Khan on Ohio v. American Express

Lina Khan 

I recently published two pieces assessing Ohio v. American Express, the Court’s most significant antitrust opinion in a decade. At Vox, I explained how the Court’s 5-4 decision ratified a new and troubling approach to antitrust. In short, the Court created a special rule for what it describes as “two-sided transaction platforms”—a term that encompasses, for example, Amazon and Uber. Antitrust plaintiffs seeking to hold these firms accountable for wielding their power in anticompetitive ways will have to meet a much higher burden, at the earliest stage of litigation. At Take Care, I identify two areas where the Court’s majority showed remarkable disregard for traditional antitrust principles. Specifically, the Court’s reasoning assumed conduct not at issue in this case—which means it introduced a special rule that is untethered from the practices that could justify the exception in the first place. Moreover, its special rule turns on a concept that is far too malleable to sustain a critical legal distinction, undermining administrability and predictability.

In short, the Court’s decision is likely to suppress legitimate antitrust suits. It comes amid growing recognition that antitrust has failed to keep markets competitive, and that dominant companies have concentrated power across our political economy, enabling firms to depress wages, hike prices, block the rise of new businesses, stifle innovation, and exert undue political power. American Express freshly illustrates the role that the judiciary has played in defanging antitrust over decades, marshaling select economic theories and methodologies to craft jurisprudence deeply at odds with the values that animated antitrust laws. This case is a good reminder that revitalizing antitrust will require Congress and the antitrust agencies to reassert their authority over shaping the substantive content of antitrust policy.

 

Lina Khan is currently a legal fellow at the Federal Trade Commission. All views expressed in this piece are her own.

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 –

business-competition-1024x681

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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Will Trump’s DOJ Crack Down on Massive Vertical Mergers?

Lina Khan –

Over the weekend, CVS announced a proposal to acquire Aetna. The $69 billion merger would be the biggest deal ever in the health insurance industry, consolidating in a single entity the role of insurer, pharmacy, and pharmacy benefit manager. There’s good reason to think the deal—if approved by the Justice Department—would harm the public.

To get a better sense of how DOJ might view the deal, it’s worth reviewing another recent action: its move to block AT&T/DirecTV from acquiring Time Warner. That deal—first announced in October 2016—would join the biggest telecom company in the country with some of the most popular news and entertainment producers, creating a behemoth and driving further consolidation in the media and telecommunications industries. By concentrating control over distribution and content in a single company, the acquisition would create a Pandora’s box of perverse incentives and give the merged entity significant power over both rival companies and consumers. The public would pay more for the same or worse service, independent programmers and producers would find it even tougher to reach market, and the health and diversity of our media ecosystem would further suffer.

Most coverage of DOJ’s action has focused on the possibility that President Trump improperly directed the Antitrust Division to oppose the merger, given his disdain for CNN (owned by Time Warner). To be sure, there is sound reason to be concerned: Trump has repeatedly attacked CNN for unfavorable coverage, even tweeting a video of himself wrestling a CNN figure to the ground. Journalists reported that White House advisors discussed using the merger review process as potential leverage over Time Warner to seek favorable coverage. Given the administration’s disregard for the rule of law and Trump’s penchant for picking winners and losers, it is reasonable to wonder whether the White House interfered in DOJ’s enforcement decision. The prospect is disturbing, and—as my organization, the Open Markets Institute, has recommended—Congress should hold hearings to ensure no improper meddling.

But it’s worth looking beyond Trump’s potential involvement to recognize that—on the merits—DOJ’s decision to oppose the deal is significant. In recent decades the government has shifted to a permissive approach to merger enforcement generally—and especially towards vertical mergers, which join two companies operating at different levels of a sector, like AT&T/DirecTV and Time Warner. Traditionally, the government had viewed vertical tie-ups skeptically, recognizing that a merger between, say, a dominant shoe manufacturer and leading shoe retailer would position the new firm to hike costs for competing retailers and manufacturers, or discriminate against them in other ways. Through the 1970s, the antitrust agencies sued to block vertical mergers on these grounds.

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