Articles Posted in Antitrust Policy

From Imago Dei to DQ: Comments on the First Major Speech by Gail Slater as DOJ’s Top Antitrust Attorney

May 12, 2025 | Bona Law PC

Late last month, Department of Justice Assistant Attorney General Gail Slater gave her first major policy address, entitled “The Conservative Roots of America First Antitrust Enforcement.” The thoughtful speech describes an antitrust perspective different from those of any recent Administrations, though consistent with other Trump Administration policies. Antitrust practitioners should prepare for at least subtle changes in the enforcement we have seen recently and for generations.

Location of Speech No Accident

Slater gave the speech at Notre Dame Law School in South Bend, Indiana (technically, Notre Dame IN). While Slater’s Principal Deputy, Roger Alford, taught at Notre Dame, she provided an additional rationale for the location:

We all know the story of the decline in manufacturing in this state. Indiana was at the heart of the United States’ thriving manufacturing industry for much of the 20th century.

But then in the 1960s and ’70s the factories started shutting down. The Studebaker factory closed here in South Bend in 1963, and other Indiana cities experienced similar population declines as manufacturing moved overseas. It took decades for cities such as South Bend to recover, and some have still not recovered. (footnote omitted)

Now, for years I have called for federal antitrust enforcers to get out their Beltway seats. And as a native Midwesterner practicing here for over 35 years, I heartily applaud the choice of Indiana. While I am a Wolverine and not a Golden Domer, my wife is a South Bend native; we were married at St. Joseph parish; and our sons have certainly seen Touchdown Jesus and prayed at the Grotto. So, I especially liked the South Bend choice.

But while I understand the gist of Slater’s point in the quote above, I will quibble enough with the details to push back on the simplistic story that some readers might mistakenly take from it.

Although the 1963 Studebaker plant closure and loss of 7000 jobs certainly was devastating for the company and the city, it was neither the beginning nor the end of problems for either. While Studebaker was “first by far with a post-war car,” the company’s employment had already peaked at 22,000 shortly after World War II and its poor finances forced a merger with Packard in 1954. By 1963, Bendix was actually South Bend’s largest employer and, two years later, the city had “truly come back” from the Studebaker hit as its unemployment rate was one-third of the 1963 rate. Unfortunately, the economic recovery was uneven, leaving behind many minorities, and not destined to last. The city suffered another blow in 1979 when the downtown Sears store closed and moved to University Park Mall in suburban Mishiwaka. So, the Studebaker plant closing was only part of a long-term process.

Any implication that the Studebaker plant closed because “manufacturing moved overseas” probably is about a decade off. In 1963, the percentage of imported cars sold in the US was just over 5%. Instead, Studebaker’s decline after 1950 has been blamed on quality issues, higher costs (especially for labor), and an inability to compete with the lower costs and prices of General Motors, Ford, and Chrysler, especially after the Big 3 started making compact cars in the early 1960’s.

So, did the Big 3 or at least GM abuse its “dominance” or otherwise violate the antitrust laws and kill off Studebaker, Packard, Nash-Kelvinator, and Hudson? Various federal entities certainly investigated several times, including in Congressional hearings in 1955 and 1958. At the latter, George Romney, head of American Motors, the result of the merger of Nash-Kelvinator and Hudson, called for GM, Ford, and the United Auto Workers to be broken up into several smaller competitors and unions.[1] I would argue that the independents failed because of an inability to compete with the Big 3, an ability foreign manufacturers like Toyota, Nissan, and Honda developed a few years later — the share of imports rose to about 15% in 1970 then to over 25% a decade later. (Readers should note that I was an in-house antitrust lawyer at GM from 1989-2012 and learned from many of my predecessors, like Tom Leary.)

Anyone using Slater’s speech to tell a simplistic story of automobile manufacturing and sales should travel about thirty minutes east from South Bend on the toll road and visit Elkhart, IN. Since the end of World War II, about 80% of the recreational vehicles sold in the US each year have been made in and around Elkhart, with most of them produced by a small handful of companies. Why the difference compared to automobiles? Perhaps a uniquely American product sold in volumes too small and erratic to attract foreign competition or mass production techniques? The explanation for Elkhart’s success might be just as complicated as that for South Bend’s troubles.

But while I quibble with Slater’s selection of anecdote, I agree with what I think is her more general argument: The demise of the independent automakers and rise of import automakers did not equally affect consumers, workers, and communities like South Bend (or my Detroit). Slater does acknowledge that “change is inevitable in a dynamic and innovative economy” but also points out, correctly in my view, that “economists call this creative destruction and shrug it off as merely market forces at play.”

Those of us who have praised the free market for the benefits it has brought consumers and society must acknowledge that markets also create winners and losers and often take a long time to adjust. While downtown South Bend is much nicer than it was when I first visited more than forty years ago, it is painful that the main remnant of Studebaker is a museum (although I highly recommend it). Still, I am not yet convinced that these stories show that antitrust law, as compared to other policies, has a large role to play beyond ensuring that the free market really is free.

Three Principles – Some Familiar, Some New to Many Practitioners

Slater described three principles of America First antitrust. I will cover them in the reverse order of their presentation but, perhaps, in decreasing order of familiarity to many practitioners.

First, “Antitrust law enforcement should support deregulation by enabling free market competition that prevents the need for government regulation of consolidated power.” In other words, Slater plans to have “a preference for litigation over regulation,” using the scalpel of litigation “to make targeted, incisive cuts to remove the cancer of collusion and monopoly abuse.” The principle is most clearly demonstrated in the Division’s recently announced task force designed to root out anticompetitive regulations as part of the Administration’s broader deregulation efforts.

This principle seems to be a clear break with the Biden Administration’s efforts at greater regulation, especially through the FTC. Besides the task force’s efforts and more litigation, it could play out in the form of a greater appetite for structural versus behavioral remedies in any problematic mergers. On the other hand, some of the Division’s proposed remedies in the Google search engine market lawsuit, such as forced sharing of data, rules on conduct to prevent self-preferencing, and the required appointment of an officer and a committee to assist in ongoing monitoring, do sound regulatory.

Second, “Antitrust law enforcement should adhere to the rule of law and respect binding precedent and the original meaning of the statutory text.” Slater’s promises to “respect originalism,” maintain a “faithful humility to law’s limits,” and “enforce the laws passed by Congress, not the laws [she wishes] Congress had passed” certainly do sound like a “truly conservative approach to antitrust law.” That conservative approach’s view of precedent and original meaning, however, might not please some businesspeople who call themselves conservative.

Slater believes that new economic theories “do not render older precedent a dead letter” and while “there will be important debates about the weight we should place on older versus newer precedent,” it “is the Supreme Court’s prerogative” to change its interpretations. That attitude can help explain this Administration’s acceptance of the Biden Administration’s Merger Guidelines with its reference to many old cases. Practically, that means that any practitioner must be prepared to explain why old, inconvenient precedent like, for example, Philadelphia National Bank’s structural presumption, should not govern Slater’s merger enforcement with arguments better than a treatise’s assertion that today’s Supreme Court probably would come out differently.

Because the Sherman Act was meant to “codify the [English and American] common law and state antitrust laws,” Slater asserts, terms like “restraint of trade” and “monopolize” “must be understood with respect to the common law that they emerged from.” Many others have spent more time exploring the common law and Sherman Act drafting history than have I; however, my understanding from reviewing works by Werden and Hawk is that the meaning of “monopolize” — and even “monopoly” beyond one established by the government — is unclear or complicated. Still, practitioners might need to bone up on what Senator Sherman, or Senators Hoar and Edmonds, meant back in 1890.

Finally, “Antitrust respects the moral agency of individuals by protecting their individual liberty from the tyranny of monopoly.” Here, we get some principles that might sound odd to antitrust practitioners but provide another good reason the speech was made at Notre Dame.

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Antitrust Law and Dynamic Competition

May 2, 2025 | Bona Law PC

Author: Nicolas Petit

This is a guest post from noted antitrust and competition law scholar Nicolas Petit. Petit is a Professor of Competition Law in the Department of Law at the European University Institute. He is also the co-founder of the Dynamic Competition Initiative with the University of California – Berkeley. Longtime blog readers will remember that I have reviewed Petit’s work before, both here and here. As I discussed in another recent post, Petit joined me on April 3 in Washington, D.C. at the ABA Antitrust Spring Meeting for the Chair’s Showcase Panel “Have We Been Doing It All Wrong” to discuss dynamic competition and related topics. Petit graciously agreed to share this lightly edited version of his opening remarks from that panel with readers of The Antitrust Attorney Blog. Enjoy! – Steve Cernak

I’m the only non-American on this panel, and as it happens, I’m French. As former President Bush once said, the trouble with the French is that they don’t have a word for “entrepreneur.” This should make me the least qualified today to talk about innovation. Now, while President Bush was incorrect, his joke highlights an important truth: understanding the entrepreneur is crucial for fostering innovation.

Today, I want to discuss how antitrust law can better support innovation. A common term used by antitrust people like me who care about innovation is “dynamic competition”, or competition through technological change.

My main point is this: antitrust law needs smart glasses to effectively support dynamic competition. The goal of the “dynamic competition” view is to supply them. We want to enhance antitrust law’s ability to identify restraints of competition that effectively harm dynamic competition, and those that do not.

The dynamic competition view makes three assumptions:

First, technological change is a vector of competition that can be better seen by antitrust law. Second, perceiving the augmented reality of dynamic competition through technological change can be done at reasonable cost. Third, an agenda of augmentation of the reality of antitrust is more acceptable than the jump in virtual reality proposed by Neobrandeisians or the weird world of Trumpian antitrust.

I want to elaborate on the first point. In some industries, technology is a vector of invisible competitive pressure that may complement, and perhaps dominate, product rivalry. In 1946, Joseph Schumpeter had an interesting line about “the businessman [who] feels himself to be in a competitive situation even if he is alone in his field”. He warned against government experts who, failing to see any product rivalry with other firms conclude that “his competitive sorrows is all make believe”.

Today, the Schumpeter aphorism resonates vividly. The R&D investments of the Magnificent 7 represent effort levels consistent with cutthroat competition. Yet, agency and court cases give them short shrift, reaching one finding of unlawful monopolization in core platform segments after the other.

It is challenging for antitrust to deal with the coexistence of large R&D budgets and monopoly shares. The puzzle is the following: Is dynamic competition seen in R&D expenditure conditional on the maintenance of some base of monopoly power in a bottleneck market? Or is dynamic competition the outcome of collapsing monopoly power in that market?

These “correlations” between static and dynamic competition, as Richard Gilbert calls them, can be positive or negative depending on the industry.^[1] Different innovation-minded policies may be required depending on how the correlations work.^[2] If an industry works on a negative correlation between static and dynamic competition, antitrust forbearance will be the optimal policy to protect innovation. A generalization of that negative correlation was used by the Supreme Court in Trinko to exonerate nearly every refusal to deal from Section 2 liability.^[3] Now, contrast this with an industry where a positive correlation exists between static and dynamic competition. In that scenario, strong antitrust enforcement can support dynamic competition through the commodification of aging firms’ monopoly rents.^[4] This may be the implicit, perhaps unconscious, logic underpinning the liability theories in United States v. Google and FTC v. Facebook.

Antitrust law’s selection of one correlation model or the other cannot be made abstractly. A concrete evaluation of (i) whether the industry has dynamic competition potential, and (ii) whether it is monopoly power, or static competition, that supports it, is needed. And note that if an industry has no dynamic competition potential – in clear, technological change is slow, because of a fixed production possibility frontier – then traditional antitrust enforcement should make markets work well.

A related way to look at this is to ask whether antitrust law should adopt a holistic lens on competition. Let us consider for a minute that innovation, technology, or R&D activity are forms of “broad spectrum competition”, “hypercompetition”, or “superimposed competition”.^[5] Now, today’s partial equilibrium logic prevents a twin evaluation of that competitive layer and of rivalry within a relevant market. We do not examine what I have called the “moligopoly” dimension in the picture. The point is this: a business organization is a whole. It is not one thing when it competes with a field of peer firms in the technological environment, and an entirely other thing when it competes with rivals in the product space.

Now, to be fair, antitrust law has attempted to adopt a broader lens. The US Guidelines for the licensing of IP refer to R&D markets. The EU market definition notice of 2024 takes note of “structural market transitions”.^[6] The EU horizontal merger guidelines contain an explicit reference to dynamic competition. In merger cases, agencies have experimented with new concepts. AMAT/TEL or Nielsen/Arbitron focused on future R&D or prospective product markets. Dow/Dupont introduced a focus on innovation “spaces” in R&D pipeline industries. Booking/eTraveli used ecosystem language to justify prohibition.

But talking about dynamic competition does not mean seeing dynamic competition. A proposition like “Google competes with Amazon” will generally attract laughter on planet antitrust. The idea that OpenAI had Chinese competitors – and perhaps some European ones – was delusion until the DeepSeek release. And a conventional application of merger tools led the UK CMA and CAT to hold that GIPHY had the ability and incentives to outcompete Facebook.

The issue, in my view, is there is no well-articulated economic and legal framework for dynamic competition, innovation, or technological change, and related analytical tools. In practice, innovation-related concepts pop up randomly in cases, sometimes to support antitrust or merger prohibitions, less frequently to credit pro-competitive justifications.^[7]

A more thoughtful framework for dynamic competition requires deepening antitrust law engagement with four high-level issues. The first one is ‘out-of-market’ competition. In some industries, market power is not just constrained by direct entry threats within the relevant market. Indirect entry that moves surplus to adjacent or lateral markets is equally as important.

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Big Thoughts at the Antitrust Big Spring Meeting Week

April 11, 2025 | Bona Law PC

Author: Steven Cernak

Years ago when I was working in-house at General Motors, one of my bosses asked just what it was that I did at all those ABA Antitrust Section meetings I attended: “Seems like you just go to nice places and think big thoughts.” He did not mean it as a compliment.

This year, as Chair of the Antitrust Section, I had an idiosyncratic perspective on the Section’s big Spring Meeting last week. I did not get to go to as many panels as I would have liked; however, I did get the chance to moderate two premier panels and interact extensively with numerous foreign enforcers and practitioners. While there were plenty of great panels on the nuts and bolts of antitrust and consumer protection law, I think the key takeaways of the week for practitioners were some of the “big thoughts” – despite what my old boss would say.

Dynamic Complexity

I organized and moderated a panel under the title “Have We Been Doing It All Wrong?” with panelists Nicolas Petit, Neil Chilson, Diana Moss, and Koren Wong-Ervin. Here was the premise: If antitrust law is supposed to protect competition and the competitive process for the good of some group, whether consumers, workers, citizens, or others, shouldn’t we have a good idea of how that competitive process works? And do we?

Antitrust law generally uses the neo-classical economics that so many of us learn in Econ 101 — supply, demand, prices adjust to create market equilibrium, inputs go in a black box that creates outputs. The panel discussed alternative views of competition, one being dynamic competition. Broadly speaking and in my own words, this view sees innovation as the driver of wealth creation and that innovation happens in a longer term, more complex way than captured by neo-classical economics and some antitrust precedent.

A related concept discussed by the panel was complexity economics. Another concept resistant to a simple definition, I describe it as viewing the economy less like a black box and more like an ecosystem, constantly evolving, dynamic, not necessarily ever in equilibrium, and where the participants are always adjusting their actions based on the outcomes that they create. We also discussed emergent order, thinking more like a gardener or park ranger, and even a taste of Austrian economics with some references to Hayek’s Pretence of Knowledge speech. The panelists tried to explain how these concepts, which might be unfamiliar to many antitrust practitioners, might be applied to real cases.

The panel was meant to bring to the audience’s attention a conversation that I and others have been having for years and that will continue. Loyal readers of these posts will remember my reviews of books by Petit and Chilson and other posts on complexity. The conversation continued the next day with a panel sponsored by the Dynamic Competition Initiative and BRG on dynamic competition and innovation. And Section members will get an entire issue of the Antitrust Law Journal devoted to articles going “Beyond Dynamic Competition” later this month.

Here are my summaries of three key takeaways for practitioners. First, Petit made the point that not all industries or companies or the actions they take are examples of dynamic competition; therefore, one research task could be to determine when these concepts make sense to apply. Second, some of the commenters at the DCI panel suggested a need to better understand how innovation occurs in that black box called a company, which might require antitrust folks to study more managerial economics from B-School economists than we have in the past. Finally, I think all the panelists made the point, at least implicitly, that application of any or all of these concepts might lead to more or less antitrust enforcement. All good reasons why antitrust practitioners, enforcers, and policy makers should become more familiar with these big thoughts.

Principles Discussed Globally

As Chair, I had the opportunity to have some informal conversations with many non-US practitioners and enforcers. I also moderated the Enforcers’ Roundtable with the head of the National Association of Attorneys General Multistate Antitrust Task Force and the top enforcers for the EU, Germany, and Brazil. Unfortunately – for the Section but also the antitrust community and them – the top enforcers at the FTC and DOJ chose not to participate in the Section’s Spring Meeting. The attendance and participation of others at the two US agencies also was drastically reduced.

I put the remarks of the non-US attendees in two categories. First, some noted the unfortunate irony of prior US enforcers preaching the need for other countries to apply principles, especially economic ones, in competition law enforcement when the current US enforcers seem to be backing away from any, or at least those same, principles. Personally, as discussed below, I do think the US enforcers will continue to take a principled approach to enforcement, although the principles might be subtly different; however, I think the US enforcers missed a great chance to explain themselves to a large, global audience. Tough to change first impressions.

Second, non-US attendees, as always, appreciated the numerous opportunities to interact with US-based colleagues, collaborators, and current or potential clients. They would have preferred to also interact with US enforcers. Their absence raised concerns that US enforcers might pull back on other formal and informal methods of cooperation, such as the International Competition Network or ICN. The presence of Mario Monti, longtime Italian and EU politician and competition enforcer and considered an ICN founder, at the Spring Meeting only highlighted the drastic changes felt by those outside the US.

Perhaps EU EVP Teresa Ribera captured both categories best with this statement (taken from an unofficial summary) at the Enforcers’ Roundtable: “Ensuring functioning markets, protecting consumers, and fighting abuse — while respecting the rule of law — takes trust and cooperation. Regionally. Globally. We’re in this together.” I think the global cooperation will continue but this year was the first time in many years when that assumption was questioned.

Hillbilly Antitrust

One of the benefits of being in DC during Spring Meeting week after an election is the chance to hear some initial thoughts from new enforcers on their priorities. Sadly (for many, as explained above), new DOJ AAG Gail Slater chose a different, smaller event last week to make some initial remarks. While some suggested the term “MAGA Antitrust” to describe the policy outlook for the new Trump Administration, Slater said she preferred “hillbilly antitrust.”

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Agencies Issue New Draft Merger Guidelines and Create More Classic Antitrust Cases

July 24, 2023 | Bona Law PC

Authors: Steven Cernak and Luis Blanquez

On July 19, 2023, the FTC and DOJ Antitrust Division issued the draft of their long-anticipated Merger Guidelines. Like prior iterations, these Guidelines are meant to explain to potential merging parties how the agencies will evaluate their proposed transactions. Earlier versions included input from noted experts across the antitrust community and so also proved persuasive to many courts evaluating challenges to mergers by the agencies. Time will tell if these Guidelines have the same power when they are finalized after the comment period expires in late September.

Below, we provide a very short summary of these new Guidelines. But one notable feature of these Guidelines is their heavy reliance on caselaw, much of it decades old, rather than near-exclusive reliance on the latest economic thinking. The result is that many cases that antitrust practitioners might not have read in years, if ever, might suddenly be important again. Because we here at Bona Law have frequently written about such “classic antitrust cases,” we will cover two of those “suddenly classic” cases below and a few more in subsequent articles.

New Guidelines Summary: Antagonism Towards Mergers

Government agencies usually challenge proposed mergers and similar transactions under Clayton Act Section 7. That statute requires a challenger to show that the effect of the transaction “may be substantially to lessen competition or tend to create a monopoly.” Key here is that the statute does not require proof that the bad effect has already happened or even that it is certain to happen, only that it probably will happen in the future. (We covered this topic in a recent Fifth Circuit amicus brief supporting Illumina.) So these new draft Guidelines, like all other prior versions, explain the factors that the agencies will consider when making that prediction.

Compared to prior Guidelines, however, these new draft Guidelines list more and different reasons why the agencies will challenge mergers. They list thirteen different factors, violation of any one of which would be a reason to try to stop the merger. For example, the prior Guidelines often started with market definition and concentration levels but then analyzed further to see if those factors really would lead to competitive harm. These new draft Guidelines, by contrast, expand the ways markets might be defined; return to lower thresholds for determining when markets are “highly concentrated” and the transaction will significantly increase concentration; and explain that mergers involving highly concentrated markets or firms with 30% or more share of the market almost certainly will be challenged without further analysis. Also, transactions in markets trending toward consolidation will be challenged. Finally, mergers that substantially reduce competition in labor markets will be challenged. If this draft represents how the agencies will review mergers, look for much longer reviews and many more challenges.

How HSR Shifted the Focus of Merger Review Away from the Courts

Before Hart-Scott-Rodino was passed in 1976, the only way for the agencies to stop a proposed merger was to go to court. The result was a decent number of court opinions on merger law, including several from the Supreme Court.

HSR triggered a requirement for parties to most large transactions to file their intentions with the two federal agencies and allow review before closing. (We recently discussed the proposed changes to HSR.) While only a small percentage of such filings triggered close reviews, those extended reviews often took many months before the agencies decided to challenge them in court. By that time, many parties decided to abandon the transactions. The results of these process changes were fewer merger opinions from courts and a greater emphasis on the analysis at the agencies. As that analysis, as embedded in prior versions of the Guidelines, evolved away from that used by courts in earlier cases, a significant gap opened between the opinions and the Guidelines. Now that this new draft is, in many ways, returning to the analysis of those earlier opinions and citing many of them for support, antitrust practitioners will need to learn, or relearn, some of those old cases (as we predicted many months ago).

New Classic Cases – Brown Shoe

One of the most important classic antitrust case is Brown Shoe Co. v. United States, mentioned more than a dozen times by the new Guidelines for numerous propositions, including vertical mergers and, especially, market definition.

In Brown Shoe, the government challenged the merger between Brown Shoe and Kinney on horizontal restraints and vertical foreclosure issues. The parties argued different market definitions. The United States proposed a broad product market including all shoes. Defendants, on the contrary, segmented the product market by age and sex of customers, together with the price and quality of the shoes.

The district court concluded that men’s shoes, women’s shoes, and children’s shoes were different product markets and determined that competition was “sufficiently threatened in these submarkets to condemn the merger.” Defendants challenged the issue of market definition all the way up to the Supreme Court.

The Supreme Court affirmed the decision of the district court and basically adopted the district court’s reasoning on the market definition issue, with a particular focus on the “interchangeability” and the “unique characteristics and uses” tests.

In the Court own words:

The outer boundaries of a product market are determined by the reasonable interchangeability of use or the cross-elasticity of demand between the product itself and substitutes for it. However, within this broad market, well defined submarkets may exist which, in themselves, constitute product markets for antitrust purposes. The boundaries of such a submarket may be determined by examining such practical indicia as industry or public recognition of the submarket as a separate economic entity, the product’s peculiar characteristics and uses, unique production facilities, distinct customers, distinct prices, sensitivity to price changes, and specialized vendors.

As eloquently highlighted in Antitrust Law: An Analysis of Antitrust Principles and Their Application by Areeda and Hovenkamp, this case––while still valid––has a limited application on today’s antitrust merger analysis:

[w]hile the Supreme Court insisted on a market definition, it did so for a very different purpose than we use merger analysis for today. To be sure, in a horizontal merger case it is still important to know where output movements are threatened among the post-merger firm and its competitors, but the movement contemplated in Brown Shoe was in the opposite direction from what we consider now. Today the concern is that the post-merger firm might be able to raise prices without causing too much output to be lost to its rivals. In contrast, the Brown Shoe concern was that by reducing its price (or improving quality at the same price), the post-merger firm could deprive rivals of output, thus forcing them out altogether or relegating them to niche markets.

As a rough approximation the boundaries of such a market might be about the same as the boundaries of a relevant market under today’s definitions. When one takes more dynamic considerations into account, however, there are fundamental differences. For example, the focus on excess capacity in merger cases today typically examines excess capacity held by the post-merger firms’ rivals to see if their output increase will offset the post-merger firm’s anticipated output reduction. [52] By contrast, under the Brown Shoe rationale one might want to see if the post-merger firm has sufficient excess capacity so as to be able to steal sales from smaller rivals. Under modern analysis in product-differentiated markets we want to know whether rivals will be able to reposition themselves closer to the post-merger firm, thus increasing competitive pressures on it. By contrast, under the Brown Shoe analysis, rival firms configure themselves away from the post-merger firm in order to avoid competing with it on price. Indeed, this concern that smaller rivals would be relegated to niche markets played an important part in the litigation. [53]

Further, under the modern analysis that identifies express or tacit collusion as the feared harm, the merger tends to affect all of the firms in the market the same way. That is, if the merger tends to make collusion or interdependent pricing more likely, the non merging firms will benefit as well as the merging firms and price will increase across the market. In very sharp contrast, the analysis in Brown Shoe saw the post-merger firm as benefitting at the expense of nonmerging rivals in the same market. In this sense Brown Shoe was very much a “unilateral effects” case—the benefits of the merger accrued to Brown Shoe alone.

Further, today’s merger concern with price increases as opposed to price reductions makes relevant a new set of questions that were simply not within the purview of Brown Shoe, namely, what are the effects of a merger between relatively adjacent firms in a product-differentiated market. [54]

New Classic Cases – Falstaff

The new Guidelines cite U.S. v. Falstaff four times in the section discussing potential competition. That 1973 case, and the new Guidelines, discussed both varieties of potential competition: actual potential competition and perceived potential competition. (We discussed both varieties, as well as Falstaff, in the context of the Meta/Within merger here and here.)

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Complexity Books for Antitrust Lawyers

May 23, 2022 | Bona Law PC

Author: Steven J. Cernak

Two months ago, I encouraged all readers of this blog to read Complexity-Minded Antitrust by Nicolas Petit and Thibault Schrepel. As I explained in that article, I think their suggestion that antitrust lawyers and policymakers should consider applying learnings from complexity theory to antitrust questions was a good one.

I hope you heeded my suggestion. Over 1300 others have at least downloaded the article. After reading the article, I wanted to get smarter about complexity as well. I had dipped my toe in the complexity water during my graduate economics studies and early legal career but that was decades ago during complexity’s infancy. How had it developed and how might it apply to antitrust issues?

To get back up to speed, I read several books on the topics. Below, I outline my thoughts on each of them. I encourage other antitrust experts to read these or other materials to stay abreast of where our field might be (should be?) heading. If you have other suggested readings, please let me know.

First, take a look at Neil Chilson’s Getting Out of Control, his short and easily readable book on emergent order that I reviewed for this blog last October. As I described in that review, Chilson uses everyday examples to define emergent order and distinguish it from randomness and designed order. He then builds on those definitions to discuss an example of emergent order near and dear to all antitrusters, the price system. From there, he derives principles for anyone (like antitrust enforcers?) dealing with emergent order to observe: expect complicated results even from simple actions; push decisions down to actors with local information; and be humble. Short, sweet, and by an author with FTC experience, this book is the one to read if you only read one.

Second, I re-watched Understanding Complexity by Scott Page, one of The Great Courses that I had purchased several years ago. I thought this course was a great summary of complexity, how it relates to many disciplines, and how its concepts can apply in many everyday settings. Page defines the attributes of complex systems—diversity, connection, interdependence, adaptation—and distinguishes such systems from others that are really just complicated. From these tools, he derives now familiar concepts like tipping and path dependence and explains why truly complex systems can be harnessed, perhaps, but not controlled. I recommend this course for an easy-to-understand but more complete and formal view of complexity.

(Disclosure: Scott Page lived a few doors down from me in my University of Michigan dormitory. In a hallway full of smart young men with great enthusiasm for Michigan athletics, Page was one of the smartest and most enthusiastic.)

I was disappointed in Complexity: A Guided Tour by Melanie Mitchell. While I was looking for a general description of complexity and its roots, this book went farther afield than I wanted or could appreciate. It covers many disparate subjects—genetics, evolution, biology—and has some interesting history of the science and some of its pioneers; however, Mitchell spends more time talking about that history and justifications for why complexity might be its own separate discipline than I found interesting. I can only recommend it for those interested in math history.

On the other hand, Complexity and the Art of Public Policy by David Colander and Roland Kupers covered just the right amount of complexity background, history, and context before applying it to various public policies. Antitrust gets a brief mention with a very short summary of the U.S. Microsoft case. More generally, the authors try to use complexity theory to begin the development of a third way of thinking about public policy choices, what they call laissez faire activism, as compared to defaulting to having either the market or the federal government do everything. Here are some of the key points that I think make this book, right after Chilson’s, one that antitrust folks should read:

The economy and various parts of it can be non-linear and able to self-organize and, so, able to be influenced but difficult to control;
Complexity theory and math can clarify choices but will not prescribe solutions;
There is a potential tradeoff between efficiency and resiliency that businesses (especially those that misunderstood all aspects of the Toyota Production System) and policymakers should consider;
Economic policy is not all of social policy and increasing material welfare is not the single goal of society;
Path dependency can exist but not in all cases

Finally, I can recommend Difference: How the Power of Diversity Creates Better Groups, Firms, Schools, and Societies by, again, Scott Page, only if you really want to go deep in the weeds on complexity or are managing a group. I had another, more personal, reason for wanting to read it.

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An Antitrust Report Card for the Biden Administration

April 15, 2022 | Bona Law PC

Authors: Steve Cernak and Luis Blanquez

Like all new administrations, the Biden Administration entered office promising change in antitrust policy. Unlike previous administrations, however, the change this Administration promised was nothing less than the total transformation of antitrust enforcement.

In its first year, the Administration has begun that transformation by overhauling enforcement personnel, starting to make policy changes, and promising much more. But will it last? The potential overthrow of the antitrust status quo faces opposition from entrenched interests and skepticism from a judiciary trained in it. It will take time to make the new ideas stick—will the new antitrust leaders have that luxury?

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The One Antitrust Article You Must Read Now

March 18, 2022 | Bona Law PC

Author: Steven J. Cernak

Apologies for the clickbait headline but all antitrust practitioners and policymakers should read Complexity-Minded Antitrust by Nicolas Petit and Thibault Schrepel. In their short article, the authors suggest a potentially radical new way to think about the competition that antitrust law is designed to protect. Written to raise more questions than answers, the article should get us all thinking about some of antitrust’s bedrock principles.

The authors are no strangers to provocative takes on cutting edge antitrust topics. Petit explored similar topics in the context of several big tech companies in his book Big Tech and the Digital Economy: The Moligopoly Scenario, a great read that I reviewed here. Schrepel has been reporting on the facts of blockchain and its implications for the economy and antitrust for years.

The article begins from the premise that neither the neoclassical/Chicago School view of competition nor its Neo-Brandesian critique are adequate to describe at least large swaths of today’s knowledge economy. The neoclassical view and its antitrust rules appear inappropriate for an economy with “unprecedented levels of increasing returns, feedback loops, and technological dynamism.” The Neo-Brandesians recognize those shortcomings, but their solution goes back in time to the “big is bad” theories of the early 20^th Century and fails to account for “empirical facts, except those denoting corporate size, dominant shares, and conglomeration.”

The authors’ potential solution? Consider applying complexity science to antitrust. As the authors explain, complexity science studies how “micro-level interactions lead to the emergence of macro-level patterns of behavior.” Complexity focuses on systems and how they adaptively change to the context they create. The article lists applications of the theory to subjects like biology, game theory, and biochemistry.

The authors very briefly describe some of the applications in economics, led by those of economist Brian Arthur, and how those applications view the economy more like an evolving living organism rather than a machine. The authors then tentatively discuss how these concepts might apply to antitrust policy. I found at least three of their explorations intriguing.

First, they suggest that antitrust pay attention not just to the market or meso-level of a competitive system but also to the industry or macro-level and the firm or micro-level. Firms that compete at the market level might not be quite as rivalrous at the industry level. Inside the firm, different divisions might engage in “co-opetition” like WhatsApp and Messenger both cooperating and competing within Meta. (This older American immediately thought of Oldsmobile and Pontiac.) The point is that antitrust should consider if competitive changes at those other two levels might affect the rivalry at the market level.

Second, the authors suggest a different mental model for antitrust authorities. Instead of a physicist or craftsman looking to “reach static and predictable outcomes,” authorities might want to view themselves as a park ranger (per Arthur) or gardener (per Hayek) and look to create the conditions under which the competitive system is most likely to thrive. I think that mental model is consistent with the humility that many of us have been championing for years while still allowing enforcers to do more than throw up their hands and say “it’s too complex for us to do anything.”

Third, the authors suggest that antitrust policy focus more on promoting uncertainty, either instead of or in addition to, rivalry. This suggestion builds on some of Petit’s work in his book. There, he describes how some Big Tech companies seemingly without direct competitors still feel competitive pressure from potential entrants or product/technology shifts that might render their product irrelevant. In some ways, antitrust already captures this idea; after all, the prohibition on price-fixing agreements is a way to force competitors to live with the uncertainty that comes from not knowing how a competitor will price. Should further antitrust restrictions be placed on certain competitors to make them at least feel more vulnerable?

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Antitrust, Antifragility, Blockchain, and the Department of Justice

September 12, 2020 | Bona Law PC

Author: Jarod Bona

I suspect that Antitrust DOJ head Makan Delrahim and I have had a similar reading list lately. And I am not even referring to any sort of antitrust books, like, for example, Steve Cernak’s book on Antitrust in Distribution and Franchising.

Let me explain.

I read, with great interest, a speech that Assistant Attorney General Makan Delraihim delivered on August 27, 2020 to the Conference on Innovation Economics in Evanston, Illinois (well, virtually).

His two topics were blockchain and Nassim Taleb’s concept of antifragility.

As a consistent reader of this blog, I trust that you already know that I am a big fan of Nassim Taleb and, particularly, his book, Antifragile: Things that Gain from Disorder. Indeed, a re-reading of Antifragile inspired an earlier article about Iatrogenics. If you haven’t read Antifragile, you should, right away.

My interest in blockchain, Bitcoin, and other cryptocurrency systems like Ethereum is relatively recent. But—like many before me—a little bit of knowledge has created an insatiable appetite for more. I am making my way down the rabbit hole, as they say.

Let’s dig in and talk about what the Department of Justice thinks about both antifragility and blockchain.

Antifragile

What does the term “antifragile” mean?

You might think that robust is the opposite of fragile. But those of us that have read Taleb know that isn’t true. Something that is fragile is likely to break or weaken from stress, shocks, or variability. If something is robust, it will resist this stress, shock, or variance.

But what you really want during times of stress (or, really, just over time), is antifragility. If you are antifragile, you improve from stress, shocks, and variance, which are inevitable, especially as time passes.

The human body is, in some ways, antifragile. Lifting weights, for example, creates a stressor on the muscles and surrounding tissues, which cause, ultimately, an increase in strength. So make sure you get your deadlifts in this week.

Antifragile is the opposite of fragile and it is better than robustness.

There is a lot more to antifragility than this. Indeed, there is an entire book about it (and, really, a set of books—Incerto). I urge you to read more—it might change your life.

Earnest Hemingway understood antifragility when he said in A Farewell to Arms that “the world breaks everyone and afterward many are strong at the broken places.” The next line is just as important for reasons you will understand if you read Antifragile: “But those that will not break it kills.”

So, what does antifragility have to do with the Department of Justice and antitrust?

Assistant Attorney General Makan, in his speech, emphasized that “the Antitrust Division has made protecting competition in order to advance innovation in the private sector one of our top priorities,” and that the Division wants to “ensure that antitrust law protects competition without standing as an impediment to rapid innovation.”

He then introduced the concept of antifragility and acknowledged that the pandemic can certainly be described as a “shock” producing a “wide array of trauma.” But with that harm comes an opportunity—“if we rise to the challenge of being antifragile, there is also an opportunity for tremendous growth.” More specifically, “[c]ritical innovations and technological developments often result from the kind of extraordinary experimentation the pandemic has made necessary. We have the opportunity to embrace antifragility, to delve into the experimentation and trial and error that drive growth, and to make ourselves better.”

According to AAG Makan, “[o]ur goal at the Antitrust Division is to extend the spirit of innovation beyond our latest efforts to combat the pandemic and protect competition—ultimately, to become antifragile.”

The market system—competition—is, of course, an antifragile system because it improves with variance over time, including shocks and stresses. As problems arise, the market provides solutions. As new preferences arise, the system meets those preferences. As demands for certain products or services decrease, resources move away from those areas. Indeed, the “heart of our national economy has long been faith in the value of competition.” And the purpose of the antitrust laws is to protect that competition.

I am pleased to read the DOJ Antitrust leader expressly affirm those values and I have no doubt that he believes them—you can’t read and quote Taleb and not be affected.

But let’s remember that large central government is not typically the friend of antifragility. Indeed, government interference is more likely to distort incentives and the market’s ability to adjust to stressors. It can also lock-up parts of the system and increase fragility.

When a knocking on your door is followed by a shout of “I am from the government and I am here to help,” your heart should feel fear not relief.

I view the antitrust laws, if applied with restraint, as similar to contract, property, and tort laws. They provide the rules of the game that allow the market to prosper. Failure to apply any of them uniformly or fairly harms the beneficial potential of markets and competition. But over-applying them does the same. Like much of life, sometimes the answer is complicated and doesn’t fit into a single tweet.

Government enforcers can, however, stay on the right track if they have in their mind the rule that doctors often forget: “First, do no harm.” Antitrust enforcement, like medical intervention, can be iatrogenic.

Blockchain, Bitcoin, and Cryptocurrency

The DOJ Antitrust Division’s attorneys have formally educated themselves on blockchain and other technologies. And, like me, once they started learning about it, they probably realized what a big deal it truly is.

My worry, frankly, is that the government is going to somehow screw it up.

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