Deep Dive Episode 197 – Competition at a Crossroads: Will the Executive Order on Competition Advance Competition, or Restrict It?

Protecting and preserving competition are the key objectives of U.S. antitrust laws, which are all phrased as prohibitions: on agreements “in restraint of trade,” of mergers and acquisitions where the effect “may be substantially to lessen competition, or to tend to create a monopoly,” and on “unfair methods of competition.” In a July 2021 Executive Order, the Biden Administration directed agencies to pursue 72 specific initiatives to tackle what are seen as our most pressing competition problems. Will these initiatives enhance the role of competition, or are they instead initiatives that would replace the outcomes of competitive markets with regulatory requirements? Both views have strong champions and well-articulated views. A distinguished panel joined us to lay out the arguments and implications of these important policy choices.


Although this transcript is largely accurate, in some cases it could be incomplete or inaccurate due to inaudible passages or transcription errors.

[Music and narration]


Introduction:  Welcome to the Regulatory Transparency Project’s Fourth Branch podcast series. All expressions of opinion are those of the speaker. 


Host:  On September 9, 2021, the Regulatory Transparency Project hosted a virtual event titled “Competition at a Crossroads: Will the Executive Order on Competition Advance Competition, or Restrict It?” The following is a recording from that event. We hope you enjoy.


Nate Kaczmarek:  Hello and welcome to this Regulatory Transparency Project webinar. This afternoon’s topic is “Competition at a Crossroads: Will the Executive Order on Competition Advance Competition, or Restrict It?” My name is Nate Kaczmarek. I am Vice President and Director of RTP. As always, please note that all expressions of opinion on today’s program are those of our speakers.


Today we are delighted to have a great panel, and a wonderful moderator in Jane Luxton. Jane is the Managing Partner at Lewis Brisbois in Washington D.C. She co-chairs the firm’s administrative law practice and is a member of their antitrust practice group. Jane is a former senior trial attorney for DOJ’s antitrust division, and she began her legal career at the FTC. If you’d like to learn more about Jane’s accomplished career and those of our expert panelists, you can visit our website,, for everyone’s complete bios.


In a minute, I will turn it over to Jane. Once the panel has completed their discussion, we’ll go to audience Q&A, so please think of the questions you’d like to ask everyone. Audience questions can be submitted on Zoom by using the Raise Hand function, and we will call on you directly.


With that, we’re very excited for a great discussion. Jane, the floor is yours.


Jane Luxton:  Thank you so much, Nate. Welcome to everyone. Let me begin by introducing our distinguished panelists, and then we’ll move to hearing their remarks.


First up will be Neil Averitt, who worked at the FTC for 37 years as an attorney, attorney to a commissioner, assistant to the chairman, and acting head of the antitrust planning staff. While at the FTC, he drafted the commission’s statement on consumer unfairness and was the principal architect of the state action antitrust case against the North Carolina Dental Board, which went to the Supreme Court. Neil is now an independent opinion and analysis columnist for the newsletter FTC:WATCH. 


Second, we’ll hear from Dr. Howard Beales, who is Professor Emeritus of Strategic Management and Public Policy at the School of Business at George Washington University. He’s been there since 1988. Dr. Beales also has a distinguished FTC background. From 2001-2004, he was the Director of the Bureau of Consumer Protection. He previously worked at the FTC from 1977-87 as a staff economist, Assistant to the Director of the Bureau of Consumer Protection, Associate Director for Policy and Evaluation, and Acting Deputy Director.


Third, we’ll hear from Dr. Ioana Marinescu, who’s an associate professor at the University of Pennsylvania School of Social Policy and Practice and also a faculty research fellow at the National Bureau of Economic Research. Her field is economics with a focus on labor and antitrust issues, and her work is widely published in leading academic journals and the popular media.


And finally, Robert Bork, Jr., who is President of the Antitrust Education Project and Bork Communication Group. Bob works as an advocate specializing in the development and implementation of communication strategies in support of litigation and legal policy. And he’s also noteworthy because he recently reissued his father’s book, The Antitrust Paradox: A Policy at War With Itself. Bob is a widely published author of opinion articles on antitrust issues. And I believe we are putting up in the chat box a link to these bios, and as Nate mentioned, you can see them on the website as well.


So let me set the stage here for what I think is going to be a really interesting panel discussion. Executive Order 14036 was issued July 9, 2021, launching a whole wave of debate and interesting discussion about the true purpose of the antitrust laws, a large question for us all. The executive order detailed 72 initiatives that are to be undertaken by multiple agencies, and this is based on the stated concern that consolidation in certain industries has hurt consumers and workers and stunted economic growth.


In his remarks at the signing of the executive order, President Biden took specific aim at the consumer welfare standard that has dominated antitrust theory for 40 plus years, and actually was laid out in the book that Bob just held up recently. This has added fuel to an already burning debate about the true purpose of the antitrust laws. Our distinguished panelists hold a range of views on these issues, and we’re privileged to get their take today on whether the changes called for in the EO will promote competition or restrict it.


With that, Neil, would you like to get us started with your remarks, please?


Neil Averitt:  I would be delighted to, and thank you, Jane. In one sense, judging this executive order ought to be a cinch because, with a few exceptions, the order simply tells agencies to study competition issues. Now, that’s a limited and reasonable goal. Surely, competition is ripe for a fresh vote now. Some of the disputes are getting quite concentrated, big tech, for example, or local hospital services. Some entry barriers are getting high, and the system may be getting ossified. FDA drug approvals are slow, and they can be gamed by competitors. Wages have stagnated. So of course, of course, these issues should all be studied.


But also, of course, the real question really lies elsewhere. It’s about the future. What concrete actions might agencies take down the road in response to these studies? Now, it’s inevitable that there were going to be some mistakes and overreach. But it seem to me there are plenty of places where this executive order is pointing everyone toward areas where useful actions are possible and likely. We can identify at least six of those areas.


First of all, make sure the government does not affirmatively create entry barriers. That’s something that government has a tendency to do. We see a number of states, for example, have occupational licensing requirements for lines of work that don’t really require that. They may be licensing florists or hair braiders. But as the executive order points out, we should be asking, “Well, what about federal licensing of individuals or firms, or what about licensing for products?” The order suggests that people look at regulations now existing on the size of liquor bottles, and it suggests that the government look into making it possible to buy hearing aids over the counter. Those seem like useful initiatives. 


A second area pointed out by the executive order is looking at newly recognized, previously under-prosecuted competition offenses, things that have been neglected in the past. And the poster child here is going to be effects on labor markets. Non-compete requirements, no poach agreements, mergers leading to labor monopsony are all things that have been underexamined in the past and ought to be looked at more. 


A third area is where the government is present as an actual participant in the market as either a buyer or a seller on its own behalf. And there, it should be encouraged to act as an aggressive, international market participant. So the government might do that when it’s buying pharmaceuticals for its own health program, or the Defense Department might rationally look to maintain multiple competing sources of supply for certain military goods because it wants to maintain a diverse mobilization base for the future, all to further the government’s own interests in competition. 


A fourth area pointed out by the order is to protect consumers from the fine print in their contracts that might otherwise gum up the markets and make them work less well. The order mentioned drip pricing for airlines and, by extension, probably for other markets like hotels. That’s a circumstance where the final price is revealed only slowly and in increments as various charges and surcharges are introduced one at a time. That can make comparison shopping difficult. Another consumer protection area that would be useful is to look at things like high cell phone termination fees, which can make it harder for people to switch to better carriers. Again, you want to make sure there are full disclosures. 


A fifth area also pointed out by the executive order is to just look at certain areas that are difficult and contentious and that would profit from study, even if you don’t know what the right answer is. And in that category, you have things like FRAND policy on technical standards or merger guidelines. Always, those things profit from study.


And then, finally, the sixth area is the possibility of presumptions in merger cases. The executive order hinted broadly that that would be a good thing, and it seems to me that that probably would be a good thing. Merger enforcement is the most important part of antitrust policy, and the resources of the antitrust agencies are limited, so it’s important that we be efficient in handling these things.


To do that, it would be useful to examine the economic evidence, look at the empirical data, see if it’s possible to identify some limited subset of acquisitions where it’s more likely than not, you would have anticompetitive effects. In that case, you could shift the burden of proof and put the burden of proof on the merging firms to show that the joint action would be okay. That doesn’t control the outcomes. It still lets everyone introduce all the rational arguments they have, but it has everyone start more economically from the most relevant starting point. 


With those six groups of benefits, it seems to me that the executive order is sound fundamentally and deserves support. Thank you.


Jane Luxton:  Thank you, Neil. Howard, can we hear from you next, please?


Dr. Howard Beales:  Thank you, Jane. It’s a pleasure to be part of this panel today.


I have a somewhat different view of the order. I think it displays — I want to make three essential points. I think the order has a somewhat schizophrenic attitude towards competition, and I’ll give you some examples. I think the order often is using a competition rationale to replace competitive market outcomes with regulatory requirements. And I think there’s a couple of places where it’s got projects that seem primarily to be trying to deliver benefits to particular interest groups. 


Regarding the schizophrenic attitude towards competition, I think there’s no better example than occupational licensure. A lot of occupational licensure is unnecessary, but the executive order says many occupational licenses are critical to increasing wages for workers, and especially workers of color.


If you buy that rationale, there are no unnecessary occupational licenses. They all raise wages. And it isn’t obvious why construction workers’ wages, which are particularly pointed to in the executive order, are any more deserving of being raised than florist wages, which, as Neil points out, is a pretty silly thing to have an occupational licensing requirement for. If raising wages in an acceptable justification, there aren’t any unnecessary occupational licenses to get rid of.


There is obviously a health and safety rationale for some occupational licensing, but it’s somewhat overblown in many cases. We don’t seem to have experienced any adverse effects from waiver of state licensing requirements for health professionals to move people across state lines to treat pandemic patients. And there’s an interesting paper on standards for electrical licensing that finds that states with stricter standards for licensing electricians have more accidental deaths from electrocution. That’s because the obvious substitute for an expensive electrician is doing it yourself, and most of us, frankly, aren’t very good at it. 


Another example of schizophrenia is health insurance. The order says that consumers have little choice, and then is says comparison shopping is hard because people offer choices. Standardizing the product in a uniform offering across all insurance markets is going to reduce consumer choice, but that was the problem they pointed to. 


Second, I think the order often uses enhancing competition as an excuse for replacing market outcomes. I think the clearest example of that is in shipping where the order complains about detention and demurrage charges, which have increased sharply.


The reason for that is fairly straightforward. The pandemic has seriously disrupted supply chains and transportation markets. There have been times when there’s 40 or more ships lined up waiting for berths in the Los Angeles harbor because there’s no place to unload their cargos. That means it’s a lot more expensive if you leave your container sitting on the dock because that space is scarce, and the response you’d expect in competitive markets is fees go up. This isn’t evidence of a competition problem; it’s evidence of markets working. And trying to regulate those fees is just going to get in the way.


Or in airlines, Neil sees the shift of fees as drip pricing. I see it more as evidence that there is indeed competition in this market because airlines are competing on the base fare that everybody pays rather than on the special services that some people use and others don’t. Again, that’s the outcome of competitive markets.


Or railroads, the order says we’ve gone from 33 Class I railroads in 1980 down to the seven today without mentioning that the 33 in 1980 were virtually bankrupt because of the federal regulatory structure. And now, the Surface Transportation Board is considering a requirement that railroads offer other freight lines access to their track. That’s a requirement that we tried in telecommunications. It really didn’t do much for competition. It does, however, reduce investment incentives in places where we’d actually like to see more investment, not less. 


Or communications, the order wants to restore the net neutrality rules, but the foundation of those rules is common carrier regulation. That’s not competition. While the net neutrality rules were in effect, broadband investment fell. When the rules were repealed, investment went up, and nothing bad seems to have happened. None of the horror stories have come to pass. It isn’t at all clear why government ought to be deciding whether selected content bundled with discounted cell phone service is acceptable or not. But that’s what net neutrality would entail. And, by the way, it’s not at all clear to me what is an excessive termination fee or how one would go about determining what’s excessive.


Third, I think the order is in places seeking to deliver favors to politically significant groups. Maybe the clearest example is in agriculture where it wants to protect “Made in U.S.A.” labels. We’ve been down that road before. It was country of origin labelling for meat products. And it turns out, cows move across the U.S.-Canadian border many times over the course of their lives and deaths, in many instances. Canada challenged those rules as a violation of free trade agreements. It won at the World Trade Organization, and the regulations were repealed. And now they’re back.


Or in technology, the order talks about retail platforms using information about sales online to decide where to offer house brands. It’s Amazon, but they don’t say that. That’s exactly what happens in brick and mortar platform markets. Walmart and Safeway offer a platform for the retail distribution of goods. They offer house brands. And for sure, they look at sales in deciding where they’re going to offer a house brand and where they’re not. It’s not any different online. It’s just a different interest group.


So I think the order is problematic. It’s schizophrenic about competition, it uses competition as an excuse to replace competitive outcomes, and it delivers favors to interest groups. And I thank you, and I look forward to our discussion. 


Jane Luxton:  Thank you, Howard. I can see we’re off and running here. So let’s get Ioana’s views on this. And when we have run through all of the speakers, I’ll offer the panel an opportunity to respond to other speakers’ comments. Maybe we’ll have a good dialogue that we could get going then. But Ioana, please go ahead. 


Dr. Ioana Marinescu:  Thank you. I’m going to focus on the issues in the order that pertain to labor markets, and I’m going to give you a brief review of some of the recent findings in the economics literature on these topics, and then talk about implications for antitrust enforcement that the order discussed. 


First, one element of the order, as was noted first by Neil, is that it requests a report to the White House on the effects of a lack of competition in the labor market. And the context is that we’ve had wage stagnation for most workers, so of course there is a lot of interest in understanding how we can increase wages. And so one of the ways we can increase wages is by strengthening competition in the labor market. So what the literature has found is that employers can suppress wages due to limited competition in the labor market. 


Essentially, what my work shows is that in many cases, workers do not have easy other alternative jobs that they can go do, just as consumers may not have an easy replacement for a given product, even more so in the labor market. Workers don’t always have a next job that they can easily go to if the current job is underpaid. And so therefore, this allows employers in many cases to pay workers less than the margin of the revenue product, or in other terms, pay them less than the value that the worker adds to the employer’s bottom line. So it is a significant markdown in the labor market where worker productivity could be as much as 20 percent or higher than the wage that they get paid.

Secondly, the literature has also shown that the majority of U.S. labor markets are highly concentrated. They have a concentration index above the threshold of 2,500 as we have in the horizontal merger guidelines. So again, the lack of competition is quite pervasive across the labor market. 


And finally, the literature has shown that when you have higher labor market concentration, that tends to lower wages. And we have shown that in a paper in general, but people have also focused specifically on mergers, which is of great importance for antitrust enforcement. And in particular, papers have looked at hospital mergers, which is a big sector of interest with healthcare, as well as just merges across many sectors.


And in both cases, the takeaway is that whenever a merger significantly increases labor market concentration — and by this, I mean the concentration of employers. If you look at the share of employers in a certain labor market, whenever a merger significantly increases concentration in labor market, it tends to reduce wages. And so that is a clear effect of mergers having this anticompetitive effect on the labor market.


And so going forward, what can be done as far as enforcement? So the executive order mentions that the agencies are encouraged to review the horizontal and vertical merger guidelines and to consider revising them. And so one of the things that I propose in the paper with Herb Hovenkamp is to more clearly incorporate labor markets in those guidelines which were already mentioned. But I think we need more clarity there.


And one of the things we propose in the article is to presumptively define labor markets as a commuting zone by occupation, so a geographic market by occupation, and calculate shares either of job vacancies or employment in this market, and that can serve to give more attention to mergers that could have an anticompetitive effect in the labor market. 


And third, another aspect of regulation is non-compete clauses, which the executive order also mentions. And so the fundamental issue of noncompetition agreements is essentially these agreements prevent workers from going to work for competitors after they leave their current employer. And so this can severely limit worker mobility.


And interestingly, this has relevance as well for merger enforcement because when you are in a labor market that has a lot of noncompetition clauses, the amount of competition between employers is less than would appear just purely based on market shares because whenever a worker leaves one of the employers, they are not allowed, in fact, to work for other employers. And so the effective concentration that they are facing can be quite a bit higher than what it would appear just on the basis of looking at shares. And therefore, we suggest that the existence of noncompetition clauses would be a factor to appreciate the significance of a given level of labor market concentration in the labor market. 


So to conclude, I think that this order makes important points that will further stronger enforcement of competition in the labor market, and that this is something that needs to be done since, until now, there has been relatively little attention paid to this area. And this is something that we have pointed out in my recent work with Eric Posner. And so I’m really looking forward to the antitrust authorities doing more to enforce antitrust laws as they apply to the labor market. Thank you. 


Jane Luxton:  Thank you, Ioana. All right, and finally, last but not least, Bob, let’s hear your thoughts on this subject.


Robert Bork, Jr.:  Well, thank you. I really appreciate the invitation to participate in this discussion, and I’m kind of humbled, more than humbled, to be in the company of my fellow panelists. For those of you who don’t know me, I am not a lawyer, I just play one on Zoom, although I do claim a participation trophy for all those years at the dinner table with my father. 


The title of this panel is “Competition at a Crossroads: Will the Executive Order on Competition Advance Competition, or Restrict It?” And I believe the answer on the whole is that it will restrict competition. That was the question we were trying to discuss today. Although some suggested reforms among the 72 make sense, most notably, as has already been mentioned, relaxing restrictive occupational licensing, on balance, the president’s executive order will increase burdensome, confusing regulation on both big and small business.


So let’s be clear. More red tape and control from the federal government restricts competition. Politicians and bureaucrats always seem to overlook the effect of their own actions, and they’re sort of blind to Newton’s Third Law as it might be applied in their own realm. Of course, I reserve my final judgement, as we all should, until we see what the agencies and departments actually produce. I hope that they take their time about it, not a very long time, and weigh the costs versus benefits of their proposals. But I think I’m kidding myself to think that they will. 


I apologize. The guys are mowing their grass outside my window today instead of tomorrow. I can’t think — I apologize.


But here are just three examples of why I am prepared at this point to pass my preliminary judgement about the executive order. First of all, smaller businesses are ill equipped to handle more regulation and the uncertainty and costs it creates. Big business is not so handicapped. However, a bigger company is more likely to be able to absorb the cost and the burden of more regulation. This is one probable reason why we’ve seen such a dramatic slowing down in the creation of new business pre-COVID. Between 2007 and the first half of 2019, applications to form businesses that would likely hire workers fell 16 percent.


Then there’s the creation of “woke standards,” if you will. For example, and here I cite my friend John McGiniss of Northwestern University Law School, the order calls on antitrust to provide an environment conducive to the preservation of our democratic and political institutions.


And as John says, it is not plausible for regulators to determine the legal rules by which companies will advance democracy. This nebulous standard is an open invitation, to, quote, “discretionary actions” by the government. These recommendations are based largely on a desire to appease some rent-seeking political or interest group, not on maximizing economic efficiency and consumer welfare. And as Howard noted, these are essentially payoffs, picking winners and losers.


And I haven’t even mentioned the infusion of social policy regulation that will be part of this effort from labor to climate change to equity, so-called equity. The agencies will have companies large and small coming to Washington every five minutes for permission to run their businesses at every level. 


One other point, as I wrote yesterday in The Hill newspaper, the president’s antitrust policies will be inflationary, and restrictions on competition will raise cost. The executive order’s focus on family farms, for example, will raise prices by favoring less efficient enterprises and discouraging efficient consolidation that make sense. And let’s not even talk about the energy markets where gas prices are going up and the administration is targeting oil companies, oil conglomerates now.


I must note, on a point of personal privilege, based on the president’s remarks announcing the executive order, that it is based on faulty facts and logic. When President Biden announced his executive order, he chose to name my father and his “failed experiment,” in quotations, by which he meant the economic and legal analysis of his book The Antitrust Paradox and the consumer welfare standard that has been repeatedly endorsed by the courts over the last 40 years. As measures of its failure, the president cited, quote, “less growth, weakened investment, and fewer small businesses” in the 40 years since the consumer welfare standard was adopted by the Supreme Court and the book came out.


The president is simply wrong. Instead of less growth, the economy has almost tripled in size from 1980 to 2020 under the consumer welfare standard. Over this time, the World Bank reports America’s per capita income is nearly double. Instead of weakened investment, we have enjoyed a 9.99 percent inflation adjusted annual rate of return from 1980 to 2020, more than 2 points above returns during the 40 years prior before the consumer welfare standard. And instead of fewer small businesses, the overall trend under the consumer welfare standard for decades has been strong with a 54 percent increase in small businesses since 1980. 


So to sum up, on the whole, the executive order will lead to less competition and harm to consumers through higher prices, less choice, fewer jobs, and less innovation. It’s part of a plan hatched by Elizabeth Warren and Amy Klobuchar and their twin Rasputins, Tim Wu and Lina Khan. The goal, to remove the neutral principle of the consumer welfare standard that is neither conservative nor liberal, Republican or Democrat, and the goal is to replace it with anti-capitalist, “big is bad,” woke set of laws and regulations that hearken back to a time in this country where competition policy was built on the subjective biases of its enforcers.


The result of all of this will be antitrust law, competition law, detached from the consumer welfare standard that becomes a regulatory, statutory, and judicial Ouija board, as apt to go anywhere and spell out anything guided by the personal preferences of the legislator, regulator, or the judge. Such rootless policy allows judges and, as I said, legislators and enforcers, to create new law introducing new levels of unpredictability. And I’ll stop there, and let’s enjoy hearing from my colleagues. 


Jane Luxton:  Thank you very much to all the speakers. I think you’ve set the table here for some very interesting discussion. I appreciate the humor and some of the very interesting references. I don’t know if we can get a free-for-all going here, but if anybody would like to respond to comments made by a previous panelist, this is a good opportunity to jump in on those point. All right, Neil, thank you for raising your hand. Go for it.


Neil Averitt:  I thought I’d get the ball rolling here.


Jane Luxton:  Right. Thank you.


Neil Averitt:  I really liked Howard Beales’ comments because discussions with him are always lively, rational, and move the ball forward. I would make a couple of points in response to them, however. One, it’s not necessary to justify every particular point mentioned in the executive order. The order is asking for study in a bunch of fields, and then we need to figure out where action would be most sensible.


Two, Howard was not really persuaded about the virtues of dealing with drip pricing or termination fees. And I agree with Howard that you don’t really want to regulate the substance of those things, but I see it as an area where consumer disclosure would be useful, and so consumer protection issue that tends to indirectly protect markets. If people know more readily up front what the final price will be, they can purchase more rationally. If they know what the termination fees are, if that’s pointed out to them with enough clarity, then they may be able to make more good decisions down the road, which seems useful. But that’s different from substantive regulation.


It seems to me also that there’s room for real improvement in a number of these functions, and it’s worth looking at the speed of the rollout of COVID vaccinations as an example there. Those were done amazingly quickly, and that tells us something about the delay that comes out of FDA approval processes. And that seems to me something clearly worth looking at. Thank you. 


Jane Luxton:  Okay. Any other responses from panelists to comments from others? 


Dr. Ioana Marinescu:  Yes. I just wanted to offer some perspective on Bob’s comments about some of the trends in the U.S. economy. And it’s definitely true and a concern there has been a decline in small business creation and business creation more generally. This has been a — it’s not well understood by us academics. There are a number of possible reasons, and part of why it’s hard to explain is because it’s been a trend that is sort of going slow. So if something happens suddenly, it’s easier to find a cause that perhaps happened at the same time, but this is kind of a slow-moving process.


Nevertheless, there is interesting aspects there that could be linked to antitrust. From my own domain of workers, we talked about noncompetition agreements, and that’s one way that small businesses can find it hard to get started if the other big businesses will not, quote, unquote, release their workers to go work for competitors. So that’s just one particular example.


Another interesting aspect where we have some literature on work in particular by my colleague Florian Ederer is the issue of so-called killer acquisitions where you do have a new business being created, but it’s being bought by a large competitor—we’ve seen that a lot in pharmaceuticals in particular—and therefore not allowed to grow to a level that it could become a big competitor in the market. And that is something that we can meaningfully think about in antitrust enforcement.


Unfortunately, these mergers can fly under the radar because the company could be too small for the merger to be regulated. This is something that in the perspective of trying to encourage more business creation, is something that is worth thinking about.


And then the last point I want to just briefly touch upon, again, this is my perspective as an economist, I have seen a recent piece by my colleague Carl Shapiro on the consumer welfare standard and how it’s more meaningful to focus on protecting competition rather than consumer welfare.


And in particular, the consumer welfare standard is a useful tool in some cases that allows us to analyze certain aspects but can hamper us in understanding others, and in particular, the labor market issue. It can be a little bit confusing because the adverse effect, for example, of mergers on wages when it’s due to an anticompetitive effect doesn’t necessarily have a direct effect on consumers. It might, and I can discuss that if you want.


But basically, the issue is the trading partner. So it’s not about the consumer. It’s whoever the trading partner is. It could be a B to B transaction, another business the supplier, and that’s very important, and we have to worry about competition there. And in that sense, the consumer welfare standard, again, it’s useful when it’s a consumer case, but it can be limiting in terms of thinking about protecting competition more broadly, which is a key objective of the antitrust laws and antitrust enforcement. 


Jane Luxton:  Okay. Thank you. 


Dr. Howard Beales:  If I could just briefly respond, I agree with Neil, disclosure can be useful in some places, but that’s not the case the executive order makes about termination fees. It’s not that consumers don’t know, it’s that they’re too high, and that’s much more problematic.


And on drip pricing, the Transportation Department has had a couple of different rulemakings to try to get better disclosure of airline fees. Turns out the disclosures are pretty good on the airline websites. Where they’re problematic is on is aggregator websites, the Travelocitys and Expedias of the world, and that’s because they’re not willing to pay to get access to real-time information from the airlines. It’s just not a competition problem. It’s an intellectual property problem.


The pharmaceutical example is interesting. It’s clear the drug approval process takes way too long, but that’s also part of why small pharmaceutical companies get acquired is there is a comparative advantage in the big companies in dealing with the FDA. And if you don’t know what you’re doing, you can’t get your drug approved. And so it’s preferable for the small companies to sell their drug to somebody who knows how to get it through the system rather than survive as a new company. 


Jane Luxton:  Okay. Bob or anybody else have follow-up comments?


Robert Bork, Jr.:  It’s more of a question, really, for Neil. You were talking about shifting the burden of proof, and I wasn’t clear whether you were saying that burden shifting is a good thing, or something we should look at, or if you were just outright endorsing it because intellectually, I have a problem with some aspects of burden shifting. It seems to me that if I’m the company merging with another or hoping to acquire another, it’s not my job to say that 20 years from now, prove that everything is going to be fine. I’d be curious what you thought about that.


Neil Averitt:  I guess it’s a question of how much empirical data can be gathered and what our confidence level in that data would be. You don’t want to shift the burden for lighter problematic reasons. You want to shift it only if you can, on an empirical basis, say this particular subset of mergers involving these kind of circumstances, let’s say, for example, market shares of more than X in a properly defined market and entry barriers defined in some other way, are circumstances where we can see from past experience that anticompetitive outcomes are more likely than not. Then in that case, it makes sense, I think, to shift the burden because that’s what the data shows.


But these are likely to be a pretty narrow set of cases. Certainly for starters, you’d want to stick to things that you’re pretty sure about. So in most cases, I’d agree with you. You don’t want to be too restrictive. But inevitably, merger enforcement is always predictive, what’s the future likely to hold, and you’re just making your best guess. And I think within the antitrust profession, we like to believe that the process is more rigorous and objective than it really is. So you reset the starting premises in accordance with your best data and best informed judgement. 


Robert Bork, Jr.:  Thanks. I had also just wanted to make a comment about labor economics, which, again, I’m not an expert in, but isn’t — correct me if I’m wrong, but the price of wages, the price of that input is what I think has primary role. And if the price is too high, then you’re going to see shifting to automation and things like that that will keep wages lower or jobs scarcer. Is that even remotely correct, in your view?


Dr. Ioana Marinescu:  So the thing with price of labor is that we are in a very dynamic and fast-moving economy. And when you have a higher price of labor, it changes the relative competitive advantage of different business models. And it’s not necessary to automation, but it’s just that it can favor certain industries relative to others who essentially can’t afford to pay more to reorganize themselves to use more expensive labor. And so it really depends.


And there are also cases where automation actually creates more jobs, paradoxically. So that’s the famous case of automatic teller machines that you might think are going to kill all the teller jobs but actually ended up creating more jobs because it was useful to have a branch that had an ATM, but then they also had bank counselors. So it turns out that in practice, this phenomenon is much more complicated, and you can’t necessarily predict a loss in employment.


I also want to say that you might think that because of a lack of competition, wages are low, that could benefit consumers because you’d think that therefore it would be cheaper to make widgets. But here’s the thing. When you have — in the classic monopsony model that’s parallel to the monopoly model, just like the monopolist restricts production and you have prices that are too high, the monopsonist restricts employment. You have wages that are too low, but also production that is too low, basically, because essentially for a given production technology, if you use fewer workers, you make less widgets. And if you make fewer widgets, the prices of the widgets are going to go up, not down.


So it turns out, actually, that in the classic monopsony model, consumers are not going to benefit if the wages are low due to anticompetitive pressures. Now, the wages could be low for other reasons. I just want to take —


Robert Bork, Jr.:  — Well, there are a lot of inputs, is what you’re saying. There are a lot of inputs here, and it needs a lot of study, although I must say I’ve never had a problem finding affordable widgets. 




Jane Luxton:  I want to open this to questions in a minute, but we’ll take the liberty of throwing out a question of my own first to see what reactions the panelists have to it. Isn’t the underlying question here in this debate really how you define competition or the true purpose of the antitrust laws? Is it an economic construct? Or I just read today an Ezra Klein interview of Felicia Wong, and they’re talking about this new thinking as a political or philosophical question about power. What are your views on what the antitrust laws really should be doing here and what competition means in the way those laws are worded? Who wants to take a crack at that one? All right, Neil, you’re up.


Neil Averitt:  I’ll take a swing at that one. It seems to me that that question you posed is really the elephant in the room that we’ve avoided in this discussion and that really the profession has avoided for a long time. And that is that there is a political crisis of legitimacy for antitrust law in that a lot of the ordinary people in the country are feeling that the system is not working quite properly for them. That’s your Donald Trump voters and your Bernie Sanders voters. And if the two could ever get together, they’d be a clear majority of the electorate. And they’re unhappy.


But the question is what do you do about that? It seems to me for the reasons that a lot of people have alluded to, you don’t want to try to factor social and political values into antitrust. Too complicated, not what the statute says.


But maybe if you have two equally valid economic ways of applying the antitrust laws, but they differ in terms of what your tolerance for risk is, or what your horizon of analysis is, or what role you give to non-price as opposed to price competition. If you’ve got two equally acceptable, efficiency-enhancing economic models, maybe you should choose among those the one that’s most conducive to the general goals that the Supreme Court mentioned in that case cited at the top of the executive order.


Jane Luxton:  Okay. Other views? 


Dr. Howard Beales:  I think antitrust laws should be an economic concept. That’s the thing they can accomplish as a practical matter. Trying to push political concerns into them is to push into unelected judges and appointed administrative agencies things that are fundamentally political decisions. And if we want to make those choices, we should make them through the political process and not pretend that there’s some objective standard where there’s not. And the antitrust laws are an objective standard.


Neil Averitt:  I’d dispute that, I think. That’s assuming that there is one body of knowledge called economics and it produces one answer. And I’m not really sure that’s right. You can have different opening premises in your analysis, and you come up with different answers. What’s the standard of risk for may harm competition?


Jane Luxton:  Anyone else want to jump in?


Robert Bork, Jr.:  Yeah, again, I stand here, or actually, sit here to defend the consumer welfare standard because it’s not partisan, it’s simple, it’s neutral, and it doesn’t favor one political view over another. And it seems to have worked fairly effectively. I understand people have issues with elements of it and think there are loopholes or problems, but essentially, it’s better than — as somebody said about democracy, it’s better than all the other solutions that we have. So I would just emphasize that I think it’s worked very well, and it should be the centerpiece of thinking about antitrust. 


Jane Luxton:  Okay. And I think Ioana had a view.


Dr. Ioana Marinescu:  Yes. I don’t have a big picture view about what the role of antitrust should be, but if we just place ourselves in the tradition of what it used to be, it very much does seem that it’s there to protect competition. And if that’s true, then we have to consider how we can apply it more effectively.


And again, this is my economist mindset, but we’ve been discussing in my paper with Eric Posner how, for example, labor markets are also an area where you have competition issues, and it’s been underapplied there. So in terms of the effectiveness of having greater enforcement or the marginal productivity, if you want, how much would we gain from doing something where we’re not doing almost anything to increase competition. The gains could be very high. 


So it’s not necessarily that I have a view about what the whole system should be like, but more just based on our immediate past and tradition of protecting competition. It’s coherent with those goals to think more broadly when we have competition issues that arise in places where we haven’t yet addressed them as vigorously.


Robert Bork, Jr.:  I think I should have made clear, though, that I agree with the goal of protecting competition. What happens, though, is that—and you can see a lot of this in the executive order—it’s about protecting competitors and picking winners and losers. And I would argue that that is not the acceptable goal, that competition should not be defined as competitors. I’ll leave it at that. 


Dr. Howard Beales:  And it seems to me that we like competition, and we want to protect competition because it maximizes consumer welfare as judged by consumers. And that’s what the consumer welfare standard reflects is trying to look at that.


And I also have a question because it seems like — and this was your comment about monopsony would restrict output and raise consumer prices. That would seem like it would show up in the consumer welfare standard. You don’t need to make a separate test for it.


Dr. Ioana Marinescu:  It’s just that the effect is sort of second order, and so in terms of — Neil was talking about the difficulty of providing evidence. So while the model predicts that, because the effect is second order, I think it makes more sense to look at the immediate anticompetitive effect in whatever market is at play, which in this case would be the labor market, instead of looking at the effect of the neighboring market, which might be different, might be harder to prove.


So it’s sort of like saying there might be — if we do something in the market for pharmaceuticals, it might affect hospitals. It might. But trying to prove an effect in the hospitals might just be more complicated because it’s more remote from the immediate action. So I think just practically speaking, it’s more sensible to focus to wherever the anticompetitive effect is expected rather than can I look for it in another market.


I also want to say the dynamics are very important, so when we’re thinking, for example, about even the consumer welfare standard, just because something may not immediately make consumers worse off doesn’t mean there couldn’t be adverse dynamic effects.


For example, to come back to the new business creation, if something is going to, in the long run, restrict entry by new businesses, this could still, in the longer run, lead to adverse effects for consumers. And that gets more complicated, but we have to use available evidence, like Neil was saying, based on things we’ve already seen to try to predict because this is the game, if we think that, in the longer run, this conduct, which is what we’re after in antitrust enforcement, is going to plausibly have an anticompetitive effect for trading partners, because that’s really the focus.


Jane Luxton:  Okay. We have one question that has been written in the chat box, and I’ll ask it now. But if others in the audience have questions, I think the mechanism is to raise your hand in that function on Zoom, and we’ll get to as many as we can. The first question comes from Coke Stewart. “The executive order resulted in a letter from HHS to the Patent Office on drug prices. Do patents promote competition? Is the administration pro- or anti-patent?” Anyone have thoughts on that question?


Dr. Howard Beales:  I actually have closely related thoughts. I think one of the things that’s problematic about the executive order is that in a number of areas, and drug prices is one, it sort of ignores long-term effects. Importing Canadian drug controls, as the executive order seems to suggest, and restricting payments, prohibiting all payments, as the order would suggest, in intellectual property litigation about drug patent rights are highly likely to reduce new product development. And in the long run, that’s a really bad thing for consumers.


It’s a different specific proposal, but there’s a recent report from the Congressional Budget Office showing significant reductions in new drug development from the price control proposals. And that is the long-term dynamic effect. I don’t know where the administration is, but the executive order seems to be ignoring the important long-term benefits of patents. 


Jane Luxton:  Any other responses? Okay. I’m not seeing any hands raised, but, fortunately, I came prepared with a couple more questions, so I’ll jump in.


Neil, I think, made this point early on that the EO is not an enforceable document, and in many cases, it calls for reports and study and so forth. But it does call for quite a few regulatory changes, and, as I think someone mentioned, we’ll have to wait and see what those are before we make judgements. But what do you think the real impact will be, given what we’ve seen in the recent court rulings on a lot of antitrust issues where some of them were ambitious plans at, quote, unquote, antitrust reform have been undertaken? How do you think these executive order initiatives are going to fare once it hits the courts? All right, who’s up for this one? Neil? Okay.


Neil Averitt:  Procedure is going to count for a lot here, I think. And the agencies — certainly, the antitrust agencies need to be careful to follow procedure, not to get snookered into using procedures that are higher risk than make sense. The executive order refers repeatedly to the FTC’s statutory rulemaking power to do various competition things. That, it seems to me, is risky because I’m not entirely convinced that the FTC’s competition rulemaking power is beyond question. It’s been a long time since it’s been used. The precedents are really old. They’re from a different era of statutory construction.


So it might make sense for the agency to do a test case and try to establish what its rulemaking power is or isn’t. But it seems to me it would also make sense for the FTC at least to be using policy statements at least as much as rules and probably more than rules. They’re a little quicker. They’re easier. They can be amended as your experience gets better. They’re a way to get your feet wet and to begin to come to terms with all these difficult issues without complicating your life more than you need to.


Jane Luxton:  Although, I have to jump in and say policy statements that are rules in disguise have a major APA problem.


Neil Averitt:  Have we really seen that as a problem?


Jane Luxton:  Well, Appalachian Coal, I think there’s pretty strong D.C. Circuit case law on that. If it’s an interpretive rule, that’s one thing, but if it’s really a rule that has a binding effect, I’d at least argue that’s problematic. But I’m sorry, I interrupted you.


Neil Averitt:  Oh, no. I guess it just seems to me that in the novel areas that the executive order highlights, policy statements are likely to be just that, rather than disguised rules with binding effect. 


Jane Luxton:  Fair enough. Okay. I am mistaken. There was one hand up. Aaron Margulis, do you have a question?


Aaron Margulis:  Hi. Can you hear me? I’m sorry, I’m not used to this type of Zoom, even though I have spent a lot of time on Zoom recently. 


My question, essentially, is — and it’s a little bit off the topic of the executive order, but how do we consolidate the antitrust regulation with small businesses that it may affect? A recent article—I don’t know, it might have been The Wall Street Journal—spoke about Amazon moving into rural Iowa with its $15 dollar minimum wage. Should we bring in — should Walmart decide to come in, or we break them up and move in seven of these corporations into rural Iowa, starting a wage war where small businesses simply can’t compete at these numbers, how do we essentially consolidate antitrust regulation with those effects?


Jane Luxton:  Okay, good question. Who’s ready? Any takers?


Dr. Howard Beales:  I guess to me, there’s always been that tension in antitrust of the extent to which you protect competitors, which is the small business problem, versus protect competition itself, which may be really bad for small businesses in certain circumstances. And I think that’s exactly what’s at issue. I think the right answer from an economic perspective is let the market prevail. Let’s see what happens. And if bigger businesses are better for both consumers and workers, that’s a good thing, not a bad thing.


Jane Luxton:  Okay. I see a question that came in, but I also see that we’re at the top of the hour. Nate, what should we do?


Nate Kaczmarek:  Sorry, I was looking to unmute. Do you want to — we could squeeze it in if it’s really quick.


Jane Luxton:  Okay. The question is, “There’s been a lot of attention on PBMs. While the FTC has historically concluded PBMs reduce drug prices, the current FTC seems to be focused on whether the rebate process reduces choices for consumers by prioritizing interchangeable drugs, generics primarily, as anticompetitive. How do you see the current FTC acting on the so-called rebate wall and the PBMs where prices are reduced but the result is some perceived or real limitation on consumer choice?”


Robert Bork, Jr.:  No idea. [Laughter]


Jane Luxton:  I don’t either. Anyone have thoughts on that? All right, I guess we’ll just have to conclude. That’s a question for the ages, and maybe the subject of another webinar.


Nate Kaczmarek:  Yes, I think we can definitely cover that on a webinar to come. But for today, we really want to thank our moderator and our excellent panel for a great discussion. We look forward to having each of you back with us again soon. Audience feedback is always welcome by email at [email protected]. I hope you all have a great day. 




Conclusion:  On behalf of The Federalist Society’s Regulatory Transparency Project, thanks for tuning in to the Fourth Branch podcast. To catch every new episode when it’s released, you can subscribe on Apple Podcasts, Google Play, and Spreaker. For the latest from RTP, please visit our website at




This has been a FedSoc audio production.

Neil Averitt

Opinion Columnist


Howard Beales

Professor Emeritus of Strategic Management and Public Policy

School of Business, The George Washington University

Robert Bork, Jr.


Antitrust Education Project

Ioana Marinescu

Associate Professor, School of Social Policy & Practice, University of Pennsylvania

Faculty Research Fellow, National Bureau of Economic Research

Jane Luxton

Managing Partner - Washington, D.C.

Lewis Brisbois Bisgaard & Smith LLP

Antitrust & Consumer Protection
Regulatory Process

The Federalist Society and Regulatory Transparency Project take no position on particular legal or public policy matters. All expressions of opinion are those of the speaker(s). To join the debate, please email us at [email protected].

Related Content

Skip to content