Friday, May 3, 2019

Spencer Waller on The Antitrust Paradigm: Restoring a Competitive Economy

Implementing Baker’s Antitrust Paradigm


Spencer Weber Waller
John Paul Stevens Chair in Competition Law
Loyola University of Chicago School of Law


Jonathan Baker’s new book is a terrific synthesis of his approach to competition law and policy based on a lifetime of teaching, scholarship, and accomplishment in the real world.   Baker is a longtime professor at American University Washington College of Law with a JD and PhD in economics, a prolific scholar, the former chief economist of both the Federal Communications Commission and Federal Trade Commission, as well as a testifying or consulting economist in numerous antitrust cases.   The Antitrust Paradigm is a welcome addition to the array of monographs laying out differing comprehensive views of the field including those from Robert Bork (1978), Richard Posner (1979), Page and Lopatka (2007), Herbert Hovenkamp (2008), First and Gavil (2014), and Tim Wu (2018).

Baker works within the existing paradigm to nudge antitrust law and policy towards more robust enforcement based on nuanced post-Chicago economic approaches.  He integrates and expands on familiar themes from his past writing including the:

  • current threats to the political bargain that undergirds antitrust law and policy;
  • need for reinvigorating merger enforcement;
  • new approaches to addresses innovation and competition; and
  • need for preventing anticompetitive exclusion.

At the risk of oversimplifying a complex and sophisticated book, Baker advocates using a series of presumptions to solve the competition problems of the new economy.  He seeks to adjust current doctrine to meet the challenges of algorithmic competition, dominant web platforms, high-tech exclusion, and injury to workers and suppliers by correcting erroneous assumptions about markets and institutions.  The notion of appropriate presumptions to give content and structure to the rule of reason permeates most of the chapters, including the need to correct erroneous assumptions of current error cost analysis.

                Baker goes beyond critique and proposes a five point action plan which urges:

  • Increasing awareness of market power;
  • Nurturing political mobilization against the exercise of market power;
  • Using the antitrust agencies to push courts (and other governmental agencies) to strengthen antitrust;
  • Convincing courts to question the Chicago school approach; and
  • Having plaintiffs rely on arguments rooted in modern economics to persuade skeptical courts.

I think the most interesting question for any such call for action is how do we achieve Baker’s desired antitrust world.  Let me expand on the limited space Baker devotes to this side of his argument.  Let us assume that whoever is President starting in January 2021 has the good sense to appoint Jonathan Baker as the head of the Antitrust Division or the Federal Trade Commission (or both if that is constitutionally possible).  What are the internal and external steps necessary to achieve his action plan and doctrinal changes?

Some things are relatively easy and quick and can be achieved without legislative or judicial approval.  Speeches, research, reports, and hearings can generate a legal, factual, and economic basis for change in the desired direction.  One can imagine revised horizontal and vertical merger guidelines, new exclusion guidelines for dominant firms, and maybe more.  Case selection becomes key with a search for cases strong on the law, facts, and post-Chicago economics designed to cement policy into precedent.  Similarly, a thoughtful amicus program can support (rather than interfere) with private and state enforcement of the antitrust laws as welcome partners to the federal agencies.   Competition rule making for the FTC is another option to enact Baker’s principles into law.  The United States also would interact with the rest of the world differently in promoting a more progressive enforcement minded agenda.

Such internal changes would be helpful, but not necessarily enough.  Administrations and priorities change and soft law and guidelines can be rewritten or ignored.   Judges can decide cases however they wish especially when a given case or doctrine has evenly matched support and opposition from advocates and experts on both sides.  To ensure that the next generation of executive branch officials, independent agencies, and courts vigorously enforce the antitrust laws in accordance with the sensible recommendations offered, more is needed.   All the nuanced economic analysis supported by a factual record may not be enough if a well-conceived case cannot garner five votes in the Supreme Court.

Congress needs to step up its game and pass new legislation that binds the judiciary as much as possible to the dictates of a competitive and consumer-friendly economy.  If Congress can’t or won’t make such changes, then there are still many helpful changes that can be accomplished through regulation or executive action, understanding the reality that such changes may not survive the next Presidential election.  State legislatures also can weigh in on these subjects.  Imagine a world where California, New York, Massachusetts, Illinois, and other progressive states rethink their state antitrust laws along the lines suggested by Baker.

The biggest challenge is to persuade the public at large of the need for a competitive economy that caters to the needs of actual consumers and the desired reforms to achieve that goal.  I doubt we will have another Election of 1912 where all the major candidates primarily ran on their visions of political economy and the need for antitrust reform.  However, I am encouraged that some of these issues were front and center in the election of 2016 and are currently key parts of the campaigns of the current Presidential field.  Enacting the antitrust world that Baker proposes ultimately relies on electing candidates and selecting judges at every level that believe (as he does) that markets are great, but they are not magic and do not always quickly or effortlessly correct themselves.



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