Articles Posted in Competition


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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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 20th 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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Author: Jarod Bona

I believe that Bitcoin is the enemy of tyranny and the greatest invention of the 21st century. Its detractors tend to either not understand Bitcoin or believe that the people are best when they are controlled and manipulated.

Maybe that was a little hyperbolic? I don’t care.

The truth is that I am still learning. I am still crawling through the rabbit hole (a cliché, but one often used in this area) and I recommend that you do the same. The more I learn, the more excited I get about Bitcoin and what it means for our future.

As someone who has made the study of and interaction with competition his career, it is fun to watch a superior competitor to government fiat currency develop.

We had (and still have) gold, but that has its limitations: Mostly, dividing and carrying it.

Blockchain v. Bitcoin

First, an important clarification: The incredible blockchain technology developed from Bitcoin, but many cryptocurrencies now utilize this technology for themselves. And NFTs (non-fungible tokens) are becoming a big deal in certain circles; they utilize blockchains like Ethereum. Bitcoin is on a blockchain, but there are other blockchains out there and other currencies and applications that utilize these blockchains.

To really get it, you must understand the distinction between Bitcoin and everything else that might appear on a blockchain. The blockchain technology is exciting and there are use cases that people are testing all over the world. And others that we can’t even contemplate yet. But there is only one Bitcoin and it is different in kind from everything else. You should read the original Bitcoin white paper by Satashi Nakamoto here to learn more.

The Limited Supply of Bitcoin

Among other more complex reasons, Bitcoin is different because it is programmed such that the number of Bitcoin will never exceed 21 million (and it won’t even reach 21 million for a long time). As far as money is concerned, it is harder than gold (even though it isn’t physical). And there isn’t a central authority (i.e. a Central Bank or any other entity) that can add inflation or otherwise screw around with it.

Go ahead, read that last paragraph again. And try to comprehend how big of a deal this is.

Currencies (even government fiat) work by supply and demand and you would be shocked if you discovered how many new dollars are introduced into the world each year, especially the last couple years. Go ahead and look it up. And it is much more than just the actual cash-money printer. It is Congress and the President adding more debt and the Federal Reserve “stimulating” the economy. Even simple bank loans increase the money supply. Anyway, poke around the internet about this to add a new anxiety to your life.

You don’t have to have a Ph.D. in Economics to understand that dramatically increasing the supply of something can negatively affect its value. And that’s just as true with dollars and other fiat currencies.

Did you know that “Mo Money Mo Problems” by The Notorious B.I.G. is really a ballad about the ravages of increases in the money supply?

Well, I made that up. But it would be a great title for what’s happened with fiat currency.

Network Effects

If you follow antitrust issues, you are now undoubtedly familiar with network effects. There are certain products, services, or platforms (even currencies) that become more valuable to each user, the more users participate. So, for example, if you are building a platform business, the more sellers on your platform, the more useful your platform will be to buyers, and vice-versa. This is one reason why you see so many new platform tech companies burning through money, charging customers as little as possible, sometimes nothing. The game is to win the market, at whatever cost. Then you can start to really monetize. Social media, of course, works the same way. People want to be where others are.

Anyway, Bitcoin also benefits from network effects. As more people use it as a store of value, the more valuable it becomes as a store of value. And while Bitcoin is also a medium of exchange, I think that its current role is much more of a store of value because it is still quite volatile and, frankly, those that understand it don’t really want to spend it as the value has consistently increased—sometimes dramatically—during this current adoption phase (which may continue for years).

Bitcoin as a Censorship-Resistant Medium of Exchange

As a medium of exchange, however, there is a second layer on top of the Bitcoin blockchain called the Lightening Network that makes it even easier for users to exchange bitcoin. And if you go to El Salvador (which has adopted Bitcoin as legal tender), you can utilize the lightening network, through an app, to purchase a McDonald’s Cheeseburger with bitcoin.

In addition, we are beginning to see people take all or parts of their salaries in bitcoin including the mayors of New York City and Miami. A company called Strike allows you to set up a direct deposit of your paycheck in part or in full in bitcoin. And as the government money printing starts to show up even in the official government inflation numbers, more and more people are looking for protection from the currency devaluation, which seems to have no end in sight. Bitcoin offers one possible solution, with its inherently limited supply that no person or entity can change.

Bitcoin (and Ethereum) have also literally saved lives by providing money for people in Ukraine when banks and ATMs weren’t available. And the government of Ukraine has taken in millions of dollars of donations in these cryptocurrencies. This isn’t a surprise as The Human Rights Foundation has long utilized Bitcoin to help those facing tyranny throughout the world.

The reason that Bitcoin is the solution to those under oppression is that it is decentralized such that no government, entity, or person can cancel it or remove people from its network. In that sense, it is censorship resistant. For the antitrust fans out there, not even a group boycott can keep you from using it. This censorship-resistant feature will likely become increasingly important, including in developed countries as banishment, oddly, seems to be in fashion as a method of punishment.

Bitcoin Competes with Government-Backed Currencies like the Dollar

Like any market, there is a market for currency. And the dollar, particularly in the United States, has market power. It is, at least for now, the world’s reserve currency. The dollar still competes well against currencies from other nation-states, despite its dramatic increase in supply, in part because other countries are doing the same thing, often to a much greater extent.

But now that there is an emerging non-government-backed currency, it will be interesting to see what happens. Bitcoin is vastly superior to government currency in many ways, but it has been around for a relatively short time, so many are still skeptical (I personally am not skeptical).

Besides Bitcoin, there are other currencies that will compete with the dollar, including China’s digital currency (which comes—at no extra charge—with high-tech surveillance tools). Bitcoin may not displace the dollar, but it wouldn’t surprise me if it has a major role alongside it, as it is better than the dollar in certain ways. This includes the programmed fixed supply, alongside the fact that people can move Bitcoin across time and space more quickly and cheaply than government-backed currencies. And, of course, its censorship-resistant qualities are becoming more apparent and important on the world stage.

You might begin to see countries, including the United States, adopt their own digital currencies. But don’t be fooled: These currencies will not be censorship resistant and will always be subject to increases in their supply. They are not worthy competitors to Bitcoin and their dystopian qualities could be frightening for those that cherish freedom.

The Environmental Benefits of Bitcoin

The Bitcoin network runs on a proof-of-work system that changes energy to value that can be stored and transferred across time and space. So—like just about everything else human-created in this world—it requires energy. Those that don’t fully understand Bitcoin sometimes target the proof-of-work energy use as a reason to criticize this positive world-changing technology. You can tell what I think by the way I framed that sentence.

But what you don’t hear in these shallow articles by those that don’t truly understand Bitcoin (see, I did it again) is that Bitcoin utilizes energy in such a unique way that the environmental impact is likely to end up as a net positive. Of course, even that is unfair to Bitcoin as we don’t routinely criticize other technologies that use energy. But if you don’t understand something, you tend to fear it and look for flaws. So, I’m not surprised that the Bitcoin luddites get stuck on the energy usage.

Bitcoin mining can be done anywhere and anytime and allows those that mine to convert energy to value in the most flexible of circumstances. These features create positive consequences for energy markets and the environment.

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Engineers and Bridge

Author: Jarod Bona

As an antitrust attorney, over time you see the same major cases cited again and again. It is only natural that you develop favorites. Here at The Antitrust Attorney Blog, we, from time-to-time, highlight some of the “Classic Antitrust Cases” that we love, that we hate, or that we merely find interesting.

The Supreme Court decided National Society of Professional Engineers in the late 1970s—when I was two-years old—and before the Reagan Revolution. But the views that the author, Justice John Paul Stevens, expressed on behalf of the Supreme Court perhaps ushered in the faith in competition often associated with the 1980s.

The National Society of Professional Engineers thought that its members were above price competition. Indeed, it strictly forbid them from competing on price.

The reason was simple: “it would be cheaper and easier for an engineer ‘to design and specify inefficient and unnecessarily expensive structures and methods of construction.’ Accordingly, competitive pressure to offer engineering services at the lowest possible price would adversely affect the quality of engineering. Moreover, the practice of awarding engineering contracts to the lowest bidder, regardless of quality, would be dangerous to the public health, safety, and welfare.” (684-85).

So price competition will cause bridges to collapse? I suppose the same argument could be made for any market where greater expense can improve the health or safety of a product or service. We better not let the car manufacturers compete to provide us with cars because they will skimp on the brakes. It is often the professionals–including and especially lawyers–that find competition distasteful or damaging for their particular profession and believe that they are above it. Well, according to the US Supreme Court, they are not.

Indeed, quite recently, in NCAA v. Alston (analyzed here by Steve Cernak), the US Supreme Court reaffirmed and applied National Society of Professional Engineers when it told the NCAA that if they don’t like competition, they better go to Congress because, as of now, the Sherman Act applies to them and that law is predicated on one assumption alone: “competition is the best method of allocating resources” in the Nation’s economy.

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Sculpture Man Controlling Trade

Author: Steven J. Cernak

How do you tie together evolution, the wave, and market prices?  As Neil Chilson explains in his brilliant little book, Getting Out of Control, all are examples of emergent order.  While Chilson is a former FTC leader, this book is not just for antitrust and consumer protection lawyers and economists but for anyone trying to understand what they can, and cannot and should not, control.

The book is about more than policy and certainly more than antitrust policy.  It explores many ways in which emergent order can play a role in your life, both personal and professional.  After all, the subtitle is “Emergent Leadership in a Complex World.” So parts of the book read like a self-help or leadership book.

Those parts might be the least interesting, at least to many of us.  There is nothing objectionable in those sections but there also did not seem to be many new insights from viewing familiar issues through an emergent-order lens.  For example, Chilson describes how changing your habits can change you and your actions and how changing your environment can help change your habits: “If you want to stop eating sugar, don’t visit candy stores.”

But that advice does not seem much different than the directions that many of us have received in various six sigma or other corporate efficiency seminars. Many of mine while at General Motors were based on lessons learned from the Toyota Production System applied to the white-collar office.  There, changing the environment might mean putting yellow taping around the stapler on the table next to the copier to develop the habit of returning it to the same place every time. Good advice that all of us, whether in the workplace a few weeks or decades, need to hear periodically, but not particularly new.

Chilson’s policy discussions, however, do offer fresh and necessary takes on policy issues, like antitrust and other economic regulation, that are especially important today.  He starts by defining emergent order and distinguishing it from both randomness and designed order. Here, emergent order is the complex behavior of a system created by the interactions of many smaller components following simpler rules with no central control. To illustrate the differences among the three types, he uses various actions of a crowd at a sporting event.

As an example of emergent order, consider “the wave” at a large sports stadium — I will use the University of Michigan football stadium. The system, that is, the attendees, engage in the complex behavior of creating the coordinated, observable pattern of a wave moving around the stadium. No central authority controls the wave — some group of students, though not always the same one, tries to start it at different points in the game — and the small components, each fan, follows the simple rule of standing at about the right time. The wave peters out as enough fans grow disinterested.

An example of randomness would be the fans entering the stadium.  As Chilson notes, “you would be hard pressed to predict when any particular fan would arrive and take their seat” (although, at Michigan Stadium, a safe prediction is that fans named Cernak will be in their seats at the one hour to kickoff announcement). Designed order, on the other hand, would be if placards are handed out that, “when everyone holds them up, spell out ‘GO TEAM’ [or a Block M] across the entire stadium.”

Chilson builds on those definitions and examples to examine “the classic economic example of emergent order,” the price system. From these concepts, he derives principles for anyone dealing with emergent order, such as: expect complicated results even from simple actions; push decisions down to those actors with important local information; and be humble.

While the book is not overly technical or academic, its points are well-supported with quotes and “greatest hits” from top economists like Adam Smith, F.A. Hayek and his knowledge problem, Ronald Coase and his theory of the firm, and Elinor Ostrom. Chilson even interviews Russ Roberts, who has been popularizing emergent order on his EconTalk podcast for years.  (Surprisingly, there does not seem to be a reference to Roberts’s It’s a Wonderful Loaf, an ode to the magic and beauty of emergent order that I suggest to all my antitrust students.)

Specifically on antitrust and other regulatory matters, Chilson has high praise for his former boss at the Federal Trade Commission, former long-time Commissioner and Acting Chairman Maureen Ohlhausen. She frequently spoke about the need for the FTC to exhibit “regulatory humility,” a position that I have supported in the past. Chilson also seems to channel Edmund Burke in advocating for a common law approach to policy decisions, rather than some elaborate rulemaking, as the many cases decided with specific and local knowledge in the past end up embodying wisdom that should be respected now and in the future.

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Author: Jarod Bona

Do you or your competitor have a monopoly in a particular market? If so, your conduct or their conduct might enter Sherman Act, Section 2 territory, which we call monopolization.

If you are in Europe or other jurisdictions outside of the United States, instead of monopoly, people will refer to the company with extreme market power as “dominant.”

Of course, it isn’t illegal itself to be a monopolist or dominant (and monopoly is profitable). But if you utilize your monopoly power or obtain or enhance your market power improperly, you might run afoul of US, EU, or other antitrust and competition laws.

In the United States, Section 2 of the Sherman Act makes it illegal for anyone (person or entity) to “monopolize any part of the trade or commerce among the several states, or with foreign nations.” But monopoly, by itself, is not illegal. Nor is it illegal for a monopolist to engage in competition on the merits.

As an aside, I have heard, informally, from companies that are considered “dominant” in Europe that the label of “dominant” effectively diminishes their ability to engage in typical competitive behavior because they are under such heavy scrutiny by EU Competition authorities.

If you are interested in learning more about abuse of dominance in the EU, read this article.

In the United States, monopolists have more flexibility, but they are still under significant pressure and could face lawsuits or government investigations at any time, even when they don’t intend to violate the antitrust laws. There is often a fine line between strong competition on the merits and exclusionary conduct by a monopolist.

Here are the elements of a claim for monopolization under Section 2 of the Sherman Act:

  • The possession of monopoly power in the relevant market.
  • The willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.

This looks simple, only two basic elements, but it isn’t.

The Possession of Monopoly Power in the Relevant Market

To determine whether an entity has monopoly power, courts and agencies usually first define the relevant market, then analyze whether the firm has “monopoly” power within that market.

But because the purpose of that analysis is to figure out whether certain conduct or an arrangement harms competition or has the potential to do so, evidence of the actual detrimental effects on competition might obviate the need for a full market analysis. If you want to learn more about this point, read FTC v. Indiana Federation of Dentists (and subsequent case law and commentary).

Sometimes this element leads to difficult questions about the line between monopoly power in a relevant market and something slightly less than that. Other times, the monopoly-power element comes down to how the court will define the relevant market. A broader market definition may create a finding of no monopoly power, while a more narrow definition means the powerful company has monopoly power.

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Author: Jon Cieslak

Many guitarists and rock music fans have recently gotten to know Rick Beato. Beato is a musician, music producer, and, most recently, a YouTube personality. He regularly produces YouTube videos about a variety of music topics, headlined by his most well-known series, What Makes This Song Great?, which breaks down and discusses popular songs. He also occasionally discusses legal issues, particularly copyright law and fair use, as he has had videos removed from his YouTube channel.

In one video, Beato touches on antitrust law in his discussion of what he refers to as the Y2K curse. The Y2K curse refers to his observation that a large number of successful rock bands from the 1990s—Beato gives twenty eight examples, including Live, Cake, Counting Crows, Bush, Blur, Goo Goo Dolls, and Barenaked Ladies—“did nothing after the year 2000.” This is not because they stopped releasing albums; rather, their releases in the 2000s did not have the same commercial success. He admits that this was not a universal problem, as bands such as Foo Fighters, Green Day, Red Hot Chili Peppers, and Weezer were able to maintain their success.

So why did so many (but not all) rock bands suffer from the Y2K curse? Beato attributes much of it to a change in radio formats indirectly prompted by the Telecommunications Act of 1996. According to the FCC, the Act’s goal was “to let anyone enter any communications business—to let any communications business compete in any market against any other.” But what happened in practice was the drastic increase in the consolidation of media ownership, particularly in radio stations. As Beato explains, in 1983, 90% of American media was controlled by fifty companies. By 2011, 90% of American media was controlled by just six companies (GE, News-Corp, Disney, Viacom, Time Warner, and CBS). This consolidated media ownership resulted in “consolidated playlists” with far fewer “gatekeepers”—who are frequently now market researchers instead of DJs—deciding what music would be played on the radio. That smaller number of corporate gatekeepers, all concerned about offending the smallest number of potential listeners, resulted in less variety and eliminated the main outlet for many popular bands from the 1990s.

Assuming this is all true, would antitrust law provide a remedy for the loss of musical variety on the radio? After all, the goal of antitrust law is to prevent the ill effects of reduced competition.

Probably not. Antitrust law most likely would not provide a remedy because it generally does not recognize the loss of variety—without some associated detrimental effect on competition—as a cognizable anticompetitive harm.

This recalls an interesting debate among antitrust scholars about what “the primary concern of antitrust law” should be. Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 51 n.19 (1977). The prevailing view—which the Supreme Court spurred with its Continental T.V. decision—is that federal antitrust laws should promote economic welfare (frequently referred to as consumer welfare) over other goals. As a leading antitrust treatise says, “economic concerns have generally dominated antitrust policy and trumped competing ‘populist’ concerns.” 1 PHILLIP E. AREEDA & HERBERT HOVENKAMP, ANTITRUST LAW ¶ 110 (5th ed. 2020). While the Supreme Court has never formally adopted the economic welfare standard—or any standard, for that matter—regulators, litigants, and courts frequently focus on price effects when evaluating alleged anticompetitive conduct. To be sure, those price effects should be based on quality-adjusted prices—i.e. prices that consider nonprice elements of a product that affect consumer preferences such as color, style, or brand reputation—but the economic welfare standard does not protect variety for variety’s sake.

Returning to Beato’s Y2K curse, application of the economic welfare standard would likely render antitrust law powerless to remedy the curse’s effects. The consolidation of media ownership and corresponding streamlining of radio playlists did not have the most common hallmarks of anticompetitive harm that courts usually consider. Prices for radio broadcasts did not go up. There was no substantial reduction in output of radio broadcasts. So unless a court was willing to find that the quality of radio broadcasts went down—while I would argue that Counting Crows are better than Limp Bizkit, I would not expect a court to take up the issue—it seems there was no loss of economic welfare and therefore no antitrust claim.

Not all antitrust scholars think this is the right result. Some have argued that the economic welfare standard is lacking precisely because it does a poor job of addressing nonprice competition. They have argued for a “consumer choice” standard instead of economic welfare, defined as business conduct “that harmfully and significantly limits the range of choices that the free market, absent the restraints being challenged, would have provided.” Neil W. Averitt & Robert H. Lande, Using the “Consumer Choice” Approach to Antitrust Law, 74 ANTITRUST L.J. 175, 184 (2007). If applied, the consumer choice standard would be more likely to provide a remedy for the Y2K curse.

Regulators and courts do sometimes consider diminished choices as indicative of anticompetitive activity. For example, in Associated Gen. Contractors v. Cal. State Council of Carpenters, 459 U.S. 519, 528 (1983), the Supreme Court held that “[c]oercive activity that prevents its victims from making free choices between market alternatives is inherently destructive of competitive conditions.” In Realcomp II, Ltd. v. FTC, 635 F.3d 815 (6th Cir. 2011), the Sixth Circuit upheld an FTC decision finding that certain policies violated the antitrust laws when they “narrow[ed] consumer choice” and “hinder[ed] the competitive process” without examining price effects.

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Author: Jarod Bona

The Coronavirus crisis has created an unusual situation for the world, but also for antitrust and competition law. People around the globe are trying to cooperate to solve and move past the crisis, but cooperation among competitors is a touchy subject under antitrust and competition laws.

Of course, cooperation between or among competitors isn’t unheard of, even during non-crisis times. Joint ventures are prevalent and often celebrated, companies will often license their technology to each other, and the existence of certain professional sport leagues, for example, depend entirely upon cooperation among competing and separately owned teams. Indeed, the Department of Justice Antitrust Division and FTC have published guidance (in 2000) on collaborations among competitors.

Human beings everywhere are working together to defeat the Coronavirus and that will require cooperation, sometimes even among and between competitors. It is unlikely that antitrust and competition law will get in the way of that. Indeed, the Antitrust Division of the Department of Justice issued a Business Review Letter confirming that certain competitors can cooperate “to expedite and increase manufacturing, sourcing, and distribution of personal-protective equipment (PPE) and coronavirus-treatment-related medication.”

At the same time, the foundations of antitrust and competition law—the “faith in the value of competition,” as articulated by the US Supreme Court in National Society of Professional Engineers—is the motor that will accelerate us toward solutions.

Private enterprise and the incentives inherent within it have created the foundations and the machinery to “science” our way out of this crisis. Over-coordination through a central planner will detract from that because we would lose the feature of massive a/b testing, or really a/b/c/d/e/etc. testing, that comes from a bottom-up, decentralized approach to creating and distributing resources.

So—at least in my opinion—antitrust and competition law should maintain their role in supporting competition during this crisis (and the FTC agrees with me). But—as is already true of antitrust and competition law—when there is a strong pro-competitive reason for cooperation among competitors, the courts and antitrust agencies can adjust to let that conduct go forward (and they have here).

And once we are past this crisis, I suspect that antitrust and competition law will become an even more popular area of discussion because of the likely greater concentration of markets resulting from government intervention.

In the meantime, here are some articles that our antitrust team has written about antitrust, competition, and the Coronovirus Crisis:







Also, Steven Cernak is heavily quoted in this article from MiBiz: Coronavirus price gouging spurs efforts to rein in ‘bad actor’ resellers.

Finally, we recommend that read the blog series from our friends at Truth on the Market entitled “The Law, Economics, and Policy of the Covid-19 Pandemic.” Lots of outstanding work by very smart people.

The other part of this, of course, is the economy. With stay-at-home orders throughout the country, there is a lot less commerce happening.

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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.


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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Author: Steven J. Cernak

As I prepare again to teach an antitrust survey course, part of the preparation involves rereading some of the classic foundational U.S. antitrust cases.  Many of them make some sweeping statements about how the Sherman Act embodies a national policy to order our entire economy through competition.  “The heart of our national economic policy long has been faith in the value of competition” comes from Standard Oil in 1911.  The Court went even further in 1958 in Northern Pacific Railway:

The Sherman Act … rests on the premise that the unrestrained interaction of competitive forces will yield the best allocation of our economic resources, the lowest prices, the highest quality and the greatest material progress, while at the same time providing an environment conducive to the preservation of our democratic political and social institutions.

Twenty years later in Professional Engineers, the Court described an argument that asserted competition might be unethical as “nothing less than a frontal assault on the basic policy of the Sherman Act.”

Were such broad statements true then?  Do they remain true now?  Is the Sherman Act “the Magna Carta of free enterprise” as the Court asserted in Topco in 1972?  After all, we have had exemptions, both legislative and court-made, for decades.  But even beyond those official exceptions, there are plenty more examples of our frequent desire for experts, not the competitive process, to supersede market outcomes.

One personal anecdote helps illustrate the point.  I have been involved in the ABA Antitrust Law Section for decades.  The ABA, like any good trade association of competitors, has its own counsel to ensure that it does not run afoul of the antitrust laws.  Years ago, however, when my day job was in-house antitrust lawyer at General Motors and my ABA assignment involved antitrust aspects of trade associations, I was asked by the Section to lead a compliance presentation for another ABA group consisting of several law school admission deans.

Our presentation started with the antitrust basics for trade associations:  The antitrust laws want to preserve competition among competitors, Sherman Act Section 1 is suspicious of agreements among competitors, trade associations are gatherings of competitors where such agreements can be reached, and law schools compete with each other in various ways, including to attract students.

After about fifteen minutes, one of the deans raised his hand and posed this hypothetical:  Some students change schools between first and second year.  Such transfers are not good for the student – usually, any issues leading to a transfer go beyond a particular school and the student should try to get help with any underlying concerns.  But the transfers also hurt the law schools – after all, we have spent considerable time, effort, and money to make that student one of ours and transfers destroy that investment.  So, could this ABA group make it unethical for law schools to solicit, or even accept, most transfer students?

My fellow presenters were taken aback and silent for a few seconds.  Had this dean not been listening when we had said a few minutes earlier that agreements not to compete among competing members of a trade association were antitrust violations?  Finally, I broke the silence.  I did a facepalm and said “D’oh!  What a great idea!  Why didn’t we think of that?  We could have gone to Toyota thirty years ago and said ‘you know, we spent considerable time, effort, and money to make those current Chevy owners ours and you selling to them will just destroy that investment.  How about we agree that you will only market to folks who have never purchased a car?’”

It took a few seconds but then the lightbulbs went off over the heads of the audience:  Yes, the competitive processes for legal education might be a little different than those for motor vehicles, but that competition still exists and antitrust law is designed to protect it.  Any agreements to short-circuit that process by having experts at the competitor-suppliers determine the customer’s best interest would be at least suspect.  My GM clients would have understood that my Toyota hypothetical was an antitrust problem.  Why didn’t this law school dean?

Was it because the deans saw themselves as “professionals” and so in some way exempt from the need to compete?  Perhaps, although the Court made clear in Professional Engineers that any hint of an antitrust exemption for professionals that some saw in Goldfarb was incorrect.  Professionals might compete in different ways but the antitrust laws still protect that competition to yield the best results for customers.

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