Wednesday, May 15, 2019

Jason Furman on Jonathan Baker's The Antitrust Paradigm

Back to the Future of Antitrust

Review of The Antitrust Paradigm

post by Jason Furman

Draft: May 14, 2019

Although many lament the increasing monopolization of the economy, one admittedly narrow market is defying this trend: books about the monopolization of the economy. The last year has seen excellent contributions to the topic including by Steven Pearlstein, Eric Posner and Glen Weyl, Jonathan Tepper and Tim Wu. We can now add Jonathan Baker’s The Antitrust Paradigm to the list. The competition for books about monopoly may not have resulted in lower prices, but it is ample testimony to the ways that competition can benefit consumers through variety and quality.

The Antitrust Paradigm is about as passionate and readable as a book with 976 footnotes can be. Nine reasons to believe market power has increased? Check. Rebuttals of nine Chicago-school style arguments against more vigorous antitrust enforcement? Check. Five high-level exclusionary behaviors by platforms, with four subsets of exclusionary behavior just under the heading of “exclusivity through vertical merger and exclusive dealing”? Check. Five proposed new rebuttable presumptions or rules? Check.

Just about every argument made in The Antitrust Paradigm could, or at least should, hold up in a court of law. This is to be expected given Baker’s combination of academic economics, law, and substantial experience in government (including as the Director of the Bureau of Economics at the Federal Trade Commission as well as stints at the Department of Justice, the Federal Communications Commission and the Council of Economic Advisers).

All of these specific arguments are embedded in a broader theme, that antitrust emerged as a “centrist” alternative to laissez faire and regulation, culminating in the “structural” period of antitrust that began around 1950 but has (partially) ended with rise of the Chicago School. Baker argues that this intellectual revolution has been invalidated by the outcome it has contributed to: increased concentration in the economy, slower productivity growth, and, in a particularly detailed analysis, reduced innovation.

Baker does accept the Chicago School premise that antitrust should be grounded in economics but shows that modern economics justifies a tougher approach both to mergers and enforcement against existing businesses. He further argues that best way to step up enforcement in an efficient and administrable manner would be to rely on the types of presumptions that have guided antitrust, but to reformulate these in a manner that is more consistent with the modern economic literature and more pro-competition. Although Baker does not explicitly frame his arguments against the renewed “neo-Brandesian” or “structuralist” approach to antitrust advanced by people like Tim Wu, Lina Kahn, and Barry Lynn, there are enough stray references to it that you can tell that he finds its arguments somewhat wanting and also unnecessary in building the case for more vigorous action.

If forced to quibble with The Antitrust Paradigm, I would cite two places where Baker’s deep grounding may come at the cost of his contributing to expanding the broader policy debate. The first is his (de facto) argument that we do not need to change the law but just its application. As Baker writes, “I have therefore emphasized the sort of arguments that can convince the [Supreme] Court: economic ones... the justices will be most responsive to economic arguments and evidence concerning competition and welfare.” For someone sitting at the FTC, this is the right approach. Given the challenges to changing the Court’s attitude, however, changes in the law itself may be warranted and I would love to know what Baker thinks those changes should be and how he would widen the debate to make them more acceptable in the future.

The second quibble is that Baker focuses almost exclusively on competition policy and dismisses regulation. At times Baker’s exclusive reliance on competition policy seemed like a carpenter with a hammer for whom everything looks like a nail. But not everything is a nail and in some cases regulation may be warranted. This is certainly the case for natural monopolies where utility-style regulation may be warranted. I do not believe the natural monopoly designation applies to the leading digital platforms, but in that area there is also substantial scope for pro-competition regulation to facilitate entry and switching, as I outlined in recommendations for the UK government.

These quibbles reflect more a desire to hear more from Baker and see him expand the debate further, not a disagreement with any of his analysis or ideas. And his analysis and ideas are so rigorously and carefully argued that The Antitrust Paradigm will be the standard text on a revived economic approach to antitrust for some time to come.

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