In the last few weeks the [FTC] has repeatedly changed policy direction without giving the public any real notice or right to be heard. Noah Phillips, FTC Commissioner
I intended to end this series of posts with Part 14, but so much is happening on the antitrust front, especially coming out of the Biden Administration, that I’ve decided to add one more essay to the series before moving on.
When I began writing about antitrust it was my objective to point out how unwieldy our ancient and creaky antitrust laws are when it comes to dealing with Big Tech in general and with the huge platform companies in particular. Somewhat to my discomfiture, the main body of opinion that agrees with me is coming from the Progressive Left, especially the neo-Brandeisians.
President Biden has added three powerful voices from the neo-Brandeisian wing of antitrust thinking to his Administration: Tim Wu at the National Economic Council (he is essentially Biden’s top advisor on antitrust issues), Lina Khan as FTC Commissioner, and Jonathan Kantor as head of the Antitrust Division of the Justice Department.
Wu and Khan were colleagues on the faculty of Columbia Law School and they, like Kantor, represent an extreme wing of antitrust thinking in America. Khan penned a famous article for the Yale Law Journal a few years ago that attacked Amazon on virtually every front. Wu, meanwhile, is the author of a book called The Curse of Bigness. Change a few names and both the article and book could have been written by Louis Brandeis thirteen decades ago (indeed, Brandeis coined the phrase “the curse of bigness”).
And that’s the problem with the neo-Brandeisian approach. On the plus side – and it’s a big plus – the neo-Brandeisians at least acknowledge the serious limitations of using existing antitrust laws to tackle Big Tech and they are searching for better answers. On the negative side – and it’s a big negative – they are so blinded by their Progressive ideology that there is little intellectual content to their approach. They are simply aggressive advocates for cutting Big Tech down to size.
Khan’s Note in the Yale Law Journal – her “note” is 95 pages long – spends most of its time being outraged by virtually everything Amazon does, much of which criticism I’ve debunked in these pages. Khan does have some interesting things to say about predatory pricing, but that’s hardly the burning issue of the day even if she’s right.
In the end, her big idea (I’m serious about this) is that Amazon and the other big platform companies should be regulated as public utilities. Can she be serious? Maybe Khan is too young (born 1989) to have noticed the immense problems associated with governments running businesses, whether its Communism, socialism, or the US Post Office. We had hoped those dark days were behind us.
Wu is, in a way, even worse. His entire argument boils down to “big-is-bad.” Maybe Wu has been in academia so long he hasn’t noticed that the global economy is huge and that the cuddly little businesses he advocates couldn’t hope to compete in it. If we actually adopted Wu’s approach the US economy would collapse overnight – and he is Biden’s top antitrust advisor.
As I noted earlier in this series, a main problem with the poor results of antitrust enforcement in the US was the lack of intellectually coherent theories behind the laws and enforcement actions. Unfortunately, neo-Brandeisian approaches perpetuate this problem, reaching back 130 years for a model.
To be fair, at the core of neo-Brandeisian concern is the fact – and it is a fact – that American industry has become ever more concentrated. This is true not just among platform companies, but also in many other industries, including candy, beer, mobile phone service, airlines, and so on. But is this good or bad? Neo-Brandeisians believe industry concentration is at the root of many evils, including inequality, the decline of labor unions, even climate change(!).
This seems unlikely on its face – the evils just enumerated resulted from many complex changes in American and global societies, of which antitrust policy is only a minute instance.
Moreover, the evidence that lax antitrust policies promoted industrial consolidation is mixed at best. A more likely explanation is that hyper-globalization has intensified competition to the point that only the largest, most productive companies can prosper. These companies have reduced consumer prices and increased consumer choice and they can still make handsome profits because they are so efficient their costs of production continue to drop. Breaking these companies up, goes this argument, wouldn’t improve competitiveness, but destroy it.
Thus it is that we’ve come to the point where, by one standard – that of the neo-Brandeisians – the big platform companies are irresponsible goliaths that need to be stopped before we are all crushed under their feet. By another standard – that of the Chicago School – the platform companies are the glory of American economic competitiveness and we should encourage the growth of more of them.
As an aside, I might point out that many of the complaints about Big Tech can also be laid at the feet of Big Pharma. But where would we have been during the pandemic without Big Pharma and its extraordinary production of highly effective vaccines in record time? Where we would be – at least half a billion of us – is dead.
I don’t know who is right, but I suspect that neither the neo-Brandeisians nor the Chicago School has a corner on wisdom in this debate. There are many legitimate concerns about Big Tech that the Chicago School’s “consumer welfare” standard struggles to deal with, but at least they have a standard – the neo-Brandeisians seem to have little but animosity.
Earlier in this series I suggested a couple of alternatives – leaving it to private sector litigation, Francis Fukuyama’s “middleware” companies idea, unregulated middleware companies – but the reality is that I’m no expert on antitrust.
But other people are experts, and before the Biden Administration risks upending half a century of American alpha competitiveness, and before the Chicago School allows Big Tech to become too big to control, we need to find a third way. Unfortunately, nobody is looking for it.
Next up: Richard Lugar
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[To subscribe or unsubscribe, drop me a note at GregoryCurtisBlog@gmail.com.]
Please note that this post is intended to provide interested persons with an insight on the capital markets and other matters and is not intended to promote any manager or firm, nor does it intend to advertise their performance. All opinions expressed are those of Gregory Curtis and do not necessarily represent the views of Greycourt & Co., Inc., the wealth management firm with which he is associated. The information in this report is not intended to address the needs of any particular investor.
