Killing Antitrust Softly (Through Procedure)

Sandeep Vaheesan – 

The Supreme Court has waged a multi-decade war on private rights of action. It has subverted the rights of consumers, workers, small businesses, and others to hold corporations accountable for wrongdoing through lawsuits. The Federal Arbitration Act (FAA) has been a preferred tool of the Court. Since the 1980s, it has reinvented this modest statute, converting the FAA into a quasi-constitutional sledgehammer for corporations to wield against private lawsuits, especially class actions. And the evisceration of private enforcement of law goes beyond arbitration. The Court has rewritten class certification, pleading, and summary judgment standards to help businesses ward off private lawsuits and accountability.

On top of these general procedural hurdles, the Supreme Court has imposed special burdens on parties seeking to vindicate their rights under the federal antitrust laws. Congress enacted an expansive private remedy originally in the Sherman Act and subsequently in the Clayton Act. Section 4 of the Clayton Act grants “any person” injured by an antitrust violation the right to recover treble damages and legal fees from the violator. Since the 1970s, however, the Supreme Court has effectively rewritten this text. While once recognizing that Section 4 “is comprehensive in its terms and coverage, protecting all who are made victims of the forbidden practices by whomever they may be perpetrated[,]” the Court has severely restricted who can enforce the antitrust laws. Two doctrines deserve special consideration. First, the Court held that, in general, only parties who purchased a good or service directly from the antitrust violator can obtain damages for overcharges. Second, it created the amorphous “antitrust injury” doctrine and granted the lower courts the power to dismiss disfavored substantive claims on supposedly procedural bases.

These procedural changes raise the age-old question: what good is substantive law if it cannot be enforced? The described procedural changes have not affected the substantive law (though the courts have done that too in certain areas) but it has prevented some of the most motivated parties from enforcing the law. Consumers and businesses injured by antitrust violations have long been the lead enforcers of the antitrust laws. Their role is only accentuated by the Department of Justice and Federal Trade Commission’s unwillingness to enforce multiple areas of antitrust law. This combination of judicial hostility to private cases and bureaucratic lethargy has turned much of the substantive law into a dead letter.

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The Erosion of Public Control Over Public Utilities

Sandeep Vaheesan –

Cable Electricity Electrical Energy DistributionSince the 1970s, Congress and federal agencies have replaced regulator-established rates with market-derived pricing in many sectors of the U.S. economy. Electricity and natural gas are two such industries. Congress and the Federal Energy Regulatory Commission (FERC) have abolished regulated rates and instituted market-based pricing in a part of the electricity and gas supply chains. (At a simplified level, both industries have three segments: production, transmission, and distribution. Policymakers generally still treat the transmission and distribution functions as monopolistic.)

These legislative and regulatory decisions are premised on the belief that markets are superior to direct public control of rates and other terms of service. While this process is often described as “deregulation,” the term is a misnomer. This industrial restructuring is a transfer of discretionary authority from public bodies to private actors. Instead of structuring competitive markets in this new environment, the federal courts have defended private market power and helped scale back all public control of sellers and traders of electricity and gas. A case before the First Circuit (in which my Open Markets Institute colleagues and I filed an amicus brief in support of the plaintiffs) illustrates this theme.

In Breiding v. Eversource Energy, New England residents have accused two large utilities of violating antitrust and consumer protection laws by creating an artificial shortage of gas and engineering a chain of events that dramatically drove up the cost of electricity. The district court dismissed the plaintiffs’ complaint and expanded a judicial doctrine intended to protect the integrity of regulator-set rates to also insulate market-based prices from private lawsuits. This decision, which is consistent with rulings by other courts, grants gas producers, power generators, and traders the freedom to engage in exclusionary and other unfair practices. In electricity and gas, the net effect of legislative, regulatory, and judicial choices over the past 40 years has been a dramatic erosion of public control over public utilities.

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How Contemporary Antitrust Robs Workers of Power

Sandeep Vaheesan

Man Controlling Trade by Michael LantzThe political economist Albert Hirschman developed the idea that members of an organization can exercise power in two ways—through exit and voice. Market activity is associated with exit: consumers unhappy with the price or quality of service of their current wireless carrier can switch to a rival carrier offering lower rates or better service. Elections exemplify voice: voters can replace a corrupt or ineffective incumbent officeholder with a challenger promising to make the government work for ordinary people. For workers, both exit (joining a new employer) and voice (making demands of a current employer) are important. Despite the pro-worker aims of the framers of the Sherman and Clayton Acts, antitrust law today is an enemy of both exit and voice for workers.

For more than a generation, antitrust enforcers have permitted labor markets to become highly concentrated and have also interfered with the efforts of a large segment of workers to build collective power. Through their labor market actions, the Department of Justice (DOJ) and Federal Trade Commission (FTC) reinforce, rather than tame, corporate power. To create a progressive, pro-worker antitrust, legislators and policymakers must adopt a radically different vision for the field.

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Against the Cult of Competition

Sandeep Vaheesan –

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Competition is one of the talismanic words in law and economics and American life. It is often hailed as an unqualified good and touted as a solution to what ails society. The value of competition is endorsed across the ideological spectrum: Conservatives decry the lack of competition in schools and taxi cab services, while progressives highlight the dearth of competition among multinational corporations and call for a revival of antitrust law. Notwithstanding this trans-ideological commitment, we should not privilege competition at the expense of alternative means of structuring a democratic and egalitarian political economy. Three examples illustrate how competition is deficient as a general social organizing principle and should be promoted selectively, not categorically.

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