Reemerging Areas of Common Ground
Remarks as Prepared for Delivery
Thank you for the invitation to speak with you today and thank you Clark for that kind introduction. I continue to pinch myself that we are able to hold events like this in person. Over the course of the pandemic, I attended probably a dozen virtual conferences. I like them because they are easier to organize and we often get the benefit of a broader audience and group of participants.
But we have also seen the downsides of doing purely virtual events all of the time. The cold edges of debate and disagreement are too stark on a zoom screen. Our monitors don’t yet convey human empathy, and so that dimension of the conversation is lost. The disagreements come through, but the spirit in which they are offered too rarely does.
Maybe this is one of the challenges the metaverse will solve for, and we can hold this conference someday on virtual mars. Clark you should start thinking about how to arrange a metaverse lunch.
In all seriousness, that’s been one of the lessons of the pandemic for me. We need the warmth of human interaction to connect, understand different perspectives, and find common ground. So where we have it, like today, I embrace it.
That’s what I’d like to talk about today, embracing common ground. This event is focused on tech platforms in the new age of competition law. What I find so remarkable about that topic is that, in an era known for disagreement, it is one with a broad and growing consensus. Experts and officials from varied backgrounds recognize pressing challenges, and agree on many aspects of the potential solutions.
Indeed, we saw critical antitrust legislation pass the House of Representatives last month, notwithstanding heavy lobbying from world’s most powerful companies. For any watcher of American politics, this was a truly remarkable moment. The floor vote on the Merger Filing Fee Modernization Act passed by a remarkable margin of 242-184. We have learned that a strong majority supports more aggressive and effective antitrust enforcement.
This new majority has emerged from a shared concern across our country with the rise of corporate power in the American economy. At the Antitrust Division, we see that in technical ways like dramatically increased price-cost markups, a decrease in new firm formation, and rising indicators of concentration.
But in public, the American people see the impacts of too little competition directly. The attention to antitrust in Congress and the media are responding to a popular interest in reinvigorating competition in the American economy. The root cause of the desire for greater antitrust enforcement is the dissatisfaction felt by many millions of Americans with a rise in corporate power and a corresponding reduction in their economic liberty. Individual Americans feel this in subtle but important ways every day, such as when they face too few choices how to connect with their loved ones, what private data will be extracted by whom, or where to sell their labor.
Congress is responding, and the Department of Justice has indicated its strong support for passing the Merger Filing Fee Modernization Act and the American Innovation and Choice Online Act in this Congress. We hope to see reforms passed into law soon.
Reemerging Areas of Common Ground
That is by no means the only area of common ground in the new antitrust era. I have observed that, for all the debate and disagreement, there are many areas of common ground among a large majority of stakeholders. In many cases, unsurprisingly, they are old concepts coming back to the fore. In my time today, I would like to touch on four other areas of what I believe to be reemerging common ground on key principles for competition law enforcement.
First, that antitrust supports not only our welfare as consumers, but our liberty as Americans.
Second, that enforcers need to stop trying to get it wrong and just try to get it right.
Third, that the law forbids mergers that pose incipient threats to competition.
Fourth, that new market realities in the digital economy have increased the urgency of action and demand we adapt our analysis.
Antitrust Protects Our Welfare and Our Liberty
The first area of emerging consensus is that antitrust protects not only our welfare as buyers and sellers, but our liberty as Americans. This is not a new concept of course. It is as old as the Boston Tea Party, when the colonists rejected the British Crown’s effective imposition of a tea monopoly in the new world even though, technically, the price was going down in the short term as a result. And it was present at the creation of the Sherman Act in 1890, when Senator Sherman said in support of his bill that monopoly “is a kingly prerogative, inconsistent with our form of government.”
The Supreme Court of course described the Sherman Act as a “comprehensive charter of economic liberty” that “provid[es] an environment conducive to the preservation of our democratic political and social institutions.” It said that in Northern Pacific in 1958, although the critical point about our democratic political institutions is often left out of the quotation.
We hear this sentiment now from a range of sources. As one member of Congress recently put it, there is a “real threat . . . when a monopoly controls information in a democracy,” and “competition is the answer.” Another said we need to “break the political influence of market-dominant companies,” and yet a third told the Senate floor that “concentrated economic power can be just as dangerous as concentrated political power.” I’ll leave you to guess whose quotes those are, but it would not surprise you they come from prominent members on both sides of the aisle.
Indeed, Justice Clarence Thomas recently lamented the “unprecedented . . . concentrated control . . . of speech in the hands of a few private parties.”
Why are these old ideas common ground again? Because they are at the heart of our constitutional structure. When I was in grade school civics, I learned that we lived in a capitalist democracy. I am sure most of us here did. But until I studied the antitrust laws, I never understood why we use those words together. What do capitalism and democracy have in common? It is their foundational premise—the liberty of the individual. That is why those words go so well together — capitalism and democracy both demand individual freedom, choice, and opportunity.
As antitrust enforcers, the work we do helps prevent our political economy from descending into oligarchy, and guarantees to our people a republican form of government.
What does that mean for antitrust enforcement, day in and day out? It means we must aggressively enforce the laws to ensure they provide an environment conducive to the preservation of our democratic political institutions. It is why my next point is so important.
Moving on From the Error-Cost-Error
The second area of emerging consensus is that enforcers should stop trying to get it wrong on purpose. I am talking, of course, about the so-called “error cost analysis” that bloomed in the 1980s as the key argument for underenforcing the law.
The error-cost-error traces most prominently to Judge Frank Easterbrook’s 1984 article on the limits of antitrust. As the argument goes, assuming monopoly is “self-destructive,” “judicial errors that tolerate baleful practices are self-correcting while erroneous condemnations are not.” The assumption that monopoly is self-correcting has been used to justify underenforcement in a wide range of circumstances, ranging from Trinko to the withdrawn Section 2 report briefly issued by the Antitrust Division in 2008.
I believe the error-cost-error undergirds an excessive focus on predictive certainty in merger enforcement and has led us to ignore the prophylactic role of the Clayton Act and the Celler-Kefauver Anti-Merger Act. More on that in a moment.
There is now an emerging consensus that the error cost framework was a mistake, for several reasons. Professors Herbert Hovenkamp and Jon Baker, writing separately, have both unpacked the history of this unfortunate error in greater detail than I can here.
But a few things stand out to me. First, the assumption that markets are inherently self-correcting is not always true. Markets do not self-correct, as we have seen, because entry barriers are quite real, whether exclusionary, regulatory, or natural features of markets. The first two of those barriers to entry — exclusionary and regulatory barriers — arise from the fact that monopoly rents, as it turns out, are profitable. A portion of those rents can then be spent to undermine competitors or pay off third parties, either of which create exclusionary barriers to entry. Meanwhile, regulatory barriers to entry may already exist when a monopoly is obtained, or they may be acquired by spending monopoly rents to influence regulatory and political processes. Indeed, the danger of monopoly to our political process is not a novel proposition — it was one of the core concerns animating the Sherman Act.
In addition to those barriers to entry that result from monopoly power, natural characteristics of markets may create significant entry barriers. In the modern economy, network effects are incredibly common — especially when we’re talking about technology platforms. That has enormous benefits for society, but flips Judge Easterbrook’s analysis on its head. A robust literature explains how network effects create barriers to entry and render markets prone to tipping. If anything, markets with network effects skew toward monopoly, not the other way around. If we take error cost analysis seriously, that would augur towards favoring overenforcement, not underenforcement, in these markets.
Meanwhile the other side of the argument is wrong as well—judicial errors can be corrected. Often, changing circumstances reveal the error in a judicial antitrust framework, or create contexts in which it is no longer applicable. The judiciary can and does recognize the outdated economic assumptions embedded in precedent and adapt the law to meet the modern economy. As the Supreme Court made clear in the unanimous Alston decision last year, “judges must be open to clarifying and reconsidering their decrees in light of changing market realities” and “[i]f…market realities change, so may be the legal analysis.”
Finally, the error cost framework never recognized the systemic benefits to our democracy and economic liberty that flow from keeping power in the economy in check. When the theory was drawn up, an important part of the equation was missing from the whiteboard. The systemic benefits of antitrust enforcement to our political economy consistently augur toward greater enforcement. In the famous Board of Regents case in 1984, Justice Stevens quoted in full the line from Northern Pacific that I mentioned earlier, underscoring that the antitrust laws provide an environment conducive to the preservation of our democratic institutions. Getting it wrong on purpose through intentional underenforcement fails to vindicate those values.
For my part, I think we should target neutral and just enforcement of the laws. That maximizes competition in the long run and ensures the systemic benefits of our antitrust regime are realized. More and more, I find that this critical point is common ground among diverse stakeholders in the antitrust community.
The Law Prevents Mergers that May Lessen Competition or Tend to Create a Monopoly
The third point of emerging consensus is that the Clayton Act and the Celler-Kefauver Anti-Merger Act demand the prohibition of mergers that may lessen competition when those harms are in their incipiency. Again, this is not a novel point—the statute says that it prohibits mergers whose effect “may be” to substantially lessen competition or tend to create a monopoly. Of the many common threads in the more than 5,000 comments we received in the merger guidelines review, an exhortation that we take incipiency seriously was among the most consistently repeated.
Brown Shoe sets forth the incipiency standard for merger review. There, the Supreme Court offered a controlling interpretation of Section 7 of the Clayton Act, using traditional tools of statutory interpretation. It evaluated the text of the statute and surveyed the legislative history, before pronouncing that “keystone” of Congress’s solution to the “rising tide of economic concentration…was its provision of authority for arresting mergers at a time when the trend to a lessening of competition in a line of commerce was still in its incipiency.”
Yet a peculiar application of the error-cost-error has been a creeping trend away from the incipiency standard and toward requiring a rule of reason framework with demonstrated, certain effects a necessary basis to challenge a merger. That of course is not the law and never was.
In fact, the last time the Supreme Court discussed the Section 7 standard — in California v. American Stores — it cited Brown Shoe for the proposition that “Section 7 creates a relatively expansive definition of antitrust liability.”  Writing for a unanimous court, Justice Stevens wrote that, “[t]o show that a merger is unlawful, a plaintiff need only prove that its effect ‘may be substantially to lessen competition.’” He italicized the “may be,” underscoring that we should take those words seriously.
I don’t mean to suggest that the post-Brown Shoe judicial canvas is blank. To be sure, courts, including the Supreme Court, have expanded on Section 7 law, refining Brown Shoe’s application in certain scenarios and emphasizing certain aspects of its holding. General Dynamics, Baker Hughes, and Hospital Corporation all acknowledge that Brown Shoe sets out the substantive standard, but discuss, often in dicta, potential means of rebutting a showing of incipient harms. Indeed, General Dynamics, like American Stores, cites Brown Shoe’s substantive standard approvingly. That a rebuttal step has been acknowledged in the intervening years does not raise the bar at step 1 of proving that, in the words of the statute and Brown Shoe, there “may be” a substantial lessening of competition or tendency toward monopoly.
The incipiency standard is particularly important as we consider markets where one of the merging firms already enjoys substantial market power. Such a merger may entrench that market power in diverse ways whose specific effects are difficult to measure and predict, but where the danger to competition from reinforcing a position of power is clear. In the guidelines comments, a wide range of stakeholders called on the agencies to reinvigorate merger enforcement in markets already dominated by powerful players. To do so more effectively and consistently with the law, we are looking closely at how we can better respect the incipiency framework to assess the risk of market power being preserved or entrenched.
The Realities of Digital Markets are Different in Important Ways
Fourth, and finally, there is now wide-spread agreement that we should be concerned about digital markets. My friend and former colleague Roger P. Alford titled his recent article in the Emory Law Journal “The Bipartisan Consensus on Big Tech.” It’s worth a read as it details the range of experts and officials who share similar concerns. While this is an area of common ground, it is not based on old ideas, but rather a recognition of changing market realities in the new economy.
I believe that power in the digital economy has captivated the world’s attention precisely because of the unique threats it poses to our liberty. The digital economy has enabled monopoly power of a nature and degree not seen in a century. Without competition to deliver ready access to the connections we seek, we are forced to pay with our time in endless scrolls. Algorithms manipulate our psychology to shape our minds and our behavior, without competition for them to do so responsibly.
We opened this morning talking about how modern tech, like phones and watches, bears resemblance to ankle bracelets used to monitor prisoners. This perfectly teed up the issue.
The digital age is not only characterized by the presence of monopoly power, but by new means of its exploitation more threatening to individual freedom than ever before.
These same attributes of market power in digital markets contribute to its preservation in new and important ways. Collaborative platforms connect not only with millions of users, but with hundreds of thousands of businesses. They are built on interconnection. When they enjoy market power, that provides many opportunities to influence businesses in adjacent markets to reinforce that power. Hosting thousands of businesses in adjacent industries on a gatekeeper platform provides a new kind of power, largely unseen before, to shape the development of an ecosystem toward the preservation of that power.
There are important implications for competition policy. Frameworks for assessing interconnection and refusal to deal policy must be viewed through the lens of fundamentally collaborative platforms. The underlying market dynamics have fundamentally changed. Cases like Trinko and linkLine, focused on unusual competitor access to solely-owned physical infrastructure, are poor corollaries for thinking through the means and manner of access to digital public squares that are inherently massively connected. The presence and power of existing barriers to entry render much more threatening any merger that threatens to raise them further, or to increase dependence on a powerful platform.
Let me conclude with this. Every one of us in the antitrust community has the good fortune to be part of one of the most important conversations going on in America today. I recently visited a bookstore to find some reading for a long plane trip. I found at least a half dozen books about the work we do in the antitrust community. And they are written from all kinds of perspectives and viewpoints. They share, however, many of the same concerns.
Because of our background and expertise, we in the antitrust community play a unique role in that conversation. I believe it is incumbent on us to hear the concerns expressed across our country, and to advance our analytical tools to reflect the same market realities that gave rise to them. Debates like we are having today will help us build the new bipartisan antitrust consensus. It’s an incredibly exciting time to be doing this work, and I look forward to the debates and developments to come.
 21 Cong. Rec. 2457 (1890) (statement of Sen. John Sherman).
 Northern Pacific R. Co. v. United States, 356 U.S. 1, 4-5 (1958).
 168 Cong. Rec. 8261 (daily ed. Sept. 29, 2022) (statement of Rep. Ken Buck), available at https://www.congress.gov/117/crec/2022/09/29/168/158/CREC-2022-09-29.pdf.
 167 Cong. Rec. 4520 (daily ed. June 14, 2021) (statement of Sen. Mike Lee), available at https://www.congress.gov/117/crec/2021/06/14/167/103/CREC-2021-06-14-pt1-PgS4519.pdf.
 Biden v. Knight First Amend. Inst. at Columbia Univ., 141 S. Ct. 1220, 1221 (2021) (Thomas, J., concurring).
 Frank H. Easterbrook, The Limits of Antitrust, 63 Tex. L. Rev. 1, 2-3 (1984). For a more detailed history, see Herbert J. Hovenkamp, Antitrust Error Costs, Univ. Pa. Inst. for L. & Econ. Paper No. 21-32 (2022), available at https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=3745&context=faculty_scholarship.
 Verizon Comm’ns, Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 414-15 (2004).
 U.S. Dep’t of Justice, Single-Firm Conduct Under Section 2 of the Sherman Act (2008), available at https://www.justice.gov/archives/atr/competition-and-monopoly-single-firm-conduct-under-section-2-sherman-act; see also U.S. Dep’t of Justice, Justice Department Withdraws Report on Antitrust Monopoly Law (May 11, 2009), available at https://www.justice.gov/opa/pr/justice-department-withdraws-report-antitrust-monopoly-law.
 Others have written persuasively, and in greater depth, on this topic. See, e.g., Hovenkamp, supra n.9; Jonathan B. Baker, Taking The Error Out of “Error Costs” Analysis: What’s Wrong with Antitrust’s Right, 80 Antitrust L.J. 1 (2015); Ariel Exrachi & David Gilo, Are Excessive Prices Really Self-Correcting?, 5 J. Comp. L. & Econ. 249 (2008).
 See 21 Cong. Rec. 2457 (1890) (“[I]f the concerted powers of this combination are entrusted to a single man, it is a kingly prerogative, inconsistent with our form of government.”) (statement of Sen. John Sherman); see also Ariel Katz, The Chicago School and the Forgotten Political Dimension of Antitrust Law, 87 U. Chi. L. Rev. 413, 413 (2020) (concluding that antitrust law has always been concerned with “the connection between market competition and a set of classic liberal political values”); Sanjukta Paul, Recovering the Moral Economy Foundations of the Sherman Act, 131 Yale L.J. 175, 204-225 (2021).
 See, e.g., Filippo Lancieri & Patricia Morita Sakowski, Competition in Digital Markets: A Review of Expert Reports, 26 Stan. J.L. Bus. & Fin. 65, 75 (2021) (summarizing several recent reports on tipping effects); (explaining impact of network effects on platform competition); Geoffrey Parker, Georgios Petropoulos & Marshall Van Alstyne, Platform Mergers and Antitrust, 30 Indus. & Corp. Change 1307, 1309 (2021) (noting relationship between network effects and tipping); Luigi Zingales et al., Stigler Committee on Digital Platforms, Final Report, Stigler Center for the Study of the Economy & the State, U. Chicago Booth 7-8, 29, 34-41 (2019) (“Stigler Report”) (noting the factors that make markets “prone to tipping”); Kenneth A. Bamberger & Orly Lobel, Platform Market Power, 32 Berkeley Tech. L.J. 1051, 1067-71 (2017).
 NCAA v. Board of Regents of Univ. of Okla., 468 U.S. 85, n. 2 (1984)
 Brown Shoe Co. v. United States, 370 U.S. 294 (1962).
 Id. at 317–18; see also id. at 346 (“We cannot avoid the mandate of Congress that tendencies toward concentration in industry are to be curbed in their incipiency.”).
 California v. Am. Stores, 495 U.S. 271, 284 (1990) (quoting Section 7, supplying emphasis; citing Brown Shoe, 370 U.S. at 323); see Brown Shoe, 370 U.S. at 317-18 (1962) (Section 7 of the clayton Act gives “courts the power to brake” concentration “at its outset and before it gather[s] momentum” by enjoining “incipient monopolies and trade restraints outside the scope of the Sherman Act” and to do so “well before they have attained such effects as would justify a Sherman Act proceeding.”).
 California v. Am. Stores, 495 U.S. at 284.
 United States v. Gen. Dynamics Corp., 415 U.S. 486, 498, 505, 506 (1974).
 Roger P. Alford, The Bipartisan Consensus on Big Tech, 71 Emory L. J. 893 (2022).