Cutthroat: A Battle for the Future of Antitrust

cut·throat

/ˈkətTHrōt/

adjective

  • (of a competitive situation or activity) fierce and intense; involving the use of ruthless measures.
  • relating to or being a game or contest in which each of three players scores individually against the other two.

Unlike Black Friday sales, college admissions, and Yale course registration, antitrust law is not commonly described as cutthroat. Indeed, until about five years ago, antitrust, which determines how companies can legally compete in the U.S. market, was a staid regime experiencing a decades-long ossification, or “ice age,” as Lina Khan, chair of the Federal Trade Commission, said in a New York Times interview. However, within the last few years, antitrust has thawed under the rays of anti-establishment sentiment. The field, dominated for half a century by a conservative ethos, is witnessing the advent of a new band of reformers seeking to reconstruct the pillars of U.S. competition law. 

Beneath the apparent tranquility, the casualties of frozen enforcement have accumulated in big cities and small towns alike. Nina Barrett is the owner of the independent bookstore Bookends & Beginnings in Evanston, IL, and the sole named plaintiff in an ongoing class-action lawsuit against Amazon. The lawsuit claims that Amazon colludes with publishers to fix prices and edge out small booksellers like Barrett. For her, aggressive government intervention is sorely needed and long overdue. 

“One of the great joys of being in New York used to be walking into some store that only sold different kinds of buttons or every single type of Italian stationery,” Barrett told The Politic. “All of that has been really crushed and decimated…  And in a small town, stores knit the community together. They create the character of the downtown of the community. When you have a downtown that has a bunch of empty storefronts, it becomes a ghost town, and it psychologically affects how people are rooted in their communities and the identity of cities.”

Long before its calcification, antitrust law sprang forth in the heat of battle. Congress erected the first pillar of antitrust in 1890 by passing the Sherman Antitrust Act. The Sherman Act is staunchly and broadly against any consolidation of economic power. It outlawed “[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States.” The Supreme Court somewhat narrowed its exhaustive scope in 1911 after successfully breaking up John D. Rockefeller’s Standard Oil Company in the landmark case Standard Oil Co. of New Jersey v. The United States. The Court reframed the Sherman Act’s prohibition of “every” restraint of trade to only “unreasonable” restraints. Then, in 1914, Congress enacted the Clayton Act, which addressed mergers and acquisitions, and created the Federal Trade Commission, an independent antitrust regulation agency. The new reformers currently taking antitrust by storm look to this period as a model for their rigorous enforcement ideology.

Under the banner of former Supreme Court Justice Louis Brandeis — himself a seminal antitrust figure — these reformers are seeking to renew and restore his populist zeal. This new school of thought is hailed by many names but is most widely known as the New Brandeis School. The emergence of the New Brandeisians, described by Khan (herself at the fore of the movement) as “the first trickle of progress,” was the first trickle of blood in this intellectual battle. Three major camps —  the Chicago, Modern, and New Brandeis Schools of thought — have now planted flags in the increasingly crowded turf of antitrust. 

A cutthroat conflict is ensuing, and like any great contest, the stakes are high. The results of this battle will make waves in global politics, privacy, big tech, national security, domestic and international business, and beyond. And the combatants are not pulling punches. Their discourse involves name-calling, Twitter wars, and scathing articles. The Wall Street Journal has published at least six pieces criticizing Khan since she took office, and in September, she released a memo emphasizing her aggressively anti-merger agenda. “It feels to the business community that the F.T.C. has gone to war against us, and we have to go to war back,” CEO of the U.S. Chamber of Commerce Suzanne Clark said in the Journal. Figures within antitrust agree: “There is a lot of contention. I think there is a good amount of heat and bad blood,” Daniel Crane, a law professor at the University of Michigan Law School, told The Politic. This heat will either reforge — dramatically or subtly — or further cement current antitrust law. 

***

When Khan laments the antitrust ice age, she refers to the rise of the Chicago School. The Chicago School, also known as the Traditionalist school, is the oldest and least interventionist of the three approaches. In the 1970s and 1980s, legal and economic scholars at the University of Chicago revolted against the classical economic structuralist model of antitrust. Figures including Judge Richard Posner and Judge Robert Bork rejected the classical antitrust theory dating back to Senator Sherman that held that a market with a few large companies is less competitive than one with many smaller ones. Chicago School theory was highly influenced and directed by Bork’s The Antitrust Paradox, advocating a laissez-faire antitrust framework, wherein efficiency and a belief in the self-corrective nature of markets reign. 

Bork and the Chicago School developed the consumer welfare standard, a doctrine used to determine if regulation is necessary for antitrust situations. The doctrine primarily asks if consumers will be hurt by a move — and it gauges injury to consumers by the metric of price. They prioritize efficiency and the lower prices that typically accompany it, and so do not believe that a firm’s accretion of wealth and size necessarily denotes anticompetitive conduct. The Chicago School disagreed with the established consensus that “Big is bad,” and instead declared “Big isn’t bad. Big behaving badly is bad,” meaning that they take no intrinsic issue with consolidation unless it is decidedly anticompetitive.

The Chicago School’s approach pulled antitrust away from its original Gilded Age populist ideology and has been ingrained in case law since the 1980s. The success of Chicago School proponents was rapid and near-total, confining subsequent antitrust enforcement to their ideology. Even as the internet, online marketplaces, and mobile technology revolutionize the economy, Chicago School theorists maintain that their 1970s regime remains satisfactory and sufficient.

“I generally think that a light touch is sufficient to keep the economy competitive. I also have the view that a number of the interventions that people propose would actually be harmful to economic efficiency and consumer welfare,” Crane, a member of the Chicago camp, said. 

However, in the 1990s, a new camp emerged, turning away from the Chicago School’s price dogma toward increasingly sophisticated mathematical models and empirical analysis. This Modern (also known as the Post-Chicago or Expansionist) camp maintains the consumer welfare standard as antitrust’s lodestar like the Chicago School but finds the Chicago model simplistic. Instead of assuming the market’s self-correction, they use tools such as game theory and models to analyze its functioning. While still targeting economic efficiency, they believe in fundamental reform to account for new anticompetitive realities in today’s markets. 

“The Modern approach recognizes that anti-trust law and policy have not been vigorous enough in recent years. Modernists favor stronger antitrust enforcement, building on what antitrust scholars and practitioners have learned in recent decades and reflecting how the economy has evolved over time,” Carl Shapiro, former deputy assistant attorney general for economics at the DOJ, said in an article.

Despite their disagreements, for a few decades, debates between the Chicago and Modern schools were rather restrained. According to Crane, “on a 100-point scale, the conflict was about 20. And it was rather inconsequential, because that was the whole field.” It was too civil a war to be characterized as a Civil War. 

But then, in the late 2010s, a third camp arose and rocked the field. Though most widely known as the New Brandeisians, they have been dubbed and redubbed as the Transformationalists, Populists, Anti-Monopolists, and  — derogatorily — the Hipsters. The New Brandeisians believe that U.S. competition law is in a state of crisis and, unlike the Modernists, their goal is nothing less than to radically supplant the prevailing Chicago School philosophy.

“The status quo is unacceptable, even more unacceptable than it was back in the origins of antitrust law in the United States with railroads and oil companies,” Megan Gray, tech and privacy attorney, told The Politic. “Now with big tech, their dominance is just so much more staggering. In terms of their wealth, but also in their ability to impact how we perceive the world.” 

In truth, the New Brandeisians are more “Traditionalist” than the Chicago School, as their philosophy harkens back to the original tenets of U.S. antitrust. They want to reinstate the primacy of egalitarianism and competitive market structure that motivated antitrust reforms in the early 20th century. New Brandeisian philosophy espouses the protection of democratic values — not simply economic efficiency — through antitrust enforcement. They believe in applying much stricter measures on big businesses to preserve a decentralized market structure, even if deconcentrating the market yields higher prices. 

In deconsolidating the market, they hope to increase opportunities for small businesses, diversify consumer choice, and attenuate inequities. However, these changes may come at a literal high price — redistributing economic power will certainly raise consumer prices for a range of goods and services. But in return, consumers will get a more robust intellectual and physical marketplace and higher quality goods, Khan said. And more abstract, novel rights in antitrust’s consideration such as privacy and consumer data will be protected, Gray said. 

They also advocate for a broader definition of consumer welfare and see the Chicago-originated consumer welfare standard — which equates lower prices to higher welfare — as an inadequate barometer of market health.

***

This focus on price in the consumer welfare standard is a major bone of contention between the New Brandeisians and their more conservative counterparts, especially adherents of the Chicago School. In her widely impactful article “Amazon’s Antitrust Paradox” — a play on Bork’s The Antitrust Paradox — Khan argues against Bork’s consumer welfare standard. This article had a seismic effect on the field; it precipitated the current antitrust battle and crystallized the New Brandeisian movement. 

In the article, Khan postulates that price is not always an accurate reflection of overall welfare: “[F]ocusing on consumer welfare disregards the host of other ways that excessive concentration can harm us — enabling firms to squeeze suppliers and producers, endangering system stability (for instance, by allowing companies to become too big to fail), or undermining media diversity, to name a few.” Khan laments that in The Antitrust Paradox, “a concern about structure… was replaced by a calculation (did prices rise?).” The New Brandeisians advocate an approach that demotes the primacy of price to just one of many elements of consumer welfare. They heavily value the distribution of power and the democratization of competition.

But both the Modern and Chicago Schools vigorously disagree with overhauling the consumer welfare standard. “How can lower prices not reflect the interests of the economy?” George Priest, an antitrust professor at Yale Law School and original member of the Chicago School, said in an interview with The Politic. “The failure of the National Industrial Recovery Act during the Depression proves that higher prices disservice workers and businesses alike,” he said. 

Chicago School scholars also stridently argue that price is a necessary benchmark because of its calculability. Crane fears that, if the consumer welfare standard was eliminated, the courts would have “very arbitrary control over business that allows competitors to take advantage to actually use antitrust law to stop their competitors from competing more efficiently.” 

However, Khan contends that the context has changed and that price in today’s internet economy is a deeply unreliable metric. She asserts that Amazon is fabricating the illusion of consumer welfare by strategically sustaining below-market prices. Amazon, Khan says, disguises predatory pricing tactics as a boon to consumers. 

Barrett feels that lower prices are part of a Faustian bargain that has deep-reaching and not readily recognized negative consequences. 

“It’s my impression that the judicial thinking on price competition is that, as long as the consumer is saving money, everything’s okay,” Barrett said in an interview with The Politic. “And do I think that should be the only guiding principle? No, because there are other considerations besides whether the customer is saving money, especially if the customer is saving money because of predatory pricing practices. Amazon can drastically mark down the price of books. And because they’ve become so dominant in the marketplace…they have devalued what books are actually worth — what price needs to be paid for them for the whole industry to be sustainable.”

Amazon can afford to undercut book prices by increasing the cost of merchandise in other branches of its sprawling empire. But for publishers and booksellers (especially independent booksellers like Barrett) their only options are to devalue all their books to retain customers, or to narrow the diversity of their stock to sell more bestsellers, Khan explains in her article. 

New Brandeisians fervently believe it is in the interests of antitrust to address and regulate this sort of situation, even if it results in higher prices. They take a more holistic view of antitrust and the economy in general, not striving for pure efficiency. Market diversity is among their central concerns.

These starkly differing attitudes on the consumer welfare standard speak to the fundamental rift between the Chicago and New Brandeis positions on the value of small business. 

“What I think the consumer welfare standard is excluding, and I think rightly so, are things like protecting small business for small business’s own sake — protecting less efficient competitors just because we want more companies in the market, even if they don’t contribute to economic efficiency and actually drag it down — just being averse to large organizations just because we want small and not big,” Crane said.  

***

The Chicago School has derided the New Brandeis School as “Hipster Antitrust.” The term was originally a hashtag but gained widespread use after Senator Orrin Hatch said in a 2017 speech on the Senate floor that the “hipster” movement “amounts to little more than pseudo-economic demagoguery and anticorporate paranoia.” Name-calling has even made its way into academic literature. Former Federal Trade Commission (FTC) commissioner Joshua Wright titled his article “Requiem for a Paradox: The Dubious Rise and Inevitable Fall of Hipster Antitrust” — continuing a nesting doll of wry antitrust references. 

“I was kind of surprised by the name-calling ,” Khan told the New York Times. “I think it’s designed to be a pejorative to try and minimize the movement, but I do think that it also suggests that these ideas are powerful and threatening to a lot of very rich people. And so I think it’s inevitable that we’re going to see some tantrums, some backlash.”

While heat between the Chicago and New Brandeis Schools comes as no surprise, what may be unexpected is that there can be even more vitriol between the Modernists and the New Brandeisians. Though they fundamentally agree on the need for reform in the field, their relationship can be bitter. The crux of their argument is economics. 

“Neo-Brandiesians are against using economics. Period. They want to make the antitrust laws work as a matter of rights and democracy,” Fiona Scott Morton, an antitrust professor at the Yale School of Management, told The Politic.

Though these camps seem to share the common goal of reforming antitrust, albeit to different degrees, their relationship can be antagonistic, as they clash on how to execute the change. Their animosity exists because Modernists want to ground antitrust in increased economic analysis, while New Brandeisians find this antithetical to their populist credo.

“I actually would pin [the problem with the antitrust establishment] on economists in general,” Matthew Stoller, director of research at the American Economic Liberties Project, said in an online discussion with Joshua Wright. “Economics today is not designed to uncover truth…It’s a language of governance. It’s designed to exclude the public from influencing political economy…There is a reification of expertise such that economists are kind of making all sorts of value judgments because they spent a few years getting a Ph.D., and they look down upon the public and voters.”

At issue between the New Brandeisians and the Modernists is what the fundamental nature of antitrust decisions and policies should be: economic or political.

“Fundamentally, when you’re thinking about how you structure markets and corporations and banks, these are social decisions. These are political decisions, they’re not decisions that you can just say, well, I know the most efficient or right answer,” Stoller said.  

Florian Ederer, an economics professor at the Yale School of Management, concedes that economic literature can be inaccessible to the public but espouses a more data-driven perspective and holds that antitrust cannot move forward without a grounding in empirical economic findings. 

***

As the conflict has intensified, this disagreement moved out of the halls of academia and into public venues that may seem more suited to airing spats between social media influencers. Specifically, New Brandeisians have taken to Twitter to critique settled antitrust and economists more broadly. 

In an article for the American Bar Association, former FTC chair William Kovacic likened New Brandeisian reform efforts to the OODA (Observe, Orient, Decide, Act) Loop used in military strategy. He identified social media tactics as an integral part of their campaign. The OODA loop calls for instantaneous observation of and reaction to enemy movements. The New Brandeisians emulate this agility by adapting the tone of their tweets as the situation calls. Sometimes it is sarcastic, undermining the perceived untouchability of academics: “In the past, I have compared neoclassical economists to astrologers. I sincerely regret that comparison and want to apologize to astrologers,” Sandeep Vahessan, legal director of the Open Markets Institute wrote on December 30. 

Other times their tone is sober and accusatory, pinning ethical and moral failings on the current establishment: “It is important to remember that most economists and conservative antitrusters frequently and casually ignore and disregard the human cost of business decisions,” Daniel Hanley, senior legal analyst at the Open Markets Institute, wrote on December 28. 

But often, their tone is angry and their callouts biting. They employ a “take-no-prisoners denunciation of opponents, especially in media such as Twitter,” wrote Kovacic. And in their denunciations, they are not afraid to point fingers and name names. 

“The regular condescension towards Lina Khan from antitrust status quo adherents Fiona Scott Morton and Herb Hovenkamp is just infuriating. The monopoly mess is their fault, you’d think they’d have some humility,” Stoller wrote on April 24.

Kovacic lauds the New Brandeisians’ “mastery of social media,” saying that “[i]n a conflict over ideas, the skillful use of Twitter can provide the high level of adaptability and mobility that keeps the user several steps ahead of rivals…Twitter helps transformation commentators attack opponents rapidly and forcefully — challenging their arguments and, frequently, questioning their motives.”

In this way, the New Brandeisians utilize a guerilla approach that accounts for their influence in online media.They combine lobbying on a federal level with Twitter skirmishes to harry established antitrust. Their savvy in levying popular resistance and disseminating ideas among the public is one of the few things widely agreed upon within the field. Even their opponents commend the New Brandeisians in their ability to revitalize political interest in antitrust and enlist public opinion on the issue.

“One thing that I think is actually very healthy about this moment is that for a long time, since the 1970s, antitrust had become very insular, very self-referential, very technocratic. It was kind of run by an establishment of lawyers and economists or professionals, and there wasn’t a lot of public consultation. I do want it overall to be technocratic. But I do think it is important that occasionally there’s democratic oversight…so even though I don’t hope that New Brandeisians win the day, I appreciate them engaging these questions,” Crane said. 

Though a Modernist, Ederer also “respect[s] Lina Khan and the other New Brandeisians for bringing new excitement to antitrust,” although they have not changed his perspective, he told The Politic.

Though the New Brandeisians have been successful in rallying public support for their movement, predictions for their overall success are mixed. They hope that the near future will see a complete realignment of the antitrust paradigm. Whether this revolution is coming, or if it is already upon us, remains a matter of dispute. 

“[An antitrust revolution] is so overdue. I can say as a small business person that monopolies are strip-mining people’s communities and downtowns,” Barrett said.

And according to Crane, the Chicago School, the group most avidly trying to preserve the 1980s framework, is “a vanishing camp.” But though they are the oldest group — and perhaps most weary, Kovacic adds — they are still the most securely ensconced in policymaking. So, it remains unclear what shape antitrust will take upon emerging from this crucible of contention. Ultimately, Scott Morton says, the courts will solely anoint the victor of the battle. 

As the combat escalates and public opinion and scrutiny increasingly come into the fray, these three players will continue to vie for the future of their field. The one thing everyone should expect is more heat — a lit match has already been tossed into The Antitrust Tinderbox. 

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