In this paper – available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3124356 – the author considers that proponents of the New Brandeis movement in antitrust are animated by a perception that antitrust is not fit for purpose in the digital age. He considers that this movement is arguing for a return to an earlier age of greater interventionism and greater focus on market structures – which is why he calls this movement ‘new structuralism’. Given this focus, proponents of this movement also advocate for a complete overthrow of the Chicago school paradigm, with its anti-interventionist bias.
The author’s argument is that the New Brandeis School gets its History wrong, misconceives the nature of the competitive process, and deliberately refuses to confront the political economy of antitrust. He builds his argument as a rebuttal of Lisa Kahn’s article on Amazon (which I circulated and discussed on 3 March 2017). In the interest of clarity, I will ignore that part of the argument when reviewing the paper, which is structured as follows:
- A first section is devoted to the history of antitrust. He argues that the Sherman Act was adopted both to deal with excessive concentrations of private power and to promote economic efficiency – and to deal with other concerns as well: ‘there was in fact no single, or indeed perhaps any, coherent vision behind American antitrust policy’. He describes the various political concerns that provided an impetus to the adoption of the Sherman Act; the haphazard way in which the Act was implemented during its first decades; and how it led to the adoption of the Clayton Act and of the Federal Trade Commission (FTC).
The discussion then turns to the impact of the economics revolution in antitrust in the 1970’s, and identifies two important Chicago-infused schools. First, there is Bork’s argument that antitrust should be devoted to output maximisation, which requires a focus on price-related practices. Second, and less discussed than it should be, there is Coase’s contribution to unpacking the riddles of non-standard contracting, long decried as “anticompetitive,” in terms of information and transaction costs. Unlike the Borkian approach, many of those explanations are concerned with matters of product quality, variety, and innovation. According to the author, this second dimension undermines the New Brandeis’ claim that competition law is unduly focused on price effects.
The Coasian approach is also valuable in that it brings to the forefront how transaction costs and limitations in knowledge are important not only for market behaviour, but also for designing regulatory interventions. If one criticises an existing system of antitrust enforcement, then one should propose practical alternatives. This requires a comparative-institutional analysis that goes beyond criticising the (alleged) limitations of market and regulatory processes, which is is something that the New Brandeis approach notably fails to do.
- A second section is devoted to competitive processes. According to the author, the New Brandeis proponents seek to do away with economic analysis and to design competitive processes that reflect societal values other than economic efficiency. This approach is criticised as ‘misguided and dangerous’. The main benefit of competition is that it makes consumers (that is to say, people) “materially better off” – and this should be the focus of competition law. Alternative approaches would most surely not lead to such obvious benefits for consumers, nor is it clear that they would be suitable to achieve whatever goals they pursue.
- A third section looks at the regulation of platforms and the digital economy. The author criticises the tacit assumption in most New Brandeis pieces that: ‘information technology companies, especially those that represent platforms, are something wholly new in industrial history and that such firms require some new kind of government regulation.’ He focuses on how United Shoe Machinery compares to Amazon(!) in terms of the vertical and lateral integration of various market operations, in order to show how a: “policy of forbidding vertical and lateral integration (by merger or otherwise) is a great way to create niche markets with less rivalry.”
He directs particular criticism at the idea that internet companies should be regulated as common carriers or maybe even natural monopolies. This has been tried before and the result has been: “the destruction of once-vibrant markets, the throttling of technological change, and the loss of diversity and access.” The author describes, in particular, the evolution of Ma’ Bell and, subsequently, AT&T; how common carrier and universal service obligations created regulatory barriers that throttled independent telephone service providers and technological development for decades; and how State regulation was used to provoke “decades-long delays in the adoption of FM radio, cable television, and satellite radio.”
This piece feels more like a polemic than a full-fledged academic piece of work – with attendant virtues and vices. On the one hand, the author could be accused of contradicting himself. Section 2 is nothing if not a (short) diatribe in favour of a specific approach to competition law that is to be seen as indisputably correct – and yet, the reasoning in support of this approach is limited. I fail to see how this improves on the approach of the New Brandeis’ proponents that the author so forcefully criticises. Section 3 is better developed, but ends up attacking mainly Tim Wu’s views in support of net neutrality – which are not exactly an example of a New Brandeis position or even a matter of competition law. I think this last section reflects a specific ideological bent on the part of the author: namely a preference for allocating and delimiting property rights to the detriment of State regulation of (broadband) spectrum. Such a bent is, of course, perfectly legitimate; but if one is not to preach to the converted, one should try to explain why such an approach is normatively attractive.
On the other hand, the piece is extremely readable. Its description of the political currents pushing for the adoption of the Sherman Act in all its glorious vagueness is particularly good. Admittedly, given my dislike of teleological and originalist approaches to the law, the author’s focus on political compromise and on the importance of enforcement institutions for the ultimate meaning of antitrust law was always going to be met with sympathy by someone like me. Nonetheless, this is recommended reading for anyone seeking to understand why US legal disputes often focus on exoteric arguments regarding the original intention of the legislators who approved the Sherman Act (whoever they may be). The piece is also quite good when it discusses the different schools of economic thought that impacted the development of competition law, and when it explains how these developments go well beyond the adoption of the tenets of the Chicago school as expressed by Bork.