This is a bold paper which argues that competition law, as it stands, is not an apt gauge of competition in the twenty-first century marketplace—especially in the case of online platforms. It was published in the Yale Law Review, and can be found here.

The argument is built around a critique of the way antitrust has (failed to) deal with Amazon. In particular, it argues that a close look at Amazon’s business strategy reveals that the current framework of antitrust— especially how it equates competition with “consumer welfare”, and “consumer welfare”  with short-term effects on price and output—fails to capture the architecture of market power in the twenty-first century marketplace.

The paper holds that, instead, antitrust should analyse the underlying structure and dynamics of markets. Rather than pegging competition to a narrow set of outcomes, this approach would examine the competitive process itself. Animating this framework is the idea that a company’s power, and the potential anticompetitive nature of that power, cannot be fully understood without looking to the structure of a business and the structural role it can play in the operation of markets. Applying this idea involves, for example, assessing whether a company’s structure creates certain anticompetitive conflicts of interest; whether a business can cross-leverage market advantages across distinct lines of business; and whether the structure of the market incentivizes and permits predatory conduct.

Part I of the paper provides an overview of the shift away from economic structuralism towards price theory in antitrust as a result of the Chicago School, and identifies how this departure has played out in two areas of enforcement: predatory pricing and vertical integration. Part II questions this school’s (and recent antitrust practice’s) focus on a standard of consumer welfare measured by reference to effects on prices and quantities, and argues that assessing market structure is vital to protect important antitrust values.

The paper then tries to demonstrate how looking at market structure can reveal anticompetitive aspects of Amazon’s strategy and conduct. Part III documents Amazon’s history of aggressive investment and loss leading practices, and its expansion across many different business lines. Part IV identifies two examples of how Amazon has built its business through taking sustained losses that crippled its rivals, and two instances in which Amazon’s activity across multiple business lines poses anticompetitive threats in ways that the current antitrust framework fails to register. Part V looks at what capital markets (and tech giant’s valuations) suggest about the economics of Amazon and other internet platforms – namely, that they have the perspective of acquiring great market power, and that their valuation reflects the prospect of great future monopoly profits. Finally, Part VI offers two approaches for addressing the power of dominant platforms: (1) restoring traditional antitrust and competition policy principles that seek to limit the effects and extent of market dominance; and (2) regulating  dominant platforms by applying common carrier obligations and duties to them.

The paper’s main argument is, ultimately, that: “Focusing primarily on price and output undermines effective antitrust enforcement by delaying intervention until market power is being actively exercised, and largely ignoring whether and how it is being acquired. In other words, pegging anticompetitive harm to high prices and/or lower output—while disregarding the market structure and competitive process that give rise to this market power—restricts intervention to the moment when a company has already acquired sufficient dominance to distort competition.”

The paper was quite interesting – if nothing else, as an indicator of a possible change in how we think about antitrust. Intellectual fashions do change, and I have noticed a number of papers and discussions that, ultimately, pine for a return to (an updated version of) antitrust theories of old.

Apart from including good discussions of how the enforcement practices regarding predatory pricing and vertical integration have changed over the years (and virtually disappeared in the US as a result of the intellectual influence of the Chicago School), the paper provides a starting point for thinking about how antitrust should deal (or not) with internet companies that are fine with foregoing profits so as to establish market position (i.e. they have a longer time-frame than the two-years framework that competition authorities usually use) and with engaging in co-opetition – both of which should be clear to anyone who reads VCs and companies’ business plans. Arguably, the success of such a strategy can be seen in how a few unicorns have developed, and is reflected in the valuation of companies that are yet to make any profit.

On the other hand, I’m not sure current practice disregards market structure or competitive process, as the author argues – it just makes very different assumptions about market entry and competitive pressures than the author (and the structuralist / Harvard school) make, and thus chooses to look mainly at outcomes instead. Further, just looking at one company – particularly one like Amazon, that provides better service and lower prices to consumers– does not disprove such assumptions. Lastly, I think the paper’s argument ultimately is about the ends of antitrust – and, at the moment, I consider that structuring competition law around consumer welfare provides us with a yardstick which is more rigorous than anything else we have available to determine the appropriate “competitive structure”.

All in all, though, a stimulating read. And maybe a premonition of things to come.

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