The Future of Antitrust: Comments on the HJC Report – Fireside Chat

Below we have provided the full text transcript from the Fireside Chat section of our conference, The Future of Antitrust: Comments on the HJC Report.

Maureen OHLHAUSEN:

Great. I’m delighted to be here, certainly with my old friend and colleague, Tim Muris. Tim and I are going to have, I think, a good conversation about the future of antitrust, and what this new report from the House Judiciary Committee might mean. Before we look too far ahead, I think we also need to understand the foundation of antitrust and some of the issues that, I think, the report is focused on. But, Tim, let me turn it over to you to say a few words before we start our dialogue.

Timothy MURIS:

Thank you, Maureen. Let me thank CPI for hosting this. Tech issues, as you mentioned, are at the forefront of the antitrust debate, certainly at the forefront of what the House Judiciary Committee is doing. Mark Twain famously said that history might not repeat itself, but it rhymes. We’re certainly going to see that today, I think, in our discussion about what’s happening in antitrust.

OHLHAUSEN:

Great. Well, thanks. I know I’ve been following what the committee has been doing. I testified last Summer at one of their hearings. I filed a comment on my own and a joint comment with this committee. Tim, I know you filed a comment, as well. But one of the things that struck me, as I followed the hearings, and particularly the one this Summer that had all the tech executives, was the committee is looking at these tech companies as being hostile to consumers. Right?

So, concerns of antitrust should be focused, obviously, on consumers. Having come from the Federal Trade Commission, Tim, you and I have both had experience. I was acting chair, you were chair. We did antitrust and consumer protection. But, Tim, you also had the very unique experience of having been the head of the Bureau of Consumer Protection, and the head of the Bureau of Competition, which, I think, is unique. I’m not sure anyone else has ever done that. So, from your experience, how would you evaluate these recent efforts by the House Judiciary Committee?

MURIS:

As I mentioned, history rhymes. We’ve been down this road before in antitrust. In the ’60s and ’70s, there were a combination of populists and economists who had a simple idea that big was bad. Now, the populists were concerned, really, with protecting competitors, especially small businesses. The economists had a different idea. They really thought that industries needed lots of competitors, many more than we’ve come to believe today. But the two of them combined to bring many, many cases based on this big is bad idea. There were many cases designed to break up big companies.

Also, the two groups, like today, wanted to attack low prices, so called predatory pricing. Today, again, a very similar combination of populists and progressive economists have combined, and their focus is on big tech. The focus before was on different kind of consumer goods. General Motors, for example, was a big target. It was a dream to break up General Motors. The FTC had a long investigation with that in mind, although the investigation came to no good. General Motors had a lot of problems on its own, eventually, as everyone saw. But that was a big focus in the ’60s and ’70s. Big is bad has returned to be a big focus again today.

OHLHAUSEN:

Yeah. I mean, I do think it’s a fascinating cycle, where you see the concerns. We had concerns, going way back in antitrust, about railroads, and then we’ve had concerns about big manufacturing, and then we’ve had concerns, oil. Right? When I started at the commission, concerns about the oil industry were very pronounced. Now we’re on to tech. Right?

One of the issues here that, I think, makes this so particularly complicated is, for consumers, they’re not necessarily saying, “I’m paying too high a price” for what a lot of these tech platforms are offering. Right? A lot of the services or free, or we see complaints about, in some ways, competition almost being too fierce and providing consumers too good a price, too low a price. So, I think that is a little paradoxical in antitrust history.

Now, obviously, there is this doctrine called predatory pricing, where, theoretically, a firm could price below cost as a way to drive out a competitor, and then once that competitor’s gone, raise the price up and recoup. That’s a fairly high standard, and, I think, a fairly rare thing to see. But how did that doctrine work historically? What led to that being antitrust theory?

MURIS:

Sure. Let me start with history that, again, is highly relevant today. There was a company called the Great Atlantic and Pacific Tea Company, which was the largest retailer in the United States for 40 years. It was an icon. It was such an icon that young John Updike, the famous novelist, wrote a short story that everybody in my generation had to read in high school. He set it at the A and P, and he called it the A and P.

The A and P, under the heading no good deed goes unpunished, was savaged, the way a lot of the big competitors. First, there was the A and P, then a statute that was the bane of antitrust for decades was passed, directly aimed at the A and P, the Robinson-Patman Act. That was aimed explicitly to try to make it harder for the A and P and other chains to compete with smaller competitors. Then the government criminally sued the A and P, then they sued again to try to break them up.

This was all astonishing, and you just have to substitute Amazon for A and P, and it’s essentially the same thing. A company comes in with a transformative way to do business, harms a lot of its competitors, and causes a lot of problems. A lot of the charges that are being made are, “You’re too efficient. Your prices were too low. You hurt companies.” There’s more to say about predatory pricing, and I think we should do that in this conversation. But the A and P is a good place to start.

OHLHAUSEN:

So, I understand that reaction to the A and P saga certainly produced some bad results, especially the Robinson-Patman Act, which has not been a big part of federal antitrust enforcement for a number of years. But a consensus grew around opposing Robinson-Patman a long time ago. You mentioned Amazon. You mentioned some of these things. Why do you think this impulse keeps recurring? Concerns about a competitor, in some way, just competing too hard, and coming up with too many efficiencies, or something that’s harming the ability of other competitors in the marketplace?

MURIS:

Well, that’s part of the irony. It’s these people making these arguments are ahistorical, in the sense that they don’t know history. Their arguments are literally very, very similar. Even when antitrust abandoned, in the ’60s and ’70s, when it went on this big is bad attack, even as they were abandoning Robinson-Patman, they were still worried about low prices in the form of … That has returned. I find that particularly surprising, and particularly surprising coming from politicians.

The idea that politicians, as the House Judiciary Committee is doing, are making predatory pricing one of their main planks in attacking big tech is surprising. Herb Hovenkamp, who’s no conservative, he’s as mainstream as they come in antitrust, said the following about this renewed interest in going after low pricing. He said, “The attack on low prices as a central antitrust goal is going to hurt consumers, vulnerable consumers the most. To the extent that it is communicated in advance, it could spell political suicide. It could never win in an electoral market, just as it’s never won in traditional markets.”

That’s why the law revolutionized, in the ’70s and ’80s. There was an article in the ’70s that we could talk about, but it revolutionized in the ’80s and since, to make it hard to win these cases against low prices.

OHLHAUSEN:

One thing that I was struck at the hearing, with the big tech CEOs, was how much of the discussion was not focused on impact on consumers at all. Right? There was a lot of discussion about you have information from the marketplace, and you used it to compete hard. You expand into new areas. You don’t just sit back. I think the whole idea of competition on the merits, actually, seems to be at issue. Right?

We often talk about that in antitrust. That’s what antitrust is supposed to protect. Right? Competition on the merits. Then we’re worried if there’s something, collusive behavior, or some sort of exclusionary conduct that keeps people from being able to compete on the merits. But for pricing, that seems to be just one of the core ways competition on the merits occurs. So, I’d be interested. We were talking about those concerns. How we’ve gotten here. Is this a big reaction to the Chicago School of Antitrust? Too much consumer welfare is not a good thing?

MURIS:

Yeah. Those are great questions. Incidentally, I should have added at the beginning, the introduction said that I also, besides being a professor, I’m a senior counsel at Sidley Austin. That law firm has clients on both sides of a lot of big tech issues, and I’m, obviously, speaking for myself and not for the firm, or its clients.

OHLHAUSEN:

I should make the same disclosure for Baker Botts. I’m just speaking for myself.

MURIS:

Sure.

OHLHAUSEN:

But, please, go ahead.

MURIS:

Sure. If you look at predatory pricing, it’s particularly interesting, and particularly in terms of what the critics are saying. There was, with the A and P and through the ’70s, this attack on predatory pricing, and there was a highly influential article written in 1975 by two professors from Harvard, Phillip Areeda and Don Turner. It changed the law because it said, “We have to look at low prices. It’s competition on the merits.” Only if the prices are ones that would hurt an efficient competitor, and only if they would hurt consumers, should by the so-called predator being able to raise prices after driving people out should that be illegal.

Stephen Breyer, who was a colleague of theirs, in 1980, in a lame duck session, was confirmed to the circuit court, First Circuit, when the incoming Reagan administration, in something that is unlikely to happen now, said, “Sure. He’s distinguished.” He was a law and economics professor. They did not object to his being confirmed. He adopted that test, wrote a very influential opinion. The Supreme Court, and most of the courts before the Supreme Court, made the Areeda-Turner the law of the land. They were not part of this so-called Chicago School.

The focus, this mis-focus on the Chicago School, is a strange part of the debate today, because antitrust, as it’s evolved over the last 40 years, is bipartisan, reflecting input from academics and economists across the spectrum, where people from Harvard and non-Chicagoans, have had every bit as much influence as people from Chicago.

OHLHAUSEN:

Yeah. One thing, I think, that is a little undervalued, or underappreciated, is the importance of having a bipartisan approach in antitrust. So, in my experience, when I was acting chairman for a year and a half at the start of the Trump administration, I’m Republican, myself and my Democratic colleague, and we were able to agree and bring a healthy number of enforcement actions, I’ll just put it that way, because of this consensus in antitrust.

There’s always debates about things at the margin, or how big the remedies should be, or if there should be a remedy, but for the most part, I think there has been a lot of consistency, which certainly allows for predictability of business decisions, a bipartisan agency like the Federal Trade Commission to function, and to have that kind of approach. But we really seem to be moving away from that. Right? So, there was this acceptance that antitrust should be for consumers. Consumer welfare should be the goal.

People might have varying decisions, different opinions on how necessary this remedy, or that remedy, or something that’s really on the line might be, but I think there was a lot of common ground on the goal. But that seems to be changing. There is now this question about antitrust decisions should be based on a wider variety of things. So, we’ve seen questions about whether it should take other goals, other than consumer welfare, labor issues, environmental issues, other social issues into account. So, that has some superficial appeal. But why? What do you think about that? Why is that something that we should be cautious about?

MURIS:

Well, and I think your performance as chairman, especially with only two people, is to be commended. Obviously, two is not an odd number. So, the two of you had to agree.

OHLHAUSEN:

That’s right.

MURIS:

And you did. Both of you did a remarkable job. If you look at the last 28 years, 16 of those years were presidents Clinton and Obama. It’s hard to distinguish, particularly in the eyes of the critics, they’re all the same, those from the 12 years under Republican presidents. My predecessor, Bob Pitofsky, who I thought was a great FTC chairman, he and I were involved in two projects, where we laid out what we thought was a joint agenda for the FTC.

It was an agenda … One was a ABA report in the late ’80s, and the other was a joint dialogue published as a long article in the Antitrust Law Journal in 2004. Those were in antitrust based on this consumer welfare standard, and the consumer welfare standard is simple. It says, “Whatever is best for consumers is what the law ought to be.” But it’s based on economic analysis. The other concerns, if you’re worried about racial discrimination, for example, which is an important issue, and the Biden-Sanders Unity Task Force says that should be involved in antitrust, it’s very hard to base an antitrust law on racial discrimination. Those kind of issues should be left to other laws and other forum.

OHLHAUSEN:

So, it seems like one of the other animating concerns here, I certainly heard a good bit of it before the committee, and in the overall populist debate, is concerns about small business. Right? If we have big business, these companies, even if they’re efficient, even if they can give consumers good prices, and convenience, and all the good things we want as consumers, that they’re somehow just too big, and that is what antitrust now should be concerned about and directed to, is the idea that big, there’s a problem, just because a company is big, or has the large market share.

So, what is your reaction to that? Why is big necessarily bad? How should we consider the size? These companies have been very successful, and they have good, healthy market shares. I’m not going to say they have ones that meet certain standards under the antitrust laws. But certainly, they’re big, well known, successful companies. Is there a concern there that they can just occupy too much of the field?

MURIS:

As the A and P illustrates, and as some of the examples Maureen mentioned, historically, there’s a tendency to turn on companies when they’re big and successful. But in antitrust terms, that doesn’t mean that you necessarily have market power. If you look in the grocery industry, A and P grew to the size, which was unprecedented. It was the first billion dollar company as a retailer. But it never had a big market share. It didn’t have 50, 60, 70 percent.

Some of the companies today, some of the big tech companies in what would look like an antitrust market, do have a big market share, but some of them don’t. They should be viewed individually. In fact, the government is looking at some of them. If you believe the press, it’s likely to sue two of the tech companies. We can have our differences of opinion on those cases. I believe in aggressive antitrust enforcement. If you look at the history of the FTC, there are two periods in the last 40 years when the FTC’s administrative process was used most aggressively, and, I think, very effectively, and both were ones in which I was associated. One, in the mid ’80s, when I was director of the Bureau of Competition, and the other at the beginning of this century when I was chairman.

The point is that even in cases involving single firms, that there have been excellent cases. The breakup of the AT&T, which was more than a breakup. It also involved significant regulation, assuring that parts of that breakup were … That was a case that made sense. We bought, when I was chairman, four of these single firm cases in three years, which because they’re very tech fact intensive, is a high rate. So, I’m not opposed to bringing these cases, but you have to look at them individually within this consumer welfare standard. The House Judiciary Committee appears to be condemning all the big tech companies, which is very strange. It’s doing it on basis, that seem to me, to be criticizing them on the basis of their success, not on the basis, the fact that they harm consumers.

OHLHAUSEN:

Well, I’m certainly well aware of your record, and the aggressive antitrust enforcement. When I was acting chairman, we had a number of cases in active litigation. They were straining the agency’s resources. Because these cases are expensive to litigate, merger challenges, a mix of those things. I think one of the critiques that’s being put forth is that either the agencies aren’t aggressive enough, they’re not interested enough, or the law is too difficult. Right? That the standard has become too high. The courts have made the standards too high for government enforcers to meet.

So, there’s this mixed narrative of either consumer welfare has just made it too difficult to enforce, or the enforcers aren’t interested, or the courts just are not very open to hearing these kinds of antitrust theories, and enforcements. So, what’s your thought on that, Tim? What was your experience, bringing these kinds of cutting edge cases, and seeing them all the way through to getting adopted into case law?

MURIS:

Well, one of the problems in the ’60s and ’70s is they were indiscriminate about bringing these cases, and that was a mistake. The Justice Department in the Clinton era brought the very important Microsoft case. They won a successful opinion from the unanimous vote of the DC Circuit. That was extremely important in antitrust law. Oddly, and this is one point where, I think, if the critics were more refined in their criticism, I would agree.

The Justice Department, since that decision, has abandoned the field in single firm cases. They’ve only filed one very small case against a single firm for monopolization. The FTC has continued, as I mentioned, the four and three years while you were chairman, and other times, has continued to bring these cases. So, I think, in that small way, the criticism would be justified. But the criticism is way, way, way broader than that. The criticism is that merger standards should be increased. We should return to the merger standards of the ’60s, when we wanted industries to have many more firms than the economics has shown to be optimal. I believe that implementing that agenda would raise prices and harm consumers.

OHLHAUSEN:

So, I know we’re getting near the end of our time, but I did want to ask about one more issue that really came through in the committee, certainly in the hearing earlier this year, and we’ve heard these concerns more broadly, which is the idea that if you are a platform, if you’re operating as a platform, that you are not allowed to have different treatment. If you’re getting information from people, that you shouldn’t be allowed to compete with people that are on your platform, basically. There’s concerns about you’re getting information to use against them, or you’re giving yourself a better position, or better advantage, and that there should be some sort of separation.

You can’t be both a player and a referee, is one of the things that we’ve heard. Now, of course, you and I both know platforms are extremely common throughout the economy. Going back to the old A and P case, a grocery store is a platform to sell different food products. Right? So, I did want to ask you a little bit about what should we be making of this argument about self-preferencing and fair access to platforms?

MURIS:

Well, the argument often starts with one anecdote that may have some veracity, but moves to a completely invalid conclusion. They often use alleged examples, and I have no idea about the truth of them, that the platforms are essentially stealing the intellectual property, the ideas of the people on their … of the smaller competitors. But then they essentially are complaining about the generic products, the house brands, which really don’t involve that problem.

There was an article in the Washington Post in the Summer, that had to have been written by someone who had never set foot in a grocery store, or super drugstore. The argument was the author was appalled by the fact that when you are something like Amazon, and you were searching for a brand name, that Amazon would tell you that you could buy a cheaper Amazon brand, or an Amazon brand for a cheaper price. They were quoting all sorts of businessmen about how that was unfair.

Well, I sent one of my research assistants, and I told them to stop counting at 50, into a super drugstore and a supermarket, and it did not take them very long to walk down the aisles and find example after example of generic products next to Aspirin, for example, where there’s a sign there, says, “Compare. This is the same thing.” They’re all over the stores. Now, some of them might be different when you go down the cola aisle. The cola might not taste as good, but it’s right next to it. It’s cheaper. There is nothing wrong with that.

The idea that that’s unfair competition, the A and P, all that’s left of the A and P … The A and P went bankrupt. All that’s left of the A and P is something called Eight O’Clock Coffee, which was a generic brand, very successful, that they created. It was a house brand, an A and P brand, and it was sold next to the other big brands. Maxwell House was the big brand in the East at the time. There was nothing wrong with that. That’s a form of competition. Walmart and Costco. Costco has its Kirkland brand. There’s Sam’s, which is owned by Walmart, has Sam’s Club. These are good for consumers. Consumers have their choices. As long as we’re not talking about violating trademark, or stealing intellectual property, the normal offering of these brands is pro-consumer. Again, we’re talking about low prices here, for the most part.

OHLHAUSEN:

Yes. Well, speaking as someone who raised four children while mainly working for the government, I was a big fan of store brand products, and certainly have had many of them in my day, and find it a little puzzling to see that put forth as a problem in the market that needs to be addressed through some sort of change in the antitrust laws.

Well, we’re getting to the end of our time. This has been a fascinating discussion. What an interesting time to be an antitrust lawyer. Right? There’s so much dynamism and rethinking of, I think, things that had been well accepted previously. But I did want to give you an opportunity, Tim, to give your last thoughts before we conclude.

MURIS:

Well, I really appreciate doing this with you. Maureen, one of the great areas of law that aggressive enforcement is good in is one that Maureen’s career has been particularly important in, and that involves the profession. She created something called an Economic Liberty Task Force when Maureen was chair, and that was one of the best examples of using economics and antitrust both to talk about and bring potential cases.

Going back to Mark Twain, it does seem that history is certainly rhyming. I have all these boxes in my basement from my classes and other things that I stopped using from the ’60s and ’70s. I started at the end of the ’70s. They’ve all come out of the basement because it’s all relevant again. The counterrevolutionaries are trying to reinstate what was, I think, consumers won the fight before, and I hope consumers win this time. So, thank you.

OHLHAUSEN:

No, thank you. It’s been a wonderful discussion. Always great to see you. Thank you for mentioning Economic Liberty Task Force. I will say in the COVID crisis, a bunch of those regulations that the task force was focusing on have started to fall away. Certainly things like telemedicine, and the ability to have lots of products delivered to your home. So, I hope, maybe, that will be one of the good things that live on after a challenging year, that people realize that some of those barriers were not serving consumers well.

Well, I just want to say great talking with you. Obviously, history, as you said, it rhymes, and I think we have to be able to talk to people like you, who have such a good understanding of the history of antitrust law, to help make sense of some of these new ideas, new pushes, and whether that actually will end up being a good thing for consumers, and a good thing for the economy. So, thank you, Tim, and thank you to CPI. It’s really been a pleasure. Thanks for joining us.

MURIS:

Thank you.