompetitive conduct, as ACMDs are fundamentally enabled, imposed, or maintained by government authorities.[42] This government backing can make ACMDs more persistent and damaging than private restrictions. Furthermore, while standard trade-policy tools like tariffs or broadly applied subsidies can distort trade, ACMDs encompass a broader range of interventions—including regulatory measures, discriminatory application of rules, or failures in governance—that specifically target the conditions of competition.[43]

In a well-functioning market, competition drives firms to innovate, improve efficiency, and lower prices, with resources flowing toward the most productive uses. ACMDs disrupt this process by insulating favored firms from competitive pressures, or by imposing artificial disadvantages on their rivals. This prevents the market mechanism from efficiently allocating resources based on merit and performance, leading to systemic inefficiencies and reduced overall economic welfare.

The scope of practices potentially constituting ACMDs is broad, extending beyond traditional trade barriers. ACMDs can encompass various government policies and practices. Examples include:

• Regulatory Barriers: Regulations designed or applied in a manner that disproportionately hinders market access for certain firms (often foreign competitors) or raises their operating costs relative to favored domestic entities. This could involve discriminatory standards, licensing requirements, or overly complex administrative procedures.[44]
• Artificial Cost Reduction: Government actions that artificially lower the production or operating costs for specific firms or industries, giving them an unfair advantage in domestic and international markets. This goes beyond general infrastructure support and targets specific beneficiaries.[45]
• Failures in Property-Rights Protection: Inadequate enforcement or discriminatory application of intellectual property rights (IPR) or other property rights can undermine the investments of innovators and legitimate producers, effectively distorting competition by allowing others to unfairly benefit from their efforts.[46] Weak IPR protection, for instance, can discourage high-technology exports into a market or hinder domestic innovation.
• Targeted Subsidies: While not all subsidies are ACMDs, those that are specifically targeted to provide a competitive advantage to select firms or industries, distort market dynamics significantly, and lack a clear, overriding public-policy justification fall under this category.[47] Distortive subsidies, particularly in manufacturing, have become a growing concern in international trade.[48]
• Other Distortions: ACMDs may also include interventions like discriminatory procurement policies, advantages extended to state-owned enterprises not based on efficiency, or regulations that exempt favored firms from general competition rules.[49]

The common thread across these examples is a government’s active role in manipulating market conditions to favor certain economic actors over others, thereby substantially lessening competition on the merits.

To be clear, our discussion of the ACMD framework should not be interpreted as advocating broadly for tariffs as a primary trade-policy instrument. Rather, if they are to be considered at all, tariffs must be narrowly tailored, rigorously justified by evidence of specific market distortions, and calibrated precisely to the level necessary to neutralize demonstrated competitive harms. The ultimate goal should always be to resolve trade distortions through international cooperation and negotiation, resorting to targeted tariff measures only when other approaches have been exhausted or clearly demonstrated as ineffective.

B. Focused Responses to ACMDs and Other Nontariff Barriers

The utility of using ACMDs as a framing device for trade distortions is that they provide tools for policymakers to 1) assess what is out of balance and 2) make specific demands of trading partners. Without some metric to judge the harms caused by trade distortions, broad tariffs are almost certainly doomed to being ineffective at deterring the harmful conduct of foreign governments.

Following diagnosis of particular ACMDs, Singham recommends  a specific corrective measure known as “ACMD tariffication.”[50] This approach involves applying a tariff to imports from the country imposing the ACMD, with the level of the tariff precisely calibrated to neutralize the estimated detrimental effect of the distortion.[51] The core objective of ACMD tariffication is to discover the quantifiable harms generated by a trading partner’s domestic policy and remedy those in a targeted fashion.

To justify such a targeted tariff, the framework requires demonstrating: 1) the existence of an ACMD (a government intervention substantially lessening competition without legitimate justification); 2) a demonstrable anti-competitive effect resulting from the ACMD (potentially using tests analogous to merger analysis, such as the substantial lessening of competition, or “SLC” test); and 3) evidence of harm caused to the domestic industry by the ACMD.[52]

This methodology represents a conceptual departure from traditional trade remedies. Anti-dumping duties, for example, typically focus on comparing export prices to domestic prices or costs, without necessarily addressing the underlying reasons for price differences.[53] Countervailing duties target specific, legally defined government subsidies (requiring a financial contribution, benefit, and specificity), potentially missing broader regulatory distortions or failures in governance that constitute ACMDs. ACMD tariffication, in contrast, seeks to directly address the economic impact of the distortion on firms’ cost base or competitive position, regardless of the specific form the government intervention takes. The calibration of the tariff is linked directly to the measured scale of distortion derived from the economic-scoring methodology.

V. Specific Foreign-Trade Distortions Affecting Pharmaceuticals

The U.S. pharmaceutical sector holds strategic importance, as it underpins not only the nation’s economic vitality through innovation and high-value employment, but also fundamental public-health and national-security interests. As a consequence, the industry is particularly sensitive to the impacts of foreign-trade distortions. Practices originating abroad can undermine the competitiveness of U.S. pharmaceutical firms, hinder innovation by devaluing intellectual property, and create vulnerabilities in the supply chains that deliver medicines to the American public.

There are two primary categories of trade distortion that are relevant to this comment: intellectual-property violations and forced technology transfer, and the effects of foreign subsidies and price manipulations.

A. IP Violations and Forced Technology Transfer

Intellectual-property rights, particularly patents and trade secrets, form the bedrock of innovation within the pharmaceutical industry.[54] The development of new medicines is an inherently costly and high-risk endeavor that requires substantial long-term investment in research and development.[55] Patents provide a critical incentive mechanism, granting inventors exclusive rights for a defined period, which allows firms the opportunity to recoup their significant investments and fund future research.[56] Further, there is a strong relationship between patent production and protection, and broader economic growth and innovation.[57] Trade secrets offer complementary protection for valuable manufacturing processes, formulas, and other proprietary knowledge that may not be patentable, or for which patent disclosure is strategically undesirable.

Despite established international agreements like the World Trade Organization’s (WTO) Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), the U.S. pharmaceutical sector faces significant challenges from IP violations abroad, particularly from China. These violations encompass a range of activities, including the counterfeiting of medicines, patent infringement, and the misappropriation of trade secrets.[58]

The scale of this problem is substantial. According to the Office of the U.S. Trade Representative, China and Hong Kong accounted for the vast majority (more than 83%) of counterfeit goods seized in the United States in 2022.[59]  Surveys have revealed that a significant percentage of U.S. companies report IP theft attributable to China, resulting in estimated annual losses to the U.S. economy that reach into the hundreds of billions of dollars.[60] While such tallies are not exclusively focused on pharmaceuticals, the sector is inherently vulnerable due to the high value of its IP.

Specific concerns within the pharmaceutical domain include inadequate protection in some jurisdictions against the unfair commercial use or unauthorized disclosure of the extensive and costly test data submitted to regulatory agencies to obtain marketing approval for new drugs.[61] Furthermore, issues persist regarding the effective implementation of patent-linkage systems (which prevent regulatory approval of generics while patents are valid) and patent-term compensation mechanisms (to account for regulatory delays), despite legislative efforts in countries like China to address these areas.[62] These IP-related frictions contribute to broader trade tensions, notably forming a core component of U.S.-China trade disputes.

Distinct from outright theft, forced technology transfer involves practices wherein foreign governments compel or pressure U.S. companies to transfer valuable technology or intellectual property as a condition to access their markets, obtaining investment or regulatory approvals, or receiving other governmental benefits or preferences.[63] Analyses have identified several mechanisms employed:

• Conditional Market Access/Approvals: Conditioning investment approvals, regulatory clearances (including for pharmaceuticals), government-procurement eligibility, or other benefits on the transfer of technology to domestic entities, or on conducting R&D locally.[64]
• Joint-Venture and Ownership Restrictions: Using foreign-ownership limitations and joint-venture requirements to pressure foreign firms into partnerships wherein technology transfer to the local partner is implicitly or explicitly expected.[65] Examples that have affected the pharmaceutical sector directly include China’s human genetic resources administrative regulation and its biosecurity law, which stakeholders report create pressure to transfer technology when research involves Chinese human genetic resources.[66]
• Administrative and Licensing Processes: Leveraging opaque or discretionary administrative review and licensing procedures to exert pressure for technology transfer.
• Cybersecurity and Data-Localization Rules: Employing cybersecurity regulations or data-localization requirements that may compel disclosure of sensitive IP or discriminate against foreign-owned IP under the guise of security reviews.[67]
• State-Sponsored Talent Recruitment: Utilizing programs designed to recruit foreign experts and researchers, which can facilitate the transfer of sensitive knowledge and trade secrets back to the sponsoring country.[68]

It is important to note that China’s official legal framework, including its foreign-investment law, explicitly prohibits administrative organs from using administrative means to force technology transfer.[69] But U.S. stakeholders and government bodies maintain that these practices persist through the application of more subtle pressures and by leveraging grants of market access.[70] This discrepancy highlights a potential divergence between formal legal commitments and actual implementation or the use of informal pressures. The practices described often fall into a grey area, where the line between voluntary business decisions made under duress and explicit coercion is blurred. Companies may face a difficult choice: transfer technology or forfeit access to a major market.

This description of the status quo that American firms face captures well the concept of ACMDs, where government actions—even if not direct mandates—create conditions that disadvantage foreign competitors or compel certain behaviors.

The U.S.-China Phase One Economic and Trade Agreement, signed in 2020, attempted to address these concerns. It included chapters on intellectual property and technology transfer, with specific commitments regarding pharmaceutical-related IP, trade secrets, and prohibitions against forcing technology transfer in exchange for market access or regulatory approvals.[71] But concerns about the implementation and scope of these commitments remain, and the agreement acknowledged the need for future negotiations on issues like data protection for pharmaceuticals.[72] The focus on pharmaceutical data protection specifically pointed to the unique value and vulnerability of the sector’s clinical-trial results and related datasets, suggesting that traditional patent and trade-secret frameworks may not fully capture the competitive significance of this information.[73]

B. Foreign Subsidies and Price Manipulation

In the context of international trade, subsidies refer to financial contributions or other forms of support provided by a government or public body that confer a benefit to specific enterprises, industries, or regions.[74] These can take various forms, including direct monetary grants; loans at preferential rates; loan guarantees; tax credits or rebates; the provision of goods or services (such as land or energy) at below-market rates; and income- or price-support mechanisms.[75] A critical distinction should be made between general government support available broadly and specific subsidies targeted at particular recipients, which are more likely to distort trade patterns.[76]

Evidence suggests that foreign governments create ACMDs when they provide significant subsidies to their domestic pharmaceutical industries.[77] China, for example, officially designated pharmaceutical production as a “high-value-added industry” and has supported the sector through various means, including direct subsidies and export-tax rebates aimed at boosting foreign sales.[78]

While comprehensive data on specific pharmaceutical subsidies can be opaque,[79] there are numerous mechanisms that indirectly subsidize inputs. For instance, China’s policy of centralized volume-based procurement (referred to as “centralized band purchasing”) for generic drugs—while primarily aimed at reducing domestic drug prices—may also function as a market-distorting mechanism.[80] Although it significantly lowers prices for consumers and the state, it channels funds (potentially including government subsidies) toward winning firms, while potentially compressing margins and hindering innovation for others disfavored (and largely foreign) firms.[81]

Indeed, this problem is not limited to China. Governments abroad routinely employ centralized negotiation and external-reference pricing systems that artificially suppress pharmaceutical prices significantly below their market-driven value.[82] Countries such as Canada, the United Kingdom, France, Germany, and Australia operate national health-care systems or single-payer models that leverage their massive buying power to negotiate or impose stringent price limits on medications. These practices ensure that foreign drug prices remain systematically low—well below what would naturally emerge under competitive market conditions.[83]

Foreign subsidies are frequently linked to exporting firms’ ability to engage in dumping or to sustain pricing below their unsubsidized costs in foreign markets. In the pharmaceutical sector, there have been allegations that Chinese companies—enabled by government subsidies and export incentives—have “dumped” low-priced APIs and generic drugs onto the global market, making it economically unviable for competitors in the United States and elsewhere to continue production.[84] If sustained by subsidies, this strategy can effectively drive out competition, even if it may not meet the strict legal definition of “predatory pricing” required for antitrust action.

This highlights a potential gap where subsidy-fueled pricing harms competitors but may evade traditional antitrust scrutiny, making trade remedies like countervailing duties (specifically targeting subsidies) or potential frameworks like ACMD analysis (focusing on the cost distortion itself) more pertinent policy tools.

Foreign subsidies, and associated practices like dumping, significantly distort international trade flows and undermine the competitiveness of unsubsidized U.S. pharmaceutical firms. Economic analysis suggests that subsidies tend to increase the exports of subsidized products from the granting country, while simultaneously depressing imports of those products into that country.[85] An International Monetary Fund (IMF) study of China’s subsidies found precisely these effects, noting that they were magnified through supply-chain linkages: subsidies provided to upstream industries (like chemical precursors or APIs) significantly boosted the exports of downstream industries (like finished pharmaceuticals).[86] This finding is particularly relevant, given the structure of the pharmaceutical value chain. In other words, subsidies to Chinese API manufacturers could indirectly enhance the export competitiveness of finished drugs produced elsewhere but reliant on those subsidized Chinese inputs.

These distortions make it difficult for U.S. firms, particularly in highly price-sensitive markets, to compete against foreign rivals whose costs are artificially lowered by government support. The pressure from subsidized imports can lead to reduced market share, lower profitability and, ultimately, the exit of U.S. manufacturers from certain market segments. This contributes to the erosion of domestic production capacity, especially for important generic medicines and their APIs, thereby magnifying U.S. reliance on imports.

This pattern mirrors the experience in other advanced technology sectors, where targeted foreign industrial policies—often involving substantial subsidies—have contributed to a decline in U.S. competitiveness over time.[87] Consequently, foreign subsidies pose a dual threat: they directly challenge the competitiveness of existing U.S. firms and indirectly weaken national resilience by fostering the offshoring that creates supply-chain vulnerabilities.

VI. Recommendations and Conclusion

Addressing the national-security implications of pharmaceutical imports necessitates a carefully calibrated strategy that acknowledges the significant economic benefits of open trade, while decisively countering foreign practices that distort markets and create vulnerabilities. The U.S. pharmaceutical sector faces notable threats from ACMDs, including inadequate intellectual-property enforcement, forced technology transfers, targeted subsidies, and discriminatory regulatory practices that disadvantage U.S. firms and threaten medicine supply chains.

But broad protectionist responses—such as expansive tariffs, sweeping reshoring mandates, or general “Buy American” requirements—carry substantial risks. Abruptly altering complex global pharmaceutical supply chains would likely increase health-care costs, disrupt patient access, and ultimately undermine the very capacities for innovation and domestic production that these measures aim to protect. Moreover, it would introduce detrimental economic uncertainty, negatively affecting long-term investment and innovation within the pharmaceutical sector.

Therefore, policymakers should pursue a strategic approach that emphasizes cooperation and targeted corrective actions:

• Targeted and Conditional Tariff Measures: To reiterate clearly, our discussion of ACMDs is not intended as a general endorsement of tariffs. Tariffs should only be considered as narrowly tailored temporary measures, rigorously justified by evidence of specific foreign-trade distortions, and carefully calibrated to neutralize competitive harms. Such tariffs, if deemed necessary, should be temporary tools to provide incentives for trade reform, not permanent trade barriers.
• Phased and Targeted Domestic Enhancement: Implement phased incentives and targeted support, potentially through public-private partnerships, to enhance domestic-production capabilities for the most critical pharmaceuticals and their important components. This would strengthen domestic capacity strategically without triggering destabilizing economic shocks.
• Allied Diversification: Actively coordinate with allied nations to diversify supply sources for critical inputs and finished products, reducing overdependence on any single nation, particularly potential adversaries.
• Measured Trade Actions: Reinforce the importance of trade actions that are carefully measured and specifically targeted at identified ACMDs, in order to maintain the U.S. pharmaceutical sector’s innovation ecosystem, avoiding broad measures that could stifle beneficial trade.

In sum, a prudent, precise, and cooperative strategy—supported by rigorous analytic frameworks—will ensure the United States can effectively address genuine national-security concerns, without sacrificing the substantial existing economic vitality, production capacity, and innovative strength that characterize the U.S. pharmaceutical sector.

[1] See, generally, Dario Caldara et al., The Economic Effects of Trade Policy Uncertainty, 109 J. Monetary Econ. 38 (2020), available at https://www.federalreserve.gov/econres/ifdp/files/ifdp1256.pdf.

[2] Id. at 1-3.

[3] Id. at 12-14.

[4] Id. at 12.

[5] Id. at 13.

[6] See, e.g., Duc Hong Vo et al., The Role of Economic Policy Uncertainty in Environmental, Social, and Governance Practices: Evidence from Quantile Regressions, 15 Sustainability 49 (2023), available at https://www.mdpi.com/2071-1050/15/1/49.

[7] See Kyle Handley & Nuno Limão, Trade Policy Uncertainty, 14 Ann. Rev. Econ. 363 (2022), available at https://www.nber.org/papers/w29672.

[8] National Academies of Sciences, Engineering, and Medicine, Globalization of U.S. Medical Product Supply Chains, in Building Resilience Into the Nation’s Medical Product Supply Chains (C. Shore, L. Brown & W.J. Hopp eds., 2022), Ch. 3, available at https://www.ncbi.nlm.nih.gov/books/NBK583730.

[9] Building a Resilient Domestic Drug Supply Chain, API Innov. Ctr. (2025), available at https://apicenter.org/wp-content/uploads/2025/03/APIIC-White-Paper-2025-Building-a-Resilient-Domestic-Drug-Supply-Chain.pdf.

[10] Id.

[11] U.S. Pharmacopeia, Supply Chain Resilience Policy Paper, available at https://www.usp.org/sites/default/files/usp/document/public-policy/supply-chain-resilience-policy-paper.pdf (last visited May 3, 2025)

[12] The Economic Impact of U.S. Biopharma Industry, Teconomy Partn. (2024), at 11, available at https://www.teconomypartners.com/wp-content/uploads/2024/05/The-Econ-Impact-of-U.S.-Biopharma-Industry-2024-Report.pdf.

[13] See Yashna Shivdasani et al., The Geography of Prescription Pharmaceuticals Supplied to the USA: Levels, Trends, and Implications, 8 J.L. & Biosci. lsaa085 (2021), available at https://pmc.ncbi.nlm.nih.gov/articles/PMC8109232.

[14] Id.

[15] Id.

[16] Geographic Concentration of Pharmaceutical Manufacturing, USP Quality Matters (May 18, 2022), https://qualitymatters.usp.org/geographic-concentration-pharmaceutical-manufacturing.

[17] Id.

[18] Maggie Fick, US Pharma Tariffs Would Raise US Drug Costs by $51 Billion Annually, Report Finds, Reuters (Apr. 25, 2025), https://www.reuters.com/business/healthcare-pharmaceuticals/us-pharma-tariffs-would-raise-us-drug-costs-by-51-bln-annually-report-finds-2025-04-25.

[19] See Andrew D. Mitchell, Geography of Health: Onshoring Pharmaceutical Manufacturing to Address Supply Chain Challenges, 22 World Trade Rev. 344 (2024), https://www.cambridge.org/core/journals/world-trade-review/article/geography-of-health-onshoring-pharmaceutical-manufacturing-to-address-supply-chain-challenges/120B2E49D4D0CA475F00944F9ACE6172.

[20] Anthony Sardella, US Generic Pharmaceutical Industry Economic Instability, Olin Sch. Bus. Cent. Anal. Bus. Insights (2023), available at https://apicenter.org/wp-content/uploads/2023/07/US-Generic-Pharmaceutical-Industry-Economic-Instability.pdf.

[21] See, e.g., Mitchell, supra note 19 (discussing economic factors that influence geographic distribution); see also id. (highlighting economic pressures—particularly in generics—that contribute to sourcing decisions).

[22] Notice of Request for Public Comments on Section 232 National Security Investigation of Imports of Pharmaceuticals and Pharmaceutical Ingredients, 90 Fed. Reg. 15951 (Apr. 16, 2025), https://www.federalregister.gov/documents/2025/04/16/2025-06587/notice-of-request-for-public-comments-on-section-232-national-security-investigation-of-imports-of.

[23]  Amrit Pathak, Shawn Leu, Mari L. Robertson, & Mahinda Siriwardana, Technical Efficiency, Scale Effect, and Trade Liberalization: Evidence from the Nepalese Manufacturing Sector, 57(9) Applied Econ. 934 (2025), https://www.tandfonline.com/doi/full/10.1080/00036846.2024.2310524.

[24]  Id.

[25] Godswill Osuma & Ntokozo Patrick Nzimande, Exploring the Dynamic Link Between Trade Openness, External Debt, and Economic Growth in Sub-Saharan Africa: Challenges and Considerations, 12 Economies 283 (2024), https://www.mdpi.com/2227-7099/12/11/283.

[26] Mariano Somale, Comparative Advantage in Innovation and Production (Int’l Fin. Discussion Papers No. 1206, May 2017), available at https://www.federalreserve.gov/econres/ifdp/files/ifdp1206.pdf.

[27] Id.

[28] Id.

[29] Id

[30] Josephine Wuri, The Role of Comparative Advantage in Enhancing Trade in Value-Added Using a Dynamic GMM Model, 12 Economies 187 (2024), available at https://www.mdpi.com/2227-7099/12/7/187.

[31] Wolfgang Keller & Stephen R. Yeaple, The Gravity of Knowledge (Nat’l Bureau of Econ. Research Working Paper No. 22647, Sep. 2016), available at https://www.nber.org/system/files/working_papers/w22647/w22647.pdf.

[32] Id.

[33] See, e.g., Osuma & Nzimande, supra note 25.

[34] See generally Walter E. Block, Do We Need Protectionism? (2011), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1881052.

[35] Jagdish Bhagwati, Protectionism, Library Of Economics And Liberty, https://www.econlib.org/library/Enc/Protectionism.html (last visited May 3, 2025).

[36] Pathak et al., supra note 23.

[37] Eric Fruits, Non-Tariff Barriers, Int’l Ctr. L. Econ. (Feb. 27, 2025), https://laweconcenter.org/resources/non-tariff-barriers.

[38] Bhagwati, supra note 35.

[39] Fruits, supra note 37.

[40] Shanker A. Singham, Market Distortions and How Best to Deal with Them: Sugar Sector Case Study, Competere (2024), available at https://shankersingham.com/wp-content/uploads/2024/10/Market-Distortions-and-How-Best-to-Deal-with-Them_-Sugar-Sector-Case-Study.pdf.

[41] 2024–25 Growth Presidency Memo: A Research Report from the Growth Commission, Growth Comm. (Nov. 13, 2024), available at https://www.growth-commission.com/wp-content/uploads/2024/11/Growth-Commission-Presidency-Report-for-Capitol-event.pdf.

[42] Unfair Advantage: Distortive Subsidies and Their Effects on Global Trade, World Bank (2023), available athttps://thedocs.worldbank.org/en/doc/0534eca53121c137d3766a02320d0310-0430012022/related/Unfair-Advantage-Distortive-Subsidies-and-Their-Effects-on-Global-Trade-2023.pdf.

[43] Singham, supra note 40.

[44] Fruits, supra note 37.

[45] Singham, supra note 40.

[46] Growth Commission, supra note 41.

[47] Singham, supra note 40.

[48] Unfair Advantage: Distortive Subsidies and Their Effects on Global Trade, World Bank (2023), available athttps://thedocs.worldbank.org/en/doc/0534eca53121c137d3766a02320d0310-0430012022/related/Unfair-Advantage-Distortive-Subsidies-and-Their-Effects-on-Global-Trade-2023.pdf.

[49] Growth Commission, supra note 41.

[50] Singham, supra note 40.

[51] Id.

[52] Id.

[53] Id.

[54] Adam Mossoff, The False Promise of Breaking Patents to Lower Drug Prices, 98(2) St. John’s L. Rev. 287 (2025), available at https://scholarship.law.stjohns.edu/lawreview/vol98/iss2/5.

[55] Id.

[56] Id.

[57] Stephanie Nebehay, In a First, China Knocks U.S. from Top Spot in Global Patent Race, Reuters (Apr. 7, 2020), https://www.reuters.com/article/us-usa-china-patents-idUSKBN21P1P9.

[58] Gerald J. Krieger, From “Made in China” to “Created in China”: Intellectual Property Rights in the People’s Republic of China, Joint Force Quarterly (Feb. 16, 2024), https://ndupress.ndu.edu/Media/News/News-Article-View/Article/3679322/from-made-in-china-to-created-in-china-intellectual-property-rights-in-the-peop.

[59] 2022 Special 301 Report, Off. U. S. Trade Represent. (2022), available at https://ustr.gov/sites/default/files/IssueAreas/IP/2022%20Special%20301%20Report.pdf [hereinafter “USTR 2022 Report”].

[60] The IP Commission Report, Comm. Th. Am. Intellect. Prop. (2013), at 11, available at https://www.nbr.org/wp-content/uploads/pdfs/publications/IP_Commission_Report.pdf.

[61] Id.

[62] Aaron Wininger, China’s State Council Releases White Paper: China’s Position on Certain Issues in China-U.S. Economic and Trade Relations, China Ip Law Update (Apr. 9, 2025), https://www.chinaiplawupdate.com/2025/04/chinas-state-council-releases-white-paper-chinas-position-on-certain-issues-in-china-us-economic-and-trade-relations-china-continuously-improves-ip-protection-and-prohibits-forced-technology.

[63] 2025 Special 301 Report, Off. U. S. Trade Represent. (2025), at 29-32, available at https://ustr.gov/sites/default/files/files/Issue_Areas/Enforcement/2025%20Special%20301%20Report%20(final).pdf [hereinafter “USTR 2025 Report”].

[64] Id.

[65] 2018 Special 301 Report, Off. U. S. Trade Represent. (2018), at 44, available at  https://ustr.gov/sites/default/files/files/Press/Reports/2018%20Special%20301.pdf  [hereinafter “USTR 2018 Report”].

[66] USTR 2025 Report, at 25-27.

[67] USTR 2025 Report, at 50.

[68] The China Threat: Chinese Talent Plans Encourage Trade Secret Theft, Economic Espionage, Fed. Bur. Investig., available at https://www.fbi.gov/investigate/counterintelligence/the-china-threat/chinese-talent-plans (last visited May 1, 2025).

[69] George Tian, The Political Economy of Technology Transfer Rules of the US-China Phase One Trade Agreement: Competition of Global Technology Leadership, 32 Ind. Int’l & Comp. L. Rev. 531, 541 (2022), https://journals.indianapolis.iu.edu/index.php/iiclr/article/view/26852.

[70] USTR 2025 Report, at 26.

[71] Tian, supra note 69, at 535.

[72] Id., at 560-61.

[73] Id., at 535.

[74] Lorenzo Rotunno & Michele Ruta, Trade Implications of China’s Subsidies (IMF Working Paper No. 2024/180, 2024), available at https://www.elibrary.imf.org/view/journals/001/2024/180/article-A001-en.xml.

[75] Id.

[76] Id.

[77] Growing U.S. Reliance on China’s Biotech and Pharmaceutical Products, in 2019 Annual Report to Congress, U.S.-China Econ. Secur. Rev. Comm. (2019), ch. 3, sec. 3, available at https://www.uscc.gov/sites/default/files/2019-11/Chapter%203%20Section%203%20-%20Growing%20U.S.%20Reliance%20on%20China%E2%80%99s%20Biotech%20and%20Pharmaceutical%20Products.pdf.

[78] Id.

[79] Unfair Advantage: Distortive Subsidies and Their Effects on Global Trade, World Bank (2023), at 32, available athttps://thedocs.worldbank.org/en/doc/0534eca53121c137d3766a02320d0310-0430012022/related/Unfair-Advantage-Distortive-Subsidies-and-Their-Effects-on-Global-Trade-2023.pdf.

[80] Xinqing Chen et al., The Impact of Centralized Band Purchasing of Pharmaceuticals on Innovation of Chinese Pharmaceutical Firms: An Empirical Study Based on Double Difference Models, 12 Front. Public Health 1406254 (2024),  https://www.frontiersin.org/journals/public-health/articles/10.3389/fpubh.2024.1406254/full.

[81] Id.

[82] See, e.g., Funding the Global Benefits to Biopharmaceutical Innovation, Counc. Econ. Advis. (2020), available at https://trumpwhitehouse.archives.gov/wp-content/uploads/2020/02/Funding-the-Global-Benefits-to-Biopharmaceutical-Innovation.pdf.

[83] Id.

[84] U.S.-China Econ. Secur. Rev. Comm., supra note 77, at 253.

[85] Rotunno & Ruta, supra note 74.

[86] Id.

[87] Sandra Barbosu, Not Again: Why the United States Can’t Afford to Lose Its Biopharma Industry, Inf. Technol. Innov. Found. (Feb. 29, 2024), https://itif.org/publications/2024/02/29/not-again-why-united-states-cant-afford-to-lose-biopharma-industry.

Abstract

This paper examines the concept of Digital Public Infrastructure (“DPI”) with a focus on digital identity systems and real-time payment (“RTP”) networks across various countries. It compares different ownership, control, and regulatory models. The evidence suggests that while government-led DPI initiatives can achieve rapid adoption, they typically create market distortions and inhibit innovation through self-preferencing and regulatory capture. More decentralized approaches tend to foster competition and innovation while avoiding technological lock-in, ultimately leading to more sustainable digital ecosystems.

Executive Summary

In recent years, there has been growing interest among economists, lawyers, and policymakers in the concept of monopsony power, particularly in labor markets. This interest has been spurred partially by academic research suggesting that labor-market concentration may be more prevalent than previously thought, as well as policy developments signaling a more aggressive approach by antitrust authorities to labor-monopsony issues. Despite this momentum, however, significant empirical and conceptual challenges remain in the use of antitrust law to address labor monopsony.

A. Economics Challenges

On the empirical front, the evidence on the extent and impact of labor monopsony is mixed. While some studies have found evidence of labor-market concentration and its effects on wages, these studies often rely on indirect measures that have limited applicability to antitrust cases. More direct estimates of monopsony power are rare, and often rely on stylized economic models that may not capture the complexities of real-world labor markets. Moreover, the economics literature has not reached a clear consensus on the appropriate framework to assess labor-market power in antitrust contexts.

Conceptually, there are important differences between monopoly and monopsony that complicate the application of traditional antitrust tools and standards to labor markets. One key difference is that monopsony and monopoly markets do not sit at the same place in the supply chain. This matters because all supply chains end with final consumers, and antitrust policy must grapple with how to balance effects at different levels of the distribution chain. In evaluating monopsony, authorities must consider the “pass through” to final product markets, a complication that does not arise in the mirror-image case of monopoly.

Another conceptual challenge is how to handle merger efficiencies in labor-market cases. In input markets, traditional efficiencies and increased buyer power are often two sides of the same coin, presenting difficult tradeoffs for authorities. Additionally, market definition—a cornerstone of modern antitrust policy—becomes more complex in labor markets, where the boundaries between different occupations, industries, and geographic areas can be blurry.

B. Policymakers’ Response

Despite these challenges, antitrust authorities have recently signaled a more aggressive approach to labor-monopsony issues. The Federal Trade Commission’s (FTC) noncompete ban, challenge to the Kroger/Albertsons merger, and the 2023 Merger Guidelines’ discussion of labor-market effects are all prominent examples of this trend. But these enforcement actions and policy statements often gloss over the unsettled state of the economics literature and the legal difficulties of proving labor-market harms under existing antitrust standards.

For example, the 2023 Merger Guidelines assert that labor markets have unique features that may exacerbate the competitive effects of mergers, but do not fully grapple with the limitations of the economic models and empirical evidence underlying these claims. Similarly, while the FTC’s Kroger/Albertsons complaint advances a novel “union grocery labor” market definition, it is unclear whether this approach aligns with economic realities or legal precedent.

C. Legal Difficulties

More broadly, it remains uncertain whether demonstrating and remedying monopsony power is feasible under existing legal standards. While harms to workers can theoretically be cognizable under the antitrust laws, proving such harms is challenging, especially under the prevailing consumer-welfare standard. Recent criminal cases targeting wage fixing and no-poach agreements have faced difficulties, and civil cases require showing harm to downstream consumers, not just workers.

Addressing these issues may require rethinking the goals and methods of antitrust enforcement. The consumer-welfare standard becomes difficult to apply when a merger may harm workers but benefit consumers downstream. Weighing these cross-market effects raises unresolved questions about the proper balance between consumer and producer surplus. While the 2023 Merger Guidelines assert that harms to upstream competition cannot be offset by benefits to downstream consumers, the basis for this stance in case law is questionable.

There are also important differences between monopoly and monopsony that complicate the mirror-image application of antitrust tools to labor markets. Most fundamentally, authorities must grapple with how to balance effects at different levels of the supply chain—an issue that does not arise in the standard monopoly context.

Moreover, the unique features of labor markets—such as the importance of firm-specific investments in human capital—pose challenges for market definition and the assessment of competitive effects. Traditional concentration measures and econometric tools used in product markets may not readily translate to the labor context. And the potential for countervailing effects on workers and consumers creates difficult tradeoffs in merger review.

Given these complexities, this paper urges caution and further study before radically expanding labor-antitrust enforcement. Advocates of reform should engage seriously with the empirical and conceptual issues highlighted here, rather than assuming that current law and economics support their policy prescriptions. Courts and enforcers should carefully consider the limitations of existing approaches and develop more robust analytical frameworks suited to the realities of labor markets.

D. The Road to Antitrust Enforcement in Labor Markets

This does not mean that antitrust has no role to play in addressing labor-market power. But it does counsel against a rush to condemn mergers and practices based on simplistic models or tenuous evidence. A more gradual, case-by-case approach focused on building legal precedent and economic consensus may be warranted. In the meantime, further dialogue between labor economists, antitrust experts, and policymakers is essential to aligning theory, evidence, and doctrine.

Such an agenda might include:

• Developing more direct, antitrust-relevant measures of labor-market power beyond concentration ratios.
• Studying the effects of specific mergers and practices on labor-market outcomes, rather than simply correlating concentration with wages.
• Refining models of dynamic competition and firm-specific investments in labor markets and considering their implications for antitrust enforcement.
• Clarifying the goals of antitrust in labor markets and how to weigh effects on different stakeholders under the consumer-welfare standard (or alternative frameworks).

The paper concludes by noting that, while the road ahead is challenging, the growing interest in labor antitrust presents an opportunity for interdisciplinary research and policy innovation. By carefully building on existing knowledge and legal frameworks, academics and practitioners can help craft an antitrust regime that promotes competition and welfare in labor markets without unduly chilling procompetitive conduct. The key is to remain grounded in sound economics and committed to empirical rigor, while adapting to the unique features of labor markets. With such an approach, antitrust can play a valuable role in ensuring that workers share in the benefits of a well-functioning economy.

I. Introduction

Market power—traditionally discussed in terms of monopoly power on the sell side—has faced increasing scrutiny from the buy-side perspective. This is especially true regarding labor monopsony, where employers may exert undue control over employees, thereby influencing wages and working conditions. This shift in focus reflects a growing concern among economists, lawyers, and policymakers about the implications of such power dynamics in the labor market. The growing discourse around monopsony power in labor markets has been further marked by a keen interest in applying antitrust laws to combat these concerns.

Recent policy initiatives and enforcement decisions indicate a burgeoning will to leverage antitrust law against perceived labor-market power abuses. In the first half of 2024 alone, the Federal Trade Commission (FTC) has enacted a rule banning noncompete agreements for nearly all workers in the United States, justified on grounds that such agreements amount to “unfair methods of competition.”[1] The FTC has also brought an enforcement action challenging the proposed Kroger/Albertsons merger, in part predicated on concerns about the combination’s potential to diminish labor competition and exacerbate monopsony power in local labor markets.[2] At year-end 2023, meanwhile, the FTC and the U.S. Justice Department (DOJ) Antitrust Division published updated merger guidelines that, for the first time, included an expanded discussion of monopsony issues.[3] While the noncompete ban, the Kroger/Albertsons merger challenge, and the 2023 Merger Guidelines are the most prominent examples, they are far from the only ones.[4]

This paper argues that, despite growing interest in the use of antitrust law to address labor monopsony, such efforts are not supported by empirical and theoretical foundations sufficient to bear the weight of these galvanized efforts. While policy proceeds apace, the debate is far from settled on the economic evidence, analytical tools, and legal standards appropriate for understanding and addressing monopsony power in labor markets as an antitrust concern. In fact, the current state of economic research and antitrust jurisprudence raises more questions than answers about the appropriate framework for assessing labor-market power.

Examples of this disconnect are legion. Empirical data concerning the magnitude and impact of labor monopsonies is inconsistent. Evidence on the extent of labor-market power is mixed, with studies reaching divergent conclusions depending on the data, methodology, and markets analyzed. While the Biden administration has been quick to cite economic research on labor-market concentration and earnings as motivating factors,[5] the referenced studies provide only indirect evidence of monopsony power and have limited applicability to antitrust cases, while direct estimates of monopsony power are rare and often rely on economic models that have not yet been accepted within antitrust. A more complete analysis of the literature on concentration in labor markets, meanwhile, does not support the narrative that labor markets are extremely concentrated across wide swathes of the economy. From a theoretical standpoint, the economics literature has not reached a clear consensus on the appropriate antitrust framework for labor markets. Moreover, the distinct economics of monopsony contrast with those of monopoly, introducing unresolved complexities into customary modes of antitrust analysis, such as market definition, assessment of efficiencies, and the consumer-welfare standard.

The antitrust authorities have ignored these complications in their recent actions. For example, Guideline 10 of the 2023 Merger Guidelines states that labor markets frequently have unique characteristics that may exacerbate the competitive effects of mergers:

[L]abor markets often exhibit high switching costs and search frictions due to the process of finding, applying, interviewing for, and acclimating to a new job. Switching costs can also arise from investments specific to a type of job or a particular geographic location. Moreover, the individual needs of workers may limit the geographical and work scope of the jobs that are competitive substitutes.[6]

This implies that market attributes like switching costs, search costs, and transportation costs are unique to labor markets. Of course, this is not true. Nor is there any reason to think labor markets are even relatively more susceptible to such costs. At the same time, the guidelines’ statement implies that these labor-market costs are borne only by workers, rather than employers. But there is no reason why that should be the case. Indeed, switching costs do not always make markets less competitive.[7]

The guidelines further assert that relevant labor markets “can be relatively narrow,” and that “the level of concentration at which competition concerns arise may be lower in labor markets than in product markets, given the unique features of certain labor markets.”[8] Because these are the merger guidelines and are meant to cover a wide variety of situations, one could read “may” as implying something more than a possibility. Indeed, the guidelines clearly appear to indicate that, following mergers, anticompetitive effects are more of a concern in labor markets than in product markets.

Unfortunately, the models commonly employed in labor economics to support these claims rely on assumptions about worker mobility, employer conduct, and market structure that likely oversimplify real-world dynamics. All models are simplifications, but how important are those simplifications for antitrust? The economic models commonly used to study labor markets have not been subjected to the same level of antitrust scrutiny as those employed in industrial-organization (IO) economics to analyze product markets. Over the past several decades, IO models of imperfect competition have been rigorously adapted and applied to assess the competitive effects of mergers, collusive agreements, and exclusionary practices in antitrust matters. Empirical IO research has frequently focused on questions of direct relevance to antitrust enforcement, and IO economists have often played an active role in developing the analytical tools used by agencies and courts.

In contrast, most labor-economics research has been conducted without an explicit focus on antitrust policy and, until recently, labor economists were rarely involved in antitrust matters. As a result, the key assumptions and implications of labor-economics models have not been fully stress tested against the evidentiary burdens and legal standards of antitrust cases—at least, not in the same ways as their IO counterparts. This disconnect poses challenges to the effective application of labor economics to antitrust enforcement, as the models and empirical techniques most familiar to labor economists may not align well with the demands of antitrust law.

Moreover, it’s not just the economics that is more unsettled than the current administration would like to claim; the law is unsettled, too. It is unclear whether demonstrating and remedying monopsony power is feasible under existing legal standards, for example. It is true that harms to labor can be cognizable under the antitrust laws, which prohibit certain exercises of monopsony power, and not just monopoly power. There are, however, ambiguities in accurately defining the boundaries of relevant labor markets. And establishing tangible anticompetitive effects on workers as “consumers” of jobs also poses challenges.

Wage-fixing agreements are per se illegal, but the decisions in recent criminal no-poach and wage-fixing cases suggest difficulties in proving that such agreements amount to meaningful market allocation, rather than insignificant job-posting-policy changes, that would be inconsistent with a per se rule. For example, in United States v. DaVita Inc., the judge ruled that no-poach agreements could be an illegal market-allocation agreement.[9] But the jury acquitted the defendants of criminal no-poach charges, finding that the DOJ had failed to prove that the agreements at-issue were made with the purpose of allocating the market and ending meaningful competition for employees. The government has faced similar difficulties in other cases.[10]

Outside of per se cases, antitrust becomes even more complicated. Addressing labor-market power requires tradeoffs under established antitrust standards, raising unresolved questions about the goals of antitrust enforcement. As Herbert Hovenkamp notes, “it has been explicit from the start that antitrust’s concern is protection from reduced market output and, concurrently, higher prices.”[11] This focus on output and price effects in downstream product markets sits uneasily with concerns about labor market harms, which may not always manifest in higher consumer prices or reduced output in the downstream product market.

For example, the consumer-welfare standard becomes difficult to apply when a merger may harm workers, but benefit consumers downstream, as when wage reductions for workers accompany consumer benefits (such as lower prices) in downstream product and service markets. Do all mergers that reduce wages for one market of workers “substantially lessen competition” in a “line of commerce”?[12] In practice, weighing these cross-market effects raises unresolved questions about the goals of antitrust enforcement. Is the sole focus on final-product consumers, or should producer surplus also be considered? If so, how should we value and compare producer versus consumer harms?

The 2023 Merger Guidelines acknowledge these issues, but sidestep them, by asserting that:

If the merger may substantially lessen competition or tend to create a monopoly in upstream markets, that loss of competition is not offset by purported benefits in a separate downstream product market. Because the Clayton Act prohibits mergers that may substantially lessen competition or tend to create a monopoly in any line of commerce and in any section of the country, a merger’s harm to competition among buyers is not saved by benefits to competition among sellers.[13]

As we explain below, however, the issue is not so simple, and its resolution cannot be assumed simply by quoting the Clayton Act.[14]

While the guidelines propose treating labor markets similarly to product markets for analytical purposes, the Kroger/Albertsons complaint suggests that, in practice, the agency believes that labor markets should be defined more narrowly—for example, unionized workers in very narrow geographic areas.[15] This approach raises further conceptual issues in market definition, as labor markets may transcend traditional industry and geographic boundaries in complex ways. More work is needed to align labor economics with the realities of antitrust enforcement. Answering these questions may require revisiting foundational assumptions that currently guide antitrust policy. Caution is thus warranted before concluding that antitrust can or should seek to remedy monopsony, absent harm to consumers of final goods.

Therefore, while monopsony concerns are becoming more prevalent in academic and policy discussions, the agencies should be extremely hesitant as they move forward. Some have argued that “[m]ergers affecting the labor market require some rethinking of merger policy, although not any altering of its fundamentals.”[16] As we discuss below, however, while the economic “fundamentals” undergirding merger policy may not change for labor-market mergers, the “rethinking” required to properly assess such mergers entails fundamental changes that have not yet been adequately studied or addressed. As many have pointed out, there is only a scant history of merger enforcement in input markets in general, and even less in labor markets.[17] It is premature to offer guidelines or impose nationwide bans on labor practices, while purporting to synthesize past practice and the state of knowledge, when neither is well-established.

The following sections illustrate some of the significant disconnects between labor economics and antitrust enforcement, highlighting the need for further research and dialogue between the two fields. In short, while interest is growing, labor economics cannot yet be readily plugged into antitrust enforcement in the same way that IO theory and empirics have been.

II. The Contemporary Relationship Between Labor and Antitrust

As discussed in the previous section, the 2023 Merger Guidelines, Kroger/Albertsons complaint, and the FTC’s noncompete rule evidence an invigorated policy effort to address competition concerns in labor markets. The merger guidelines discuss the potential labor-market implications of mergers in multiple sections, and adopt a guideline specifically related to labor-market considerations that calls out the purportedly unique features of labor-monopsony markets “that can exacerbate the competitive effects of a merger.”[18] While the noncompete ban contains an extensive discussion of the labor-economics literature on noncompetes,[19] the sweeping nature of the ban suggests that policymakers view monopsony power as a pervasive issue affecting most workers, despite the nuances and ambiguity of the literature.[20] And the FTC’s complaint in the Kroger/Albertsons case argues that the merger would eliminate labor-market competition between Kroger and Albertsons and would increase their leverage in negotiations with local unions over wages, benefits, and working conditions in an asserted “union grocery labor” market—introducing a novel and remarkably narrow market definition and an untested, contentious theory of harm (reduction in bargaining leverage) particular to labor markets.[21]

While these efforts may signal a newly heightened attention to labor-market concerns, the antitrust focus on labor monopsony did not originate with them. In recent years, there has been growing interest in using the tools of antitrust to address labor issues, with both academic literature and enforcement actions paving the way for a more labor-centric approach to antitrust. This section provides an overview of some of the key developments in this area, illustrating the growing attention given to labor-market power by antitrust authorities and scholars.

Conceptually, the relationship between labor economics and antitrust law has also been a subject of growing academic attention in recent years. A number of law-review articles have highlighted the historical disconnect between the two fields, noting that labor markets have often been overlooked in antitrust analysis.[22] They also point, however, to some areas where labor economics has begun to make inroads into antitrust enforcement.

On the policy front, President Joe Biden explicitly called for greater scrutiny of “monopsony power” in labor markets in his 2021 executive order on competition.[23] The U.S. antitrust agencies have similarly been ramping up enforcement and other policy work at the intersection of labor and competition policy. For instance, the DOJ sued to block Penguin Random House’s acquisition of Simon & Schuster, in part based on monopsony concerns regarding the market for top-selling book authors.[24] Under the current leadership, the FTC has brought and settled several enforcement actions alleging that certain noncompete agreements violated the FTC Act’s prohibition on “unfair methods of competition.”[25] The day after announcing the first three of those settlements, the FTC first proposed a nationwide ban on the use of noncompetes via a notice of proposed rulemaking.[26]

As noted above, the DOJ has brought several recent wage-fixing cases, albeit with limited success.[27] Previously, during the Obama administration, the DOJ and FTC jointly issued antitrust guidance for human-resource professionals that warned that agreements among competing employers to fix terms of employment may violate the antitrust laws.[28] The DOJ also brought suits against major Silicon Valley employers for entering into anticompetitive “no-poach” agreements to restrict hiring of engineers and programmers from competitor firms.[29] The department alleged in those suits that the agreements amounted to unlawful allocation of the relevant labor market among horizontal competitors. The DOJ also challenged a hospital association’s members agreement to set uniform billing rates for certain nurses as an improper exertion of buyer power.[30] Although both the “no-poach” and nurse wage-setting actions ultimately settled, these cases demonstrated an increasing willingness to extend antitrust scrutiny to labor-market effects and to discipline allegedly monopsonistic practices by dominant buyers of labor.

Finally, in 2022, the FTC signed a memorandum of understanding with the National Labor Relations Board (NLRB) “regarding information sharing, cross-agency training, and outreach in areas of common regulatory interest.”[31] In 2023, the FTC signed a similar memorandum of understanding with the U.S. Labor Department.[32]

While these recent developments reflect growing interest in the application of antitrust law to labor-monopsony concerns, the linkage between labor economics and antitrust is not yet as developed as the one between antitrust law and IO and antitrust economics for output markets. Over the 20th century, the fields of IO economics and antitrust law evolved considerably. While the two fields are not co-extensive, the mutual influence has been considerable and ongoing, as strong connections have developed between economic theory, empirical study, and legal doctrine. Models of imperfect competition were incorporated into analyses of mergers, collusion, and exclusionary practices.[33] Notably, even the Chicago School, despite some scholars’ claims to the contrary,[34] made extensive use of models beyond perfect competition as a central part of its approach to antitrust.[35] Empirical IO research also frequently studied topics directly relevant to antitrust inquiries.[36] This close, co-evolutionary relationship does not yet exist—at least, not to the same extent—between labor economics and antitrust.[37]

While some scholars have worked to integrate labor and antitrust economics more closely, most empirical research remains focused on indirect concentration measures, rather than pricing conduct directly relevant to antitrust enforcement. Labor economics does not yet have IO’s established track record of successful application to assessing the competitive impact of mergers, restraints, or exclusionary practices. Before that sort of track record can be built, certain limitations must be overcome—not least that labor research has largely developed without a focus on, or involvement in, antitrust policy.

III. The Newly Developing Economic Literature on Labor-Market Power

Labor markets have become an increasingly popular topic in antitrust-policy debates. These debates have, at least in part, been spurred by academic research that purports to find widespread market power in labor markets, thus warranting the need for antitrust scrutiny.[38] For example, the U.S. Treasury Department’s report on “The State of Labor Market Competition” connects the economics research to “a description of Biden Administration actions to improve competition.”[39] Unfortunately, conclusions that the labor-market-power literature supports tougher antitrust enforcement often rely on indirect measures of market power, such as concentration figures, that are sometimes far-removed from the needs of antitrust enforcement, which usually requires more direct measures and more antitrust-relevant markets.[40]

Against this backdrop, this section reviews the scholarly evidence on labor-market power. Subsection A reviews economic papers that attempt to measure firms’ labor-market power directly, while Subsection B reviews papers that rely on such proxies as industry-concentration measures (i.e., indirect evidence of labor-market power). Ultimately, we find that these bodies of research say little about the need for tougher antitrust enforcement, largely because their measures of market power fail to indicate that there is an antitrust-relevant problem that is currently unaddressed in labor markets.

A. Direct Evidence: Do Employers Have Significant Labor-Market Power?

How do we measure labor-market power? While the bulk of the evidence on labor markets is only indirectly related to market power (if related at all), there have been a few explicit attempts to quantify the extent of labor-market power within U.S. markets.

The most popular way to directly estimate labor-market power is through the residual labor-supply elasticity that a firm faces. A labor-supply elasticity measures how responsive the supply of labor is to a change in wages. In the simplest model, a more elastic labor supply means workers have more outside options and employers have less wage-setting power. In the extreme, a perfectly competitive firm faces a perfectly elastic residual supply curve; in the baseline (two-firm) model, if one firm pays $0.01 less than the other employer, all the employees will leave for the other employer.

Outside of the perfectly competitive case, a firm may have some degree of labor-market power, which can be measured by the difference between the wage and the marginal revenue product, known as the wage “markdown.”[41] In the case of perfect competition (i.e., no market power), the firm is unable to pay wages below the marginal product of labor (the revenue generated for the firm by an additional worker), and thus the labor markdown of wages is zero. By contrast, the presence of a larger wage markdown (because of a lower labor elasticity) indicates greater labor-market power.[42]

Naidu, Posner, and Weyl summarize estimates of labor-supply elasticity from several studies, finding evidence of substantial market power in some labor markets, but by no means all.[43] Indeed, the underlying papers find residual labor elasticities ranging from 0.1 to 4.2, which would mean that workers are receiving between 9% and 81% of their marginal product, depending on the particular paper’s estimate.[44] While the list of papers estimating labor elasticity is too lengthy to detail in this paper, the upshot for antitrust policy is that low elasticity (and thus large labor-market power) is not universal (nor should we expect it to be; even if average market power is large, not every market is average).[45]

But even if the empirical labor-economics literature unanimously identified a large degree of labor-market power, which it does not, it would remain unclear what the implications are for antitrust policy. The crux of the problem is that the literature’s estimates of labor elasticities generally rely on assumptions that may not mirror those typically used in antitrust analysis. Applying these estimates to a simple antitrust model of monopsony generates implications that go against the data. For example, a labor-supply elasticity of 0.1 would imply a labor share of income of just 8% in the model described in Naidu, Posner, & Weyl.[46] That is far lower than the actual labor share observed in most countries, which has fallen, but is still closer to 60%, not 8%.[47] This suggests that the connection between the estimate and the model may not be appropriate. Thus, while labor-supply elasticities can provide valuable information about the degree of labor-market competition, antitrust practitioners should be wary of applying them mechanically to standard models of product-market competition without considering the unique features and dynamics of labor markets.

There can also be discrepancies between the tools employed to estimate labor-supply elasticities, on the one hand, and the needs of antitrust enforcement, on the other. For instance, a study by Ransom and Sims employs a search model—a standard tool in labor economics, but not a model generally seen in antitrust. The model is based on the idea of “search frictions,” which refers to the time and effort required for workers to find jobs and for employers to fill vacancies.[48] Because of these frictions, workers may accept lower-paying jobs while continuing to search for better opportunities.

This model assumes that, in the long run, the number of workers leaving a job is equal to the number of workers taking a new job. While this “steady state” assumption may hold in many contexts, it is not one typically seen in antitrust analysis of product markets. If the assumption is violated, estimates of labor-market power derived from the model could be biased in either direction, depending on the specific imbalance of worker flows. In the realm of antitrust enforcement, this could lead to both false positives and false negatives. It remains to be seen what courts would do when confronted with these new models.

Conversely, other papers attempt to apply the standard Cournot model from antitrust product-market analysis to labor markets.[49] In this approach, the authors take the median Herfindahl-Hirschman Index (HHI), a common measure of market concentration, and divide it by the aggregate labor-supply elasticity to estimate labor-market power. But there may be a mismatch here, as well. Indeed, it is unclear whether the Cournot model, where firms commit to hiring a certain number of workers each period, is a realistic representation of labor markets for antitrust purposes, because it relies on critical assumptions that may not be present in real-world markets, such as simple wage-posting, monopsony models. In fact, this may explain why search models, despite their flaws, remain the most common approach to assessing labor markets.

Recognizing these limitations, a burgeoning literature attempts to design labor-market competition models that better align with the needs and realities of antitrust analysis. But as yet, there is no silver bullet. Azar, Berry, and Marinescu, for example, combine elements of a static model of imperfect competition (commonly used in IO economics) with a labor-market model.[50] This approach aims to capture the dynamics of labor-market competition more accurately by considering the differentiation among jobs and workers’ preferences.

The authors use data on job vacancies from CareerBuilder.com (a popular online job board) to estimate a model of differentiated jobs and workers’ preferences for those jobs. Because of data limitations, however, they only have information on the elasticity of vacancy demand—i.e., the intensity of responses to posted job vacancies—not on actual wages. To overcome this, they assume a simple model where employers post wages and workers choose whether to accept those offers, similar to how firms post prices in the Cournot model of product-market competition. Using this approach, the authors estimate that workers are paid 21% less than their marginal product, suggesting significant labor-market power.[51] But their model relies on the same long-run-equilibrium assumption discussed earlier, where the number of workers leaving a job equals the number of workers taking a new job.

One final approach uses wage markdowns to estimate labor-market power, but this, too, is far from perfect. Yeh, Macaluso, and Hershbein, for example, use data from the U.S. Census Bureau to estimate markdowns in the manufacturing sector.[52] They find that, on average, workers earn about 65 cents for every dollar of value they generate for their employer.[53] This would imply a significant degree of labor-market power. The researchers also find that markdowns tend to be larger for bigger companies, suggesting that these firms have more power to set wages.[54] Interestingly, they find that markdowns decreased from the late 1970s to the early 2000s, but have increased sharply over the past 20 years.[55] This recent increase in markdowns could indicate a growing problem of labor-market power.

Unfortunately, interpreting markdowns as a clear sign of labor-market power is not always straightforward, and there are reasons to be skeptical of these results. To see why, imagine two hair salons: Salon A is a basic salon that charges $20 for a haircut, while Salon B is a luxury salon that charges $40 for a haircut that the econometrician believes is the same quality. If both salons hire hairdressers who can do one haircut per hour, Salon B might pay only slightly more than Salon A—say $21 per hour—to attract hairdressers. This means that the hairdressers at Salon B are receiving a wage that is far less than the $40 value of their marginal product. Superficially, this might look like a sign of labor-market power.

But where the price difference is attributable to non-labor factors—such as the salon’s luxury branding, posh environment, and free drinks—the apparent markdown might, in fact, reflect the salon owner’s return on investment, rather than its power to set wages. This is why some economists view markdowns as a “residual”—the leftover value after accounting for other factors.[56] In the real world, we do not know whether an apparent markdown comes from labor-market power due to weak competition, or whether it is a return to something the owner contributes that the economist does not see.

In fact, some evidence suggests that a significant portion of markdowns may be just that: a return to some technology the firm has rather than labor-market power. Kirov and Traina look at markdowns in U.S. manufacturing over time and find that workers received the full value of their output in 1972, but only about half in 2014.[57] They argue that this increase in markdowns was driven largely by rapid productivity growth due to technological advancements, not by slower wage growth. The authors find that markdowns were strongly correlated with measures of information technology, management practices, and automation. This suggests that the growing gap between worker pay and productivity might be more about technological change than about employers’ bargaining power—a very different issue than the monopsony problem that antitrust law could (potentially) address.

All of this is not to say that labor-economics tools are unsuitable for antitrust policy or enforcement. Rather, it highlights the need for further research and legal precedent to establish how these tools can be effectively adapted to meet the evidentiary standards and analytical frameworks of antitrust law. While proponents of increased labor-antitrust enforcement may be eager to apply insights from labor economics to antitrust cases, it is crucial to recognize that this translation is not always straightforward and may require careful consideration of the underlying assumptions and their implications for antitrust analysis.

In short, there is a gap between existing direct evidence on labor-market power and the needs of antitrust policy and enforcement. Labor economics generally relies on models that are not germane to antitrust enforcers, while the models that are common in antitrust enforcement might not fully capture the dynamics of labor markets. Further research and dialogue between labor economists and antitrust experts is needed to develop a consistent and reliable framework to analyze labor-market power in antitrust cases. Until then, the inapt assumptions and limitations of the models presented to antitrust authorities and courts call their predictive value into question.

Ultimately, the direct evidence from labor-elasticity estimates and other measures of labor-market power remains limited in scope and varies widely across studies. While these studies provide valuable insights, they are far from conclusive, and do not yet approach the level of evidence and analysis typically relied upon in the IO literature to assess product-market competition. Courts and policymakers are likely to expect a more robust and consistent body of evidence before making significant changes to antitrust enforcement in labor markets. The disputes over direct evidence on labor-market power underscore the need for further research and highlight the challenges of applying antitrust tools to labor markets based on the current state of knowledge. Antitrust enforcers should take policy insights gleaned from labor-economics studies with a grain of salt, as they may be of limited use when informing antitrust policy decisions.

B. Indirect Evidence: Are Labor Markets ‘Relatively Narrow’?

The 2023 Merger Guidelines assert that labor markets can be “relatively narrow” and that “the level of concentration at which competition concerns arise may be lower in labor markets than in product markets, given the unique features of certain labor markets.”[58] The academic literature, however, presents a more nuanced picture that casts doubt on some of these claims. This section provides an abbreviated review of that literature. A more thorough explanation is provided in the Appendix.[59]

Given the limited direct evidence discussed in the previous section, as well as the difficulties entailed in collecting and applying it, it is not surprising that many scholars have turned to indirect measures of market power to fill the evidentiary gap. There are, however, significant issues with these indirect measures, as they often rely on concentration metrics, such as the Herfindahl-Hirschman Index (HHI), which are more readily available, but considerably less reliable than direct estimates of market power.[60]

While all indirect data sources have limitations, some are more comprehensive and reliable than others. The most comprehensive data is administrative data. While these differ on the levels of concentration, depending on how narrowly the market is defined, they consistently document falling concentration levels in local labor markets, where most job search and hiring occurs. [61] These studies have the advantage of comprehensive coverage of employers and workers, but often define labor markets based on industry codes, rather than occupations, which may not fully capture the relevant competitors for specific types of labor.

On the other hand, the administrative data concern all employer establishments.[62] The administrative data directly measure employment levels and shares, instead of being restricted to online vacancies as a proxy for employment.[63] This distinction matters, because employment shares are the natural counterpart of market shares—a cornerstone of antitrust enforcement. Concentration measures based on vacancies will be systematically higher than those based on employment, because not all firms will hire in any particular period (in addition to any other issues with the data sample). Using the most direct comparison available, the governmental microdata finds an average HHI roughly one-tenth as large as that found using vacancy data.[64]

Unfortunately, no dataset is perfect, even the administrative data. For example, many rely on employment data organized by North American Industry Classification System (NAICS) codes for market definition, which are organized by establishment, not by occupation. For example, all Wal-Mart employees at a store are labeled as NAICS 4521 (Department Stores), instead of being broken out by different occupations (Standard Occupational Classifications or “SOC”) for different vacancies.[65] That makes their results better interpreted as local industrial-concentration measures, instead of true labor-market concentration measures.

For pure concentration measures, this may not matter too much. Berger, Herkenhoff, and Mongey argue that “there is little practical difference in defining a market at the occupation-city level rather than the industry-city level as these two measures are highly correlated.”[66] But at the more granular level of antitrust enforcement, the difference between measures may be significant. In particular, many workers may be able to easily substitute between employers located in different industries. An accountant, for instance, might be just as qualified to work for a bank as for a hotel or a tech company. This cross-industry substitution is obscured by market definition undertaken at the NAICS level.

With these caveats about market definition, what does the administrative data show about concentration? Rinz uses the Longitudinal Business Database, covering nearly all private-sector employers, to estimate labor-market concentration from 1976 to 2015.[67] At the beginning and end of the time period studied, unsurprisingly, Rinz finds rural labor markets to be more concentrated than urban markets.[68] He finds that the average local HHI, defined by commuting zones and four-digit NAICS industries, decreased from 0.16 in 1976 to 0.12 in 2015, indicating a shift toward less-concentrated local markets. Local concentration fell in all population quintiles.[69]

By contrast, national HHI increased modestly over the same period, driven by large firms entering more local markets.[70] Similarly, Lipsius documents falling local concentration from 1976 to 2015, using alternative market definitions based on five-digit NAICS codes and urban areas, rather than commuting zones.[71] Despite these definitional differences, the average local HHI remains consistently low, ranging from 0.14 to 0.17 depending on the year and market definition. Berger, Herkenhoff, & Mongey further corroborate these findings with a different way of averaging HHI measures across markets.[72] They estimate an average local HHI of 0.17 for the year 2014, with even lower concentration levels when analyzing individual sectors like manufacturing and services. The average local HHI levels documented in these studies are below the 1,800 (or 0.18) threshold associated with highly concentrated markets in the 2023 Merger Guidelines.[73]

Studies using job vacancies, rather than employment data, tend to find higher market concentration, but this may partly be driven by their omission of job openings that are not published online (or at all). Indeed, the most well-cited papers on labor-market concentration use online job postings to measure concentration.[74] These studies can define labor markets more granularly, but they may not capture all employers and job openings, particularly those that are not advertised online. This focus on vacancies rather than employment may not always reflect the actual options available to workers, as not all job vacancies are advertised (online).[75]

While the 2023 Merger Guidelines suggest that labor markets warrant a lower concentration threshold for competition concerns, they do not provide a clear basis for this assertion or specify what that threshold should be. The indirect evidence from local labor-market concentration metrics does not support the notion that labor markets are inherently more problematic than product markets, from a concentration perspective. Instead, these low and falling concentration levels suggest that many local labor markets are relatively competitive and do not necessarily require a lower concentration threshold for merger analysis. While the guidelines’ recognition of labor markets’ unique features is important, this acknowledgment should be coupled with a more precise and empirically grounded approach to defining concentration thresholds.

More fundamentally, regardless of the data source used, market-definition issues remain. The variety of concentration estimates stemming from different geographic units and shifting occupational groupings demonstrates the lack of clarity around reasonable market boundaries. Worker mobility also introduces questions about appropriate geographic scope. While some labor markets may be highly concentrated, it does not follow that relevant antitrust labor markets are often relatively narrow. Establishing narrowness, in the antitrust sense, requires specific proof that additional employer options do not provide meaningful competitive discipline against potential wage reductions—something these papers do not do.

The upshot is that antitrust enforcers will need to rely on case-specific evidence, rather than broad claims of high concentration levels and narrow labor markets. Concentration measures have long been considered imperfect indicators of market power in antitrust policy and IO debates.[76] While high concentration may be suggestive of market power, it is not conclusive evidence. Many factors other than concentration can affect wages, such as differences in firm productivity, local labor-market conditions (e.g., urban vs. rural), and institutional factors like unionization rates.

Moreover, there is good evidence that employer concentration does not lead to depressed wages.[77] For example, Kirov and Traina find that rising markdowns (the gap between worker productivity and wages) are more strongly associated with technology-related factors, such as automation and managerial practices, than with employer concentration.[78] Moreover, they caution that:

These results suggest the workhorse assumptions behind some of the labor-market power literature might need reevaluation, particularly work that uses cross-sectional variation to infer trends in labor-market power. Concentration is likely an inappropriate measure of labor-market power in this case.[79]

Their critique underscores the limitations of relying heavily on concentration metrics to assess labor-market competition, especially when making claims about trends over time. As Berry, Gaynor, and Scott Morton write:

A main difficulty in [the monopsony power literature] is that most of the existing studies of monopsony and wages follow the structure-conduct-performance paradigm; that is, they argue that greater concentration of employers can be applied to labor markets and then proceed to estimate regressions of wages on measures of concentration. For the same reasons we discussed above, studies like this may provide some interesting descriptions of concentration and wages but are not ultimately informative about whether monopsony power has grown and is depressing wages.[80]

This is not to say that indirect evidence of market power is entirely without value. These studies can provide useful background information to guide antitrust policy. Moreover, antitrust law itself often relies on indirect measures of market power, such as concentration ratios and HHIs. In the case of antitrust enforcement, however, these measures are typically derived from carefully defined relevant markets. Defining the relevant market for labor is a complex task that requires considering such factors as job characteristics, worker skills, worker mobility, and geographic scope. There is currently little consensus among labor economists about the best way to define labor markets for antitrust purposes.

Ultimately, the indirect evidence from concentration metrics does not support the merger guidelines’ strong claims about ubiquitous labor-market narrowness or the need for a lower concentration threshold in merger analysis. While concentration trends are not uniform across all markets and data sources, the weight of the evidence points toward falling local concentration and increasing labor-market competition over time (if concentration is a proxy for competition). Antitrust authorities should engage with this evidence and provide a stronger empirical basis for their policy recommendations, rather than relying on unsubstantiated assumptions about the inherent narrowness of labor markets.

IV. The Problems of Addressing Labor-Market Power Under Antitrust Law

The empirical literature that attempts to measure labor-market power remains unsettled and limited, and provides, at best, only indirect evidence of economy-wide monopsony power. But even if robust measures of labor monopsony were available, applying antitrust laws to remedy monopsony power would still face conceptual hurdles. Economic theory indicates important differences between monopoly and monopsony power that complicate simple policy translation.

While antitrust statutes technically apply equally both upstream and downstream,[81] the economics of monopoly versus monopsony raise thorny theoretical issues regarding dynamic efficiency, merger efficiencies, market definition, and more that may differ between the two. Just as the empirical questions remain far from settled, the theory provides little straightforward guidance on how to address these concerns.

U.S. antitrust agencies have nevertheless long sought to reinvigorate anti-monopsony enforcement. Before concluding that labor-monopsony enforcement should be a priority for antitrust enforcers, both the evidentiary limitations and conceptual challenges warrant careful consideration by enforcers, scholars, and the courts.

On the surface, it may appear that monopsony is simply the “mirror image” of monopoly.”[82] There are, however, several important differences between monopoly and monopsony, as well as several complications that monopsony analysis raises that significantly distinguishes it from monopoly analysis. Most fundamental among these, monopsony and monopoly markets do not sit at the same place in the supply chain.[83] This matters, because all supply chains end with final consumers. Accordingly, from a policy standpoint, it is essential to decide whether antitrust ultimately seeks to maximize output and welfare at that (final) level of the distribution chain (albeit indirectly); whether intermediate levels of the distribution chain (e.g., an input market) should be analyzed in isolation; or whether effects in both must be somehow aggregated and balanced.

This has important ramifications for antitrust enforcement against monopsonies. As we explain below, competitive conditions of input markets have salient impacts on prices and output in product markets. Given this, any evaluation of monopsony must consider the “pass through” to the final product market. There is, however, no such “mirror image” complication in the consideration of final-product monopoly markets. Along similar lines, treating the assessment of mergers in input markets as the simple mirror image of product-market mergers presents important problems for how authorities address merger efficiencies, as traditional efficiencies and increased buyer power are often two sides of the same coin. Finally, it is unclear how authorities should think about market definition—a cornerstone of modern antitrust policy—in labor markets, in particular.

The upshot is that, while monopsony concerns have become more prevalent in academic and policy discussions, the agencies should be extremely hesitant as they move forward. Some have argued that “[m]ergers affecting the labor market require some rethinking of merger policy, although not any altering of its fundamentals.”[84] As we discuss below, however, while the economic “fundamentals” undergirding merger policy may not change for labor-market mergers, the “rethinking” required to properly assess such mergers does entail fundamental changes that have not yet been adequately studied or addressed. As many have pointed out, there is only a scant history of merger enforcement in input markets in general, and even less in labor markets.[85] It is premature to offer guidelines that purport to synthesize past practice and the state of knowledge, when neither is well-established.

A. Theoretical Differences Between Monopoly and Monopsony

Before getting to the practical differences of a monopoly case versus a monopsony case, consider the theoretical differences between identifying monopsony power and monopoly power.[86] Suppose, for now, that a merger either generates efficiency gains or market power, but not both. In a monopoly case, if there are efficiency gains from a merger, the quantity sold in the output market will increase. With sufficient data, the agencies will be able to see (or estimate) the efficiencies directly in the output market. Efficiency gains result in either greater output at lower unit cost, or else product-quality improvements that increase consumer demand. In contrast, if the merger simply enhances monopoly power without efficiency gains, the quantity sold will decrease, either because the merging parties raise prices or quality declines. The empirical implication of the merger is seen directly in the market in question.

The monopsony case is, however, rather more complicated. Ultimately, we can be certain of the effects of monopsony only by looking at the output market, not the input market where the monopsony power is claimed. To see this, consider again a merger that generates either efficiency gains or market (now monopsony) power. A merger that creates monopsony power will necessarily reduce the prices and quantity purchased of inputs like labor and materials. But this same effect (reduced prices and quantities for inputs) would also be observed if the merger is efficiency enhancing. If there are efficiency gains, the merged entity may purchase fewer of one or more inputs than the parties did pre-merger. For example, if the efficiency gain arises from the elimination of redundancies in a hospital merger, the hospital will buy fewer inputs, hire fewer technicians, or purchase fewer medical supplies.

We have seen there are scale efficiencies associated with a hospital merger. As work from the FTC’s Bureau of Economics explains, there can be scale efficiencies associated with “surgical procedures that exhibit a volume-outcome relationship.”[87] Typically, these are high-risk, complex procedures. “By consolidating such procedures at fewer hospitals, or by sending experienced personnel from one hospital to another, a system potentially can reap the benefits of increased scale.”[88] That is, reassignment of personnel and/or consolidation of procedures (and attendant personnel) at fewer hospitals can facilitate more efficient, and higher quality, provision of services, even as it may decrease labor demand in certain geographic markets. This may even reduce the wages of technicians or the price of medical supplies, even if the newly merged hospitals do not exercise any market power to suppress wages.[89]

Decisionmakers cannot simply look at the quantity of inputs purchased in the monopsony case as the flip side of the quantity sold in the monopoly case, because the efficiency-enhancing merger can look like the monopsony merger in terms of the level of inputs purchased. The court can only differentiate a merger that generates monopsony power from a merger that increases productive efficiencies by looking at the output market. Once we look at the output market, as in a monopoly case, if the merger is efficiency-enhancing, there will be an increase in output-market quantity. If the merger increases monopsony power, by contrast, the firm perceives its marginal cost as higher than before the merger and will reduce output.[90]

In short, the assumption that monopsony analysis is simply the mirror image of monopoly analysis does not hold.[91] In both types of mergers—those that possibly generate monopoly and those that possibly generate monopsony—agencies and courts cannot look solely at the input market to differentiate them from efficiency-enhancing mergers; they must also look at the output market. Therefore, it is impossible to discuss monopsony power coherently without considering the output market.

This crucial conceptual difference in the theoretical understanding of monopsony versus monopoly has important implications for antitrust enforcement in labor markets. The need to look at output markets to distinguish efficiency-enhancing mergers from monopsonistic ones complicates the analysis and may require a different approach than traditional monopoly cases. Antitrust authorities and courts must carefully consider how a merger affects both output and input markets, and weigh potential efficiencies against anticompetitive effects.

This is particularly challenging under the consumer-welfare standard, which focuses on output-market effects. The potential for countervailing effects on output and input markets creates difficult tradeoffs for enforcers and courts, who must balance the interests of consumers, workers, and overall economic efficiency.

B. Monopsony and Merger Efficiencies

In real-world cases, mergers will not necessarily be either solely efficiency-enhancing or solely monopsony-generating, but a blend of the two. Any rigorous consideration of merger effects must account for both and make some tradeoff between them. It’s true that, in some cases, there will be output increases alongside labor-market increases and, in such scenarios, we can look simply at output.[92] In the standard monopsony models in economics, there is no offsetting effect; harm to sellers of inputs (workers) hurts consumers, as well.[93] This was the case in the recent successful action to block Penguin-Random House from merging with Simon & Schuster.[94] The parties agreed that, if there was harm to the authors, there would be fewer books, thereby harming consumers.[95] There was no need to think about offsetting harms. That’s the easy case.

But what about other cases where the effects are not so clearcut? The question of how guidelines should address monopsony power is inextricably tied to consideration of merger efficiencies—particularly given the point above that identifying and evaluating monopsony power will often depend on its effects in downstream markets.

This reality raises some thorny problems for monopsony-merger review that have not been well-studied to date:

Admitting the existence of efficiencies gives rise to a subsequent set of difficult questions central to which is “what counts as an efficiency?.” A good example of why the economics of this is difficult is considering the case in which a horizontal merger leads to increased bargaining power with upstream suppliers. The merger may lead to the merging parties being able to extract necessary inputs at a lower price than they otherwise would be able to. If so, does this merger enhance competition in a possible upstream market? Perhaps not. However, to the extent that the ability to obtain inputs at a lower price leads to an increase in the total output of the industry, then downstream consumers may in fact benefit. Whether the possible increase in the total surplus created by such a scenario should be regarded as off-setting any perceived loss in competition in a more narrowly defined upstream market is a question that warrants more attention than it has attracted to.[96]

With monopoly mergers, plaintiffs must show that a transaction will reduce competition, leading to an output reduction and increased consumer prices. This finding can be rebutted by demonstrating cost-saving or quality-improving efficiencies that lead to lower prices or other forms of increased consumer welfare. In evaluating such mergers, agencies and courts must weigh the upward pricing pressure from reduced competition against the downward pricing pressure associated with increased efficiencies and the potential for improved quality.

As we have explained above, this analysis becomes more complicated when a merger raises monopsony concerns. In a simple model, the monopsony merger would increase market power in the input market (e.g., labor), leading to a lower price paid for the input and a smaller quantity used of the input relative to pre-merger levels. Assuming no change in market power in the final product market, these cost savings would result in lower prices paid by consumers. Should such efficiency effects “count” in evaluating mergers alleged to lessen competition in input markets? It is surely too facile a response to assert that such efficiency effects would be “out of market” and thus irrelevant. If that were the case, the legality of a merger would turn arbitrarily on the choice of input or output market, while flatly ignoring evident and quantifiable effects in an equally affected market. No sensible approach to antitrust would countenance this arbitrariness.[97]

Some would argue these are the types of efficiencies that merger policy is meant to encourage. Others may counter that policy should encourage technological efficiencies, while discouraging efficiencies stemming from the exercise of monopsony power.

But this raises another complication: How do agencies and courts distinguish “good” efficiencies from “bad?” Is reducing the number of executives pro- or anticompetitive? Is shutting down a factory or health-care facility made redundant post-merger pro- or anticompetitive? Trying to answer these questions places agencies and courts in the position of second guessing not just the effects of business decisions, but also the intent of those decisions (to a first approximation, the observed outcomes are identical). But intent is far from dispositive in determining the competitive effects of business conduct, and it may be misleading.[98] Even worse, it can create a Catch-22 where an efficiencies defense in the product market is turned into an efficiencies offense in the input market—e.g., a hyper-efficient merged entity may outcompete rivals in the product market, possibly leading to monopsony in the input market. In ambiguous cases, this means the outcome may depend on whether it is challenged on the input or output side of the market. It even implies that overcoming a challenge by successfully identifying efficiencies in one case creates the predicate for a challenge based on effects on the other side of the market.

Hemphill and Rose argue that “harm to input markets suffices to establish an antitrust violation.”[99] But surely, this cannot be a general principle, at least not if markdowns are seen as a form of anticompetitive harm. To see why, consider a merger that has no effect on either monopoly or monopoly power; it solely improves the merging parties’ technology by removing redundancies. For example, suppose the merged firms require fewer janitors. By assumption, this merger lowers consumer prices and increases consumer and total welfare. But proponents of the Hemphill and Rose view would likely call it an antitrust violation, because it harms the input market for janitors. Fewer janitors will be hired, and janitors’ wages may fall (even though, by assumption, there is no monopsony power pushing down wages).

This likely explains why Marinescu and Hovenkamp recognize that assessing a monopsony claim requires looking at both input and output markets:

To have a chance of succeeding, an efficiency case for a merger affecting a labor market must show that post-merger reorganization will decrease the need for workers and will not lower total production. Both of these requirements are essential. A merger that decreases the need for workers may represent nothing more than an exercise of monopsony power, but in that case, ceteris paribus, it will also reduce production. By contrast, a merger that eliminates duplication can also reduce the need for workers, but production will not go down. Indeed, it should go up to the extent that the post-merger firm has lower costs.[100]

The complications only multiply once we move beyond a classical, wage-posting monopsony. For example, many labor-market models include some form of wage bargaining.[101] Labor economists believe this captures important aspects of labor markets that are not purely about wage-posting.[102] With bargaining—as compared to classical monopsony—when firms achieve more product-market power, they generate higher profits and, therefore, more potential surplus to be split between employers and employees.[103] Workers (at least those who keep their jobs), may welcome greater monopoly power, as they are able to extract higher wage rents, which would not be the case for a firm earning thin or no margins in an extremely competitive product market. Consequently, this generates the opposite implication at the firm level: more product market power puts upward, not downward, pressure on wages. Yet, presumably, no one would argue that courts should allow mergers simply because they raises wages. But then the reverse should also be true: courts should not block mergers simply because they lower wages.

Far from being a theoretical curiosity, bargaining is of first-order importance when we are thinking about unions and labor markets. In its Kroger/Albertsons complaint, for example, the FTC defines the relevant labor market as “union grocery labor” and alleges that the merger would harm competition specifically for these workers.[104] But through their collective-bargaining agreements, unions exercise monopoly power in labor negotiations that likely counterbalances any attempted exercise of monopsony power by the merged firm.[105] If there is no increase in monopsony power, but there is an increase in monopoly power, the union will bargain to split that profit and increase wages.

How likely is this outcome? One local union endorsed the merger and divestiture package, arguing that “[e]mployees of Kroger and C&S will be better off than employees of other potential buyers.”[106] Of course, it is possible that most unions do not believe wages will increase; after all, delegates of the UFCW unanimously voted to oppose the merger.[107] And yet, rather than citing concern over monopsony power or lower wages, the union delegates’ stated reason for their opposition was lack of transparency.[108] The point is not to draw a conclusion about this particular merger’s likely effects on wages; it is to point out the complex tradeoffs inherent in applying antitrust to labor markets.

And there are further complications. When dynamic effects are taken into account, for example, even apparent harms confined to the seller side of an input market may turn into benefits:

[T]he presence of larger buyers can make it more profitable for a supplier to reduce marginal cost (or, likewise, to increase quality). This result stands in stark contrast to an often expressed view whereby the exercise of buyer power would stifle suppliers’ investment incentives. In a model with bilateral negotiations, a supplier can extract more of the profits from an investment if it faces more powerful buyers, though the supplier’s total profits decline. Furthermore, the presence of more powerful buyers creates additional incentives to lower marginal cost as this reduces the value of buyers’ alternative supply options.[109]

Of course, none of this is to say that creation of monopsony power should categorically be excluded from the scope of antitrust enforcement. But it is quite apparent that this sort of enforcement raises complicated tradeoffs that are elided or underappreciated in the current discourse, and manifestly underexplored in the law.[110]

C. Determining the Relevant Market for Labor

Even in the most basic monopoly cases, agencies and courts face enormous challenges in accurately identifying relevant markets. These challenges are multiplied in input markets—especially labor markets—in which monopsony is alleged. Many inputs are highly substitutable across a wide range of industries, firms, and geographies. For example, changes in technology—such as the development of PEX tubing and quick-connect fittings—allow laborers and carpenters to perform work previously done exclusively by plumbers. Technological changes have also expanded the relevant market in skilled labor. Remote work during the COVID-19 pandemic, for example, demonstrates that many skilled workers are not bound by geography and compete in national—if not international—labor markets.

When Whole Foods attempted to acquire Wild Oats, the FTC defined (and the court accepted) the relevant market as “premium natural and organic supermarkets,” as a way to exclude larger firms, such as Walmart and Kroger, from the relevant product market.[111] But even if one were to accept the FTC’s product-market definition, it is unlikely that anyone would consider employment at a “premium natural and organic supermarket” as a distinct input market.[112] Even the narrowest industries considered in the economics literature would never be defined that narrowly. This is because the skillset required to work at Whole Foods overlaps considerably with the skillset demanded by myriad other retailers and other employers, and virtually completely overlaps with the skillset needed to work at Kroger or another grocer.

As noted above, the FTC’s complaint in Kroger/Albertsons defines the relevant labor market as “union grocery labor” in “local CBA areas” (i.e., the geographic areas covered by each collective-bargaining agreement’s jurisdiction).[113] While the alleged product-market definition aligns with the FTC’s approach in past supermarket mergers, the labor-market definition is novel and does not appear to have a direct precedent in prior cases.[114] By focusing on unionized workers in specific localized areas, the FTC is implicitly arguing that the merger’s potential anticompetitive effects on labor are limited to these narrow categories of workers.

This approach to labor-market definition diverges from much of the economic literature on labor monopsony, which often defines markets based on industry or occupation codes that may not capture the full scope of competition for workers.[115] The FTC’s narrow market definition may reflect the practical challenges of bringing a labor-monopsony case under existing antitrust frameworks. But it also risks overlooking the fluid and dynamic nature of labor markets, where workers may have employment options across different industries, occupations, and geographies.[116]

We can see the difficulty with pursuing a labor-monopsony case by recognizing that the usual antitrust tools—such as merger simulation—cannot be easily applied to the labor market. Unlike the DOJ’s recent success in blocking Penguin-Random House from merging with Simon & Schuster on grounds that the merger would hurt authors with advances above $250,000,[117] the labor market for most employees is much larger than the two merging companies. This fact alone likely renders the DOJ’s successful challenge in that case more of an aberration than a model for future labor-market enforcement actions, as is sometimes claimed.[118]

Indeed, the relevant market often cannot be narrowed down to even a handful of readily identifiable companies. For the vast majority of workers, a great number of potential employers would remain following a merger. This “potential competition”—the range of feasible employers that present an outside option to the merged companies’ present employees—limits the merged firm’s ability to exercise monopsony power in its labor negotiations. While we are not aware of publicly available data that would more comprehensively illustrate worker flows among different companies (and industries), such flows of retail workers into and out of roughly adjacent labor markets make intuitive sense. As economist Kevin Murphy has explained:

If you look at where people go when they leave a firm or where people come from when they go to the firm, often very diffuse. People go many, many different places. If you look at employer data and you ask where do people go when they leave, often you’ll find no more than five percent of them go to any one firm, that they go all over the place. And some go in the same industry. Some go in other industries. Some change occupations. Some don’t. You look at plant closings, where people go. Again, not so often a big concentration of where they go to. If you look at data on where people are hired from, you see much the same patterns. That’s kind of a much more diffuse nature.[119]

In any particular merger—such as between Kroger and Albertsons, for example—an overwhelming majority of Kroger workers’ next best option (i.e., what they would do if a store closed) will not be at an Albertsons store, but something completely outside of the market for grocery-store labor (or even outside the retail-food industry more broadly). Where that is the case, the merger would not take away those workers’ next best option, and the merger cannot be said to increase labor-monopsony power to the extent necessary to justify blocking it.[120]

Fundamentally, the labor-economics literature has offered little guidance to date on how to define markets in labor cases. As explained above, concentration varies greatly, depending on the exact definition of the relevant market, especially the geographic market.[121] It is virtually impossible to know what outside options to include in the relevant market, and it may not always be possible to identify even where such potential employers are located (e.g., are commuting zones, for example, better proxies for the relevant geographic labor market than metropolitan areas?). These market-definition issues are far more acute in monopsony cases than in traditional monopoly cases, both because the intrinsic question of substitutes is more complicated and because there is far less precedent to guide parties and enforcers.

D. Labor Markets Are Not Spot Markets

The merger guidelines stress that labor markets are not simple spot markets where each side calls out a price and the two make an exchange when bid/ask prices align. As the guidelines state, “labor markets often exhibit high switching costs and search frictions due to the process of finding, applying, interviewing for, and acclimating to a new job.”[122] Moreover, “finding a job requires the worker and the employer to agree to the match. Even within a given salary and skill range, employers often have specific demands for the experience, skills, availability, and other attributes they desire in their employees.”[123]

The typical employment contract is often more complicated than the typical end-user purchase agreement. Employment contracts are, indeed, not spot contracts, and thus contain a temporal dimension often absent from the product markets at-issue in monopoly cases. The terms of employment contracts are also rarely purely monetary, and the value of any given employment contract (and especially of aggregated “employment data”) may not be reflected in the nominal “price” (i.e., wage) of the agreement. Various benefits, deferred compensation, location, start date, moving costs and the like can dramatically complicate identifying the value of employment contracts. Complicating matters further is that the value of these terms to any given employee may vary widely, as people’s preferences for employment terms are significantly idiosyncratic. All of which makes the analysis of observable employment terms inordinately complicated and assessments of market power fraught with error.

There are, however, additional relevant aspects of labor markets that distinguish them from spot markets and that warrant consideration in antitrust analysis. One crucial factor is that employment relationships frequently involve mutual investments by both parties that develop over time. Employers often make substantial investments to build workers’ firm-specific skills through training, knowledge sharing, and opportunities to form client relationships.[124] Some of these skills are general and portable across firms, while others are firm specific and have limited value to other employers.

Firm-specific investments can increase workers’ productivity at their current firms, but also make it more costly for them to switch jobs, potentially giving employers some labor-market power. This “lock in” effect exists because the worker’s current role is more valuable due to firm-specific investments and, in some cases, this increased value cannot be ported to a new employer.

In other cases, however, employers can and do invest in training that provides workers with general—and thus transferable—skills.[125] In such examples, there is a risk that those workers will leave for a competitor before the employer can fully recoup its investment. A higher wage may be justified for a subsequent employer, as the employee comes with the added value provided by the former employer (e.g., training, knowledge of competitively valuable information, relationships with potential customers). This “holdup” problem can lead firms to underinvest in worker training, even when such training would be socially beneficial.

To mitigate this risk, firms and workers may seek contractual solutions that incentivize workers to stay long enough for the firm to earn a return on its investment. These arrangements could include promises of future wage increases, promotions, or other benefits that are contingent on the worker remaining with the firm. In turn, these contractual mechanisms create a new problem: once the investment is made and the worker has acquired valuable skills, they may be “locked in” to their current employer through the promise (implicit or explicit) of future wage gains or other benefits.

Of course, to the extent these arrangements give firms some ex-post market power, they are accompanied by terms implicitly or explicitly sharing the benefits with employees. But if a merger enhances employers’ ability to make such productivity-enhancing investments, it could simultaneously increase labor-market power while generating efficiencies, which may be shared with employees in ways that are difficult to identify or to value. Assessing the competitive effects of such a merger requires identifying and weighing these competing effects, which may be extremely difficult.

The FTC’s complaint against the proposed Kroger/Albertsons merger provides a concrete example of how antitrust enforcers must grapple with these issues in practice.[126] In defining the relevant labor markets, the FTC focuses on “union grocery labor” in “local CBA areas” (i.e., the geographic areas covered by each collective-bargaining agreement’s jurisdiction).[127] By narrowing the market to unionized workers covered by specific CBAs, the FTC appears to be making a form of lock-in argument. The complaint alleges that “[u]nion grocery workers can move between grocery employers covered by their union while retaining their pension and healthcare benefits, as well as other valuable workplace benefits and protections provided by the CBAs. If a union grocery worker leaves for a non-union employer, however, the worker will lose any non-vested CBA benefits and protections.”[128] In other words, the CBA-specific benefits function similarly to firm-specific investments in tying workers to a particular set of employers, or a contractual solution to the holdup problem involving promised future benefits, potentially giving those employers monopsony power.

From an antitrust perspective, assessing such a merger’s effect on firm-specific investments is complex. Will the merger increase or decrease employers’ incentive to provide worker training? How should antitrust balance potential productivity gains against increased labor-market power over workers? Efficiency arguments by merging parties should be met with appropriate skepticism, but such investments may be more than a rounding error in calculating overall effects. Indeed, the concept of firms investing in building worker skills is more than just a theoretical curiosity; there is clear empirical evidence that these investments occur, affect human capital, and have effects on wages.[129] These dynamic investment effects are first-order factors in labor markets, but are not easily captured in a static monopsony framework. Further study on these tradeoffs within merger analysis is essential.

The complications caused by the importance of investment in workers show up in antitrust contexts beyond merger enforcement, such as the FTC’s noncompete rulemaking.[130] The FTC recognized as much, noting that “[t]here is some empirical evidence that non-competes increase investment in human capital of workers, capital investment, and R&D investment,”[131] and citing numerous studies indicating such effects.[132] Of course, the commission nevertheless adopted a rule banning all noncompete agreements outright, despite this recognition.

All of this makes the simple monopsony model difficult to apply and map to the actual competition that occurs in the market. For example, to estimate labor-supply elasticities, many papers take a traditional monopsony model that assumes a spot market where the buyer sets a price and lets as many people buy as are willing.[133] Such analysis can be informative, but it may say little about the competitive effects of various practices in real-world antitrust markets.

The point is not to establish the proper model of human-capital formation. Instead, it is simply to point out that human-capital development is of first-order importance in labor markets. How should antitrust treat it? Contrary to the impression from the merger guidelines (and the short shrift given this point in the proposed NCA rules), not every feature of the labor market simply points toward a need for more enforcement.

V. Monopsony and the Consumer-Welfare Standard

As discussed in the previous sections, using antitrust enforcement to thwart potential monopsony harms is a task full of evidentiary difficulties and complex, poorly understood tradeoffs. Perhaps more problematically, it is also unclear whether (and, if so, how) such an endeavor is consistent with the consumer-welfare standard—the lodestar of antitrust enforcement, at least as it is currently understood and implemented by courts.[134]

Marinescu & Hovenkamp assert that:

Properly defined, the consumer welfare standard applies in exactly the same way to monopsony. Its goal is high output, which comes from the elimination of monopoly power in the purchasing market.… [W]hen consumer welfare is properly defined as targeting monopolistic restrictions on output, it is well suited to address anticompetitive consequences on both the selling and the buying side of markets, and those that affect labor as well as the ones that affect products. In cases where output does not decrease, the anticompetitive harm to trading partners can also be invoked.[135]

And Hemphill & Rose state that:

Overall, then, a trading partner welfare approach accords well with the case law and economic reasoning, and under this approach, a merger that results in increased classical monopsony power may be condemned on account of harm to the input market.[136]

But this is far from self-evident. There are at least two problems with this reasoning.

To start, the assertion that harm to input providers that does not result in reduced product output is actionable is based on a tenuous assertion that a mere pecuniary transfer is sufficient to establish anticompetitive harm.[137] This is problematic, because such “harms” actually benefit consumers in the baseline model. In the extreme example, all of the benefits of a better negotiating position are passed on to consumers, and the firm is more of a direct intermediary trading on behalf of consumers, rather than a monopolistic reseller.[138]

The main justification for ignoring these cross-market effects (as with all market-definition exercises) is primarily a pragmatic one (although it is rather weakened in light of modern analytical methods).[139] But particularly in the context of inputs to a specific output market, these cross-market effects are inextricably linked and hardly beyond calculation. As the enforcement agencies have previously recognized, “[i]nextricably linked out-of-market efficiencies, however, can cause the Agencies, in their discretion, not to challenge mergers that would be challenged absent the efficiencies.”[140]

The assertion that pecuniary transfers of bargaining power are actionable is also inconsistent with the fundamental basis for antitrust enforcement, which seeks to mitigate deadweight loss, but not mere pecuniary transfers that do not result in anticompetitive effects.[141]

Second, it is unclear whether the consumer-welfare standard applies to input markets. At its heart, the consumer-welfare standard focuses on the effects that a(n) (incipient) monopolist’s behavior may have on consumers. And courts have extended this welfare calculation to all direct purchasers affected by anticompetitive behavior. Less clear is whether courts have consistently extended (or would extend) this notion of anticompetitive harm to all “trading partners” in input markets.[142] This goes to the very heart of the consumer-welfare standard:

[I]f only consumers matter, then a buying cartel should be perfectly legal and indeed should be encouraged. Monopsony power would not matter in antitrust cases, because the fact that sellers are harmed is irrelevant under a consumer surplus standard. I know of no proponent of the consumer surplus standard who endorses buyer cartels, or who believes that monopsony is not harmful. Instead, proponents of a consumer surplus rule tend to argue that buyer cartels and monopsony are exceptions to the otherwise sensible rule of maximizing consumer surplus. However, the need for these exceptions illustrates the lack of a coherent logic for the consumer surplus standard.[143]

Other scholars appear too ready to accept that there is a “coherent logic” of the consumer-welfare standard that unquestionably contemplates upstream trading-partner welfare because their interests align with those of consumers:

A useful definition of “consumer welfare” is that antitrust should be driven by concerns for trading partners, including intermediate and final purchasers, and also sellers, including sellers of their labor. These all benefit from high output, high quality, competitive prices, and unrestrained innovation. Higher output and lower prices are good indicators of competitive benefit, and there is little practical difference between the way courts talk about antitrust harm and the idea of “consumer welfare.”[144]

As we explain above, however, this coincidence of interest is far from complete, and lower wages could be consistent with both efficiency and monopsony.[145] As the FTC summarized in closing the investigation of a merger between two pharmacy benefit managers, “[a]s a general matter, transactions that allow firms to reduce the costs of input products have a high likelihood of benefitting consumers, since lower costs create incentives to lower prices.”[146] “Higher output and lower prices [may be] good indicators of competitive benefit,” but it seems problematic to assume they reflect a clear benefit to workers if they result from lower wages. Indeed:

Larger buyers may also be able to reduce their purchasing costs at the expense of suppliers…. The concept of buyer power as an efficiency defence rests squarely on such a presumption. What is more, the argument also posits that the exercise of buyer power will not only have distributional consequences, but also increase welfare and consumer surplus by reducing deadweight loss. As we spell out in detail below, welfare gains may arise both at the upstream level, i.e., in the transactions between the more powerful merged firm and its suppliers, as well as at the downstream level, where the creation of buyer power may translate into increased rivalry and lower prices. The extent to which final consumers ultimately benefit is of particular importance if antitrust authorities rely more on a consumer standard when assessing mergers. If total welfare is the standard, however, distributional issues are not directly relevant and any pass-on to consumers is thus only relevant in as much as it contributes to total welfare.[147]

This raises an obvious question: can the consumer-welfare standard (and thus antitrust authorities and courts) reach a finding of anticompetitive harm if consumers (at least, in the narrow market under investigation) are ultimately charged lower prices?

Consider Judge Breyer’s Kartell opinion. As Steve Salop explains:

The famous Kartell opinion written by Judge (now Justice) Stephen Breyer provides an analysis of a buyer-side “cartel” (comprised of final consumers and their “agent” insurance provider, Blue Cross) that also is consistent with the true consumer welfare standard.… Buyer-side cartels generally are inefficient and reduce aggregate economic welfare because they reduce output below the competitive level…. However, a buyer-side cartel. comprised of final consumers generally would raise true consumer welfare (i.e., consumer surplus) because gains accrued from the lower prices would outweigh the losses from the associated output reduction, even though the conduct inherently reduces total welfare (i.e., total surplus).…

… Judge Breyer treated Blue Cross essentially as an agent for the customers it insured, rather than as an intermediary firm that purchased inputs and sold outputs as a monopolistic reseller. The court apparently assumed (perhaps wrongfully) that Blue Cross would pass on its lower input costs to its customers in the form of lower insurance premiums….

… In permitting Blue Cross to achieve and exercise monopsony power by aggregating the underlying consumer demands for medical care—i.e., permitting Blue Cross to act as the agent for final consumers—the Kartell court implicitly opted for the true consumer welfare standard. Blue Cross’s assumed monopsony conduct on behalf of its subscribers would thus lead to higher welfare for its subscribers despite reduced efficiency and lower aggregate economic welfare. Thus, this result represents a clear (if only implicit) judicial preference for the true consumer welfare standard rather than the aggregate economic welfare standard.[148]

By this logic, it seems, the relevant “consumer” welfare in antitrust analysis—including that of mergers that increase either monopoly or monopsony power—is that of the literal consumer: the final product’s end-user. But this contrasts quite sharply with the standard mode of analysis in monopsony cases as the mirror image of monopoly, in which the merging parties’ trading partner (whether upstream or downstream) is the relevant locus of welfare analysis.

Indeed, extended to other current potential cases, this mode of analysis raises a distinct problem for the agencies. Consider, for example, a hypothetical case against Kroger-Albertsons that did not mention the product market and in which the merger was alleged to increase monopsony power, but not monopoly power. Should such a challenge fail regardless of the effect on input providers because Kroger can be considered “an agent for the customers it [sells to]”? There is, as Salop seems to suggest,[149] some merit in such an approach, but it is certainly not how similar cases have been evaluated in the past.

Indeed, the rule of reason arguably contemplates some sort of balancing of effects across markets.

Critically, the balancing required by the rule of reason is neither quantitative nor precise. In California Dental Association, the Supreme Court described a court’s task as reaching a “conclusion about the principal tendency of a restriction” on competition. If a restraint suppresses competition in one market and promotes competition in a related market, the Chicago Board of Trade and Sylvania statements of the rule of reason can be read to hold that legality turns on which effect predominates in a qualitative sense.[150]

The U.S. Supreme Court’s Alston case highlights this dynamic, and in a case involving labor-market monopsony, no less. Despite the NCAA’s undisputed monopsony power in the “market for athletic services” (an upstream labor market), the Court considered its proferred procompetitive justification of preserving amateurism in college sports—an effect avowedly in the downstream, output market.[151] As the Court described the proceedings below:

The NCAA’s only remaining defense was that its rules preserve amateurism, which in turn widens consumer choice by providing a unique product—amateur college sports as distinct from professional sports. Admittedly, this asserted benefit accrues to consumers in the NCAA’s seller-side consumer market rather than to student-athletes whose compensation the NCAA fixes in its buyer-side labor market. But, the NCAA argued, the district court needed to assess its restraints in the labor market in light of their procompetitive benefits in the consumer market—and the district court agreed to do so.[152]

Tellingly, the district court’s rejection of the NCAA’s procompetitive justification turned on the lack of connection between it and the challenged conduct in the input market. “As the court put it, the evidence failed ‘to establish that the challenged compensation rules, in and of themselves, have any direct connection to consumer demand.’”[153] The plain implication is that, where restraints in one market are sufficiently connected to benefits in another market, those benefits will be considered—and may turn out to justify—the challenged restraints.[154]

There is perhaps no easy answer to the difficulty of assessing harm in upstream markets when downstream markets benefit. At first blush, excluding deadweight losses that stem from monopsony power (or, at least, forcing plaintiffs to show that downstream purchasers are also harmed) seems like legalistic reasoning largely incompatible with the welfarist ancestry of the consumer-welfare standard.[155] Indeed, the consumer-welfare standard is largely premised on the assumption that increased output is desirable, and deadweight losses are harmful to society, regardless of their second-order effects.

There is no tension here when output and labor both benefit from an action; sometimes, output reduction goes directly with labor harms.[156] But what about the cases that are not so neat? It seems odd to depart from this focus on output as the lodestar of antitrust just because a supplier, rather than a consumer, is being harmed.

Faced with what may potentially be intractable economic questions, antitrust courts have, for the sake of administrability, often decided to limit antitrust analysis to what economics generally refer to as partial-equilibrium analysis.[157] This largely explains, e.g., why only direct purchasers can claim antitrust damages.[158] Perhaps it also explains why the Court in Ohio v. American Express chose to simply ignore potential harm to cash purchasers in limiting the market in that case to the “market for credit-card transactions,” even though the district court found that Amex’s conduct would increase retail prices for cash consumers [159]

But much to some commentators’ chagrin,[160] the Court in Amex did take account of cross-market effects—in that case, by combining both sides of a two-sided market into a single market—and noted that failing to do so would lead to error.[161] While the Court limited its holding to two-sided, “simultaneous transaction” markets,[162] it is difficult to escape the realization that the logic of the holding—and the arbitrariness of considering effects on one side in isolation—would apply as well to the analysis of upstream and downstream trading partners:

Absent consideration of both sides of a platform, the analysis will arbitrarily include and exclude various sets of users and transactions, and incorrectly assess the extent and consequences of market power. Indeed, evidence of a price effect on only one side of a two-sided platform can be consistent with either neutral, anticompetitive, or procompetitive conduct. Only when output is defined to incorporate the two-sidedness of the product, and where price and quality are assessed on both sides of a sufficiently interrelated two-sided platform, is it even possible to distinguish between procompetitive and anticompetitive effects.[163]

The upshot is that, with some notable exceptions (such as the case of two-sided markets in Amex), antitrust courts have been reluctant to analyze competitive effects in adjacent markets. Alas, it is unclear where that line is appropriately drawn, or whether it has been drawn somewhat arbitrarily in the past.

What might seem like an arbitrary decision appears more reasonable, of course, when one considers the sheer complexity of the task at-hand. Economic behavior will often have second-order effects that run in an opposite direction to its first-order or “partial equilibrium” ones. A coal monopoly may cause buyers to opt for cleaner energy sources; a conservation cartel may maximize the long-term value of scarce resources.[164] Yet surely there are cases where out-of-market effects are “inextricably linked” to in-market effects, and where extending the analysis would not create insurmountable burdens. A practical approach—and one consistent with the broad scope of the rule of reason—would at least consider out-of-market effects when they are a direct and identifiable consequence of conduct challenged in a separate market.

The question is further complicated in merger cases where the Clayton Act’s “any line of commerce” language seems to limit merger analysis to a single market, and where the Court’s holding in Philadelphia National Bank clearly reiterates this apparent constraint.[165] But those legal rules do not address the economic propriety of so limiting merger analysis, and neither is predicated on the complexity of undertaking the requisite economic analysis. Indeed, whatever the merits of such an approach at the time Philadelphia National Bank was decided, both the law and the economics have moved past them:

Despite the incorporation of efficiencies analysis into modern merger evaluation, and the advances in economics that allow efficiencies to be identified and calculated more accurately than at the time of Philadelphia National Bank, antitrust doctrine in the United States still supports a regime that fails to take into account efficiencies arising outside of the relevant market. Only a handful of federal court cases since Philadelphia National Bank raise the issue of out-of-market efficiencies, and those that address the merits quickly dispatch such efficiencies as being precluded by the Supreme Court precedent. In light of the advances in the ability to identify and measure efficiency benefits, the federal courts should update antitrust doctrine to support a serious and committed treatment of out-of-market efficiencies in merger analysis.[166]

In part reflecting this change in approach, the Court in Baker Hughes held that “[t]he Supreme Court has adopted a totality-of-the-circumstances approach to the statute [Section 7], weighing a variety of factors to determine the effects of particular transactions on competition.”[167] And lower courts have been increasingly willing to consider efficiencies in evaluating the application of Section 7 to proposed mergers.[168] It is even arguable that the district court in New York v. Deutsche Telekom (reviewing the T-Mobile/Spring merger) credited out-of-market efficiencies in approving the merger.[169]

Moreover, as with virtually all legislative language, the Clayton Act’s language is not as clear as some make it out to be. The phrase “in any line of commerce” need not be interpreted to constrain the permissible zone of analysis, or to condemn effects in a single “line of commerce” regardless of its effects in another. Rather, the phrase’s most obvious meaning is to indicate that no area of commercial activity is exempted from the Clayton Act. Indeed, the use of the word “line” to refer to the indicated area rather than “market” seems clearly to indicate general categories of business that are to be included in the law’s prescriptions, rather than specific markets for identifying effects.

In other words, “it is plain that Section 7 does not limit the range of ‘lines of commerce’ that can trigger a merger’s prohibition.”[170] But it is by no means clear that Section 7 proscribes liability when a merger “lessen[s] competition” in a single market, regardless of whether it may enhance competition elsewhere in the same “line of commerce.”[171] As the Court suggested in Amex, the relevant “line of commerce” may incorporate distinct markets that need not exist on the same side of a given transaction. Indeed, modern “business ecosystem” theories suggest that conglomerate businesses with widely different “markets,” interrelated by an overarching business model that “inextricably links” them, may constitute something like a single “line of commerce,” despite the superficial distinctions between the components that comprise them.[172]

The question remains whether antitrust law has a comparative advantage in dealing with more “systemic” issues (like worker welfare, environmental effects, or even the “amateurism” offered by the NCAA in Alston), or whether other legal frameworks are better adapted. Put differently, antitrust law’s main strength might be that it is mostly a consumer-oriented body of law that focuses on a single tractable problem: the prices consumers and other direct purchasers pay for goods. If that is true, then other bodies of law (such as, e.g., labor and environmental laws) may be better suited to deal with broader harms. Indeed, in the case of each of these fields, there exists a massive regulatory apparatus specifically designed to implement government standards. Under the law as it stands, where antitrust law and a regulatory regime conflict, antitrust must give way.[173]

We do not purport to have a satisfactory answer to this complicated question. In fact, it is probably fair to say that one does not exist. Antitrust law can either depart from its welfarist underpinnings—a large loss for its economic consistency—or it can follow those principles toward difficult problems that may ultimately impair its administrability. At this juncture, it is not clear there is a compromise that would enable enforcers to thread the needle to solve this complex conundrum. And if such as solution exists, it has yet to be articulated in a convincing manner that may lead to actionable insights for enforcers or courts. But it is crucial to note that some cross-market analysis may be unavoidable under a welfarist approach if antitrust is going to continue to attempt to address potential harms in upstream markets, including labor markets.

Given all of this, the FTC and DOJ’s update of their merger guidelines to address monopsony harms, while clearly important, also appears to be premature, compared to the state of the economic literature, and potentially unactionable (or, at least, incoherent as stated) under the consumer-welfare standard. This is not to say the antitrust-policy world should simply ignore monopsony harms, but rather that more research, discussion, and case law are needed before definitive guidelines can be written. Ultimately, it may well be that legislative change is needed before any such guidelines will be enforceable before the courts.

VI. A Path Forward: An Agenda for Antitrust and Labor Markets

The previous sections have highlighted the empirical and conceptual challenges that complicate the application of antitrust law to labor monopsony. While the growing interest in this area presents opportunities for research and policy innovation, it is important to approach these issues with a mix of enthusiasm and skepticism. The current state of economic knowledge and antitrust doctrine suggests that we are not yet ready for a major expansion of enforcement in labor markets. This, however, does not mean that antitrust has no role to play or that the status quo is optimal. Rather, it suggests the need for a thoughtful and incremental approach that prioritizes the development of better analytical tools, evidence-based policymaking, and inter-disciplinary collaboration.

The recent FTC complaint against the proposed Kroger/Albertsons merger underscores the importance of the issues raised in this paper, as well as the ongoing challenges that antitrust authorities face when assessing labor-market effects in merger cases.[174] While the complaint reflects an increased focus on labor issues in merger enforcement, it also highlights the complexities of defining markets, assessing competitive effects, and weighing efficiency claims in this context. The Kroger/Albertsons case provides a real-world example of how the FTC is grappling with these issues in practice, but also raises questions about the rigor of its proposed market definitions, the sufficiency of evidence required, and the theories of harm proposed.

Perhaps most notably, although the complaint proposes two distinct markets, one on either side of the supermarket business (“union grocery labor” on the one hand, and “the retail sale of food and other grocery products,” on the other), it fails to note that both are simultaneously intrinsic to the operation of supermarkets. It also fails to offer any suggestion for how a court should respond if, for example, harm is found in one market but not the other. Of course, as noted, the complaint does not even contemplate the possibility that its alleged theory of harm in the labor market could result in procompetitive effects in the retail market.[175]

As labor-market concerns continue to arise in antitrust cases, it will be critical for the FTC and other enforcers to develop more robust analytical frameworks and evidentiary standards to support their claims, and for courts and policymakers to provide clearer guidance on how labor-market harms should be assessed under existing legal standards. While the FTC’s increased focus on labor issues is noteworthy, the Kroger/Albertsons complaint also demonstrates that the agency’s approach needs to be further refined and clarified.

One key priority should be to develop more direct, antitrust-relevant measures of labor-market power. While some recent studies have proposed measures such as labor-supply elasticity[176] and wage markdowns,[177] these tools have not been widely validated in antitrust contexts. Moreover, as discussed earlier, these measures may be sensitive to assumptions about the nature of competition.[178] Further refinement and testing of these measures, with a focus on their robustness and applicability to antitrust cases, is needed.

In addition, scholars should continue to study the effects of specific mergers and practices on labor-market outcomes, using more sophisticated research designs that can isolate causal impacts. While some recent studies have taken steps in this direction,[179] much more work is needed to build a body of evidence that can inform antitrust enforcement. In particular, studies that can disentangle the effects of labor-market concentration from other factors, such as firm-specific investments and productivity differences, would be valuable.

Scholars and policymakers should also continue to refine models of dynamic competition and firm-specific investments in labor markets, with an eye toward their implications for antitrust enforcement. As discussed earlier, standard static models of monopsony may not fully capture the complexities of labor-market competition, such as the role of search frictions, bargaining, and human-capital investments. Some recent papers have started to incorporate these features,[180] but more work is needed to develop tractable models that can guide enforcement decisions. It remains to be seen to what extent the FTC’s lock-in argument in the Kroger/Albertsons complaint will be supported with such models.[181]

Another key priority should be to clarify the goals and legal standards for antitrust enforcement in labor markets. The consumer-welfare standard, which has long guided antitrust policy, becomes difficult to apply when a merger or practice may harm workers but benefit consumers.[182] While some have argued for a “worker-welfare standard” that would prioritize the interests of workers,[183] it is not clear whether this would be consistent with the goals of antitrust law, nor how it would be reconciled with simultaneous findings of countervailing consumer effects.[184] Policymakers, courts, and scholars should continue to grapple with these normative questions and work toward developing a coherent and administrable framework for weighing labor-market effects in antitrust cases.

Finally, it is important to foster dialogue and collaboration between antitrust and labor experts to develop a shared understanding of the issues at-stake. Economists, lawyers, and policymakers approaching these issues from different perspectives must find common ground and a common language to assess concerns about labor-market power.

While these challenges are significant, there are reasons for cautious optimism. The increased attention to labor-market power from scholars, policymakers, and the public has created a unique opportunity to reexamine long-held assumptions and explore new approaches. By pursuing an agenda that emphasizes empirical rigor, legal clarity, and interdisciplinary collaboration, we can make progress toward more competitive labor markets. This will not happen overnight, just as the development of the consumer-welfare standard and the integration of antitrust with economic theory did not happen overnight. By staying focused on the ultimate goal of promoting the welfare of both workers and consumers, and being willing to adapt to new evidence and insights, we can move closer to an antitrust regime that is suited to the realities of the modern labor market.

Given that these complex tradeoffs still lack anything approaching definitive resolution in research or precedent, antitrust authorities would best serve the integrity of enforcement standards by exercising restraint. The disregard of difficult tradeoffs and the premature or overzealous application of questionable theories both risk distorting competition and innovation incentives more than protecting them. This is not an argument against addressing labor-market power entirely through uncertain means, as further co-evolution of economic and legal understanding may resolve some quandaries. It is, however, an argument that threading the needle to expand prohibitions into input markets requires a cautious, studious approach—especially when they conflict with the consumer interests that antitrust ultimately aims to safeguard.

Appendix: Detailed Discussion of Labor-Market Concentration Research and Its Implications for Antitrust

The 2023 Merger Guidelines assert that labor markets can be “relatively narrow” and that “the level of concentration at which competition concerns arise may be lower in labor markets than in product markets, given the unique features of certain labor markets.”[185] The academic literature presents a more nuanced picture, however, and casts doubt on these claims. This section provides a more thorough review of the literature discussed in Section III.B, infra.

By examining the strengths and limitations of each approach, we aim to provide a balanced assessment of what the current evidence can (and cannot) tell us about the extent of labor-market power in the U.S. economy. Our review suggests that, while some labor markets may indeed be highly concentrated, the evidence does not support a blanket characterization of labor markets as “narrow.” Antitrust authorities should carefully consider the specific contours of the relevant labor market in each case, drawing on multiple data sources and methodologies. The broad pattern does not support general presumptions that mergers systematically make already-narrow labor markets dramatically more concentrated over time. If anything, concentration data indicate that labor markets are growing more competitive.

I. Administrative Data

The narrative of rising employer dominance and increasing labor-market concentration has been challenged by recent research using comprehensive administrative data. These studies generally find that, while national labor-market concentration has been rising, local concentration levels have declined or remained stable over recent decades.

Papers leveraging datasets like the Longitudinal Business Database, which covers nearly all private-sector employers, point to falling concentration within local labor markets, such as commuting zones and urban areas. Rinz[186] and Lipsius^[187] both used this data and estimated decreasing local concentration from 1976-2015, even as national measures increased. Their explanation is the entry of large firms into more local markets over time.

Autor, Patterson, and Van Reenen reinforce these findings using Economic Census data across major sectors. They estimated local-employment concentration fell from 0.35 in 1992 to 0.30 in 2017, contrary to rising national concentration.^[188] This divergence was partly driven by employment shifts away from the highly concentrated manufacturing sector toward more competitive services sectors.

Focusing on just manufacturing, Benmelech, Bergman, and Kim found relatively stable average local concentration from 1978-2016 in the Longitudinal Business Database.^[189] Importantly, their wage data allowed them to examine concentration’s direct earnings impact, suggesting a 3% wage decrease when moving from a low to high concentration market, or 9-14% using mergers as an instrument. This correlation, even with an instrument, should be interpreted with caution.

Modeling by Berger, Herkenhoff, and Mongey highlighted weighting concentration by payroll, rather than employment.[190] Though producing lower estimates, their approach still showed the diverging national/local trends.

While mixed, this literature consistently finds declining or stable local-labor market concentration when leveraging government-collected microdata. This casts doubt on claims of pervasive local-monopsony power and suggests national trends may be more relevant for assessing competitiveness. These findings have antitrust-policy implications regarding employer concentration and merger effects.

The papers that use administrative data find a trend that contradicts the popular narrative. They generally find a decline in local-labor market concentration, alongside a rise at the national level. Such findings suggest that employer dominance in the labor market may not be as pervasive or detrimental at the local level as it is nationally, complicating the narrative of widespread monopsony power in labor markets.

A. Rinz (2022) and Lipsius (2018)

First, let us consider papers that use administrative data, generally considered to be the best when available. Rinz uses administrative data from the Longitudinal Business Data and finds that local labor-market concentration has been declining, while national concentration has been increasing.[191] Lipsius uses the same dataset and finds the same result, but focuses on connecting labor-market concentration to changes in labor share of income.[192] Both papers have data on employment at the firm level for the years 1976-2015, so they are able to study the evolution over time. The data cover the near universe of non-farm, private establishments with employees.

The two papers use different levels of aggregation. Rinz uses four-digit NAICS for the job description and commuting zones for the location. Lipsius used 5-digit NAICS codes and urban areas, which are smaller than commuting zones but based on economic integration instead of political lines, such as counties.

Rinz assesses concentration using HHI measures. He finds that, at the national level, HHI declined roughly 40 percent from 1976 to 1983, stayed flat through the 1980s and has risen since. When divided into commuting zones, however, he finds a falling trend in concentration. The difference in trends has various explanations, but the simplest is that large firms are entering more and more labor markets. For example, when Wal-Mart enters a small town with one retail store, national concentration may rise, even though the town’s concentration falls.

Source: Rinz (2022)^[193]

B. Autor, Patterson, & Van Reenen (2023)

Recent work by Autor, Patterson, and Van Reenen provides additional evidence on trends in local labor-market concentration using establishment-level data from the Economic Census.[194] Autor, et al. analyze six broad sectors—manufacturing, retail trade, wholesale trade, services, utilities/transportation, and finance—that comprise roughly 80% of U.S. employment and GDP. The authors have data covering the period from 1982-2017 for manufacturing, retail, wholesale, and services, and going back to 1992 for the others. They define markets by county and by six-digit NAICS industry, and find that employment-based HHI fell from 0.35 in 1992 to 0.30 in 2017.[195] Similar results hold for three- and four-digit NAICS.[196] This contrasts with the rise in national employment concentration over the same period, which rose by 1.7 points for employment (from 0.025 in 1992 to 0.042 in 2017).[197] The authors also show substantial divergence between national and local concentration trends over the longer 1982 to 2017 period for the four sectors with available data. Moreover, the local-employment HHI exhibits a consistent downward trend over most five-year intervals between 1992 and 2017. Overall, the results point to a robust fall in local employment concentration that runs counter to the rise in national concentration.

Some of this trend is structural. A key element of Autor et al.’s analysis is distinguishing between changes occurring within industries, versus those across industries. The divergence between national and local employment-concentration trends is largely attributable to the reallocation of economic activity from more-concentrated manufacturing industries to less-concentrated service industries. In fact, the authors show that, holding industry structure fixed at 1992 levels, local employment concentration would have risen by about 9%, rather than falling by 5%.[198] This between-industry reallocation had a smaller dampening effect on sales concentration, since the shift from manufacturing to services was greater for employment than sales. At the same time, Autor et al. find that concentration has risen within detailed industries and localities for both employment and sales.

C. Benmelech, Bergman, & Kim (2022)

Diving into manufacturing, specifically. Benmelech, Bergman, and Kim uses administrative, micro-level data on manufacturing establishments (“plants”), covering the period 1978-2016.[199] To calculate concentration measures, they use the Longitudinal Business Database (as did Rinz and Lipsius).[200] They use four-digit standard industry-classification codes (the predecessor of NAICS codes). For concentration measures, their data shares all the costs and benefits of the Longitudinal Business Database discussed above.

For manufacturing, they find the average levels of concentration have remained relatively stable, with employment-weighted HHI being 0.569 for the period 1978-1987 and 0.587 for 2008-2016.[201] One should be careful when extrapolating from manufacturing to the whole U.S. economy, given that manufacturing has been declining and the forces changing manufacturing may not apply to the rest of the economy. According to the U.S. Bureau of Labor Statistics, the percentage of employment in manufacturing sector dropped from roughly 22% in 1980 to slightly more than 10% in 2012 (Lipsius 2018, p. 4).

They supplement the concentration measures with two data sets: the Census of Manufacturers, which covers all plants in years ending in 2 and 7, and the Annual Survey of Manufacturers, which covers about 50,000 plants with a threshold of 250-1000 employees for the non-Census years. Other smaller firms are sampled randomly. The Annual Survey of Manufacturers is mandatory reporting, subject to fines for misreporting. They collected data on many things, such as value of shipments. For our discussion, the important thing is that they collect data on actual wages and labor hours, compared to simply posted wages. Moreover, since they are looking at manufacturing, they have better estimates of productivity of firms, as they have better data on inputs and outputs at the plant level. In their baseline regression, moving from a market that is one standard deviation below the median to one standard deviation above is associated with a 3% decline in wages.

Moreover, they are able to use mergers and acquisitions to instrument for concentration to potentially estimate a causal effect of concentration on wages. Using their instrumental-variable approach, they estimate that moving from a market that is one standard deviation below the median to one standard deviation above is associated with a decline in wages of between 9% and 14%.

D.  Berger, Herkenhoff, & Mongey (2022)

Berger, Herkenhoff, and Mongey estimate a general-equilibrium model to measure labor-market power.[202] In the process, their model suggests a certain way to average HHI across markets. They start with LBD at the 3-digit industry level within commuting zones, but they are still left with the problem of how to weight different markets. Instead of weighting by employment level or vacancies level, they weight by market-level payroll, which lowers concentrations slightly, although the trend remains the same.

They find that local concentration is declining over the full period, while national-concentration measures are more complicated. For tradeable sectors, national concentration is falling. For non-tradeable sectors, after falling in the early 1980s, it has slowly risen. But non-tradeables are larger, so the overall national concentration measure has also been rising since the mid 1980s.

In the data (model) weighted average concentration measured in terms of employment is 0.15 (0.16) and in terms of payroll is 0.17 (0.17). In the data (model) unweighted average concentration measured in terms of employment is 0.45 (0.32) and in terms of payroll is 0.48 (0.33).

Source: Berger, Herkenhoff, & Mongey (2022)^[203]

E. Handwerker & Dey (2023)

Handwerker and Dey use microdata from the Occupational Employment and Wage Statistics, mapped to the Quarterly Census of Employment and Wages, which records quarterly employment levels for each establishment in the United States that reports to state-level Unemployment Insurance departments.[204] They define markets by 6-digit SOC by metropolitan area. They also look by industry, instead of occupation. They focus on the case where they weight markets by payroll shares, following the theory of Berger, Herkenhoff, and Mongey.[205]

They find an average HHI that is relatively stable and low. They also only look at the private sector and weight by employment, so their results are more directly comparable to some other papers. For example, they directly compare the concentration measures in their data to the 26 occupations of Azar, Marinescu, and Steinbaum.[206] Handwerker and Dey find an HHI in the private sector of one-tenth that found in Azar, Marinescu, and Steinbaum (0.0383 vs. 0.3157).[207] This is the clearest example of how the different data sources matter for concentration numbers.

Source: Handwerker & Dey (2023)^[208]

II. Online Job Vacancies

While the above papers use administrative data, other papers on labor-market concentration use online job vacancies (postings) to measure concentration.

A. Azar, Marinescu, Steinbaum, & Taska (2020)

Azar, Marinescu, Steinbaum, and Taska use data on job openings from Burning Glass Technologies (BGT), which collects online job-posting data from 40,000 websites.[209] They restrict their analysis to calendar year 2016, which was the most recent year with available data when the paper was first written. They claim the years 2007-2015 show similar concentration measures (footnote 4).

The papers that use job openings, compared to measures of employment levels, claim openings are a better way to gauge how easy it is for searching workers to find a new job.[210] The nearest government-data product to BGT’s is the Job Opening and Labor Turnover Survey (JOLTS), which is a nationally representative sample of employers. When comparing BGT’s collected job postings to the job postings in JOLTS, the authors estimate that they captured roughly 85% of the job openings in the United States during 2016.

BGT cleans the data to remove double postings and consolidate different spellings for the same employer; i.e., “Bausch and Lomb”, “Bausch Lomb”, and “Bausch & Lomb” are marked as the same employer. After cleaning, 35.9% of employer names are missing, especially if staffing companies do not want to disclose the employer. They assume that all of these with missing employer names are different employers. This means that they have a lower bound on market-concentration measures.

For job description, the BGT dataset uses the Standard Occupational Code (SOC). In the baseline, they consider 200 occupations, which capture 90% of the vacancies in their dataset.[211] For occupations, the authors use six-digit SOC codes for their baseline, but argue that is likely too broad.[212] For location, they use commuting zones, which are geographic definitions based on groups of counties and were developed by the U.S. Department of Agriculture (USDA) to capture local economies and labor markets.[213]

In the SOC-6 occupation by commuting zone by quarter, they find an average HHI of 0.44. For reference, the 2010 Horizontal Merger Guidelines defined markets with post-merger HHIs exceeding 2,500 or 0.25 as “highly concentrated,” and held that mergers in such markets that also increase the HHI level by at least 100 points “raise significant competitive concerns and often warrant scrutiny.”[214] Using the 2010 thresholds, they find that 60% of markets were considered “highly concentrated.”[215] They calculate many other measures of concentration, including at different percentiles and how they vary across the country.[216]

B. Schubert, Stansbury, & Taska (2024)

Schubert, Stansbury, and Taska also use BGT data on vacancies, but with data from 2011 through 2019.[217] They define markets by SOC-6, but use metropolitan area as the location. They do not focus on trends in concentration but on the distribution of concentration and its relationship to wages through outside options to other markets. While the median market has an HHI of 0.0882, the 75^th percentile market has an HHI of 0.2143 and the 95^th percentile market has an HHI of over 0.8025.[218]

If, however, you weight by level of employment—since many markets have low levels of employment but high levels of concentration—the 50^th percentile worker works in a market with an HHI of 0.0137; the 75^th percentile worker in a market with an HHI of 0.0404; and the 95^th percentile worker in a market with an HHI of 0.1845.[219] That means that under their data and definition of markets, around 5% of workers are in markets that cross the merger-guidelines threshold for a structural presumption (an HHI greater than 1,800 or 0.18, along with an increase of HHI of 100 or 0.01).[220]

When weighting each labor market equally, instead of by size, they find around 25% of markets are over the new threshold.[221] In contrast, using the same data source (BGT) but defining markets differently, Azar, Marinescu, Steinbaum, and Taska find 60% of markets were above the 2,500 threshold.[222]

Source: Schubert, Stansbury, & Taska (2024)^[223]

C. Azar, Marinescu, & Steinbaum (2022)

Azar, Marinescu, and Steinbaum use data from CareerBuilder.com, which is a large online job board.[224] The total number of vacancies on CareerBuilder.com represents 35% of the total vacancies in the US in January 2011, as counted by JOLTS. They consider the SOC-5 definition and pick the 13 most frequent occupations over the 2009 to 2012 window, plus the three most frequent occupations in manufacturing and construction. They then consider the SOC-6 definition, which further splits the SOC-5, and end up with 26 occupations in total.[225]

Like Azar, Marinescu, Steinbaum, and Taska,[226] they use commuting zones. They also have data on the number of applicants, which allows measures of “tightness” as (number of vacancies)/(number of applications). They calculate an average HHI for vacancies of 0.3157. When they look at the average based on applications, they find a higher HHI of 0.3480.[227] Again, this is significantly higher than the HHI measure found for the same occupations but using the administrative microdata.[228]

[1] Non-Compete Clause Rule, Final Rule (RIN 3084-AB74, adopted Apr. 23, 2024) (to be codified at 16 C.F.R. Part 910), available at https://www.ftc.gov/system/files/ftc_gov/pdf/noncompete-rule.pdf.

[2] Complaint, In the Matter of the Kroger Company and Albertsons Companies, Inc., FTC Docket No. D-9428 (Feb. 26, 2024), https://www.ftc.gov/legal-library/browse/cases-proceedings/kroger-companyalbertsons-companies-inc-matter.

[3] U.S. Dep’t. of Just. & Fed. Trade Comm’n, Merger Guidelines 27 (2023), available at https://www.justice.gov/d9/2023-12/2023%20Merger%20Guidelines.pdf.

[4] See infra Part II.

[5] See generally U.S. Dep’t of the Treas., The State of Labor Market Competition (Mar. 7, 2022), available at https://home.treasury.gov/system/files/136/State-of-Labor-Market-Competition-2022.pdf.

[6] Merger Guidelines, supra note 3, at 27.

[7] See Jean-Pierre Dubé, Günter J. Hitsch, &Peter E. Rossi, Do Switching Costs Make Markets Less Competitive?, 46 J. Marketing Rsrch. 435, 435 (2009) (“In the simulations, prices are as much as 18% lower with than without switching costs. More important, equilibrium prices do not increase even in the presence of switching costs that are of the same order of magnitude as product price.”).

[8] Merger Guidelines, supra note 3, at 27.

[9] United States v. DaVita Inc., et al., Case No. 21-cr-00229 (D. Colo. 2021).

[10] See, e.g., United States v. Patel, et al., Case No. 21-cr-00220 (D. Conn. 2021) (acquitting all defendants and holding that the evidence did not permit a reasonable jury to conclude there was an agreement to meaningfully allocate the labor market for engineers); United States v. Manahe, et al., Case No. 22-cr-00013 (D. Me. 2022) (acquitting all defendants of charges of a wage-fixing conspiracy among home-healthcare agencies); United States v. Surgical Care Affiliates LLC, et al., Case No. 21-cr-00011 (N.D. Tex. 2021) (DOJ voluntarily dismissed its indictment of a no-poach conspiracy of senior-level surgical facility employees).

[11] Herbert Hovenkamp, The Slogans and Goals of Antitrust Law, 25 Leg. & Pub. Pol’y 705, 705 (2023).

[12] See 15 U.S.C. § 18 (2018) (“No person… shall acquire… the whole or any part of the stock… of another person…, where in any line of commerce…, the effect of such acquisition may be substantially to lessen competition….”).

[13] Merger Guidelines, supra note 3, at 27 (bold/italics emphasis added; italics-only emphasis in original).

[14] See infra Sections IV.B and V.

[15] Complaint, In the Matter of Kroger/Albertsons, supra note 2.

[16] Ioana Marinescu & Herbert J. Hovenkamp, Anticompetitive Mergers in Labor Markets, 94 Indiana L.J. 1031, 1034 (2019).

[17] See, e.g., id. (“While the use of section 7 to pursue mergers among buyers is well established, there is relatively little case law.”).

[18] Merger Guidelines, supra note 3, at 26-27.

[19] See Non-Compete Clause Rule, Final Rule, supra note 1.

[20] For an extensive review of the noncompete literature relied upon by the FTC and a discussion of the nuances and limitations of that literature, see Alden Abbott, et al., Comments of Scholars of Law & Economics and ICLE in the Matter of Non-Compete Clause Rulemaking, FTC Matter No. P201200 (Apr. 19, 2023), https://laweconcenter.org/resources/comments-of-scholars-of-law-economics-and-icle-in-the-matter-of-non-compete-clause-rulemaking.

[21] Complaint, In the Matter of Kroger/Albertsons, supra note 2, at ¶¶ 63 & 70.

[22] See, e.g., Suresh Naidu, Eric A. Posner, & Glen Weyl, Antitrust Remedies for Labor Market Power, 132 Harv. L. Rev. 536 (2018), (“As far as we know, the DOJ and FTC have never challenged a merger because of its possible anticompetitive effects on labor markets, or even rigorously analyzed the labor market effects of mergers as they do for product market effects. Nor have we found a reported case in which a court found that a merger resulted in illegal labor market concentration.”). Ioana Marinescu & Eric A. Posner, Why Has Antitrust Law Failed Workers?, 105 CORNELL L. REV. 1343 (2020)

[23] Exec. Order No.14036, 86 FR 36987 (2021).

[24] See United States v. Bertelsmann SE & Co. KGaA, et al., 646 F. Supp. 3d 1 (D.D.C. 2022).

[25] See Press Release, FTC Cracks Down on Companies That Impose Harmful Noncompete Restrictions on Thousands of Workers, Fed. Trade. Comm’n, (Jan. 4, 2023), https://www.ftc.gov/news-events/news/press-releases/2023/01/ftc-cracks-down-companies-impose-harmful-noncompete-restrictions-thousands-workers. See also, e.g., Complaint and Decision and Order, In the Matter of Anchor Glass Container Corp., et al., Fed. Trade. Comm’n (Jun. 2, 2023), https://www.ftc.gov/news-events/news/press-releases/2023/01/ftc-cracks-down-companies-impose-harmful-noncompete-restrictions-thousands-workers https://www.ftc.gov/legal-library/browse/cases-proceedings/2110182-anchor-glass.

[26] See Non-Compete Clause Rule, Notice of Proposed Rulemaking, 88 Fed. Reg. 3482 (RIN 3084, proposed Jan. 19, 2023) (to be codified at 16 C.F.R. Part 910).

[27] See cases referenced supra note 10.

[28] Dept of Just. & Fed. Trade Comm’n, Antitrust Guidance For Human Resource Professionals (2016), https://www.justice.gov/atr/file/903511/download.

[29] Press Release, Justice Department Requires Six High Tech Companies to Stop Entering into Anticompetitive Employee Solicitation Agreements, U.S Dept. of Just. (Sep. 24, 2010), https://www.justice.gov/opa/pr/justice-department-requires-six-high-tech-companies-stop-entering-anticompetitive-employee.

[30] United States v. Arizona Hosp & Healthcare Ass’n & AzHHA Service Corp., No. CV07-1030-PHX (D. Az. May 22, 2007).

[31] Memorandum of Understanding Between the Fed. Trade Comm’n and the Nat’l Labor Relations Bd. Regarding Information Sharing, Cross-Agency Training, and Outreach in Areas of Common Regulatory Interest (Jul. 19, 2022), available at https://www.ftc.gov/system/files/ftc_gov/pdf/ftcnlrb%20mou%2071922.pdf.

[32] Memorandum of Understanding Between the U.S. Dep’t of Labor and the Fed. Trade Comm’n (Aug. 30, 2023), available at https://www.ftc.gov/system/files/ftc_gov/pdf/23-mou-146_oasp_and_ftc_mou_final_signed.pdf.

[33] See generally Herbert Hovenkamp, The Antitrust Enterprise: Principle and Execution 38-9 (2005) (citing examples and noting that “post-Chicago theory typically models strategic behavior by use of game theory, with alternatives that reach far beyond the conventional Cournot oligopoly analysis”). See also, e.g., Edward J. Green & Robert H. Porter, Noncooperative Collusion under Imperfect Price Information, 52 Econometrica 87 (1984); Thomas G. Krattenmaker & Steven C. Salop, Anticompetitive Exclusion: Raising Rivals’ Costs to Achieve Power over Price, 96 Yale L.J. 209 (1986).

[34] Herbert J. Hovenkamp & Fiona Scott Morton, Framing the Chicago School of Antitrust Analysis, 168 U. Pa. L. Rev. 1843, 1847 (2020) (“Built into Chicago School doctrine was a strong presumption that markets work themselves pure without any assistance from government. By contrast, imperfect competition models gave more equal weight to competitive and noncompetitive explanations for economic behavior….”).

[35] See, e.g., Lester G. Telser, Why Should Manufacturers Want Fair Trade?, 3 J.L. & Econ. 86 (1960); George J. Stigler, A Theory of Oligopoly, 72 J. Pol. Econ. 44 (1964); Howard Marvel, Exclusive Dealing, 25 J. L. Econ. 1 (1982).

[36] See, e.g., Gregory J. Werden & Luke M. Froeb, The Effects of Mergers in Differentiated Products Industries: Logit Demand and Merger Policy, 10 J.L. Econ. & Org. 407 (1994); Jonathan B. Baker & Timothy F. Bresnahan, The Gains from Merger or Collusion in Product-Differentiated Industries, 33 J. Indus. Econ. 427 (1985).

[37] To be clear, this is merely a descriptive claim about the present state of the relationship between labor economics and antitrust, not a normative claim that the two fields should not develop stronger connections.

[38] See, e.g., Jose Azar, Iona Marinescu, & Marshall Steinbaum, Labor Market Concentration, 57 J. Hum. Res. S167, S197 (Supp. 2022) (“The type of analysis we provide could be used to incorporate labor market concentration concerns as a factor in antitrust analysis.”).

[39] See U.S. Dep’t of the Treas., supra note 5.

[40] See, e.g., Azar, Marinescu, & Steinbaum, supra note 38, at S174 (“Our baseline measure of market power in a labor market is the Herfindahl–Hirschman index (HHI)….”); Carl Shapiro, Protecting Competition in the American Economy: Merger Control, Tech Titans, Labor Markets, 33 J. Econ. Persp. 69, 75-76 (2019). (“Measures of industry concentration based on data from the US Economic Census are simply not very informative for merger analysis because these data are available only at an aggregated level. The modest increases in concentration observed when using these data confirm that the largest firms are responsible for a greater portion of economic activity in many industries, but they tell us very little about concentration in properly defined relevant antitrust markets… Furthermore, it is important to remember that an increase in concentration in a properly defined relevant market does not prove that competition in that market has declined.”).

[41] This is effectively the labor-market equivalent of markups that measure whether firms enjoy market power in the market for goods or services. See, e.g., Naidu, Posner, & Weyl, supra note 22, at 556 (“The firm’s absolute markup is the gap between this price and the firm’s cost. The markup equals the difference between the monopoly price and the competitive price, and thus serves as a natural gauge of market power… As in the monopoly case, a monopsonist will not internalize this effect on workers and will choose an “absolute markdown” of wages below the marginal revenue product.”).

[42] As we will discuss later, this connection between labor-supply elasticities, marginal products, and wages is more complicated. For example, the markdown could be a mismeasured return to technology, not traditional market power. See, e.g., Ivan Kirov & James Traina, Labor Market Power and Technological Change in US Manufacturing, conference paper for Institute for Labor Economics (Oct 2022), at 42, available at https://conference.iza.org/conference_files/Macro_2022/traina_j33031.pdf (“The labor [markdown] therefore increases because “productivity” rises, and not because pay falls. This suggests that technological change plays a large role in the rise of the labor [markdown].”).

[43] See Naidu, Posner, & Weyl, supra note 22.

[44] Id. at 567. See also Douglas O. Staiger, Joanne Spetz, & Ciaran S. Phibbs, Is There Monopsony in the Labor Market? Evidence from a Natural Experiment, 28 J. LAB. ECON. 211 (2010); Arindrajit Dube, Laura Giuliano, & Jonathan Leonard, Fairness and Frictions: The Impact of Unequal Raises on Quit Behavior, 109 AM. ECON. REV. 620 (2019).

[45] For one example, Matsudaira uses a natural experiment around the introduction of state minimum-nurse-staffing laws and evidence consistent with perfect competition and zero market power for nurse-aides. High and low market power can exist at the same time. See Jordan D. Matsudaira, Monopsony in the Low-Wage Labor Market? Evidence from Minimum Nurse Staffing Regulations, 96 Rev. Econ. & Stat. 92 (2014).

[46] See Naidu, Posner, & Weyl, supra note 22, at 564-566.

[47] Loukas Karabarbounis & Brent Neiman, The Global Decline of the Labor Share, 129 Quarterly J. of Econ. 61, 71 (2013).

[48] Michael R. Ransom & David P. Sims, Estimating the Firm’s Labor Supply Curve in a “New Monopsony” Framework: Schoolteachers in Missouri, 28 J. LAB. ECON. 331 (2010).

[49] See, e.g., Efraim Benmelech, Nittai K. Bergman, & Hyunseob Kim, Strong Employers and Weak Employees, How Does Employer Concentration Affect Wages?, 57 J. Hum. Res. S200 (Supp. 2022). See also David Berger, Kyle Herkenhoff, & Simon Mongey, Labor Market Power, 112 Am. Econ. Rev. 1147 (2022).

[50] José A. Azar, Steven T. Berry, & Ioana Marinescu, Estimating Labor Market Power (Nat’l Bureau of Econ. Rsch., Working Paper No. 30365, 2022).

[51] Id. at 35.

[52] Chen Yeh, Claudia Macaluso, & Brad Hershbein, Monopsony in the US Labor Market, 112 Am. Econ Rev. 2099 (2022).

[53] Id. at 2099.

[54] Id. at 2114.

[55] Id. at 2099.

[56] See Steven Berry, Market Structure and Competition Redux, Presentation at Fed. Trade. Comm’n Micro Conference (Nov. 2017), available at https://www.ftc.gov/system/files/documents/public_events/1208143/22_-_steven_berry_keynote.pdf; See also Brian Albrecht, Markups as Residuals, Economic Forces (Nov. 17, 2022), www.economicforces.xyz/p/markups-as-residuals.

[57] See Kirov & Traina, supra note 42.

[58] 2023 Merger Guidelines, supra note 3.

[59] See infra Appendix.

[60] In order to evaluate concentration, the relevant market must be defined. For labor markets, the relevant market is usually defined as both the job description (e.g., nurse) and the location of the job (e.g., Portland area). Using this, one can calculate some measure of concentration, such as the HHI. Economics papers tend to report HHI as a percentage, instead of as a cardinal number out of 10,000, as used in the merger guidelines. For example, an HHI of 1,800 would be written as “0.18.”

[61] See, e.g., Kevin Rinz, Labor Market Concentration, Earnings, and Inequality, 57 J. Hum. Res. S251 (Supp. 2022); David Autor, Christina Patterson, & John Van Reenen, Local and National Concentration Trends in Jobs and Sales: The Role of Structural Transformation, 5 (Nat’l Bureau of Econ. Rsch., Working Paper No. 31130, 2023) at 7 (“The employment-based HHI fell by 2.3 points, from 33.3 in 1992 to 31.0 in 2017, which stands in contrast to the 3.4 point rise in the sales HHI. Our estimates for local employment concentration echo those of Rinz (2022), who uses the LBD.”) (emphasis in original).

[62] Rinz, id. at S256.

[63] See Azar, Marinescu, & Steinbaum, supra note 38.

[64] Handwerker & Dey directly compare the concentration measures in their data to the 26 occupations studied by Azar, Marinescu, & Steinbaum. They find an HHI in the private sector of 0.0383, compared to 0.3157 in Azar, Marinescu, & Steinbaum. See Elizabeth Weber Handwerker & Matthew Dey, Some Facts About Concentrated Labor Markets in the United States, 63 Indus. Rel. 132, 135 (2023); Azar, Marinescu, & Steinbaum, supra note 38.

[65] A firm may have multiple establishments, and the data allow different NAICS codes for each establishment, so, in some cases and to some extent, different types of workers can be separated out if they work in different locations.

[66] Berger, Herkenhoff, & Mongey, supra note 49, at 1169 (citing Elizabeth Handwerker & Matthew Dey, Megafirms and Monopsonists: Not the Same Employers, Not the Same Workers (Unpublished)).

[67] Rinz, supra note 61.

[68] Id. at S264 (“In both years, the areas that are most concentrated tend to be rural. In particular, the Great Plains region has a relatively large number of highly concentrated commuting zones in both 1976 and 2015. The least concentrated markets tend to be in urban areas.”).

[69] Kevin Rinz, Labor Market Concentration, Earnings Inequality, and Earnings Mobility, National Bureau of Economic Research Summer Institute (Jul. 23, 2019) (slides obtained from author).

[70] Rinz, supra note 61 at S253.

[71] See Ben Lipsius, Labor Market Concentration Does Not Explain the Falling Labor Share, Working Paper (2018), available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3279007.

[72] See Berger, Herkenhoff, & Mongey, supra note 49.

[73] See 2023 Merger Guidelines, supra note 3.

[74] See, e.g., Azar, Marinescu, and Steinbaum, supra note 38; Jose Azar, Iona Marinescu, Marshall Steinbaum, & Bledi Taska, Concentration in US Labor Markets: Evidence from Online Vacancy Data, 66 Labor Econ. 101886 (2020).

[75] For a more detailed discussion of these papers and their limitations, see Appendix Section II, infra.

[76] See Harold Demsetz, Industry Structure, Market Rivalry, and Public Policy, 16 J. L. & Econ. 1 (1973). See also, e.g., Richard Schmalensee, Inter-Industry Studies of Structure and Performance, in 2 Handbook of Industrial Organization 951 (Richard Schmalensee & Robert Willig, eds., 1989); William N. Evans, Luke M. Froeb, & Gregory J. Werden, Endogeneity in the Concentration-Price Relationship: Causes, Consequences, and Cures, 41 J. Indus. Econ. 431 (1993); Berry, supra note 56; Nathan Miller, et al., On the Misuse of Regressions of Price on the HHI in Merger Review, 10 J. Antitrust Enf. 248 (2022).

[77] Some papers find lower wages in markets with higher employer concentration, but do not differentiate rural from urban labor markets. Rural and urban labor markets can differ significantly in terms of their economic structures, job opportunities, and wage levels. Any regression of wages on concentration is likely picking up something unrelated to concentration directly. See Benmelech, Bergman, & Kim, supra note 49.

[78] Kirov & Traina, supra note 42.

[79] Id. at 46 (emphasis added).

[80] Steven Berry, Martin Gaynor, & Fiona Scott Morton, Do Increasing Markups Matter? Lessons from Empirical Industrial Organization, 33 J. Econ. Persp. 44, 57 (2019) (emphasis added).

[81] The antitrust statutes do not distinguish buy-side and sell-side behavior, besides the partial exception in Section 6 of the Clayton Act, which provides that workers do not violate antitrust laws when they organize unions. See 15 U.S.C. § 17 (“The labor of a human being is not a commodity or article of commerce. Nothing contained in the antitrust laws shall be construed to forbid the existence and operation of labor… organizations, instituted for the purposes of mutual help…, or to forbid or restrain individual members of such organizations from lawfully carrying out the legitimate objects thereof….”). In practice, however, it seems the agencies have historically treated labor markets differently. See, e.g., Naidu, Posner, & Weyl, supra note 22.

[82] See, e.g., Roger G. Noll, Buyer Power and Economic Policy, 72 Antitrust L.J. 589, 589 (2005) (“[B]uyer power arises from monopsony (one buyer) or oligopsony (a few buyers), and is the mirror image of monopoly or oligopoly.”); id. at 591 (“Asymmetric treatment of monopoly and monopsony has no basis in economic analysis.”).

[83] Of course, monopoly markets in intermediate products (i.e., products sold not to end users, but to manufacturers who use them as inputs for products that are, in turn, sold to end users) may indeed sit in the same place in the supply chain as the typical monopsony market. Some, but not all, of the complications associated with monopsony analysis are relevant to these monopoly situations, as well.

[86] For purposes of this discussion, “monopoly” refers to any merger (or other conduct) that would increase market power by a seller in a product market, and “monopsony” refers to any merger (or other conduct) that would increase market power by a buyer in an input market (including a labor market).

[87] Keith Brand, Martin Gaynor, Patrick McAlvanah, David Schmidt, & Elizabeth Schneirov, Economics at the FTC: Office Supply Retailers Redux, Health Care Quality Efficiencies Analysis, and Litigation of an Alleged Get Rich Quick Scheme, 45 Rev. Indus. Org. 325 (2014).

[88] Id.

[89] Some efficiency-enhancing mergers will be identifiable, of course. For example, if the merger raises quantities and prices for all inputs, that must be efficiency enhancing. The problem, as always, is with the hard cases.

[90] See C. Scott Hemphill & Nancy L. Rose, Mergers that Harm Sellers, 127 Yale L.J. 2078 (2018).

[91] In theory, one could force a monopsony model to be identical to monopoly. The key difference is about the standard economic form of these models that economists use. The standard monopoly model looks at one output good at a time, while the standard factor-demand model uses two inputs, which introduces a tradeoff between, say, capital and labor. See Sonia Jaffe, Robert Minton, Casey B. Mulligan, and Kevin M. Murphy, Chicago Price Theory (2019) at Ch. 10. One could generate harm from an efficiency for monopoly (as we show for monopsony) by assuming the merging parties each produce two different outputs, apples and bananas. An efficiency gain could favor apple production and hurt banana consumers. While this sort of substitution among outputs is often realistic, it is not the standard economic way of modeling an output market.

[92] Herbert Hovenkamp, Worker Welfare and Antitrust, 90 U. CHI. L. REV. 511, 529 (2023) (“To the extent that such actions lead to higher prices or reduced product output, labor as well as consumers suffer.”).

[93] Marinescu & Hovenkamp, supra note 16 at 1042 (“The key message from economic theory is that as one moves away from the competitive equilibrium towards a situation of monopsony in the labor market, wages and production both generally tend to decrease.”).

[94] See United States v. Bertelsmann SE & Co. KGaA, et al., supra note 24.

[95] Id. at 23 (“The defendants do not dispute that if advances are significantly decreased, some authors will not be able to write, resulting in fewer books being published, less variety in the marketplace of ideas, and an inevitable loss of intellectual and creative output.”)

[96] John Asker & Volker Nocke, Collusion, Mergers, and Related Antitrust Issues, in 5 HANDBOOK oF INDUSTRIAL ORGANISATION 177, 221-22 (Kate Ho, Ali Hortasçu & Alessandro Lisseri eds., 2021).

[97] But see United States v. Bertelsmann SE & Co. KGaA, et al., supra note 24, at 28 (“Thus, even if alternative submarkets exist at other advance levels, or if there are broader markets that might be analyzed, the viability of such additional markets does not render the one identified by the government unusable.”). Of course, in that case, the parties (and the court) did identify downstream harms. See id. at 23.

[98] See generally, Geoffrey A. Manne & E. Marcellus Williamson, Hot Docs vs. Cold Economics: The Use and Misuse of Business Documents in Antitrust Enforcement and Adjudication, 47 Ariz. L. Rev. 609, 619 (2005).

[99] Hemphill & Rose, supra note 90. The authors make a useful distinction between mergers that generate classical monopsony and those that increase buyer leverage. As explained below, however, increased buyer bargaining leverage is just a transfer from sellers to buyers. If it truly has no effect on output, as supposed for Hemphill & Rose, it is not anticompetitive. If antitrust is to weigh in on splitting the surplus and conclude that a merger that leads to more of the surplus going to the buyer is anticompetitive, the courts would be implicitly saying that either the division before the merger was optimal or that more surplus going to sellers is always better. While people may have an intuition that more surplus going to sellers of labor (i.e., workers) is better, do we have the same intuition for all types of sellers? Moreover, would we be willing to apply the same logic to mergers to monopoly? If so, and mergers that increase buyer leverage are bad and mergers that increase seller leverage are bad (again with no effect on output), are we concluding all mergers are bad, full stop?

[100] Marinescu & Hovenkamp, supra note 16, at 1040 (emphasis added).

[101] Such bargaining models have been awarded Nobel prizes. See Peter Diamond, Wage Determination and Efficiency in Search Equilibrium, 49 Rev. Econ. Stud. 217 (1982); Christopher A. Pissarides, Equilibrium Unemployment Theory (2017).

[102] See, e.g., Richard Rogerson, Robert Shimer, & Randall Wright, Search-Theoretic Models of the Labor Market: A Survey, XLIII J. ECON. LIT. 959,961 (2005) (“Bargaining is one of the more popular approaches to wage determination in the literature…”).

[103] See, e.g., John Van Reenan, Labor Market Power, Product Market Power and the Wage Structure: A Note 224 (Program on Innovation and Diffusion, Working Paper No. 085, 2023), https://poid.lse.ac.uk/PUBLICATIONS/abstract.asp?index=10529, (“Here, when firms achieve more product market power there are higher profits and therefore more of a potential surplus to be split between employers and employees. Workers (at least those who keep their jobs), may welcome greater monopoly power as they are able to extract higher wage rents, which would not be the case for a firm earning thin or no margins in an extremely competitive product market. Consequently, this generates the opposite implication at the firm level – more product market power generates higher, not lower, wages.”).

[104] Complaint, In the Matter of Kroger/Albertsons, supra note 2, at ¶ 63 (“Union grocery labor is a relevant market in which to analyze the probable effects of the proposed acquisition.”).

[105] Indeed, increased bargaining power is the purpose of a union. Whether the coordination leads to equivalent, lesser, or greater bargaining power than that of employers in a given case depends on many specifics. But the whole point of both the union and the labor antitrust exemption is to facilitate the exercise of this increased bargaining power on the labor side.

[106] Lynn Petrak, Local Union Supports Kroger-Albertsons Merger, Progressive Grocer (Feb. 21, 2024), https://progressivegrocer.com/local-union-supports-kroger-albertsons-merger.

[107] Press Release, America’s Largest Union of Essential Grocery Workers Announces Opposition to Kroger and Albertsons Merger, United Food and Commercial Workers (May 5, 2023), https://www.ufcw.org/press-releases/americas-largest-union-of-essential-grocery-workers-announces-opposition-to-kroger-and-albertsons-merger.

[108] See Petrak, supra note 106.

[109] Roman Inderst & Christian Wey, Countervailing Power and Dynamic Efficiency, 9 J. Eur. Econ. Ass’n 702, 715 (2011).

[110] For further discussion of the problems of reconciling upstream and downstream market effects when labor markets are taken into account, see Section V, infra.

[111] FTC v. Whole Foods Mkt., Inc., 548 F.3d 1028, 1063 (D.C. Cir. 2008). See also Geoffrey Manne, Premium, Natural, and Organic Bullsh**t, Truth on the Market (Jun. 6, 2007), https://truthonthemarket.com/2007/06/06/premium-natural-and-organic-bullst (“In other words, there is a serious risk of conflating a ‘market’ for business purposes with an actual antitrust-relevant market.”).

[112] Unsurprisingly, there is no SOC code that corresponds to such a market definition, and the FTC did not allege it. See Occupational Employment and Wage Statistics, May 2023 Occupation Profiles, Bureau of Labor Statistics (last visited Apr. 23, 2024), https://www.bls.gov/oes/current/oes_stru.htm#41-0000.

[113] Complaint, In the Matter of Kroger/Albertsons, supra note 2, at ¶ 63.

[114] See Brian Albrecht, Dirk Auer, Eric Fruits, & Geoffrey A. Manne, Food-Retail Competition, Antitrust Law, and the Kroger/Albertsons Merger, Int’l. Ctr. for Law & Econ. White Paper 2023-10-17 (2023), https://laweconcenter.org/resources/food-retail-competition-antitrust-law-and-the-kroger-albertsons-merger.

[115] See generally Section A, infra.

[116] See, e.g., Amos Golan, Julia Lane, & Erika McEntarfer, The Dynamics of Worker Reallocation within and across Industries, 74 Economica. 1 (2007). (“About 27% of workers who had previously exhibited a substantial degree of attachment to their employer reallocate in a given year. About two-thirds of this reallocation is job-to-job reallocation, split roughly evenly between, within and across broadly defined industries.)

[117] See United States v. Bertelsmann SE & Co. KGaA, et al., supra note 24.

[118] See, e.g., Press Release, Justice Department Obtains Permanent Injunction Blocking Penguin Random House’s Proposed Acquisition of Simon & Schuster, US Dep’t of Justice (Oct. 31, 2022), https://www.justice.gov/opa/pr/justice-department-obtains-permanent-injunction-blocking-penguin-random-house-s-proposed (“‘The decision is also a victory for workers more broadly,’ said AAG Kanter. ‘It reaffirms that the antitrust laws protect competition for the acquisition of goods and services from workers.’”). Notably, both the complaint and the court’s decision also noted (rightly or wrongly) downstream effects in the product market. See id. at 23.

[119] Transcript: Public Workshop on Competition in Labor Markets, Antitrust Div. of the U.S. Justice Dep’t (Sep. 23, 2019), available at https://www.justice.gov/atr/page/file/1209071/download.

[120] See, Albrecht, Auer, Fruits, & Manne, supra note 114.

[121] See infra Section III.B (“More fundamentally, regardless of the data source that is used, market definition issues remain. The variety of concentration estimates stemming from different geographic units and shifting occupational groupings demonstrates the lack of clarity around reasonable market boundaries.”).

[122] 2023 Merger Guidelines, supra note 3, at 27.

[123] Id.

[124] For a recent summary, see Carl Sanders & Christopher Taber, Life-Cycle Wage Growth and Heterogeneous Human Capital, 4 Ann. Rev. Econ. 399 (2012).

[125] See, e.g., Edward Lazear, Firm?Specific Human Capital: A Skill?Weights Approach, 117 J. Pol. Econ. 914 (2009) (noting that “no skills need be truly ‘firm specific’ in the sense of there being no other firm at which they have value. On the contrary, the skills appear to be general because in isolation they are used at a number of firms in the market. But the weights differ by firm”). See also Jesper Bagger, François Fontaine, Fabien Postel-Vinay, & Jean-Marc Robin, Tenure, Experience, Human Capital, and Wages: A Tractable Equilibrium Search Model of Wage Dynamics, 104 Am. Econ. Rev. 1551 (2014).

[126] Complaint, In the Matter of Kroger/Albertsons, supra note 2.

[127] Id. at ¶ 63.

[128] Id.

[129] See, e.g., Robert Topel, Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority, 99 J. Pol. Econ. 145 (1991).

[130] See Non-Compete Clause Rule, Final Rule, supra note 1, at 283. See also Comments of Scholars of Law & Economics and ICLE in the Matter of Non-Compete Clause Rulemaking, supra note 20, at 29.

[131] Non-Compete Clause Rule, Final Rule, id., at 283.

[132] See id. at 283-86 (citing Evan Starr, Consider This: Wages, Training, and the Enforceability of Covenants Not to Compete, 72 Indus. & Labor Rel. Rev. 783 (2019) (finding that moving from mean NCA enforceability to no NCA enforceability would decrease the number of workers receiving training by 14.7% in occupations that use NCAs at a relatively high rate); Jessica Jeffers, The Impact of Restricting Labor Mobility on Corporate Investment and Entrepreneurship, Working Paper (Sep. 7, 2022), https://ssrn.com/abstract=3040393 (finding that knowledge-intensive firms invest 32% less in capital equipment following decreases in the enforceability of NCAs); Matthew S. Johnson, Michael Lipsitz, & Alison Pei, Innovation and the Enforceability of Non-Compete Agreements, NBER Working Paper Series (Jul. 2023) (finding that greater non-compete enforceability increases R&D expenditure). At least one more study finding similar results was previously cited in the proposed Non-Compete Clause Rule (see supra note 1, at 3505), but not included in the final rulee. See Matthew S. Johnson & Michael Lipsitz, Why Are Low-Wage Workers Signing Noncompete Agreements?, J. Human Resources 0619-10274R2 (May 12, 2020) (finding that hair salons that use NCAs train their employees at a higher rate and invest in customer attraction through the use of digital coupons at a higher rate, both by 11 percentage points)).

[133] Naidu, Posner, & Weyl, supra note 22.

[134] See especially Section I.B, infra.

[135] Marinescu & Hovenkamp, supra note 16, at 1062-63. See also Hovenkamp, Worker Welfare and Antitrust, supra note 92, at 521.

[136] Hemphill & Rose, supra note 90, at 2092.

[137] As Marinescu & Hovenkamp note (attributing the point to Hemphill & Rose), “[i]n this case, there is merely a transfer away from workers and towards the merging firms. Yet… such a transfer is a harm for antitrust law as it results from a reduction in competition.” Id. at 1062 (citing Hemphill & Rose, id., at 2104-05).

[138] See, e.g., Kartell v. Blue Shield of Mass., Inc., 749 F.2d 922 (1st Cir. 1984). See also Steven C. Salop, Question: What Is the Real and Proper Antitrust Welfare Standard? Answer: The True Consumer Welfare Standard, 22 Loy. Consumer L. Rev. 336, 342 (2010) (“However, Judge Breyer treated Blue Cross essentially as an agent for the customers it insured, rather than as an intermediary firm that purchased inputs and sold outputs as a monopolistic reseller. The court apparently assumed (perhaps wrongfully) that Blue Cross would pass on its lower input costs to its customers in the form of lower insurance premiums.”).

[139] See Jan M. Rybnicek & Joshua D. Wright, Outside In or Inside Out?: Counting Merger Efficiencies Inside and Out of the Relevant Market, in 2 William E. Kovacic: An Antitrust Tribute—Liber Amicorum (Nicolas Charbit & Elisa Ramundo, eds., 2014) at 10 (“Despite the incorporation of efficiencies analysis into modern merger evaluation, and the advances in economics that allow efficiencies to be identified and calculated more accurately than at the time of Philadelphia National Bank, antitrust doctrine in the United States still supports a regime that fails to take into account efficiencies arising outside of the relevant market.”).

[140] U.S. Dep’t. of Justice & Fed. Trade Comm’n, Commentary on the Horizontal Merger Guidelines (2006) at 57. See also Gregory J. Werden, Cross-Market Balancing of Competitive Effects: What Is the Law, and What Should It Be?, 43 J. Corp. L. 119, 121 (2017) (“Since 1997, however, the Horizontal Merger Guidelines have asserted the inextricably linked exception.”); U.S. Dep’t. of Justice & Fed. Trade Comm’n, Horizontal Merger Guidelines (2010) at § 10, n.14 (“In some cases, however, the Agencies in their prosecutorial discretion will consider efficiencies not strictly in the relevant market, but so inextricably linked with it that a partial divestiture or other remedy could not feasibly eliminate the anticompetitive effect in the relevant market without sacrificing the efficiencies in the other market(s). Inextricably linked efficiencies are most likely to make a difference when they are great and the likely anticompetitive effect in the relevant market(s) is small so the merger is likely to benefit customers overall.”).

[141] See, e.g., Brunswick Corp. v. Pueblo Bowl-O-Mat, Inc., 429 U.S. 477, 487 (1977) (“Every merger of two existing entities into one, whether lawful or unlawful, has the potential for producing economic readjustments that adversely affect some persons. But Congress has not condemned mergers on that account; it has condemned them only when they may produce anticompetitive effects.”). See also Robert H. Bork, The Antitrust Paradox: A Policy at War with Itself (2021) at 110 (“Those who continue to buy after a monopoly is formed pay more for the same output, and that shifts income from them to the monopoly and its owners, who are also consumers. This is not dead-weight loss due to restriction of output but merely a shift in income between two classes of consumers. The consumer welfare model, which views consumers collectively, does not take this income effect into account.”).

[142] See, e.g., Herbert Hovenkamp & Fiona Scott Morton, The Life of Antitrust’s Consumer Welfare Model, ProMarket (Apr. 10, 2023), https://www.promarket.org/2023/04/10/the-life-of-antitrusts-consumer-welfare-model (“A useful definition of ‘consumer welfare’ is that antitrust should be driven by concerns for trading partners….”).

[143] Dennis Carlton, Does Antitrust Need to Be Modernized?, 21 J. Econ. Persp. 155, 158 (2007).

[144] Hovenkamp & Scott Morton, supra note 34.

[145] See also Hemphill & Rose, supra note 90, at 2106. Hemphill & Rose distinguish monopsony power from increased buyer leverage, which does not result in a deadweight loss but is simply a redistribution from sellers to buyers. Leverage will be partially passed through to consumers as lower prices. Standard monopsony increases in bargaining power will not generate lower prices, since “[a]n increase in monopsony power increases the firm’s perceived marginal cost and reduces output. Far from lowering output prices, the increased monopsony power raises price in output markets (if the firm faces downward sloping demand for its output) or else leaves it unchanged.”

[146] Statement of the Federal Trade Commission Concerning the Proposed Acquisition of Medco Health Solutions by Express Scripts, Inc., FTC File No. 111-0210 (Apr. 2, 2012) at 7, available at https://www.ftc.gov/sites/default/files/documents/closing_letters/proposed-acquisition-medco-health-solutions-inc.express-scripts-inc./120402expressmedcostatement.pdf.

[147] Roman Inderst & Greg Shaffer, Buyer Power in Merger Control, in ABA Antitrust Section Handbook, Issues in Competition Law and Policy (Wayne Dale Collins, ed. 2008) at 1611, 1612-13 (emphasis added).

[148] Salop, supra note 138, at 342 (“Efficiency benefits count under the true consumer welfare standard, but only if there is evidence that enough of the efficiency benefits pass through to consumers so that consumers (i.e., the buyers) would directly benefit on balance from the conduct.”).

[149] It is worth noting that, although the analogy between Blue Cross and Kroger here seems quite apt and powerful, there can be little doubt that Salop would not condone this mode of analysis in a case against Kroger. Whether (if correct) that is a function of one person’s idiosyncratic preferences or an expression of the complication inherent in assessing consumer welfare in monopsony cases is uncertain.

[150] Werden, Cross-Market Balancing of Competitive Effects, supra note 140, at 129. The referenced language from Chicago Board of Trade and Sylvania is: “The true test for legality is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition.” Chi. Bd. of Trade v. U.S., 246 U.S. 231, 238 (1918); “Under this rule, the factfinder weighs all of the circumstances of a case in deciding whether a restrictive practice should be prohibited as imposing an unreasonable restraint on competition.” Cont’l T.V. v. GTE Sylvania, 433 U.S. 36, 49 (1977).

[151] Nat’l Collegiate Athletic Ass’n v. Alston, 141 S. Ct. 2141, 2154 (2021).

[152] Id. at 2152.

[153] Id.

[154] To be clear, the legal process for evaluating this tradeoff is not a strict balancing, but a “less-restrictive alternative” test—exactly as the Court laid out and applied in Amex. See id. at 2162 (“The court then proceeded to what corresponds to the third step of the American Express framework, where it required the student-athletes ‘to show that there are substantially less restrictive alternative rules that would achieve the same procompetitive effect as the challenged set of rules.’”).

[155] See, e.g., Gregory J. Werden, Monopsony and the Sherman Act: Consumer Welfare in a New Light, 74 Antitrust L.J. 707, 735 (2007) (“Predatory pricing that excludes competitors and results in monopsony is condemned by the Sherman Act, just as the Act condemns predatory pricing that excludes competitors and obtains a monopoly.… Protecting consumer welfare is the principal goal of the Sherman Act, but it is only a goal: The Sherman Act protects the people by protecting the competitive process. The competitive process could not be undermined any more clearly than it is when competing buyers conspire to eliminate the competition among themselves, and it matters not one whit under the Sherman Act whether the conspiracy threatens the welfare of conspirators’ customers or the welfare of end users. It is enough that the conspiracy threatens the welfare of the trading partners exploited by the conspiracy. Harm to them implies harm to people protected by the Sherman Act.”).

[156] See discussion supra, text at notes 11 and 92.

[157] See, e.g., Sean P. Sullivan, Modular Market Definition, 55 U.C. Davis L. Rev. 1091, 1118 (2021) (“One traditional purpose of market definition has been to act like a microscope trained upon a specific area of concern. The full, interconnected web of commerce—of all possible products and technologies and consumptive uses and trading partners—is simply too big and too overwhelming to provide useful context for antitrust analysis.”).

[158] See Illinois Brick Co. v. Illinois, 431 U.S. 720, 731-32 (1977) (“The principal basis for the decision in Hanover Shoe was the Court’s perception of the uncertainties and difficulties in analyzing price and output put decisions… and of the costs to the judicial system and the efficient enforcement of the antitrust laws of attempting to reconstruct those decisions in the courtroom.”); Hanover Shoe, Inc. v. United Shoe Machinery Corp., 392 U.S. 481, 493 (1968).

[159] Ohio v. Am. Express Co., 138 S. Ct. 2274, 2287 (2018) (“Accordingly, we will analyze the two-sided market for credit-card transactions as a whole to determine whether the plaintiffs have shown that Amex’s anti-steering provisions have anticompetitive effects.”). See also U.S. v. Am. Express Co., 88 F. Supp. 3d 143, 216-17 (E.D.N.Y. 2015) (“Merchants facing increased credit card acceptance costs will pass most, if not all, of their additional costs along to their customers in the form of higher retail prices…. [C]ustomers who do not carry or qualify for an Amex card are nonetheless subject to higher retail prices at the merchant, but do not receive any of the premium rewards or other benefits conferred by American Express on the cardholder side of its platform…. Thus, in the most extreme case, a lower-income shopper who pays for his or her groceries with cash… is subsidizing, for example, the cost of the premium rewards conferred by American Express on its relatively small, affluent cardholder base in the form of higher retail prices.”).

[160] See, e.g., Michael Katz & Jonathan Sallet, Multisided Platforms and Antitrust Enforcement, 127 Yale L.J. 2142 (2018).

[161] Id. (“For all these reasons, ‘[i]n two-sided transaction markets, only one market should be defined.’ Any other analysis would lead to ‘mistaken inferences’ of the kind that could ‘chill the very conduct the antitrust laws are designed to protect.’”) (cleaned up and citations omitted).

[162] Id. at 2286.

[163] Geoffrey A. Manne, In Defence of the Supreme Court’s “Single Market” Definition in Ohio v American Express, 7 J. Antitrust Enf. 104, 110 (2019).

[164] See Jonathan H. Adler, Conservation Through Collusion: Antitrust as an Obstacle to Marine Resource Conservation, 61 Wash. & Lee L. Rev 3, 78 (2004) (“The purported aim of antitrust law is to improve consumer welfare by proscribing actions and arrangements that reduce output and increase prices. Conservation aims to improve human welfare by maximizing the long-term productive use of natural resources, an aim that often requires limiting consumption to sustainable levels. While such conservation measures might increase prices in the short-run, when successful they enhance consumer welfare by increasing long-term production and ensuring the availability of valued resources over time.”)

[165] See Clayton Act, 15 U.S.C. § 18 (2018); U.S. v. Philadelphia Nat’l Bank, 374 U.S. 321 (1963). See also Daniel A. Crane, Balancing Effects Across Markets, 80 Antitrust L.J. 397, 397 (2015) (noting that PNB is usually read to hold that “it is improper to weigh a merger’s procompetitive effects in one market against the merger’s anticompetitive effects in another.”). See also Merger Guidelines, supra note 3, at 27.

[166] Rybnicek & Wright, supra note 139, at 10.

[167] U.S. v. Baker Hughes Inc., 908 F.2d 981, 984 (D.C. Cir. 1990).

[168] See, e.g., Saint Alphonsus Med. Ctr.-Nampa v. St. Luke’s Health Sys., 778 F.3d 775, 790 (9th Cir. 2015) (“[A] defendant can rebut a prima facie case with evidence that the proposed merger will create a more efficient combined entity and thus increase competition.”); FTC v. Tenet Health Care, 186 F.3d 1045, 1054-55 (8th Cir. 1999) (“[Courts should consider] evidence of enhanced efficiency in the context of the competitive effects of the merger… [as] the merged entity may well enhance competition.”).

[169] Although its decision was not limited to the acceptance of “innovation” effects, the court rejected the contention that such “efficiencies” would not accrue to consumers in the relevant market, instead accepting that innovation itself was a cognizable efficiency. See New York v. Deutsche Telekom AG, 439 F. Supp. 3d 179, 215-16 (S.D.N.Y. 2020) (“Scott Morton stated that because these speeds are far beyond the levels that consumers now require, and because the value of speed to consumers diminishes the more that speeds exceed the level that consumers can practically use, there is no reliable way to determine how consumers would value speeds higher than roughly 250 mbps…. This argument is too limiting. The same may have been said about airplane speeds and pilotless flying machines in 1920. It unduly discounts the rate at which technological innovation, new products, and consumer applications develop to take advantage of enhanced capabilities, and the extent to which this merger might specifically help accelerate that process.”).

[170] Basel J. Musharbash & Daniel A. Hanley, Toward a Merger Enforcement Policy That Enforces the Law: The Original Meaning and Purpose of Section 7 of the Clayton Act, Working Paper (2024) at 58-59, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4745310.

[171] Indeed, as Musharbash & Hanley go on to note, the phrase “in any line of commerce” does not map onto the traditional conception of market definition used in merger analysis and defined by substitutability of products: “[A] ‘line of commerce’ is a category of business occupation which is defined by characteristics that separate or distinguish it from other categories of business occupation. Under this definition, the fact that a group of business occupations offer substitute products from the perspective of consumers certainly could, at least in theory, qualify them as a “line” of commerce, but nothing in the phrase signifies that such substitutability is the only permissible basis for identifying a line of commerce. Indeed, using other characteristics that reasonably distinguish one business occupation from another — such as distinct products or services, peculiar know-how and operations, or divergent supply chains and distribution channels — to identify a line of commerce would be more consistent with the phrase’s textual import. For the word line was ordinarily used to identify, with varying degrees of generality, the type of business a party was engaged in, not the markets it sold to or participated in.” Id. at 61.

[172] See, e.g., Viktoria H. S. E. Robertson, Antitrust Market Definition for Digital Ecosystems, Concurrences No. 2-2021 (2021) at 5, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3844551 (“However, the picture would not be complete without also considering the macro level of the digital ecosystem, which is needed in order to understand the various competitive constraints (or the absence of such constraints) that are at work. The dif?culty for market de?nition is to account for the various layers of competition that are present in the market realities of digital ecosystems in order to allow for the substantive analysis of a speci?c market behaviour or concentration. The challenge lies in providing an approach that does justice to the complexity of these markets, but without unnecessarily adding to that complexity.”).

[173] See Credit Suisse Securities (USA) v. Billing, 551 U.S. 264, *19-*20, *1-*2 (2007) (holding that where “(1) an area of conduct [is] squarely within the heartland of… regulations; (2) [there is] clear and adequate… authority to regulate; (3) [there is] active and ongoing agency regulation; and (4) [there is] a serious conflict between the antitrust and regulatory regimes…, [such] laws are ‘clearly incompatible’ with the application of the antitrust laws…[,]” thus “implicitly precluding the application of the antitrust laws to the conduct alleged”). See also Philadelphia Nat. Bank, 374 U.S. at 398-74 (Harlan, J. dissenting) (“Sweeping aside the ‘design fashioned in the Bank Merger Act’ as ‘predicated upon uncertainty as to the scope of § 7 of the Clayton Act,’ the Court today holds § 7 to be applicable to bank mergers and concludes that it has been violated in this case. I respectfully submit that this holding, which sanctions a remedy regarded by Congress as inimical to the best interests of the banking industry and the public, and which will in large measure serve to frustrate the objectives of the Bank Merger Act, finds no justification in either the terms of the 1950 amendment of the Clayton Act or the history of the statute.”).

 

[174] Complaint, In the Matter of Kroger/Albertsons, supra note 2.

[175] See supra, notes 137-140 and accompanying text.

[176] See, e.g., Naidu, Posner & Weyl, supra note 22.

[177] See, e.g., Yeh, et al., supra note 52; Kirov & Traina, supra note 42.

[178] Id.

[179] See, e.g., David Arnold, Mergers and Acquisitions, Local Labor Market Concentration, and Worker Outcomes, unpublished manuscript (April 2, 2021), available at https://darnold199.github.io/madraft.pdf.

[180] See, e.g., Bagger, et al., supra note 125.

[181] See Complaint, In the Matter of Kroger/Albertsons, supra note 2, at ¶ 63.

[182] See Section V, infra.

[183] See, e.g., Hovenkamp, Worker Welfare and Antitrust, supra note 92, at 543 (“Consumer welfare—when it is properly defined—and worker welfare travel in tandem. When a practice harms consumers by raising prices and reducing output, it harms labor as well. There is no a priori reason for thinking that worker harm is less severe than consumer harm. A properly designed antitrust policy must focus on both sets of interests.”).

[184] See infra, Section V.

[185] See 2023 Merger Guidelines, supra note 3.

[186] Rinz, supra note 61.

[187] Lipsius, supra note 71.

[188] Autor, Patterson, & Reenen, supra note 61.

[189] Benmelech, Bergman, & Kim, supra note 49.

[190] Berger, Herkenhoff, & Mongey, supra note 49.

[191] Rinz, supra note 61.

[192] Lipsius, supra note 71.

[193] Rinz, supra note 61, at S259.

[194] Autor, Patterson & Reenen, supra note 61.

[195] Id. at 13.

[196] Id. at 24, Figure A4.

[197] Id. at 6.

[198] Id. at 2

[199] Benmelech, Bergman, and Kim, supra note 49.

[200] Id.

[201] Id. at 202.

[202] Berger, Herkenhoff, & Mongey, supra note 49.

[203] Id.

[204] Handwerker & Dey, supra note 64.

[205] Berger, Herkenhoff, & Mongey, supra note 49.

[206] Azar, Marinescu, and Steinbaum, supra note 38.

[207] Handwerker & Dey, supra note 64, at 135.

[208] Id.

[209] Azar, Marinescu, Steinbaum, & Taska, supra note 74.

[210] Id. at *2 (According to this perspective, ease of finding when searching may be a better measure of the relevant outside option for workers. More job openings means more feasible outside options which is basically all models means less market power by employers: “we measure concentration using job openings rather than employment because we view vacancies as a better gauge of how likely searching workers (whether employed or unemployed) are to receive a job offer.”).

[211] Id. at Table 1.

[212] Id. at *5 (“Using online job board data from CareerBuilder.com, Marinescu and Wolthoff (2019) show that, within a 6-digit SOC, the elasticity of applications with respect to wages is negative. Therefore, the 6-digit SOC is too broad of a market according to the [small significant non-transitory reduction in wage test].”); Ioana Marinescu & Ronald Wolthoff, Opening the Black Box of the Matching Function: The Power of Words, 38 J. LAB. ECON. 535 (2020).

[213] Id. at *4 (“According to the USDA documentation, “commuting zones were developed without regard to a minimum population threshold and are intended to be a spatial measure of the local labor market.” Marinescu and Rathelot (2018) also show that 81% of applications on CareerBuilder.com are within the commuting zone, with the probability of submitting an application strongly declining in the distance between the applicant’s and the job’s zip code.”); Ioana Marinescu & Roland Rathelot, Mismatch Unemployment and the Geography of Job Search, 10 Am. Econ J. Macroeconomics 42 (2018).

[214] U.S. Dept. of Just. & Fed. Trade Comm’n, Horizontal Merger Guidelines (2010).

[215] Azar, Marinescu, Steinbaum, & Taska, supra note 74, at *13.

[216] Azar, Berry, & Marinescu, supra note 50 (The authors argue the SOC-6 by commuting zone is a plausible definition of a market, based on the market supply elasticity they back out from their estimated job vacancy elasticities).

[217] Gregor Schubert, Anna Stansbury, & Bledi Taska, Employer Concentration and Outside, Working Paper (2024), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3599454.

[218] Id. at Table 2, Panel A.

[219] Id.

[220] Merger Guidelines, supra note 3, at 6.

[221] Schubert, Stansbury, & Taska, supra note 217, at Table 2, Panel A.

[222] Azar, Marinescu, Steinbaum, & Taska, supra note 74, at 13.

[223] Schubert, Stansbury, & Taska, supra note 217.

[224] Azar, Marinescu, and Steinbaum, supra note 38.

[225] Id. at Table 1. The authors argue this market is likely too large. (“Using the vacancies data set from the same source as the one used in this paper, Marinescu and Wolthoff (2020) show that, within a six-digit SOC, the elasticity of applications to a given job posting with respect to posted wages is negative. Therefore, the six-digit SOC is likely too broad to be a labor market, since we would expect applications to increase in response to posted wages in a frictional labor market”) Marinescu & Wolthoff, supra note 212.

[226] Azar, Marinescu, Steinbaum, & Taska, supra note 74.

[227] Azar, Marinescu, and Steinbaum, supra note , at Table 2.

[228] See infra Appendix Section I.E

 

Abstract

ICLE Chief Economist Brian Albrecht was a guest on the Mobile Dev Memo podcast to discuss antitrust, consumer protection, neo-Brandeisianism, and tariffs. The full audio is embedded below.

ICLE Senior Scholar Ben Sperry took part in a recent webinar co-hosted by TechFreedom and the Washington Legal Foundation on the subject of common carriage, from railroads to the internet. Video of the full panel is embedded below.

ICLE President Geoffrey A. Manne and Case Associates Managing Partner Cento Veljanovski explored the role of economic evidence in competition-law litigation and enforcement in a discussion moderated by ICLE Intern Sabrina Pekarovic held at IE Law School in Madrid, Spain.

This ICLE seminar brought together two perspectives: one focused on the admissibility and evidentiary standards applied to economic analyses in court, and the other examining the broader relevance of economic reasoning in shaping enforcement decisions. At a time when the relevance of economics in antitrust law is being contested, these discussions aim to illuminate both the practical challenges and the theoretical implications of integrating economics into the legal framework of competition law, and the consequences of not doing so.

Video of the full panel is embedded below.

ICLE Senior Scholar Lazar Radic delivered a lecture on the superiority of the consumer welfare standard to Istanbul Bilgi University’s Competition Law and Policy Research Center. Video of the full lecture is embedded below.

ICLE Senior Scholar Eric Fruits appeared in a news segment from KOIN-6 in Portland, Oregon, on the dissolution of the proposed merger between nonprofit health system Legacy Health and public research university OHSU. Video of the appearance is embedded below.

I. Introduction

The way we enjoy our favorite shows and movies has changed dramatically from even five years ago. Streaming has expanded the amount of content available to American viewers and multiplies the ways to watch it. This has affected not just audiences, but also the marketplace, with large technology firms like Amazon, Apple, and Google and other new entrants now directly competing with traditional broadcast and cable networks and pay-TV distributors.

The economic advantages of streaming platforms initially presented compelling cost efficiencies, as they expanded available content while significantly reducing consumers’ per-hour viewing expenses relative to traditional cable packages. But the proliferation of services, the dispersion of exclusive programming, and generally growing subscription costs have narrowed this value gap. These trends have also underscored the importance of new business-model experimentation, such as optional bundling, to maintain consumer satisfaction and mitigate subscription fatigue.

While the choices available to consumers have certainly grown, the many new players in the marketplace and the disaggregation of networks, brands, and content have made the viewing experience more complicated for audiences. In the past, cable and satellite bundles gave viewers an economically efficient and convenient way to receive virtually all television content. Today, audiences might subscribe to multiple services and still be unable to receive all or even most of the popular and niche programming they desire, including content to which they previously had access.

At the same time, the sheer number of shows and outlets, and the rise in cord cutting, means that many traditional content producers and distributors are garnering relatively smaller audiences. The result has been a drop in advertising and subscription revenue, precisely when these producers and distributors face increasing pressure to invest more in order to: 1) create or acquire rights to additional content to meet growing viewer demand; 2) build out their streaming operations; and 3) increase marketing expenses to reach fractured audiences and win back viewership.

In this environment, traditional media companies have begun exploring new business models to maintain their competitiveness, seeking to invest, innovate, and collaborate in novel ways to address the market’s fragmentation. In applying regulatory, economic, and antitrust principles, policymakers should account for the increase in competition and the market’s fragmentation. The rise in competition, including from the entry of large tech companies, should assuage past concerns that traditional media companies could misuse—or even possess—meaningful market power. At the same time, any regulatory response must account for the need for flexibility to experiment with different business models—such as bundling, joint ventures, and other combinations—in order for market participants to innovate and remain competitive.

II. A New and Rapidly Changing Video Environment

The growth in video streaming and the entry of companies such as Netflix, Amazon, Google, and Apple has fundamentally altered the video market’s competitive landscape from the days when just a handful of networks and local cable companies were both the source of most popular content and responsible for its delivery. This evolution has led to a dramatic increase in competition and consumer welfare.

FIGURE 1: Number of Subscribers of Select Video Services (Q1’24, in Millions)

SOURCES: S&P Global Market Intelligence, StreamTV Insider[1]

Between 2009 and 2023, the number of original scripted shows across cable, broadcast, and streaming grew by almost 150%.[2] As of 2024, approximately 25% of total TV viewership came from services that didn’t exist a decade ago. This is before one even attempts to account for smartphone and other online viewership of content broadly available through YouTube, TikTok, Instagram, and other social-media services.[3] Only 45% of all TV viewing in 2024 came from cable and satellite services, and only about half of all TV viewing was on linear services (including online linear services).[4]

Netflix and Amazon now each have far more video subscribers than any other streaming service, including Hulu, Disney+, Paramount+, Peacock, and HBO Max. By 2026, YouTube TV is expected to surpass Charter and Comcast to become the largest linear pay-TV provider.[5]

FIGURE 2: Traditional MVPD and Online Linear Video-Service Subscriptions

SOURCE: S&P Kagan Global Forecast

As seen in Figure 2, with the rise of cord cutting, the percentage of U.S. television households subscribing to traditional MVPD services (which include cable, satellite, and telco-video services) dropped below 50% in 2022 and continues to shrink.[6]

Linear broadcast and cable-network programming that viewers historically accessed from cable, satellite, and telecom providers are now also available through multiple streaming platforms, such as Sling TV, DirecTV Stream, Hulu + Live TV, YouTube TV, and free, ad-supported streaming television (FAST) services like Tubi, Freevee, and Pluto TV. Television and film content is also available on-demand over various streaming services. In addition, mobile devices are increasingly the primary screen for video consumption, even inside the home.

As demonstrated in Figure 3, the traditional media companies are now much smaller than their newer competitors. Google, Amazon, and Apple each have a market cap of between six and 10 times the combined market caps of Disney, Comcast, Warner Bros. Discovery, and Paramount. In 2024, those big three tech platforms’ respective annual revenues were each between one and 2.2 times the combined revenues of Disney, Comcast, Warner Bros. Discovery, and Paramount.

FIGURE 3: Market Cap and Annual Revenue of Select Video Services (2024)

SOURCE: Google Finance

The new tech competitors’ business models make them particularly strong rivals in the media marketplace because they often supply their video services as loss-leaders for their other businesses, including software and hardware (e.g., Apple), and online commerce (e.g., Amazon). The companies’ size and reach also enable them to, in many cases, outbid traditional media for content. In sports programming, for example, Amazon Prime now offers Thursday Night Football, YouTube TV offers the NFL Sunday Ticket, and Apple TV+ offers Major League Baseball and Major League Soccer—all either new offerings or content that was formerly available from traditional providers.

The shift in consumer behavior—including subscriber “churn,” or frequent subscription cycling to optimize spending based on content availability—demonstrates a dynamic market environment in which traditional contractual lock-in has largely vanished.[7] This consumer-driven flexibility further underscores the diminished market power of traditional media companies and highlights the competitive discipline imposed by consumer preferences.

These changes have also affected the advertising side of the industry. Traditional media companies have always relied on advertising revenue to fund the creation and/or acquisition of compelling content, to finance innovation, and to reduce out-of-pocket costs for potential viewers. With the advent of streaming, however, advertisers now have many more options to place ads on television programming.

In its 2019 challenge to the proposed merger between broadcast companies Nexstar and Tribune, the U.S. Justice Department (DOJ) argued that the “[i]nventory of ad-supported, high-quality, long-form video on the internet is limited.… The most popular high-quality, long-form video available on the internet is provided through ad-free subscription services (like Netflix or Amazon Prime).”[8]

But streaming platforms that initially launched as subscription-only services now offer ad-supported tiers. For example, 70 million Netflix users globally subscribe to an ad-supported tier,[9] and ads are now the default for subscribers to Amazon Prime Video.[10] Overall, approximately 46% of households subscribe to at least one ad-supported tier of a streaming service,[11] and 56% of new streaming-service subscribers in the first quarter of 2024 chose an ad-supported tier.[12]

In addition, short-form content delivered via social-media platforms like YouTube, Facebook/Instagram, and TikTok compete with sitcoms and dramas for advertisers.[13] Even traditional media companies’ ability to deliver local spot advertising is no longer unique, as streaming and social-media platforms can use IP addresses to geo-target audiences for both long-form and short-form content.

The dramatic changes in the industry outlined above have greatly increased competition for users, content, and advertisers. This has eroded traditional sources of market power, such as control over the most popular mass-market content (e.g., network programming), as well as control over the limited channels of distribution (e.g., local cable distribution). This growth in competition, and the resulting reduction in potential for firms to exercise market power, will likely continue to benefit consumers.

III. Marketplace Fragmentation, Consumer Welfare, and the (In)Efficiency of Video-Content Delivery

While viewers have clearly benefited from the explosion in both content and the number of ways to watch it, some attributes of the contemporary video market actually impede the efficient distribution of content.

Until recently, the majority of viewers subscribed to one of several pay-TV packages that provided access to most of the popular and niche content available. Now, Americans who subscribe to a streaming package pay, on average, for four streaming services—for many, such subscriptions are in addition to their live TV subscription.[14] And even then, they might not have access to all the content they desire, including content that was previously available to them—either because they don’t subscribe to an additional streaming service that has exclusive content, or because they have “cut the cord,” replacing their cable or satellite service with streaming services that don’t carry programming they previously consumed.

For example, to watch all of the Green Bay Packers’ 2024 regular season games, a fan in most parts of Wisconsin would have needed access to Fox, CBS, NBC, and ABC; an Amazon Prime subscription for the Thursday Night Football game; and a Peacock subscription to watch the season opener. Then, to watch their favorite comedies and dramas, those same viewers might also have needed additional services such as Netflix, Apple TV, and Hulu.

Even viewers willing to subscribe to multiple streaming services may face frictions in accessing their preferred content, when compared to the relative ease of traditional bundled TV packages. The proliferation of separate interfaces, distinct platforms, and multiple controllers raises viewers’ practical switching costs, particularly for some elderly or less-technologically savvy viewers. As a result, subscribers who theoretically have access to a wider range of content than before may, nevertheless, incur substantial search costs when attempting to find their preferred programming or to discover new shows. Indeed, survey evidence highlights the significance of these costs. In 2023, nearly 50% of respondents told Deloitte that they would increase their viewing time on streaming-video services if finding content were easier.[15]

By the same token, increased market fragmentation requires content providers to spend more to overcome these transaction costs, as they must intensify their marketing efforts across a wider range of outlets and shows to inform audiences about content availability. Less fragmentation and more integrated offerings would decrease these transaction and search costs, enhancing efficiency for both consumers and content providers.

Relatedly, empirical evidence suggests that market fragmentation has inadvertently contributed to a modest resurgence in online piracy.[16] Troublingly, a growing number of consumers who report that they are frustrated by fragmented content offerings and rising cumulative subscription costs view unlawful access as a valid response to manage entertainment expenses.[17]

The fragmentation of outlets, combined with the proliferation of content, has diluted the audience share of programming on traditional networks, eroding their competitive positions and reducing their advertising and subscription revenue. For example, TV’s top scripted linear program in 2014, The Big Bang Theory, averaged more than 20 million total viewers. By 2024, the highest-rated scripted program was CBS’s Tracker, averaging just over 11 million viewers—a much smaller audience share.[18]

And the shrinking audience shares is happening precisely when competing successfully with new entrants would require traditional media companies to increase their investments in order to 1) create or acquire rights to additional content to meet growing viewer demand; 2) build out their streaming operations; and/or 3) increase marketing expenses to reach fractured audiences and win back viewership. These trends reinforce the urgency for media companies to innovate in user-friendly content aggregation and pricing strategies.

IV. Applying Competition Policy in the Video Sector to Enable Innovation and Competition

Technological developments have created more competition and viewer choice, but pose a new challenge: how to package all of that content and deliver it to viewers in a cost-effective and convenient way. Developing user-friendly ways to combine the vast amount of available content will be key to facilitating ongoing competition and improving the viewing experience for audiences.

Competition policy will likely play a critical role in allowing such innovation and value creation, as market participants combine and recombine to discover profitable business models that will enable continued innovation and content growth. Properly assessing these ventures will require policymakers and the antitrust agencies to recognize certain key market characteristics:

• First, technological evolution and changing consumer preferences have enabled new entrants and business models. These have, in turn, increased competition and expanded output, while significantly diminishing the market power of traditional media companies.
• Second, the current environment of abundant content is accompanied by a complex and disaggregated ecosystem of platforms and delivery mechanisms. This has increased search and transaction costs, limiting viewers’ easy access to and discovery of programming they potentially value.
• Third, the creation, acquisition, and delivery of long-form video content entails immense capital investments, which are only increasing as the growth in content and its dispersion across outlets necessitates increased spending to differentiate new content.

These market characteristics lead inevitably to a fourth consideration, the recognition of which is essential to ensure a proper assessment of business conduct in today’s (and tomorrow’s) video market:

• The ability to offer aggregated content packages is virtually essential to reduce consumer frictions, compete successfully for viewers, and therefore to draw (and keep) broad audiences. Obtaining and maintaining sufficient scale is, in turn, crucial to the subscription and advertising revenues required to fund further content creation and operations.

Partnerships, joint ventures, and combinations will thus likely play a central role in the evolving media sector. Survey evidence suggests that viewers may be nearing their limit in the number of subscriptions they will maintain, and in their willingness to spend more to gain or retain access to preferred content.[19] In January 2024, 62% of respondents told The Motley Fool they felt there were too many streaming services, up from 53% in 2022; 46% said they are subscribed to more video-streaming services than they were a year ago, down from 54% in 2022; and 37% said they subscribed to fewer services, up from 13% in 2022.[20] According to a 2023 Deloitte survey, 48% of respondents said they would cancel their favorite paid streaming video-on-demand service if monthly prices went up by $5.[21]

The fragmentation of content delivery is a challenge for consumers, and addressing this challenge is key to generating consumer benefits from the ongoing growth in content. Policymakers should take care not to inhibit providers from experimentation, and instead to allow the market to determine the industry’s structure and the content that individual streaming services provide.

The recent landmark agreement between Disney and Charter Communications illustrates the sort of innovative hybrid revenue models that can arise from combining linear television and streaming rights.[22] In describing the deal, Walt Disney Co. CEO Bob Iger and Charter Communications CEO Chris Winfrey said that it “recognizes both the continued value of linear television and the growing popularity of streaming services while addressing the evolving needs of our consumers.”[23] The partnership highlights how market participants increasingly transcend traditional business and regulatory boundaries in order to create hybrid offerings that are responsive to consumer preferences.

The need to maintain this flexibility in contracting and bundling should inform antitrust assessments of the sector, emphasizing the importance of allowing experimentation that addresses consumer demand effectively. Traditional media companies will inevitably try a range of different business models and collaborations—both vertical and horizontal—to better attract viewers and improve their operations. The content sector is in transition, and antitrust enforcement should promote, not stymie, innovation and experimentation to increase benefits for all companies and viewers in the marketplace.

Given the rapidly evolving marketplace, regulatory approaches based on traditional static equilibrium models and backward-looking market definitions are unlikely to adequately capture the competitive dynamics. In the market for both viewers and advertisers, superficially differentiated services like Google, Apple, and Amazon, on the one hand, and Disney, Comcast, and HBO, on the other, are direct and vigorous competitors. Policymakers must recognize the transient nature of apparent market positions and adopt flexible frameworks that permit novel arrangements for content creation, as well as distribution, monetization, marketing, and R&D. Such regulatory humility is essential to avoid stifling beneficial market innovations and to support sustained consumer-welfare gains in the video marketplace.

V. Conclusion

The video marketplace has undergone rapid and radical transformation since the advent of television, through phases exemplified by companies like ABC, CBS, and NBC; TBS, MTV, and ESPN; HBO, Showtime, and Cinemax; Blockbuster Video; Netflix, Amazon, and Apple; Disney+, Hulu, and Peacock; and TikTok, Instagram, and YouTube.

At every step, the market has delivered substantial consumer benefits, including greater flexibility, choice, and cost efficiencies. At the same time, these shifts have also presented new challenges. Today’s market is notably marked by fragmentation, subscription fatigue, monetization challenges, and rising capital costs.

Policymakers and industry stakeholders must embrace regulatory flexibility and innovation-friendly competition policies to foster continued experimentation. By doing so, they will better align industry practices with consumer preferences, ensuring sustained growth and consumer welfare in this dynamic market.

[1] Subscribers for Select US Video Subscription Services, S&P Global Market Intelligence (Dec. 2024); Bevin Fletcher, Amazon’s Prime Video Aims to Be One-Stop Video Entertainment Hub, StreamTV Insider (Mar. 6, 2024), https://www.streamtvinsider.com/video/amazons-prime-video-aims-be-one-stop-video-entertainment-hub (Amazon Prime Video counts reflect MoffettNathanson’s estimates of active U.S. subscriber base. Hulu counts include subscribers who have access through their Hulu +LiveTV subscription).

[2] This includes the reduction in output from the 2023 Writers Guild of America strike; between 2009 and 2022, the increase was 300%. See Lesley Goldberg, Peak TV Is Officially Over: FX Tallies 14 Percent Drop in Scripted Series for 2023, Hollywood Report. (Feb. 9, 2024),https://www.hollywoodreporter.com/tv/tv-news/scripted-originals-fall-14-percent-2023-fx-tally-1235821248.

[3] Nielsen, L+3, Total Day (6a-6a), Duration Weighted Delivery, Dual Feed Date Range: 01/01/2024-12/29/2024, 12/30/2013-12/28/2014, 2024 Share of Total TV Usage, 2014 Share of Linear TV Usage.

[4] Id.

[5] See Jeremy Goldman, YouTube TV Price Hike Follows Platform’s Massive Living Room Growth, eMarketer (Dec. 12, 2024), https://www.emarketer.com/content/youtube-tv-price-hike-follows-platform-s-massive-living-room-growth.

[6] Less Than 50% of US Households Now Subscribe to Pay TV, as Cord-Cutting Jumps More Than Expected, eMarketer (Mar. 7, 2023), https://www.emarketer.com/press-releases/less-than-50-of-us-households-now-subscribe-to-pay-tv-as-cord-cutting-jumps-more-than-expected.

[7] The ability to easily switch services gives consumers implicit bargaining power in the form of churn risk, with approximately 42% of U.S. streaming consumers regularly subscribing, canceling, and re-subscribing to services based on content availability. See Daniel Frankel, Disney Bundlers Are 59% Less Likely To Churn, Research Company Says (Chart), NextTV (Jul. 9, 2024), https://www.nexttv.com/news/disney-bundlers-59-less-likely-to-churn-research-company-says-chart.

[8] United States et al. v. Nexstar Media Grp. Inc. & Tribune Media Co., Complaint at 13-14, Case No. 1:19-cv-02295 (D.D.C. Jul. 31, 2019), available at https://www.justice.gov/archives/opa/press-release/file/1189776/dl.

[9] Brian Steinberg, Netflix Says Ad Tier Reaches 70 Million Users Globally, Variety (Nov. 12, 2024), https://variety.com/2024/tv/news/netflix-ad-tier-reaches-70-million-global-users-1236207015.

[10] Adrian Pennington, Prime Video’s Ad Tier Entry Makes Immediate Impact on Ad-Supported Streaming, StreamTV Insider (May 7, 2024), https://www.streamtvinsider.com/advertising/prime-videos-ad-tier-entry-makes-immediate-impact-ad-supported-streaming.

[11] Kevin Westcott et al., Streaming Video at a Crossroads: Redesign Yesterday’s Models or Reinvent for Tomorrow?, Deloitte 2024 Digit. Media Trends (Mar. 20, 2024), https://www2.deloitte.com/us/en/insights/industry/technology/digital-media-trends-consumption-habits-survey/2024/customization-and-personalization-lead-the-svod-revolution.html.

[12] John Koblin, What Happened to Our Ad-Free TV?, N.Y. Times (May 26, 2024), https://www.nytimes.com/2024/05/26/business/media/ads-tv-streaming.html.

[13] See Alex Sherman, TikTok and Instagram Inch Closer to the Streaming Wars as Competitive Barriers Blur, CNBC (Jul. 5, 2012), https://www.cnbc.com/2021/07/05/tiktok-and-instagram-inch-closer-to-streaming-wars.html.

[14] See Westcott et al., supra note 10. (“On average, US subscribing households spend US$61 per month on four SVOD services. Additionally, 68% of consumers surveyed pay for either a TV subscription or live streaming TV.”).

[15] Id.

[16] See, e.g., Gregory Ellis, Streaming Has a Consumer and a Piracy Problem; The Answer Lies in the Music Industry, Alliotts (Sep. 22, 2023), https://www.alliotts.com/articles/streaming-has-a-consumer-and-a-piracy-problem-the-answer-lies-in-the-music-industry; Gintaras Radauskas, With Streamers Raising Prices, Digital Piracy Is Back, Cybernews (Nov. 15, 2023), https://cybernews.com/editorial/streaming-price-fuel-torrenting.

[17] Arun Perinkolam et al., Impatience and Price Motivate Consumers to Watch Pirated Content and Borrow SVOD Passwords, Deloitte 2024 Digit. Media Trends (Oct. 8, 2024), https://www2.deloitte.com/us/en/insights/industry/technology/digital-media-trends-consumption-habits-survey/2024/password-sharing-pirated-content.html.

[18] See Tony Maglio, ‘Big Bang Theory’: How Its Ratings Are Different Than Every Other Show’s, TheWrap (May 4, 2016), https://www.thewrap.com/big-bang-theory-tv-ratings-season-9-finale-cbs; Michael Schneider, The 100 Most-Watched Telecasts of 2024, Variety (Dec. 27, 2024), https://variety.com/2024/tv/news/most-watched-shows-2024-tracker-young-sheldon-super-bowl-olympics-oscars-1236260223; Press Release, ‘Tracker’ Was Television’s #1 Show in 2023-24, CBS (May 22, 2024), https://www.prnewswire.com/news-releases/tracker-was-televisions-1-show-in-2023-24-302153267.html.

[19] See Westcott et al., supra note 10.

[20] Jack Caporal, State of Streaming 2024: Streaming Services and Consumer Sentiment, Motley Fool (Mar. 18, 2024), https://www.fool.com/research/state-of-streaming.

[21] See Westcott et al., supra note 10.

[22] See Dawn Chmielewski, Disney, Charter Deal Reshapes Media Landscape, Executives Say, Reuters (Sep. 14, 2023), https://www.reuters.com/business/media-telecom/disney-charter-deal-reshapes-media-landscape-executives-2023-09-14.

[23] Press Release, The Walt Disney Company and Charter Communications Announce Transformative Agreement for Distribution of Disney’s Linear Networks and Direct-To-Consumer Services, Walt Disney Co. (Sep. 11, 2023), https://thewaltdisneycompany.com/disney-charter-spectrum-agreement.

 

Brian Albrecht, Chief Economist at ICLE, is quoted in Reason article on why government intervention in concert ticket markets is unlikely to lower prices or improve access. Read the full story here.

ICLE Affiliate Lars Powell was quoted in an Associated Press news piece about a new study that finds climate-resilient construction can save money in insurance claims.

The results show “mitigation works and that we can build things that are resilient to climate change,” said Dr. Lars Powell, director of the Center for Risk and Insurance Research at the University of Alabama’s Culverhouse School of Business, which led the study with the Alabama Department of Insurance.

Read the full piece here.

Brian Albrecht, Chief Economist at ICLE, is quoted in Reason article on the Apple v. Epic verdict and how it could force Apple to make major changes to iOS, used by millions of Americans. Read the full story here.

Brian Albrecht, chief economist at the International Center for Law and Economics, tells Reason that Apple’s in-app fees can be justified by platform investment incentives and security concerns, which shield Apple from liability under federal antitrust laws.

ICLE is mentioned in this American Bankers Association article about misguided Durbin-Marshall Credit Card mandate and how it is being attached to GENIUS Act. Read the full story here.

In the letter, the groups noted that interchange fees help to fund various cardholder benefits, including rewards programs, and investments in critical security tools. Reducing these fees through mandated routing would diminish or eliminate such programs, which American consumers value and similarly oppose the federal government reaching into their wallets. The groups noted that a reduction in rewards and cash back opportunities would significantly harm minority and lower-income consumers, pointing to a study from the International Center for Law and Economics that found that 77% of cardholders with a household income of less than $50,000 have an active rewards card.

 

ICLE President Geoffrey A. Manne is quoted in this Law360 article discussing the Ninth Circuit’s decision to expedite Apple’s appeal in its ongoing App Store dispute with Epic Games, while declining to pause the lower court’s injunction. Read the full article here.

Last week, the International Center for Law & Economics, a privately funded nonprofit research group, filed an amicus curiae brief backing Apple’s request, and arguing that the new injunction goes too far by imposing

numerous and complex duties to deal that were not identified in the previous injunction and have not been shown necessary to prevent foreclosure.

Eric Fruits, senior scholar at ICLE, is mentioned in this The Globe and Mail article about the Capital One-Discover $35 billion merger means to credit and debit cardholders. Read the full story here.

Eric Fruits, a senior expert at the International Center for Law and Economics, says that one of Capital One’s first steps after the merger will probably be to switch its debit cards to use Discover’s payment network. This change could increase the fees Capital One earns from card swipes, bringing in more money. Fruits added that within the next few months or a year, customers might see new rewards debit cards. Because of the merger, Capital One can bypass certain rules (called the Durbin amendment), allowing it to offer better rewards. This could be a big benefit for Capital One and its customers.

Eric Fruits, senior scholar at ICLE, is mentioned in this TipRanks by Prytek article about the Capital One-Discover $35 billion merger means to credit and debit cardholders. Read the full story here.

Eric Fruits, a senior expert at the International Center for Law and Economics, says that one of Capital One’s first steps after the merger will probably be to switch its debit cards to use Discover’s payment network. This change could increase the fees Capital One earns from card swipes, bringing in more money. Fruits added that within the next few months or a year, customers might see new rewards debit cards. Because of the merger, Capital One can bypass certain rules (called the Durbin amendment), allowing it to offer better rewards. This could be a big benefit for Capital One and its customers.

Julian Morris, senior scholar at ICLE, was quoted in this Business Insider article on Capital One-Discover merger. Read the full article here.

In a white paper published in July, four economists and lawyers at the International Center for Law & Economics wrote that the merger might finally end the Visa and MasterCard “duopoly.”

They added that the merger would let Capital One switch its debit cards to Discover’s payment networks, and it might offer “more attractive products to depositors.” This could include free checking accounts with no minimum balance rules and debit cards with cash back for lower-income customers.

Ian Adams, ICLE Executive Director, is mentioned in this Los Angeles Daily News article on the homeowners’ insurance market collapse and how to fix it. Read the full story here.

Research by the International Center for Law & Economics revealed that California has the worst regulatory rate suppression for both home and auto insurance in the nation. The annual cost of homeowners’ insurance in California is nearly $700 below the national average, despite California being relatively more expensive and prone to natural disasters, especially wildfires.

Kristian Stout, Director of Innovation Policy at ICLE is quoted in this Inside AI Policy article about the House Energy and Commerce Committee’s reconciliation legislation on the usage of AI in federal data system. Read the full story here.

“Generally speaking, I think the language reflects the needs of the moment,” says Stout in a statement provided to Inside AI Policy.

“There is a lot of interest in regulating AI, but not a lot of understanding what exactly is being regulated. A moratorium of some sort is called for just to give lawmakers some breathing room to actually study and understand what is being developed and deployed.”

“Further, as I read the language, it would not preempt laws of general applicability that happen to apply to AI and non-AI in the same way,” Stout adds.

“So, if AI is being used to commit crimes or torts, or what have you, laws can still be written and enforced to deal with actual discovered harms,” according to Stout.

Ian Adams, ICLE Executive Director, is quoted in this Independent Institute article on the homeowners’ insurance market collapse and how to fix it. Read the full story here.

Research by the International Center for Law & Economics, based on data from S&P Capital, revealed that California ranks the worst in the nation in terms of regulatory rate suppression for both home and auto insurance. Despite the fact that California is a disaster-prone state, the average cost of homeowners’ insurance in the state, $1,250 per year, is well below the national average of $1,915.

According to the International Center for Law & Economics, the “deemer” clause has essentially been rendered moot because the CDI often requests that insurance companies waive this sixty-day timeline, a request for which it has significant leverage. If the CDI cannot complete rate applications in a timely manner, it can elect to move to a rate hearing, rather than allowing automatic rate approval to occur. If companies do not comply with CDI’s request to waive the sixty-day deadline, they will face a rate hearing, which will delay the process significantly.

Kristian Stout, Director of Innovation Policy at ICLE is quoted in this Broadband Breakfast article on federal data-privacy and security framework by House Energy and Commerce Committee Privacy Work Group. Read the full story here.

But Kristian Stout, director of innovation policy at the International Center for Law & Economics, defended the moratorium. Several elements in the bill echo comments he submitted to the Energy and Commerce Committee’s privacy working group last month.

“We don’t really know what AI is yet,” Stout told Broadband Breakfast. “The real risk is that states rush to create broad, compliance-heavy frameworks that consolidate the industry and freeze out the innovation we actually want. There are probably things we’ll want to regulate – but we don’t yet know what they are.”

Roger Bate, Nonresident Scholar at ICLE was quoted in this Manila Standard article on World Health Organization and its effectiveness in addressing global health issues. Read the full story here.

“The WHO needs fundamental reform,” said Roger Bate, a global health policy expert at the International Center for Law and Economics, during a panel organized by the Taxpayers Protection Alliance (TPA).

Bate said the WHO has “failed repeatedly” in areas ranging from COVID-19 response to tobacco policy.

“If the organization cannot evolve to incorporate modern science and real-world solutions, then it risks becoming obsolete,” Bate said.

Bate also criticized the WHO’s political nature and its Geneva bureaucracy, noting that it is now at least 60-percent funded by “powerful vested interests,” including pharmaceutical companies and wealthy individuals with “very strong and strict agendas.”

Lazar Radic, Senior Scholar at ICLE, was mentioned in this Taxpayers Protection Alliance paper on what you should be reading: April 2025. Read the full story here.

International Center for Law & Economics: “Imaginary Consensus as a Legitimizing Philosophy of the New Antitrust Meta-Narrative”

Lazar Radic of the International Center for Law & Economics writes that the ongoing revolution in the land of competition policy began in error.

“The prevalent (or, at least, the loudest) grand antitrust narrative of today posits that so-called ‘digital markets’ present unique anticompetitive and evidentiary challenges that can only be adequately addressed through ex-ante rules or strong presumptions that mitigate (if not entirely overturn) the previous ‘dogmatic’ adherence to economic analysis,” Radic writes. “This story — a subplot in a broader fairy tale about the alleged unmitigated failure of antitrust in the ‘neoliberal era’ — functions as the lynchpin of a new antitrust ideology that seeks to redefine the role of competition and competition law in society.”

As the report describes, no international consensus — imagined by the competition-policy revolutionaries — has congealed with respect to how digital markets ought to be regulated. The theories behind Europe’s Digital Markets Act — a revolutionary law that abandons consumer welfare to give favors to uncompetitive rivals of big firms — have found little purchase in many countries. Moreover, digital markets remain competitive. Attempts to implement the new ideology — such as the Federal Trade Commission’s pursuit of Meta’s acquisition of an artificial intelligence startup — have faltered in court.

Radic outlines recent global trends masterfully, and in detail. For that alone, the report merits reading. But some of its best contents provide a larger view:

Grand narratives will always be compelling because they tap into popular themes and prejudices to offer simple stories about (and solutions to) complex phenomena. As narratives go, the new antitrust meta-narrative is particularly difficult to dispel, because it rides a generational populist anti-capitalist wave built on a shaky but attractive ideational foundation: “techno-feudalism,” “surveillance capitalism,” “neoliberalism,” etc. These are the bogeymen of our time, and “Big Tech” embodies them all.

Here, narrative appeal trumps facts and analysis. It doesn’t matter that those brandishing the term cannot even properly define what “neoliberalism” is. It doesn’t matter that, despite the supposed hegemony of neoliberalism, government spending as a percentage of GDP has exploded. It doesn’t matter that markets are shot-through with laws and regulation. It doesn’t matter that “killer acquisitions” constitute a minuscule portion of tech acquisitions.

 Meta-narratives are big stories that rely on big, sweeping claims. What they offer is a story of heroes and villains; good vs. evil; the righteous vs the wicked. And in such a story, there is no place for nuance and no need for evidence.

Competition policy can be a dreary place. Merely patrolling the edge of markets for the occasional anticompetitive conduct cannot satisfy regulators who wish to rearrange entire markets to reflect their own conceptions of “fairness.” This impulse leads enforcers to preference competitors over true competition, innovation, and consumer welfare. It is no way to run a railroad — or to regulate digital markets.

Thibault Schrepel, Academic Affiliate at ICLE, is quoted in this Politico Pro article on what it could mean for the EU if U.S. antitrust enforcers decide to break up Google. Read the full story here.

Of course, the U.S. decision has no legal bearing on what comes out of Brussels — and others argue it may not pave the way for Brussels to act.

“The U.S. case could have an impact on the European Commission’s investigation, but that is not a given,” said Thibault Schrepel, a law professor at Vrije Universiteit Amsterdam. “Even if the DOJ pushes for a [Google] breakup, I doubt the U.S. administration would be pleased to see the EU ordering something similar.”

He also noted that “on a legal level, the U.S. decision would not directly affect the European Commission’s investigation.”

Kristian Stout, Director of Innovation Policy at ICLE is quoted in this Communications Daily article about enforcement petition raised by CTIA  and NCTA  and its impact towards FCC. Read the full story here.

Kristian Stout, director-innovation policy at the International Center for Law & Economics, said industry may view this as “an opportune time to suggest further reforms to the FCC’s process with a commission that may be sympathetic to improving the FCC’s enforcement procedures.”

Brian Albrecht, Chief Economist at ICLE, is quoted in this Reason article on the risks of Trump’s “America First” antitrust agenda. Read the full story here.

Brian Albrecht, chief economist at the International Center for Law & Economics, says “It is very strange to compare a government-granted monopoly to any of the relevant ‘monopolies’ people worry about today.”

The empirical record unambiguously shows that “antitrust, at least before the development of the consumer welfare standard, was employed to help competitors and a form of rent seeking,” says Albrecht.

Threads from ICLE scholars on trending issues for the month of May 2025.

I'm looking forward to participating in this ITIF-sponsored panel discussion on the FTC v Meta antitrust case in district court in D.C. https://t.co/GP8xh6soZS

— Daniel J Gilman (@DanielJGilman1) May 28, 2025

Creative destruction at play. ?1/7 https://t.co/14HhymXwsW

— Lazar Radic (@laz_radic) May 28, 2025

The Commission’s DMA decision vs Apple is out. It is apparent that regulation now means imposing the regulator’s preferred product design—free of charge, exactly as envisioned—with no regard for incentives, trade-offs, or the fundamental freedom to conduct business. ? 1/9

— Lazar Radic (@laz_radic) May 26, 2025

Meta starts AI training with public EU user data on May 27. Ireland's data regulator seems OK with it, but Hamburg is pushing back and there's a court case trying to stop it. Why this matters: rules that get imposed on Meta will likely be the standard for all AI devs in Europe

— Miko?aj Barczentewicz (@MBarczentewicz) May 22, 2025

Two things can be true at the same time:

This is a self-defeating move by the US administration that could hardly have come at a worse time.

AND

The EU has brought it upon itself by refusing to compromise on its worst regulations.

This could easily have been avoided.

? pic.twitter.com/3im8OEVSIW

— Dirk Auer (@AuerDirk) May 23, 2025

Yesterday, we @LawEconCenter filed comments in the FTC's Request for Public Comment Regarding Technology Platform Censorship.

tl;dr: More information on technology platform content moderation is useful, but FTC must recognize legal limits on authority and underlying econ

a ?

— Ben Sperry (@RBenSperry) May 22, 2025

Now out in DePaul Law Review

"Labor Monopsony and Antitrust Enforcement: A Distorting Mirror" with @geoffmanne and @AuerDirk

How straightforward is it to bolt classic antitrust onto labor markets? In general, not very. ?https://t.co/6N8FP60NPt pic.twitter.com/64VMzzP6fG

— Brian Albrecht (@BrianCAlbrecht) May 21, 2025

At a time when economics in antitrust is being contested, experts from @ielawschool and @LawEconCenter, in the seminar Economics on Trial: Admissibility and Relevance in Competition Law Enforcement, explore its role in competition law- illuminating both practical challenges and… pic.twitter.com/7aKXHjdn7w

— Int'l Ctr Law & Econ (@LawEconCenter) May 20, 2025

Folks are saying the proposed Charter/Cox merger should sail through?

But will it?

Maybe yes … pic.twitter.com/sQSixFjKRA

— Eric Fruits, Ph.D. (@ericfruits) May 20, 2025

People who lament that antitrust enforcement has been crippled since the alleged neoliberal revolution of the 1970s—what world are you living in? It’s a well-documented fact that since the 1970s, antitrust enforcement has exploded globally. ? 1/4

— Lazar Radic (@laz_radic) May 15, 2025

Interesting (and worrying) on the EU Commission's approach to EU Digital Markets Act interpretation and its effects on other businesses than "gatekeepers" and their use of personalised advertising.

— Miko?aj Barczentewicz (@MBarczentewicz) May 15, 2025

NEW: I talk #computationalantitrust with Kamil Nejezchleb (@kamilnejezchleb), Vice-chairman of Czech Competition Autority (@UOHS_CZ).@CodeXStanford pic.twitter.com/MSjVp1IYwJ

— Thibault Schrepel (@ProfSchrepel) May 14, 2025

Colorado Governor Jared Polis just endorsed a federal moratorium on state-level AI regulations—a huge reversal from last year when he signed the nation’s first major AI oversight bill. Incredible and important pivot!
? https://t.co/fcGybQQxKZ

— kristian stout (@kristianstout) May 13, 2025

Colorado Governor Jared Polis just endorsed a federal moratorium on state-level AI regulations—a huge reversal from last year when he signed the nation’s first major AI oversight bill. Incredible and important pivot!
? https://t.co/fcGybQQxKZ

— kristian stout (@kristianstout) May 13, 2025

New ?: 18 scholars submit an amicus brief to the US District Court in US v Google emphasizing that remedies must address proven harm to competition and consumer welfare, not punish success or stifle innovation. ? in comments. 1/8 pic.twitter.com/Jz71mp75DQ

— Int'l Ctr Law & Econ (@LawEconCenter) May 12, 2025

1/ True: the DMA sets fines based on global turnover—not EU turnover. This goes beyond EU competition law, which calculates fines from EU turnover (though capped at 10% of global turnover). But the DMA arguably raises even more serious concerns. ? https://t.co/wHfafvyieL pic.twitter.com/6bhnlea0Yg

— Lazar Radic (@laz_radic) May 7, 2025

https://twitter.com/laz_radic/status/1920148862716502175

DOJ just dropped its Google AdTech remedy proposal:

1. Break off AdX (the exchange)
2. Break off DFP (the publisher ad server), and
3. Bar Google from exchanges for 10 years.

Bold? Absolutely. Whether it squares with the opinion and helping consumers is another question ?

— Brian Albrecht (@BrianCAlbrecht) May 6, 2025