× Expand Cliff Owen/AP Photo Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division, left, said recently of antitrust prosecutions: “If we don’t use our scalpel, we shouldn’t be surprised to see the reformers sharpening their axes.”

In a competitive economy, what would we expect to see following the Trump tax cuts? If we were operating in an environment of competitive pressures, companies would use the windfall to expand production, pay higher wages to attract more and better-qualified employees, or invest significant sums in research and development. Preliminary results suggest that is not what happened. While there are doubtless a number of reasons why, one strong candidate is the concentration of corporate power. When companies are this sanguine about their market position, something has gone wrong—as John Oliver memorably put it, pitching a new slogan for United Airlines: “You want to fuckin’ rollerblade to Houston? Shut up and get in.”

In 1945, the Second Circuit Court of Appeals put forward, without much controversy, that the antitrust acts grew out of a sense that “possession of unchallenged economic power deadens initiative, discourages thrift and depresses energy; that immunity from competition is a narcotic, and rivalry is a stimulant.” By 2003, Justice Antonin Scalia had inverted this formula entirely: “the opportunity to charge monopoly prices … is what attracts business acumen in the first place; it induces risk taking that produces innovation and economic growth.” Though Scalia qualified this conclusion by suggesting that others attracted by the chance to dominate would compete to prevent anyone from wielding such power for too long, a survey of our economy today suggests his assumption is tragically wrong.

The court in 1945 went even further, asserting an idea that even those who disagree with Scalia often downplay: Congress, in enacting these laws, “was not necessarily actuated by economic motives alone.” They may well have preferred, “because of its indirect social or moral effect,” a system other than “one in which the great mass of those engaged must accept the direction of a few.”

Recently, a group of younger antitrust scholars, taking up a challenge issued to them at the recent “New Future for Antitrust” conference, has sought to lay the groundwork for how to reanimate this dual vision of antitrust—as both a prescription for a vigorous economy and an essential adjunct to building a better society, weakening corporations’ power to exploit labor and dominate political lobbying.

Because of the location of the conference, they call it the Utah Statement. It lists several basic principles and a set of doctrinal and enforcement-oriented proposals, while inviting additions and refinements, including arguments that certain issues are best addressed through other areas of industrial policy, rather than antitrust. The Utah Statement is concise but touches on a large number of issues, and is offered up “as just one starting point in an ongoing discussion.” With several presidential candidates interested in antitrust reform, it is worthwhile to translate some of these proposals for an audience outside the academy. Many of them can be usefully categorized in the following manner: mergers, presumptions, and democracy-reinforcing reforms.

Mergers

In Fiscal Year 2018, according to the annual report issued by the Federal Trade Commission and the Department of Justice, 2,111 proposed mergers crossed the size threshold (approximately $84 million) that requires reporting to the government. During that same year, the FTC and DOJ issued second requests (a substantial investigation into the proposed merger) in only 45 cases and ultimately brought just 39 merger enforcement actions. Of the mergers reported that year, 275 involved more than $1 billion in total assets, but only about 10 percent of those triggered a second request. Moreover, most of these enforcement actions were resolved by settlement agreements, which in practice can mean little, because both judges and the federal government are very reluctant to unwind a merger even if evidence emerges that the settlement failed to protect competition.

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To take one example from the past year, Northrop Grumman was cleared to merge with Orbital ATK, a company the FTC calls the “premier supplier” of solid rocket motors, an essential input in the missile systems Northrop and its competitors supply to the government. The settlement requires the merged company to turn over records regularly, allow inspections, and not to overcharge Northrop’s direct competitors, such as Lockheed Martin. However, enforcement is made more difficult because unwinding the completed merger is essentially off the table as a threat. Moreover, monitoring—if it’s going to be sufficiently serious to forestall anti-competitive behavior—is costly to the agency, thus only so many of these agreements are feasible at a given time.

This grim state of affairs is one of the major issues that the Utah Statement authors hope to reverse. In addition to pushing for more robust requirements before clearing mergers (above and beyond monitoring and anti-overcharge provisions like those in the Orbital agreement), they propose to reinvigorate what is called the “structural presumption” in horizontal mergers (mergers between direct competitors). The presumption, formally still a part of the Horizontal Merger Guidelines, provides thresholds of market share beyond which agencies will require increasingly strong evidence that the merger will not harm consumers. In theory, it decreases enforcement costs by shifting the burden of proof to the merging parties.

While conservatives continue to argue that the presumption places an insurmountable burden on merging companies, you wouldn’t know it from reading cases from the last 15 years. Mergers regularly blow past the thresholds, as the Sixth Circuit Court of Appeals put it, “in spectacular fashion.” And even this does not guarantee success: A court in 2015 refused to enjoin a proposed merger between the second- and third-largest global providers of radiation sterilization services. Without the injunction, the FTC decided against trying to convince the court that the merger should be undone. The current presumption regime allows conservatives to have it both ways: They decry the (relatively low) thresholds, even as hostile courts and tepid enforcement render those thresholds largely meaningless.

Overturning Chicago-Style Presumptions

Even as the structural presumption has been weakened, courts influenced by the “Chicago school” have cemented a number of anti-enforcement presumptions into antitrust laws, undermining more and more claims that fall outside a conspiracy to fix prices. The Chicago paradigm does not hold that markets never require action by the state, only that most state action is unnecessary or wrong. As John Stuart Mill said about the Chicago school’s close cousin, laissez-faire economics: “every departure from it, unless required by some great good, is a certain evil.” This ably describes the approach of many of the Chicago-influenced antitrust doctrines that the Utah Statement wants to reverse.

For example, take predatory pricing. The maximalist Chicago view—that predatory pricing was so irrational that cases claiming it should be summarily dismissed—failed to win over the courts, but the presumption arising from this view accomplished essentially the same end: Two Supreme Court cases in the 1980s declared that “predatory pricing schemes are rarely tried, and even more rarely successful.” As a result of this decree, plaintiffs are obliged to prove (1) that the would-be monopolist priced below cost (which requires expensive expert argument at trial to determine, assuming you can convince a court to adopt your definition of “cost”) and (2) that the defendant had a “dangerous probability” of recouping all losses, with interest. (“Dangerous probability” seems to translate as “very high probability,” in light of how presumptively rare and unsuccessful courts think these schemes are.)

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Consider Uber, which lost $20 billion between 2015 and 2019, according to a post on the Stigler Center’s ProMarket blog written by Hubert Horan. Horan notes that:

Uber is actually a higher cost/less efficient producer of urban car services than the taxi companies it has driven out of business; individual Uber drivers with limited capital cannot acquire, finance, maintain and insure vehicles more economically than Yellow Cab; expenses other than drivers, vehicles, and fuel account for 15 percent of traditional taxi costs but Uber charges drivers 25-30 percent without coming close to covering their actual costs.

Based on Supreme Court precedent, it is incredibly difficult to imagine convincing a court that Uber will ever recoup these losses, though the money was clearly deployed to obtain a monopoly. Some of this massive transfer of wealth went to consumers in the form of slightly lower fare prices, but the ability to change prices during the day meant that many paid more. (As Horan notes, taxi demand “is sociologically bipolar; 35 percent of users have incomes over $100,000 and 55 percent have incomes under $40,000.” So surge pricing works out well for the company even as it likely means fewer total fares.) It seems likely that the taxi industry will experience increased financing costs regardless of whether Uber and Lyft attempt to shift to actually making profits. As long as there are mountains of investor cash floating around, the threat that this cash will be used to subsidize predatory tactics will remain and will increase credit risk for the taxi industry’s creditors. Rebuilding after all the bankruptcies will also not be a costless task.

In sum: We have significant benefits for some investors (mainly insiders and early investors); some benefit to some consumers; significant harm to workers, other consumers, and to the competitiveness of the industry; and no reasonable prospect of litigation success under the antitrust laws.

Democratizing Power

The Utah Statement hits on one of the newest lines of academic discussion (and one of the oldest purposes of the antitrust laws): the potential for competition policy to reinvigorate our democracy. Over the phone, professor Marshall Steinbaum, an economist and one of the statement’s authors, pointed to two recent major cases that illustrate the need for “deconcentrating and democratizing power” as guiding antitrust principles. In 2015, the Seattle City Council authorized rideshare drivers (theoretically classified as independent contractors) to unionize. And in 2019, a group of talent agencies sued the Writers Guild of America, challenging new rules prohibiting WGA members from working with agencies that collect “packaging fees,” which draw from the budget of the writers that the agents are supposed to represent. The city of Seattle and the WGA were both sued for violating antitrust law by enabling workers to band together for better terms. Once again, we are repeating the awful practices of the Gilded Age; federal injunctions against labor were a common weapon for management in those days. Worse yet, the federal government—on its own initiative—took sides against labor in both of these cases, another throwback to the Gilded Age.

The broader problem, as Steinbaum emphasized, is that we authorize certain forms of coordination in our markets and we severely penalize other forms. The Utah Statement can be seen as part of a push to get scholars and the public to engage with why we privilege the coordination that we do. Why can the NCAA dominate players’ lives, but players cannot fight back? Why are public defenders or gig economy workers barred from working together against their employers? Why do we allow all these mergers, which themselves allow greater coordination rights to a company to be wielded against employees, suppliers, and even legislatures?

A Generational Shift

Chicago has not dominated the scholarly scene in many years, as academics and enforcers have largely broken with them on, for example, vertical conduct (say, Northrop wielding its dominance of solid rocket motors against Lockheed), strategic anti-competitive behavior, and the antitrust implications of intellectual property and network effects. However, lifetime federal court seats—coupled with perhaps the most successful right-wing organization out there, the Federalist Society—have given Chicago a long afterlife. The Utah Statement arises in part from a conviction that we should think more broadly about antitrust if we want to accomplish significant reform.

A concrete example of this comes from differing treatments of the consumer welfare standard, the foundational framework that orients courts’ analysis of antitrust claims. Under this standard, when prices go up, or quantity or quality of products and services goes down, consumers are harmed, and their injury may result in antitrust redress. However, implementation tends to focus almost entirely on price.

The authors of the Utah Statement believe this is too narrow and lacks a foundation in the text of the statute or congressional intent. They also believe it has made antitrust unable to meet the challenges of the modern economy. The statement lays out a vision of antitrust as a bulwark against the private power that “breeds antidemocratic political pressures and undermines liberties.”

For example, Steinbaum highlighted the retail sector, widely considered in mainstream antitrust circles as a consumer welfare success story. While there is significant concentration in parts of the sector, people obtain products quite cheaply because large corporations have leveraged technological innovations and global supply chains. He emphasized, however, that it is difficult to look at the human cost of that global supply chain, or the domestic labor practices of Walmart, or Amazon’s push to absolve itself of product liability, and say that we should have more sectors like this.

Conservatives have raised alarms over this broader focus beyond consumer welfare. The current head of antitrust at DOJ, Makan Delrahim, urging a strategy of placating the reformers, recently told the Federalist Society that if “we don’t use our scalpel” (actually prosecute violations under consumer welfare), then “we shouldn’t be surprised to see the reformers sharpening their axes.” Professor Josh Wright, a conservative economist and former commissioner of the FTC, has suggested to centrists that they push back against reform before they, too, become its targets.

This appears to be yet another area in which conservatives have been thinking far more strategically and materially than liberals. Conservatives have been grooming the federal judiciary about their ideas for years. On the left, there’s nothing quite like 105 corporations contributing to your Law and Economics Center so you can take hundreds of federal judges on a tropical getaway and teach them conservative economics, as was especially prevalent in the 1980s and ’90s. This messaging and PR groundwork allows Delrahim and Wright to characterize a defense of their ideological position as a defense of economics and expertise itself.

The Utah Statement authors recognize that a better approach to economics is important but insufficient on its own. They know that, as the economist F.M. Scherer (who has plenty of positive things to say about Chicago economics) put it: “Economists’ subject matter is intrinsically complex, characterized by uncertainty, reciprocal expectations puzzles … and incommensurable values. Our data are often deficient and our empirical methodologies less than satisfactory (though improving).” It is not enough to appeal to expertise when that expertise has yielded paltry results. To push back against conservative power, the Utah Statement asks us to see antitrust as a “means to a thriving and democratic society and an instrument for both the creation of opportunity and the distribution of wealth and power.”