Publications, Scholarly and Popular

Scholarly • Popular

On the Misuse of Regressions of Price on the HHI in Merger Review (Nathan Miller et al.),  Journal of Antitrust Enforcement, July 2022.

Economists widely agree that, absent sufficient efficiencies or other offsetting factors, mergers that increase concentration substantially are likely to be anticompetitive. Further, holding everything else equal, the magnitude of anticompetitive effects tends to be larger, the larger is the increase in concentration caused by the merger. As market concentration is more easily measured than the post-merger equilibrium (which is unobserved ex ante), the use of concentration screens in the antitrust review of mergers is sensible and economically well-founded.
It might seem natural to determine whether prices are positively related to measures of concentration, such as the Herfindahl-Hirschman Index (HHI), comparing across different geographic markets or time periods. This might be implemented by using a simple regression of price on the HHI. However, for reasons that we describe, regressions of price on the HHI should not be interpreted as establishing causation. That is, they do not inform how a change in concentration from a merger would affect prices. Courts and other policy-makers should not rely on regressions of price on the HHI for the purposes of antitrust merger review.

Oligopoly Coordination, Economic Analysis, and the Prophylactic Role of Horizontal Merger Enforcement (Jonathan Baker & Joseph Farrell), University of Pennsylvania Law Review, 2021.

This article takes a fresh look at a longstanding issue in antitrust economics and policy: the problem of oligopoly coordination. First, it explains why coordinated conduct in oligopoly markets is a serious problem and an appropriate concern of antitrust enforcement. It shows that empirical economic studies, experimental results, real-world examples, and economic theory do not support the claims of antitrust commentators and courts influenced by the Chicago school that coordination is unlikely absent express collusion and that express collusion itself is uncommon. Second, it clarifies that coordinated outcomes can arise both from “purposive” conduct, when firms attempt to develop a common understanding and deter price-cutting, and from “non-purposive” conduct, when firms respond to one another’s price changes in a natural and predictable business way. While non-purposive conduct was once a central concern of antitrust enforcement, the article explains, it is largely and inappropriately ignored today. Third, the article shows how the detailed analysis of the potential coordinated effects of horizontal mergers should turn on whether the coordinated effects concern principally involves purposive or non-purposive strategic conduct. It also explains that greater concentration can be expected to make coordination more likely, stronger, or more effective, whether through purposive or non-purposive conduct. This supports a structural merger policy, by which mergers between rivals that increase concentration significantly in a concentrated market are presumed to harm competition.

Finding Common Ground Among Antitrust Reformers (Jonathan Baker), Antitrust Law Journal, 2022.

This forthcoming article explains why antimonopolists (neoBrandeisians) and post-Chicagoans (centrist reformers) should work together to advance both groups’ goals. Doing so is likely a prerequisite for assembling a successful political coalition and mobilizing a broad range of support for antitrust reform. To place in context the views of the leading camps in today’s antitrust policy debate, the article explains how modern antitrust was adopted in the 1940s as part of a broader effort to support inclusive economic growth, how that approach to economic regulatory policy was modified in the 1980s, and why that approach is under pressure today. The article also describes the neoBrandeisian intellectual framework and policy positions, and points out where they differ from the centrist reform perspective. With that background, the article explains why the antimonopolist camp and the centrist reform camp should work together, identifies fault lines they must navigate in order to do so, and identifies areas of potential common interest.

Anything, Anytime, Anywhere: Is Antitrust Ready for Flexible Market Arrangements? (Barak Orbach) Antitrust Source, April 2021.

The migration of business and social activities from physical to virtual venues, once known as the transition to the “New Economy,” is one of the defining characteristics of the digital revolution. This article explores a relatively underdeveloped aspect of the migration: the proliferation of fluid forms of arrangements, which, in the absence of a better term, I call flexible market arrangements (FMAs). In their essence, FMAs are alternatives to some of the structured arrangements that pervaded the brick-and-mortar economy. The core feature of FMAs—the flexibility—is derived from the elimination of economic constraints that are inherent to activities in physical spaces, such as the location of workers and consumers, capital investments, long-term contracts, employment relations, and preferences for in-person interactions. Concerns about competition in digital and labor markets and long-term trends in income and wealth inequality have shaped debates over antitrust policies in recent years. These debates, I argue, have failed to identify adequately the significance of the increasing prevalence of FMAs. This article explains why the rapid spread of FMAs will become the subject of antitrust litigation, investigations, and legislative proposals.

Antitrust in the Shadow of Market Disruptions  (Barak Orbach)  Antitrust, August 2020.

The COVID-19 pandemic triggered a chain reaction of large-scale disruptions, which drew attention to an old antitrust theme: the relationship between competition policy and large-scale market disruptions, such as wars, financial crises, natural disasters, pandemics, political upheavals, and technological change. This paper revisits the topic.  Discussions of the topic in the literature emphasize concerns that large-scale disruptions tend to lead to the relaxation of antitrust enforcement and assertions that lax antitrust standards subvert preparedness for large-scale disruptions. The COVID-19 pandemic inspired reams of commentary presenting both sets of concerns. Despite their popularity in the literature and public discourse, these claims are uninformed.  The United States partially suspended antitrust enforcement three times in the first half of the 20th century, when the belief that competition was ruinous and wasteful was common and influential. By contrast, today, there is a broad consensus that the competitive process is beneficial and that antitrust standards have been overly lax in recent decades. It is, therefore, doubtful that the COVID-19 crisis would lead to further relaxation of enforcement standards.  Assertions that lax antitrust standards undermine national preparedness for disasters, in turn, reflect a misunderstanding of the competitive process. When governments fail to address disruption risks, the market system does not generate adequate incentives for organizations and individuals to invest in preparedness. In the absence of regulatory resilience standards, market competition can deter private investments in preparedness measures because firms do not internalize the effects of their conduct on disruption risks. By contrast, when the government sets and enforces resilience standards, the competitive process is likely to drive down the costs of compliance with the standards and foster innovation in preparedness technologies.

Quantitative Methods for Evaluating the Unilateral Effects of Mergers (Nathan Miller & Gloria Sheu), July 2020.

We describe the quantitative modeling techniques that are used in horizontal merger review for the evaluation of unilateral effects, and discuss how the 2010 Horizontal Merger Guidelines helped legitimize these methods and motivate scholarly research. We cover markets that feature differentiated-products pricing, auctions and negotiations, and homogeneous products, in turn. We also develop connections between quantitative modeling and market concentration screens based on the Herfindahl-Hirschman Index (HHI).

Why Google Dominates Advertising Markets (Dina Srinivasan) June 2020.

Approximately 86% of online display advertising space in the U.S. is bought and sold in real time on electronic trading venues, which the industry calls “advertising exchanges.” With intermediaries that route buy and sell orders, the structure of the ad market is similar to the structure of electronically traded financial markets. In advertising, a single company, Alphabet (“Google”), simultaneously operates the leading trading venue, as well as the leading intermediaries that buyers and sellers go through to trade. At the same time, Google itself is one of the largest sellers of ad space globally. This Paper explains how Google dominates advertising markets by engaging in conduct that lawmakers prohibit in other electronic trading markets: Google’s exchange shares superior trading information and speed with the Google-owned intermediaries, Google steers buy and sell orders to its exchange and websites (Search & YouTube), and Google abuses its access to inside information. In the market for electronically traded equities, we require exchanges to provide traders with fair access to data and speed, we identify and manage intermediary conflicts of interest, and we require trading disclosures to help police the market. Because ads now trade on electronic trading venues too, should we borrow these three competition principles to protect the integrity of advertising?

D&O Liability for Antitrust Violations (Barak Orbach) Santa Clara Law Review, May 2020.

This Article provides a guide for liability of directors and officers (“D&O”) for antitrust violations.  Where violations of law appear profitable, a misalignment of compensation schemes and formal compliance policies may preserve incentives to engage in misconduct. In such situations, the likelihood and prevalence of misconduct heavily depend on the effectiveness of the company’s oversight system. Antitrust violations intend to increase profit, are hard to detect, and are hard to prove. The perceived profitability of antitrust violations, thus, sometimes motivates D&O to participate in, encourage, or ignore such violations.  I review the liability standards that may apply to D&O for antitrust violations, as well as trends in relevant doctrines and enforcement policies. I explain the reasons for the growing risk of personal liability and argue that this risk is likely to continue rising in the foreseeable future. Specifically, today, D&O may be held liable for failures to make good faith efforts to develop and maintain organizational culture of compliance with antitrust law. I outline factors that D&O and their counsels should consider.

The Economic Basis of the Independent Contractor/Employee Distinction (Eric Posner) May 2020.

In recent years, a controversy has erupted over the distinction between employees and independent contractors. Commentators have argued that in the modern “gig economy,” many people traditionally classified as independent contractors are as vulnerable as employees and should be granted the legal protections that employees alone normally enjoy. However, the distinction between the two categories remains inescapable, and the theoretical basis for it has not been identified. I argue that the distinction is derived from market structure. Employees are workers who, because they must make relationship-specific investments in a single firm, are subject to labor monopsony. Independent contractors do not make such relationship-specific investments, and hence normally operate in a competitive labor market. Employment and labor law may be explained as a method for protecting workers from labor monopsony; because independent contracts are not subject to labor monopsony, they do not require such protection.

The Paramount Decrees:  Lessons for the Future (Barak Orbach) Antitrust Source, April 2020.

There are some striking similarities between the tech giants of the 21st century and the powerful Hollywood studios in the second quarter of the 20th century. In their respective eras, each group of companies symbolized the acquisition of economic power by innovative firms and inspired calls to use antitrust law to break up large corporations, deconcentrate the economy, and protect small businesses.  In their pursuit of growth, each group of companies harnessed efficiencies and acted aggressively to exclude competition. The studios developed supply chains for mass production and mass distribution of entertainment products. Their success devastated less efficient entertainment industries, such as the “legitimate theater,” vaudevilles, and nickelodeons. They also acted to eliminate competition from rivals in the motion picture industry. The tech giants developed digital platforms, whose success devastated brick-and-mortar industries. They have also acted to eliminate competition from other tech companies.  The studios were the target of the most ambitious campaign to reform markets through antitrust enforcement. The story of this campaign could benefit contemporary debates about the future of antitrust law, including assessments of antitrust policy in periods of rapid technological change, vertical arrangements, conspiracy inference, divestitures, and behavioral remedies. This paper summarizes this episode in antitrust history and lessons that it offers.

The Economics of Social Data (Dirk Bergemann & Alessandro Bonatti) March 2020.

A data intermediary pays consumers for information about their preferences and sells the information so acquired to Örms that use it to tailor their products and prices. The social dimension of the individual dataó whereby an individualís data are predictive of the behavior of othersó generates a data externality that reduces the intermedi-aryís cost of acquiring information. We derive the intermediaryís optimal data policy and show that it preserves the privacy of the consumersí identities while providing precise information about market demand to the Örms. This enables the intermediary to capture the entire value of information as the number of consumers grows large.

Tying and Exclusion in FRAND Licensing: Evaluating Qualcomm (Erik Hovenkamp & Timothy Simcoe) Antitrust Source, February 2020.

In an enforcement action brought by the Federal Trade Commission, a district court recently found that Qualcomm violated the antitrust laws by engaging in anticompetitive exclusive dealing and refusing to license its standard-essential patents (SEPs) to rivals. In this article, we unpack and evaluate three aspects of the Qualcomm decision. First, we describe how the tying relationship between chips and licenses goes primarily in the opposite direction of how most commentators characterize it. Second, we consider how Qualcomm’s commitments to license its SEPs on “fair, reasonable, and nondiscriminatory” (FRAND) terms bear on the antitrust analysis. Third, we discuss how FRAND might have been used to better justify finding an antitrust duty-to-deal with competitors.

Mergers, Entry, and Consumer Welfare (Nathan Miller, Peter Caradonna & Gloria Sheu) February 2020.

We analyze mergers and entry in a differentiated products oligopoly model of price competition. We prove that any merger among incumbents is unprofitable if it spurs entry sufficient in magnitude to preserve consumer surplus. Thus, mergers occur in equilibrium only if barriers limit entry. Numerical simulations indicate that with profit-neutral mergers—the best-case for consumers—entry mitigates under30 percent of the adverse price effects and, in most cases, under 50 percent of the consumer surplus loss. The results suggest a limited and conditional role for entry analysis in merger review.

Interstate Circuit and Conspiracy Theories (Barak Orbach), University of Illinois Law Review, January 2020.

An antitrust conspiracy is an unlawful horizontal agreement in restraint of trade. Proof of antitrust conspiracy requires evidence that tends to exclude the possibility of independent conduct. In most conspiracy cases, however, direct evidence is not available. Instead, circumstantial evidence is used to prove the existence of the alleged conspiracy. Interstate Circuit v. United States (1939), one of the most known Supreme Court antitrust opinions, laid the foundation of conspiracy inference in antitrust law. Hundreds of judicial opinions, books, monographs, and articles summarize and interpret the facts of the case. With some minor variations, the summaries of Interstate Circuit are similar in their details, yet materially incomplete and erroneous.  As summarized in judicial opinions and the literature, Interstate Circuit concerned a powerful retailer who sent a letter to eight suppliers requiring them to amend their distribution policies to raise his rivals’ costs. The letter named all recipients, informing each supplier that its competitors received the same letter. The suppliers’ compliance was partial but uniform. This account raises the question of whether parallel compliance with an invitation to collude permits the inference of conspiracy. It became the paradigmatic illustration of hub-and-spoke conspiracies, the agreement requirement, conscious parallelism, tacit agreement, and the raising rivals’ costs strategy.  Interstate Circuit, however, presents a very different set of factual findings: a powerful retailer, which was a partially-owned subsidiary of one of its suppliers, negotiated a deal with its parent company and its rivals.  This Article explores the Interstate Circuit myth. It offers a detailed study of cartel formation in an industry with intricate relationships among the colluding parties. The study finds that the extensive use of an incorrect account of Interstate Circuit by courts and commentators explains, in part, some of the flaws of antitrust’s conspiracy doctrines. It, thus, refines four antitrust concepts whose origins are in Interstate Circuit: the agreement requirement, conscious parallelism, plus factors, and tacit agreement. The Interstate Circuit myth, this Article argues, demonstrates that erroneous myths may last long and influence policies.

The Anticompetitive Effects of Covenants not to Compete (Eric Posner) Competition Policy International, January 2020.

Covenants not to compete, which prevent workers from quitting their employer and moving to a competing employer, have ambiguous effects on welfare, according to economic theory. Noncompetes may enable employers to invest in assets by protecting those assets from expropriation by workers or competitors, but noncompetes also interfere with labor market competition. Recent research, however, suggests that the anticompetitive effects of noncompetes are greater than any benefits, and thus that the existing common law regime for regulating noncompetes is too weak. A plausible step forward is to strengthen the antitrust law on noncompetes. A better antitrust law would shift the burden, allowing employers to use noncompetes only when they can prove that their use of noncompetes results in higher wages in the affected labor market.

Antitrust Law and Its Critics (A. Douglas Melamed), January 2020.

Antitrust law is the subject of substantial current controversy, criticism, and proposed reform. The current unease seems to reflect the confluence of four factors: rising populism, on both the left and the right, that decries free markets, globalism, and increasing inequality within the developed countries; the rise of big tech, which seems to expand without limit through scale and scope economies and network effects; a growing body of economic studies that suggest that market concentration and market power have increased in recent years; and increasing concern of libertarians about private, as well as government, power coupled with evidence of increased industry concentration.  On the surface, there appears to be a conversation about the future of antitrust law between three groups; conservatives who argue that antitrust law is basically fine as it is, progressives who argue that antitrust enforcement has been too lax and that antitrust law should be adjusted but within the prevailing consumer welfare paradigm; and populist critics who have more far-reaching reform proposals. In fact, however, there are really two very separate conversations. One, between conservatives and progressives, concerns how antitrust law might best promote economic welfare. The other, pushed largely by the populists, concerns how to replace what is now known as antitrust law with alternatives that will serve other objectives, in addition to economic welfare, such as promoting an equitable distribution of wealth and of economic and political power. The two conversations seldom intersect in any meaningful way.  This paper analyzes the current controversies. It explains what the consumer welfare standard means, why proposals for abandoning or replacing it are unsound, and how the two conversations have not intersected. It ends by describing ways in which the various critics and defenders of antitrust law might fruitfully join in a single conversation that addresses both antitrust and regulatory issues.

Framing the Chicago School of Antitrust Analysis (Herbert Hovenkamp & Fiona M. Scott Morton), November 2019.

The Chicago School of antitrust has benefitted from a great deal of law office history, written by admiring advocates rather than more dispassionate observers. This essay attempts a more neutral stance, looking at the ideology, political impulses, and economics that produced the Chicago School of antitrust policy and that account for its durability. The origins of the Chicago School lie in a strong commitment to libertarianism and nonintervention. Economic models of perfect competition best suited these goals. The early strength of the Chicago School of antitrust was that it provided simple, convincing answers to everything that was wrong with antitrust policy in the 1960s, when antitrust was characterized by over-enforcement, poor quality economics or none at all, and many internal contradictions. The Chicago School’s greatest weakness is that it did not keep up. Its leading advocates either spurned or ignored important developments in economics that gave a better accounting of an economy that was increasingly characterized by significant product differentiation, rapid innovation, networking, and strategic behavior. The Chicago School’s initial claim was that newer models of the economy lacked testability. That argument lost its credibility, however, as industrial economics experienced an empirical renaissance, nearly all of it based on various models of imperfect competition. Students getting PhDs in economics increasingly abandoned perfect competition as a useful starting point. What kept Chicago alive was the financial support of firms and others who stood to profit from less intervention. Properly designed antitrust enforcement is a public good. Its beneficiaries— consumers—are individually small, numerous, scattered, and diverse. Those who stand to profit from nonintervention were fewer in number, individually much more powerful, and much more united in their message. As a result, the Chicago School went from being a model of enlightened economic policy to a powerful tool of regulatory capture.

The Consumer Welfare Controversy (Barak Orbach) CPI Antitrust Chronicle, November 2019.

“Consumer welfare” (“CW”) is the stated goal of antitrust law. Among the cognoscenti, the CW standard is a proxy for the transformation of antitrust law over the past four decades and Robert Bork’s deep imprint on antitrust law. In recent years, calls to abandon the CW standard and replace it with an array of fairness values gained traction. This paper summarizes the key findings and conclusions of my study of the CW controversy. The CW standard, I argue, has failed to protect competition effectively because it has multiple meanings and its applications are guided by erroneous premises. These problems should be addressed. The goal of antitrust law, I argue, should align with antitrust’s core task: protecting the competitive process by banning business agreements, practices, and transactions whose adverse effects on trading opportunities unreasonably impair the process.

Antitrust in Digital Markets (John M. Newman) Vanderbilt Law Review, October 2019.

Antitrust  law  has  largely  failed  to  address  the  challenges  posed  by  digital markets. At the turn of the millennium, the antitrust enterprise engaged in intense debate over whether antitrust doctrine, much of it developed during a bygone era of smokestack industries, could or should evolve to address digital markets. Eventually, a consensus emerged: although the basic doctrine is supple enough  to  apply  to  new  technologies,  courts  and  enforcers  should  adopt  a  defendant-friendly, hands-off approach.But  this  pro-defendant  position  is  deeply—and  dangerously—flawed.  Economic  theory,  empirical  research,  and  extant  judicial  and  regulatory  authority  all  contradict  the  prevailing  views  regarding  power,  conduct,  and  efficiencies in digital markets. Far from being self-correcting, digital markets facilitate  the  creation  and  maintenance  of  uniquely  durable  market  power.  Digital markets are conducive to complex anticompetitive strategies that have largely escaped regulatory scrutiny. Perhaps most importantly, digital-market conduct tends to lack significant offsetting efficiencies.As a result, the consensus view is ripe for rejection. Digital markets do require  a  different  approach,  but  it  must  be  uniquely  interventionist,  not  unusually laissez-faire. This Article concludes by offering a set of doctrinal and policy  proposals  aimed  at  creating  a  more  robust,  vigilant,  and  welfare-enhancing digital antitrust enterprise.

United States v. Apple: Competition in America (Chris Sagers) Harvard University Press, September 2019.

In 2012 the Department of Justice accused Apple and five book publishers of conspiring to fix ebook prices. The evidence overwhelmingly showed an unadorned price-fixing conspiracy that cost consumers hundreds of millions of dollars. Yet before, during, and after the trial millions of Americans sided with the defendants. Pundits on the left and right condemned the government for its decision to sue, decrying Amazon’s market share, railing against a new high-tech economy, and rallying to defend beloved authors and publishers. For many, Amazon was the one that should have been put on trial. But why? One fact went unrecognized and unreckoned with: in practice, Americans have long been ambivalent about competition.

The Antitrust Challenge to Covenants Not to Compete in Employment Contracts  (Eric Posner) September 2019.

Employee covenants not to compete bar workers who leave their jobs from working for a competing employer for a period of time. The common law regards noncompetes as restraints of trade and imposes a “reasonableness” standard on them; they can also be challenged under the antitrust laws. But new research suggests firms frequently abuse noncompetes, causing significant harm to workers and to the economy. The existing legal approach is inadequate because the common law offers minimal sanctions and antitrust law imposes excessive burdens of proof on plaintiffs. While antitrust law is the appropriate vehicle for challenging noncompetes because of its focus on market effects, it needs to be strengthened.

Reactionary Antitrust (John Newman) Concurrences Revue, September 2019.

Antitrust is undergoing a renaissance. New voices have emerged. Lively debate has prompted antitrust stakeholders to re-evaluate familiar concepts. Issues long considered settled have been opened for re-examination. Some have welcomed this opportunity for self-reflection. But it has also been met with hypocritical charges of politicization and populism, fallacious criticisms, and a refusal to engage with the actual core arguments of the new progressives.  These new critics have famously been labeled as “Hipster Antitrust.” What has been lacking thus far is an equivalent label for the anti-progressive attack on their work. Borrowing from a recent article by Professor Herbert Hovenkamp, this essay proposes “Reactionary Antitrust.” Reactionary Antitrust is a grouping of flawed arguments more likely to discourage, rather than encourage, debate and dialogue. These include disparagement of progressives as “political” and “populist,” the imposition of impossible burdens of proof on would-be reformers, and erecting straw-man versions of opponents’ actual positions. This essay urges an end to Reactionary Antitrust. Instead of seeking to bury the critical reform movement, antitrust discourse should welcome new voices and the renewed intellectual ferment they have inspired.  Given the tone of the current antitrust debates, additional framing may be warranted at the outset. Antitrust commentary has a long and troublesome history of attempting to associate particular individuals with one camp or another, instead of engaging with those individuals’ actual positions. This essay is emphatically not a critique of entire articles or schools of thought, and certainly not of particular authors. Instead, it identifies and responds directly to particular arguments and modes of argument. In other words, the essay strives to model that which it calls for: a return to the highest and best form of scholarly enterprise.

Mergers, Innovation, and Entry-Exit Dynamics: Consolidation of the Hard Disk Drive Industry, 1996-2016 (Mitsuru Igami & Kosuke Uetakez) The Review of Economic Studies, September 2019.

How far should an industry be allowed to consolidate when competition and innovation are endogenous? We find plateau-shaped equilibrium relationships between competition and innovation, with heterogeneity across time and productivity. Our counterfactual simulations suggest the current rule-of-thumb policy, which stops mergers when three or fewer firm exist, strikes approximately the right balance between pro-competitive effects and value-destruction side effects in this dynamic welfare tradeoff.

“Do Increasing Markups Matter? Lessons from Empirical Industrial Organization” (Fiona Scott Morton, Steven T. Berry & Martin Gaynor) Journal of Economic Perspectives, Summer 2019.

This paper considers the recent literature on firm markups in light of both new and classic work in the field of Industrial Organization. We detail the shortcomings of papers that rely on discredited approaches from the “structure-conduct-performance” literature. In contrast, papers based on production function estimation have made useful progress in measuring broad trends in markups. However, industries are so heterogeneous that careful industry specific studies are also required, and sorely needed. Examples of such studies illustrate differing explanations for rising markups, including endogenous increases in fixed cost associated with lower marginal costs. In some industries there is evidence of price increases driven by mergers. To fully understand markups, we must eventually recover the key economic primitives of demand, marginal cost, and fixed and sunk costs. We end by discussing the various aspects of antitrust enforcement that may be of increasing importance regardless of the cause of increased markups.

The Misguided Assault on the Consumer Welfare Standard in the Age of Platform Markets (A. Douglas Melamed & Nicolas Petit) Review of Industrial Organization, June 2019.

In this paper, we discuss whether the consumer welfare (CW) standard needs to be replaced or revised in order for antitrust law to deal effectively with the economic challenges of the platform economy. We argue that both the general and platform-specific assaults on the CW standard are misguided, that the CW standard is capable of addressing the economic concerns that critics have raised, and that the proposed alternatives would make things worse—not better.

The American Express Case: Back to the Future (A. Douglas Melamed) Colorado Technology Law Journal, June 2019.

This paper examines what the Supreme Court’s 2018 decision in the American Express case, which is the only U.S. antitrust case that has explicitly addressed the unique issues raised by so-called platform or multi-sided markets, might tell us about the attitudes of the Court’s five-Justice majority about antitrust law.The majority opinion conflated the enduring normative contributions of the Chicago School with its embrace of empirical propositions from 40 years ago that have not stood the test of time and some of which are, in any event, not applicable to two-sided markets. The majority was willing to decide novel issues on the basis of abstract ideas about vertical restraints and free riding that were central to Chicago School analysis 40 years ago but which have since been shown to require more qualification and modification depending on factual context. The majority ignored the fact findings of the district court, and it was plainly willing to increase the risk of false negatives. Its decision was a triumph of ideology over fact-based decision-making.

Forward Contracts, Market Structure, and the Welfare Effects of Mergers (Nathan Miller & Joe Podwol),  Journal of Industrial Economics, June 2019.

We  examine  how  forward  contracts  affect  economic  outcomes  undergeneralized market structures.  In the model, forward contracts discipline the  exercise  of  market  power  by  making  profit  less  sensitive  to  changesin  output.   This  impact  is  greatest  in  markets  with  intermediate  levels of  concentration.   Mergers  reduce  the  use  of  forward  contracts  in  equi-librium and, in markets that are sufficiently concentrated, this amplifies the adverse effects on consumer surplus.  Additional analyses of mergerprofitability  and  collusion  are  provided.   Throughout,  we  illustrate  and extend the theoretical results using Monte Carlo simulations.  We discuss the practical relevance for antitrust enforcement.

Killer Acquisitions (Colleen Cunningham, Florian Ederer, & Song Ma) June 2019.

This paper argues incumbent firms may acquire innovative targets solely to discontinue the target's innovation projects and preempt future competition. We call such acquisitions "killer acquisitions." We develop a parsimonious model illustrating this phenomenon. Using pharmaceutical industry data, we show that acquired drug projects are less likely to be developed when they overlap with the acquirer's existing product portfolio, especially when the acquirer's market power is large due to weak competition or distant patent expiration. Conservative estimates indicate about 6% of acquisitions in our sample are killer acquisitions. These acquisitions disproportionately occur just below thresholds for antitrust scrutiny.

The Present New Antitrust Era (Barak Orbach)  William & Mary Law Review, May 2019.

Antitrust scholars frequently refer to an “ideological pendulum” to describe the rise and fall of trends in the evolution of antitrust law. This pendulum arguably swings between fairness and laissez-faire visions, while a technocracy vision moderates its motion. Mapping key phases in the evolution of antitrust law, I argue that a new antitrust era with distinctive characteristics has been forming in recent years.  The present new antitrust era is a product of growing tensions and contradictions among policy prescriptions. After several decades in which antitrust was a specialized field that drew little public attention, in the aftermath of the Great Recession, antitrust became a proxy for disagreements over economic policies. Today, antitrust law exemplifies striking discrepancies among positions advanced by the Supreme Court, the established antitrust technocracy, political populism, and economics. This resurrection of public and political interest in antitrust, I argue, marks the end of one antitrust era and the beginning of another.

 Oligopolistic Price Leadership and Mergers: The United States Beer Industry (Nathan Miller, Gloria Sheu & Matthew Weinberg), May 2019.

We  study  an  infinitely-repeated  game  of  oligopolistic  price  leadership  in  which  one firm, the leader, proposes a supermarkup over Bertrand prices to a coalition of rivals. We estimate the model with aggregate scanner data on the beer industry and find the supermarkup accounts for 6% of price. Price leadership increases profit by 8.9% relative to  Bertrand  competition,  and  decreases  consumer  surplus  by  nearly  four  times  the change in profit.  We use the model to simulate the ABI/Modelo merger.  The merger relates incentive compatibility constraints and increases the equilibrium supermarkup. Merger efficiencies do not mitigate—and can amplify—this coordinated effect.

Toward Controlling Discrimination in Online Ad Auctions (L. Elisa Celis, Anay Mehrotra & Nisheeth K. Vishnoi) May 2019.

Online advertising platforms are thriving due to the customizable audiences they offer advertisers. However, recent studies show that advertisements can be discriminatory with respect to the gender or race of the audience that sees the ad, and may inadvertently cross ethical and/or legal boundaries. To prevent this, we propose a constrained ad auction framework that maximizes the platform’s revenue conditioned on ensuring that the audience seeing an advertiser’s ad is distributed appropriately across sensitive types such as gender or race.  Building upon Myerson’s classic work, we first present an optimal auction mechanism for a large class of fairness constraints. Finding the parameters of this optimal auction, however, turns out to be a non-convex problem. We show that this non-convex problem can be reformulated as a more structured non-convex problem with no saddle points or local-maxima; this allows us to develop a gradient-descent-based algorithm to solve it. Our empirical results on the A1 Yahoo! dataset demonstrate that our algorithm can obtain uniform coverage across different user types for each advertiser at a minor loss to the revenue of the platform, and a small change to the size of the audience each advertiser reaches.

The Antitrust Paradigm: Restoring a Competitive Economy  (Jonathan B. Baker) Harvard University Press, May 2019.

The U.S. economy is growing less competitive. Large businesses increasingly profit by taking advantage of their customers and suppliers. These firms can also use sophisticated pricing algorithms and customer data to secure substantial and persistent advantages over smaller players. In our new Gilded Age, the likes of Google and Amazon fill the roles of Standard Oil and U.S. Steel. Drawing on the latest in empirical and theoretical economics to defend the benefits of antitrust, Baker shows how enforcement and jurisprudence can be updated for the high-tech economy. His prescription is straightforward. The sooner courts and the antitrust enforcement agencies stop listening to the Chicago school and start paying attention to modern economics, the sooner Americans will reap the benefits of competition.

Markets for Information: An Introduction (Dirk Bergemann & Alessandro Bonatti) Annual Review of Economics, May 2019.

We survey a recent and growing literature on markets for information. We offer a comprehensive view of information markets through an integrated model of consumers, information intermediaries, and firms. The model embeds a large set of applications ranging from sponsored-search advertising to credit scores to information sharing among competitors. We then zoom in to one of the critical elements in the markets for information: the design of the information. We distinguish between ex ante sales of information (the buyer acquires an information structure) and ex post sales (the buyer pays for specific realizations). We relate this distinction to the different products that brokers, advertisers, and publishers use to trade consumer information online. We discuss the endogenous limits to the trade of information that de-rive from the potential adverse use of information to the consumers. Finally, we discuss recommender systems and other information filtering systems that use artificial intelligence to predict ratings or preferences in markets for indirect information.

Measuring the Incentive to Collude: The Vitamin Cartels, 1990-1999  (Mitsuru Igami & Takuo Sugaya) May 2019.

This paper studies the stability of the vitamin cartels in the 1990s and presents a repeated-games approach to quantify “coordinated effects” of a merger.  We use data and direct evidence from American courts and European agencies to show the incentive compatibility constraint (ICC) of the short-lived vitamin C cartel was likely to be violated when it actually collapsed in 1995,whereas the ICCs of the long-lived cartels (vitamins A and E, and beta carotene) were satisfied until the prosecution in 1999. Simulations suggest some mergers could have prolonged the vitamin C cartel, but others could have further destabilized it, because both the direction and magnitude of “coordinated effects” depend not only on the number of firms but also on their cost asymmetry.

FTC v. Qualcomm: New Frontiers in the Antitrust-IP Interface (Erik Hovenkamp) Regulatory Review, May 2019.

The Federal Trade Commission recently scored a substantial victory in its antitrust suit against Qualcomm. The case represents a novel confluence of standard-setting and IP licensing issues with bedrock antitrust subjects: tying and exclusive dealing. It also takes a surprising turn in resuscitating the long-dormant doctrine of the antitrust “duty to deal.” In this short essay, I review and evaluate the court’s decision in FTC v. Qualcomm. The analysis of Qualcomm’s exclusive dealing is sound and very likely correct. However, the court’s duty-to-deal analysis sits on shakier ground, omitting consideration of potential immunity under the Patent Act and sidestepping thorny questions on the appropriate source of law.

Procompetitive Justifications in Antitrust Law, (John M. Newman) Indiana Law Journal, Spring 2019).

The  Rule of  Reason,  which has come to dominate modern antitrust law,  allows defendants the opportunity to justify their conduct by demonstrating procompetitive effects.   Seizing the opportunity,   defendants   have   begun   offering   increasingly numerous and creative explanations for their behavior.But  which  of  these  myriad  justifications  are  valid?  To  leading  jurists  and scholars,  this has  remainedan  “open  question,”  even  an  “absolute  mystery.” Examination  of  the  relevant  case  law  reveals multiple competing  approaches  and seemingly  irreconcilable  opinions.  The  ongoing  lack  of  clarity  in  this  area  is inexcusable: procompetitive-justification analysis is vital to a properly functioning antitrust enterprise. This Article provides answers and clarity. It identifies the market failure approach to analysis as doctrinally correct and economically optimal. The leading alternatives pose an unacceptably high risk of error, in the form of both false positives and false negatives. Most importantly, the Article identifies the proper, three-step method for assessing procompetitive   justifications.   This   three-step   analytical   framework increases transparency and rigor, minimizes errors, and maximizes welfare.

Judge Douglas H. Ginsburg and Antitrust Law's Rule(s) of Reason (Jonathan Baker and Andrew Gavil), April 2019.

This essay, written for a volume in honor of Judge Douglas H. Ginsburg, explores the evolution of the rule of reason and its development into a common structured, burden shifting approach guiding judicial decisions under Sections 1 and 2 of the Sherman Act and under Section 7 of the Clayton Act. It highlights the influential role that Judge Ginsburg and the Court of Appeals for the D.C. Circuit, on which he served, played in that evolution.

Antitrust As Allocator of Coordination Rights (Sanjukta Paul) UCLA Law Review, April 2019.

This paper develops a novel framework for understanding antitrust law. Antitrust’s primary function—to allocate economic coordination rights—is discursively submerged, yet logically inescapable. Under current law, these criteria amount to a preference for coordination through concentrated control, and are treated as neutral economic principles. In reality, they constitute autonomous legal judgments that cannot be derived from an external referent.

Fissuring and the Firm Exemption (Sanjukta Paul) Law and Contemporary Problems, April 2019.

This paper applies the conceptual framework developed in Antitrust as Allocator to the business arrangements that constitute the “fissured workplace” or the gig economy, discussing the permissive antitrust doctrines that make these arrangements possible. 

Five Principles for Vertical Merger Enforcement Policy (Jonathan B. Baker, Nancy L. Rose, Steven C. Salop, & Fiona Scott Morton) April 2019.

There seems to be consensus that the Department of Justice’s 1984 Vertical Merger Guidelines do not reflect either modern theoretical and empirical economic analysis or current agency enforcement policy. Yet widely divergent views of preferred enforcement policies have been expressed among agency enforcers and commentators. Based on our review of the relevant economic literature and our experience analyzing vertical mergers, we recommend that the enforcement agencies adopt five principles: (i) The agencies should consider and investigate the full range of potential anticompetitive harms when evaluating vertical mergers; (ii) The agencies should decline to presume that vertical mergers benefit competition on balance in the oligopoly markets that typically prompt agency review, nor set a higher evidentiary standard based on such a presumption; (iii) The agencies should evaluate claimed efficiencies resulting from vertical mergers as carefully and critically as they evaluate claimed efficiencies resulting from horizontal mergers, and require the merging parties to show that the efficiencies are verifiable, merger-specific and sufficient to reverse the potential anticompetitive effects; (iv) The agencies should decline to adopt a safe harbor for vertical mergers, even if rebuttable, except perhaps when both firms compete in unconcentrated markets; (v) The agencies should consider adopting rebuttable anticompetitive presumptions that a vertical merger harms competition when certain factual predicates are satisfied. We do not intend these presumptions to describe all the ways by which vertical mergers can harm competition, so the agencies should continue to investigate vertical mergers that raise concerns about input and customer foreclosure, loss of a disruptive or maverick firm, evasion of rate regulation or other threats to competition, even if the specific factual predicates of the presumptions are not satisfied.

Why Has Antitrust Law Failed Workers? (Ioana Elena Marinescu & Eric A. Posner)  April 2019.

In the last several years, economists have learned about an antitrust problem of vast scope. Far from approximating the conditions of perfect competition as long assumed, most labor markets are characterized by monopsony — meaning that employers pay workers less than their productivity because workers lack a credible threat to quit and find a higher-paying job in the same market. Yet while antitrust law regulates labor monopsony in the same way as it regulates monopoly on the product market side, antitrust litigation against employers is rare. We document both the magnitude of labor monopsony and the paucity of cases, and argue that this “litigation gap” exists because antitrust case law, which has developed through product-side litigation, is poorly tailored to labor-side problems. We conclude with four proposals for reform of antitrust law so it can better deter labor monopsony.

“Antitrust and Innovation: Welcoming and Protecting Disruption” (Fiona Scott Morton, Giulio Federico & Carl Shapiro) Innovation Policy and Economy,  April 2019.

The goal of antitrust policy is to protect and promote a vigorous competitive process. Effective rivalry spurs firms to introduce new and innovative products, as they seek to capture profitable sales from their competitors and to protect their existing sales from future challengers. In this fundamental way, competition promotes innovation. We apply this basic insight to the antitrust treatment of horizontal mergers and of exclusionary conduct by dominant firms. A merger between rivals internalizes business-stealing effects arising from their parallel innovation efforts and thus tends to depress innovation incentives. Merger-specific synergies, such as the internalization of involuntary spillovers or an increase in the productivity of R&D, may offset the adverse effect of a merger on innovation. We describe the possible effects of a merger on innovation by developing a taxonomy of cases, with reference to recent U.S. and E.U. examples. A dominant firm may engage in exclusionary conduct to eliminate the threat from disruptive firms. This suppresses innovation by foreclosing disruptive rivals and by reducing the pressure to innovative on the incumbent. We apply this broad principle to possible exclusionary strategies by dominant firms.

Ownership Concentration and Strategic Supply Reduction (Ulrich Doraszelski, Katja Seim, Michael Sinkinson, & Peichun Wang) April 2019.

We explore the implications of ownership concentration for the recently-concluded incentive auction that re-purposed spectrum from broadcast TV to mobile broadband usage in the U.S. We document significant multi-license ownership of TV stations. We show that in the reverse auction, in which TV stations bid to relinquish their licenses, multi-license owners have an incentive to withhold some TV stations to drive up prices for their remaining TV stations. Using a large-scale valuation exercise, we find that this strategic supply reduction conservatively increases payouts to TV stations by between 7.0% and 20.7%.

Startup Acquisitions, Error Costs, and Antitrust Policy (Erik Hovenkamp & Kevin Bryan) University of Chicago Law Review, April 2019.

Startup acquisitions by dominant incumbents, especially in high-tech, have recently attracted significant attention. Many researchers and practitioners worry about harms to competition or innovation. However, there has been very little antitrust enforcement in this area. This is emblematic of a prominent feature of modern antitrust law: a strong preference for erring on the side of non-enforcement. A leading rationale for this preference is the claim that market power self-corrects by attracting new entrants who discipline incumbents.  As a result, plaintiffs generally face very demanding evidentiary requirements, which are particularly hard to satisfy in the case of startup acquisitions. A typical startup is both new and small, providing little data for estimating competitive effects. Despite this uncertainty, it is unlikely that society is best served by a policy of near-universal inaction. Recent work in economics, both empirical and theoretical, identifies various harms to competition and innovation as a result of startup acquisitions in concentrated markets. Further, the traditional error cost argument is particularly in-apposite in this context, as startup acquisitions may be undertaken precisely because they forestall competitive entry. We therefore argue for expanded antitrust intervention (i.e. more than zero) in startup acquisitions by dominant incumbents. In practice, the acquirer’s market power and the transaction value may be useful signals of the risk of harm.

Accommodating Competition: Harmonizing National Economic Commitments (Jonathan Baker) William & Mary Law Review, March 2019.

This article shows how the norm supporting governmental action to protect and foster competitive markets was harmonized with economic rights to contract and property during the 19th century, and with the development of the social safety net during the 20th century. It explains why the Constitution, as understood today, does not check the erosion of the entrenched but threatened national commitment to assuring competitive markets.

The Worst Opinion in Living Memory: AT&T/Time Warner and America’s Broken Merger Law (Chris Sagers), March 2019.

The "worst opinion" of the title is not the appellate affirmance in United States v. AT&T, which put the final end to the government's challenge to the merger of AT&T and Time Warner. It was the trial court's fundamental ruling at the close of the bench trial, rejecting the government's claims. But the point is definitely not to criticize the bombastic, maverick judge who wrote it. His role really is incidental. It is that an opinion this bad, and affirmance of it, proves how deeply broken our merger law is. It was among the more remarkable demonstrations of anti-government bias in living memory, and its 172 pages of fact-finding and reasoning were relentlessly flawed, illogical, and wrong. But it was more than good enough as far as our law is concerned. Nearly the entirety of it boils down to the personal impulses of one judge, who operates under a radically lopsided burden of proof and an appellate standard of near unreviewability.

Platforms, American Express, and the Problem of Complexity in Antitrust (Chris Sagers) Nebraska Law Review, March 2019.

Something old and important is lost sight of in a case like Ohio v. American Express, the Supreme Court's recent adoption of "platform" or "two-sided market" theory in American antitrust, and in theoretical efforts like the one on which it is based. A rarely discussed idea built in to American antitrust is that, as far as the law is concerned, markets are all pretty much the same. I explain why that seemingly prosaic fundamentalism in fact serves key instrumental goals, and why neglect of them is largely responsible for the failure of modern antitrust. I show the serious consequences of that mistake by asking whether anything was preserved by the "anti-steering" rules protected in the Amex case that justify making them so hard to challenge. I further ask what the broader consequences may be of letting the cat of out-of-network effects out of the bag of static, partial equilibria.

Antitrust Limits on Startup Acquisitions (Erik Hovenkamp & Kevin Bryan) Review of Industrial Organization, March 2019.

Should there be limits on startup acquisitions by dominant firms? Efficiency requires that startups sell their technology to the right incumbents, that they develop the right technology, and that they invest the right amount in R&D. In a model of differentiated oligopoly, we show distortions along all three margins if there are no limits on startup acquisition. Leading incumbents make acquisitions partially to keep lagging incumbents from catching up technologically. When startups can choose what technology they invent, they are biased toward inventions which improve the leader's technology rather than those which help the laggard incumbent catch up. Further, upon obtaining a pure monopoly, the leading incumbent's marginal willingness to pay for new technologies falls abruptly, diminishing private returns on future innovations. We consider antitrust measures that could help to mitigate these problems.

The Price Ain't Right? Hospital Prices and Health Spending on the Privately Insured (Zach Cooper et al.) Quarterly Journal of Economics, February 2019.

We use insurance claims data covering 28% of individuals with employer-sponsored health insurance in the United States to study the variation in health spending on the privately insured, examine the structure of insurer-hospital contracts, and analyze the variation in hospital prices across the nation. Health spending per privately insured beneficiary differs by a factor of three across geographic areas and has a very low correlation with Medicare spending. For the privately insured, half of the spending variation is driven by price variation across regions, and half is driven by quantity variation. Prices vary substantially across regions, across hospitals within regions, and even within hospitals. For example, even for a nearly homogeneous service such as lower-limb magnetic resonance imaging, about a fifth of the total case-level price variation occurs within a hospital in the cross section. Hospital market structure is strongly associated with price levels and contract structure. Prices at monopoly hospitals are 12% higher than those in markets with four or more rivals. Monopoly hospitals also have contracts that load more risk on insurers (e.g., they have more cases with prices set as a share of their charges). In concentrated insurer markets the opposite occurs-hospitals have lower prices and bear more financial risk. Examining the 366 mergers and acquisitions that occurred between 2007 and 2011, we find that prices increased by over 6% when the merging hospitals were geographically close (e.g., 5 miles or less apart), but not when the hospitals were geographically distant (e.g., over 25 miles apart).

The Antitrust Case Against Facebook: A Monopolist’s Journey Towards Pervasive Surveillance in Spite of Consumers’ Preference for Privacy (Dina Srinivasan) Berkeley Business Law Journal (February 2019).

The Facebook, Inc. (“Facebook”) social network, this era’s new communications service, plays an important role in the lives of 2+ billion people across the world. Though the market was highly competitive in the beginning, it has since consolidated in Facebook’s favor. Today, using Facebook means to accept a product linked to broad-scale commercial surveillance — a paradox in a democracy. This Paper argues that Facebook’s ability to extract this qualitative exchange from consumers is merely this titan’s form of monopoly rents. The history of early competition, Facebook’s market entry, and Facebook’s subsequent rise tells the story of Facebook’s monopoly power. However, the history which elucidates this firm’s dominance also presents a story of anticompetitive conduct. Facebook’s pattern of false statements and misleading conduct induced consumers to trust and choose Facebook, to the detriment of market competitors and consumers' own welfare.

The Common Ownership Hypothesis: Theory and Evidence  (Matthew Backus, Christopher Conlon, & Michael Sinkinson) Brookings, February 2019.

Under one model of corporate governance that embraces a strict interpretation of the common ownership hypothesis, the authors calculate that in 1980 an average S&P 500 firm would have valued a dollar of profits to another randomly chosen S&P 500 component firm at 20 cents. By the end of 2017, this more than tripled to approximately 70 cents. If common ownership incentives translate to firm behavior, this rise would give firms an incentive to raise prices even in the absence of collusion (which would be illegal).

Controlling Polarization in Personalization: An Algorithmic Framework (L. Elisa Celis, Sayash Kapoor, Farnood Salehi & Nisheeth Vishnoi), January 2019.

 Personalization is pervasive in the online space as it leads to higher efficiency for the user and higher revenue for the platform by individualizing the most relevant content for each user. However, recent studies suggest that such personalization can learn and propagate systemic biases and polarize opinions; this has led to calls for regulatory mechanisms and algorithms that are constrained to combat bias and the resulting echo-chamber effect. We propose a versatile framework that allows for the possibility to reduce polarization in personalized systems by allowing the user to constrain the distribution from which content is selected. We then present a scalable algorithm with provable guarantees that satisfies the given constraints on the types of the content that can be displayed to a user, but -- subject to these constraints -- will continue to learn and personalize the content in order to maximize utility. We illustrate this framework on a curated dataset of online news articles that are conservative or liberal, show that it can control polarization, and examine the trade-off between decreasing polarization and the resulting loss to revenue. We further exhibit the flexibility and scalability of our approach by framing the problem in terms of the more general diverse content selection problem and test it empirically on both a News dataset and the MovieLens dataset.

Labor Monopsony and the Limits of the Law (Suresh Naidu & Eric Posner) January 2019.

Recent literature has suggested that antitrust regulation is an appropriate response to labor market monopsony. This article qualifies the primacy of antitrust by arguing that a significant degree of labor market power is “frictional,” that is, without artificial barriers to entry or excessive concentration of employment. If monopsony is pervasive under conditions of laissez-faire, antitrust is likely to play only a partial role in remedying it, and other legal and policy instruments to intervene in the labor market will be required.

A Proposal to Enhance Antitrust Protection Against Labor Market Monopsony (Ioana Elena Marinescu & Eric A. Posner) December 2018.

Recent empirical studies have revealed that labor market monopsony is far more common than previously thought, and that there is a strong correlation between wage suppression and labor market concentration. Yet few antitrust cases have been brought by workers against employers who exercise significant market power against them, and hardly any such cases have been successful. In contrast, antitrust cases against monopolists on the product market side are common. We argue that section 2 of the Sherman Act, which prohibits certain forms of monopolization (and has been interpreted to apply to labor market monopsonization as well) is insufficient for addressing monopsonization of labor markets because of structural differences between labor markets and product markets. We propose a new statute that would strengthen the law by giving employees a more robust claim against labor monopsonists who abuse their market power.

 The Limits of Antitrust in Privacy Protection (Eugene Kimmelman, Harold Feld & Agustin Rossi) International Data Privacy Law, November 2018.

 Key Points: (1) Antitrust has been put forward as a tool to defend consumers’ privacy. (2) Antitrust should encourage non-price competition, and can be the right tool to fight anti-competitive hoarding of personal data. (3) However, antitrust in general is not the right tool to address, nor the right conceptual framework to analyse, privacy harms. (4) Instead, a comprehensive approach to consumer protection is needed.
 

Does competition from private surgical centres improve public hospitals' performance? Evidence from the English National Health Service
(Zack Cooper, Stephen Gibbons & Matthew Skellern) Journal of Public Economics, October 2018.

This paper examines the impact of a government programme which facilitated the entry of for-profit surgical centres to compete against incumbent National Health Service hospitals in England. We examine the impact of competition from these surgical centres on the efficiency – measured by pre-surgery length of stay for hip and knee replacement patients – and case mix of incumbent public hospitals. We exploit the fact that the government chose the broad locations where these surgical centres (Independent Sector Treatment Centres or ISTCs) would be built based on local patient waiting times – not length of stay or clinical quality – to construct treatment and control groups that are comparable with respect to key outcome variables of interest. Using a difference-in-difference estimation strategy, we find that the government-facilitated entry of surgical centres led to shorter pre-surgery length of stay at nearby public hospitals. However, these new entrants took on healthier patients and left incumbent hospitals treating patients who were sicker. This paper highlights a potential trade-off that policymakers face when they promote competition from private, for-profit firms in markets for the provision of public services.

Coty, Amazon, and the Future of Vertical Restraints: Evolving Distribution Norms on Both Atlantic Shores (Chris Sagers), September 2018.

Coty Germany, GmbH v. Parfümerie Akzente, GmbH, a late 2017 decision of the European Court of Justice (ECJ), set off something of a tizzy along North Atlantic shores concerning the future of vertical restraints and distribution relationships in online commerce sectors. Generally, Coty seemed to reflect the sense that online distribution posed threats to them that were new or special. Firms and their lawyers saw need to protect their brands from the rapacity of big, no-frills, price-cutting online retailers, including above all Amazon. Sure enough, the same anxieties find expression in other broad policy initiatives relating to online commerce, including the “Better Deal” program of Democrats in the U.S. Congress and the European Union’s ambitious new “Digital Single Market” program. But all this anxiety might look rather different if—contrary to our usual habit—consider it in historical context. In fact recent developments may not really be so new, at least not any ways relevant to competition policy. In fact, technological innovation in distribution, and the tension that has always characterized relations of suppliers and distributors, is an old story, and has been associated with some of the bitterest politics in antitrust history. And in times past, when similar anxieties of aggressive or innovative distributors have been met with private trade restraints or lobbying for protectionist government intervention, it has often enough turned out that the motives were not so pure and the changes that were feared were not ultimately so bad.

Antitrust, Political Economy, and the Nomination of Brett Kavanaugh (Chris Sagers), September 2018

The essay considers the record of Supreme Court nominee Brett Kavanaugh within antitrust law and related policies. Deep substantive engagement with a nominee’s record by subject-area experts—as an adjunct to review by generalist Senators and interest groups—seems desirable and missing from much of our debate, as to Supreme Court nominees of any background or persuasion. In this particular case it is uncommonly necessary, because the nominee is himself uncommon. Review of the antitrust cases, along with cases on cognate competition issues and the closely related context of net neutrality, turns out to be both stark and quite telling. It discloses a more generalized political economy and a more generalized approach to judging. In particular, Judge Kavanaugh has demonstrated a strongly ideological agenda and a willingness to pursue it with substantial disregard for precedent and statute.

Common Ownership, Competition, and Top Management Incentives (Miguel Anton, Florian Ederer, Mireia Gine, & Martin C. Schmalz) Ross School of Business Paper No. 1328,  September 2018.

When one firm's strategy affects other firms' value, optimal executive incentives depend on whether shareholders have interests in only one or in multiple firms. Performance-sensitive contracts induce managerial effort to reduce costs, and lower costs induce higher output. Hence, greater managerial effort can lead to lower product prices and industry profits. Therefore, steep managerial incentives can be optimal for a single firm and at the same time violate the interests of common owners of several firms in the same industry. Empirically, managerial wealth is more sensitive to performance when a firm's largest shareholders do not own large stakes in competitors.

Unlocking Antitrust Enforcement Collection, Yale Law Journal, May 2018.

There is no antitrust law without antitrust law enforcement. Unlocking Antitrust Enforcement contends that existing tools to advance antitrust enforcement are well-suited to confront today’s U.S. antitrust challenges. Primarily focused on efforts by the federal antitrust agencies, these Features lay the foundation for an overarching enforcement agenda.

The Myth of Free (John M. Newman) George Washington Law Review, March 2018.

Myths  matter.  This  Article  is  the  first  to  confront  a  powerful  myth  that pervades  modern  economic,  technological,  and  legal  discourse:  the  Myth of Free.  The  prevailing  view  is  that  consumers  capture  massive  welfare  surplus from a flood of innovative new products that are offered free of charge. Economists,  legal  scholars,  and  industry  stakeholders  created  an  origin  story—a myth—to  explain  how  these  products  became  “Free.” But  that  orthodox  origin  story  is  fatally  flawed.  This  Article  formalizes, then  debunks,  the  Myth  of  Free  and  its  underlying  assumptions.  The  Myth  is riddled  with  internal  inconsistencies,  logical  errors,  and  factual  inaccuracies. In their place, this Article provides a revisionist history of Free, one that offers greater  descriptive  and  predictive  accuracy.  Along  the  way,  it  solves  several puzzles:  Why  has  Free  become  the  default  online  business  model?  Why  does the  age  of  abundance—so  often  predicted—always  fail  to  materialize?  And why  is  society  nonetheless  drawn  to  such  predictions? The  task  is  urgent:  the  Myth  of  Free  is  not  benign.  It  has  misled  courts into  granting  protected  legal  status  to  Free-product  suppliers  in  cases  ranging from contract disputes to antitrust and privacy litigation. It has also motivated policy proposals that call for eliminating market interventions—or competitive markets  themselves—without  adequate  justification  in  either  case.  Moreover, policies  designed  for  a  post-scarcity  world  necessarily  overlook  the  persistent problems  attendant  to  scarcity,  thereby  creating  substantial  allocative  inefficiencies.  This  Article  seeks  to  dispel  the  Myth  of  Free  before  it  can  wreak further  harm  to  societal  welfare  and  the  rule  of  law.