By Kirk Victor. Originally published on FTC:Watch on May 5, 2017.
When the University of Chicago — of all places — recently held a three-day conference devoted to whether the US has a "concentration problem," it demands that you sit up and take notice.
After all, the "Chicago School" of antitrust enforcement — with its emphasis on efficiency and consumer welfare along with its strong laissez-faire tilt — has dominated thinking for decades. So the gathering in the Windy City shows that the increasing chatter among academics, economists and government officials that the antitrust watchdogs should be more aggressive cannot be ignored.
"Yeah, this is an inflection point," Matt Stoller, a fellow at the open markets program at New America, a think tank, said in an interview. Antitrust authorities will "feel political pressure from the public," and they must deal with new research that shows concentration is a serious problem, said Stoller, who participated in the Chicago program.
But just how much this building momentum for more enforcement will affect the thinking of the new team in charge of antitrust is a subject of debate. At the moment things are in limbo, as the new permanent players have not yet taken posts at the Justice Department and the Federal Trade Commission.
Makan Delrahim has been nominated to head the Justice Department's antitrust division and Tad Lipsky is the acting head of the Federal Trade Commission's Bureau of Competition.
"Frankly, DOJ antitrust or FTC have never felt political pressure from the public, [though] they have felt political pressure from the antitrust bar," Stoller said. "That will have an impact on them. Even if they don't [respond], the pressures have their ways of working anyway."
The Chicago conference brought together "truly a new generation — in their 20s and 30s — who reject Borkism, reject the libertarian approach, consumerism," said Barry Lynn, who directs the open market program, is a senior fellow at New America and was on a panel in Chicago. "The hold that libertarianism has had on law and economics remains in place, but it is loosening."
Diana Moss, president of the American Antitrust Institute, agreed that it is noteworthy that such a gathering took place at the university, where she also participated on a panel. But Moss noted that it shows that proponents of the Chicago School "want in on the debate. They are smart people, accomplished, good thinkers. But we didn't hear anything at the conference about disavowing conservative ideology."
Still, Moss is of the view that ultimately the evidence, the data, will make all the difference. "It is hard to argue with evidence — it really is," she noted, pointing to "rising prices and higher levels of concentration."
But not everybody is buying it. "We are back in this world of blaming every bad thing that happens in the world on insufficient antitrust enforcement," said Geoffrey Manne, founder and executive director of the International Center for Law and Economics, which supports property rights from "inefficient interference" by government agencies. "That is just crazy."
Manne found it impossible to ignore what he called "the uptick" in "sort of populist antitrust — the pendulum is swinging that way."
But Manne says that these times demand humility, as the evidence cited by critics of the Chicago School is far from decisive. "Nobody can confidently say we have too much, too little or just the right amount of antitrust enforcement," he continued. "Any argument anyone makes today saying some market is anticompetitive and antitrust enforcement would have prevented that — they are making it up."
"I'm making it up too when I say antitrust enforcement would deter all this innovation," he acknowledged. "All we are doing is talking about the broad strokes of very basic economic theory."
But calls for more aggressive enforcement are based on more than just finger-pointing. The data supporting such a shift includes a book in 2015 authored by Northeastern University economics professor John Kwoka that offers a retrospective analysis of thousands of mergers.
Kwoka found the antitrust authorities are green-lighting too many anticompetitive deals and consumers are taking a hit. Though two FTC economists questioned Kwoka's methodology — and Kwoka responded by citing flaws in their critique — the book has generated spirited debate about antitrust enforcement.
Other data include an "issue brief" released last year by the White House Council of Economic Advisers which concluded that competition was lagging. Then, acting antitrust division chief Renata Hesse made the remarkable comment in a speech last September that enforcers are "justifiably more skeptical about the promise of procompetitive benefits of mergers and the likelihood that remedies solve the competitive concerns."
But Manne had little patience for her take. "She doesn't know that," he said of Hesse's view. "She has no proof of that. She has no evidence that that is the case whatsoever."
Manne sees things differently. "My theory is if you threaten too much enforcement, you will get too little investment, too little innovation," he said. "But I don't have strong empirical evidence on this. Kwoka purports to have empirical evidence but no one's evidence is strong on this. We have to take it all with a grain of salt."
For now, even as the debate over antitrust enforcement heats up, the big question is whether it really will have an impact on the new players making those calls during the Trump administration. Donald Trump as a presidential candidate raised the issue in the context of some media mergers and his populist comments sounded very much in line with Chicago School critics.
Trump charged that the proposed AT&T-Time Warner merger had to be challenged because "it's too much concentration of power in the hands of too few."
The merger, he added, "concentrates far too much power in one massive entity that is trying to tell the voters what to think and what to do," and he warned that "deals like this destroy democracy."
What do Trump's comments mean for Delrahim and others charged with antitrust enforcement?
"They [Trump's appointees] are not immune to political influence, especially at the DOJ," Manne said. "You have a president who has himself talked about using antitrust laws to achieve his political ends."
"I would love for Makan to be completely insulated from that — it may have just been campaign talk —but certainly it is possible that there will be some [White House] pressure," he said. "And then there is all this chatter — this narrative [about the need for more aggressive enforcement]. Makan is too nice a guy to talk about that stuff the way I do."
"Makan will take it seriously. He will look at it. He won't be immune from the pressure to do something coming from those quarters," Manne continued. "Whether that ultimately means that he changes when it comes to signing on the dotted line of an enforcement action, I don't know, but I am sure it will have some influence."