​Real Clear Politics (Commentary)

COMMENTARY FROM AEP'S PRESIDENT, ROBERT H. BORK, JR., ON REAL CLEAR POLITICS

Congress can be like a frozen lake in the Midwest, solid on the surface but with schools of fish beneath the ice. While Democrats are locked into conflict over spending, and Republicans burrow into opposition, senators from both parties are cooperating to craft bipartisan legislation to subject a handful of Big Tech companies to stringent new antitrust regulations. 

If they succeed, these senators are setting out to prove that with a little hard work and cooperation, leaders in Washington can still reach across the aisle to harm consumers and the economy.​

​AEP Presents

THE ANTITRUST EDUCATION PROJECT PRESENTS: THE FUTURE OF ANTITRUST WITH SENATOR CHUCK GRASSLEY

Robert H. Bork, Jr., President of the Antitrust Education Project, talks with Sen. Chuck Grassley, Ranking Member of the Senate Judiciary Committee, about the radically changing landscape of antitrust enforcement in the United States.

After this 30-minute “fireside chat,” Mr. Bork was joined by Ashley Baker, Director of Public Policy at the Committee for Justice and founder of the Alliance for Antitrust, and Jan Rybnicek, antitrust and competition counsel at Freshfields to discuss Senator Grassley’s insights and the outlook for antitrust enforcement.

Speaker Bios:
Senator Grassley
Ashley Baker
Jan Rybnicek
Robert Bork, Jr.
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​Event Recap

On September 15, 2021, the Federalist Society presented this special day-long, in-person conference on Judge Robert Bork's The Antitrust Paradox. The influential work has been recently republished so that the new generation of general practitioners and antitrust thinkers alike can bring his work to bear on their own. This conference featured discussion of the book and its relevance to contemporary antitrust issues. 
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AEP's President, Robert H. Bork, Jr., joined the panel to discuss the republishing of the book and the Consumer Welfare Standard today.

Thank you for the invitation to participate in this discussion. I am humbled to be in the company of my fellow panelists.

The title of this panel is: Competition at a Crossroads: Will the Executive Order on Competition Advance Competition, or Restrict It?

I believe that the answer is, on the whole, that it will restrict competition.

Although some suggested reforms among the 72 make sense – most notably relaxing restrictive occupational licensing – on balance the President’s XO will increase burdensome, confusing regulation on both big and small business. Let’s be clear – more redtape and control from the federal government restricts competition. Politicians and bureaucrats always seem to overlook the effect of their own actions. They are blind to Newton’s third law as it might be applied in their own realm.

Of course, I reserve my final judgment, as we all should, until we see what the agencies and departments of the federal government actually produce. I hope they take their time about it and weigh costs versus benefits – but who am I kidding.

But here are just three examples why I am prepared at this point to pass my preliminary judgment:

1. Smaller businesses are ill equipped to handle more regulation and the uncertainty and costs it creates. Big business is not so handicapped. However bigger companies are more likely to be able to absorb the cost and burden of more regulation. This is one probable reason why we’ve seen a dramatic slow-down in the creation of new businesses pre-covid. Between 2007 and the first half of 2019, applications to form businesses that would likely hire workers fell 16 percent.
   
   
2. Then there is the creation of woke standards. For example, and here I cite my friend John McGinnis of Northwestern University Law School, the order calls on antitrust to provide an “environment conducive to the preservation of our democratic and political institutions.” 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 “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. As Howard notes 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. The agencies will have companies large and small coming to Washington for permission to run their businesses at every level.

1. One other point, as I wrote yesterday in The Hill, the President’s antitrust policies will be inflationary as restrictions on competition will raise costs. The X0’s focus on family farms for example will raise prices by favoring less efficient enterprises and discouraging efficient consolidation that makes sense. The persecution of energy markets – seen in the cancelling of the Keystone Xl Pipeline, the discouragement of new pipelines, the war on natural gas – has transformed the United States … and not in a good way. After becoming the world’s lead energy provider, we now have National Security Advisor Jake Sullivan begging Putin and OPEC to open their spigots. We are already seeing significant energy inflation. The confused antitrust standards of the XOs will make energy inflation worse.

 
I must note, on a point of personal privilege, based on the President’s remarks announcing the XO – that it is based on faulty facts and logic.

When President Biden announced his XO he chose to name my father and his failed “experiment” by which he meant the economic and legal analysis of his book The Antitrust Paradox and the consumer welfare standard that has repeatedly been endorsed by the courts. As measures of its failure he cited:

 “Less growth, weakened investment and fewer small businesses.”

The president is simply wrong:

Instead of “less growth”, the economy almost tripled in size from 1980 to 2020 under the consumer-welfare standard. Over this time, the World Bank reports that Americans’ per capita income has nearly doubled.

Instead of weakened investment , we have enjoyed a 9.99% inflation-adjusted annual rate of return from 1980 to 2020 -- more than 2 points above returns during the prior 40 years before the consumer welfare standard.

Instead of “fewer small businesses” the overall trend under the consumer welfare standard had for decades been strong, with a 54% increase in small businesses since 1980.

So, to sum up, on the whole, the XO will lead to less competition and harm consumer through higher prices, less choice, fewer jobs, and less innovation. It is part of larger plan hatched by Elizabeth Warren, Amy Klobuchar, and their twin Rasputin’s: Tim Wu and Lina Khan.

The goal to remove the neutral principle of the CWS that is neither conservative nor liberal, Republican nor Democrat and replace it with an anti-capitalist, big is bad, woke set of laws and regulations that harken back to a time in this country where competition policy was built on subjective biases of its enforcers.

The result of all of this will be antitrust law detached from the Consumer Welfare Standard that is becomes a regulatory, statutory, and judicial Ouija board – it is apt to go anywhere and spell out anything guided by the personal preferences of the legislator, the regulator, or the judge. Such rootless jurisprudence allows judges to create new law, introducing a level of unpredictability.
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Thank you.

​The Hill (Opinion)

BY AEP PRESIDENT, ROBERT H. BORK, JR

​The Biden administration, finally beginning to worry about the political impact of the rising cost of food, fuel and other basic consumer necessities, is neatly dovetailing its push for aggressive antitrust enforcement by blaming inflation on big business and market concentration.

Politically speaking, it is a neat fix. It drives one of the central policies of the Biden administration — to shift antitrust enforcement from the consumer welfare standard of the past 45 years back to an earlier era’s more nebulous standard against “bigness.” And it deflects blame for inflation.

President Biden lacks the theatrical flourish of a Huey Long, but he is nevertheless trying out his best version of the Kingfisher routine. “I’ve directed my administration to crack down on what some major players are doing in the economy that are keeping prices higher than they need be,” Biden said in August. The cause of higher prices, he argued, is greedy big business and its stranglehold on the American consumer.

​There has never been a significant antitrust ruling against a company that offers a service at a zero-price point. The Federal Trade Commission, under the leadership of Chair Lina Khan, is seeking to make history. The FTC’s amended filing on Thursday, after being thrown out earlier by Judge Boasberg in D.C. federal court, tries (in the words of a puckish Law360 headline) to “plug holes” in its original case.
 
Judge Boasberg noted that the original filing made a “naked allegation” that Facebook has a dominant share of a market, without defining what that market is. Lina Khan has returned from the second-hand store to try to dress this mannequin.
 
Reading between redactions, Chair Khan’s amended complaint claims Facebook has at least 80 percent of the “personal social networking market.” Left out of FTC’s definition are Twitter, TikTok and other popular services that allow people to make and follow friends.
 
Many questions emerge from this amended filing, which reads like the same-old, same-old, only with more hyperbolic language – a company with “staggering profits” that “kneecaps” competitors. Did James Patterson have a hand in writing this? The Zuckerberg Conspiracy?
 
What about the recent growth of personal networks on other major social media platforms? What about people with multiple accounts with multiple services? Then again, it is undeniable that Facebook has a 100 percent market share of major social media platforms founded by someone named Mark.
 
If Khan prevails, it will have to be under the standard still held by courts – the Consumer Welfare Standard. Maybe there’s a pony in there somewhere. But the breadth and brazenness of some of FTC’s claims in this filing hints at how reckless filings would become if the Biden Administration succeeds at scrapping the Consumer Welfare Standard altogether.

UPCOMING EVENT 

AEP's President, Robert H. Bork, Jr., will be headlining a special day-long, in-person conference hosted by The Federalist Society on Judge Robert Bork's The Antitrust Paradox. The influential work has been recently republished so that the new generation of general practitioners and antitrust thinkers alike can bring his work to bear on their own. This conference will feature discussion of the book and its relevance to contemporary antitrust issues. 

Ever have the teacher tell you to redo your homework? What did you do?
 
You probably made your paper longer, added more facts and footnotes. Not surprisingly, government works the same as well.
 
As you will recall, the Federal Trade Commission launched an antitrust lawsuit against Facebook. In June, U.S. District Judge James Boasberg tossed that FTC suit, complaining that the FTC failed to offer a coherent description of the market that the social media company supposedly dominates.
 
“The FTC’s inability to offer any indication of the metric(s) or method(s) it used to calculate Facebook’s market share renders its vague ’60%-plus’ assertion too speculative and conclusory to go forward.” The FTC did not even bother to say who made up the other 40 percent.
 
Judge Boasberg did add, however, that there was some “meat” on the bones of FTC’s argument, encouraging FTC to come back and try to transform a “D” paper into an “A” paper.
 
So now Chair Lina Khan and the FTC have refiled with some meat, in the form of an additional 27 pages to its original 53. So what do these pages add?
 
Not much in terms of new facts or logic.
 
The FTC continues to define the market as “personal social networking services.” But it redacts the actual math that describes the components of that market. Why? Why hide from the public the very companies and their market shares that the judge demanded to see?
 
Is it possible that the FTC is afraid that its numbers are too shaky?
 
The FTC Khanate – with its staff under severe restrictions and gag orders, so it will be hard to query their reasoning – also identifies TikTok as being outside of the “personal social networking services” market. If one were to define the market by percentage of cat videos, TikTok is a vicious, toe-to-toe competitor. More to the point, doesn’t TikTok’s “friends” application make it a competitor of Facebook? The latter certainly thinks so.
 
Antitrust law was designed with Standard Oil, railroads, and the steel and the copper trusts in mind. These were giants who made necessities and had deals to lock out competition, harming consumers. It is abuses like those which the venerable Consumer Welfare Standard has sorted out for almost half-a-century.
 
Does it make sense to apply antitrust law against social media platforms that provide services for free, almost none of them necessities, and that anyone can abandon with a single click?
 
However Boasberg rules, the real danger is that we will degrade and diminish the one clear standard that makes antitrust work.

For decades, the prospect of a dream acquisition by a large company has driven startups to innovate by developing the next “killer app.” The acquisition model leaves founders and their employees with fortunes, relieves them of the need to scale and monetize their technology, and often results in them serving in high-level executive positions under the parent company (see Will Cathcart, still heading WhatsApp owned by Facebook) – or with enough capital to fund their next startup (see PayPal’s Elon Musk, currently packing his bags for Mars).
 
For decades now, large companies and platform hubs have in effect acted as bottomless venture capital funds, encouraging and developing outside technologies. What will happen now that Washington, D.C., is working overtime to kill these incentives?
 
If Sen. Amy Klobuchar manages to pass her antitrust legislation, corporations seeking mergers and acquisitions would need to prove – in advance – that a proposed deal would do no harm to competition. In many cases, measuring competitive harm is a highly subjective enterprise, a warning to any executive that a different interpretation of the law, facts or economics of a deal could result in prosecution.
 
Even if Klobuchar’s legislation outlawing “predatory” acquisitions fails to pass, the steroidal regulators at the Federal Trade Commission, the Department of Justice antitrust division and the White House – Lina Khan, Jonathan Kanter and Timothy Wu – stand over every potential deal like a trio of housemothers showing up at a raucous frat party. Talk about a buzz kill for innovators!
 
Does their “predatory” argument even make sense? Jonathan M. Barnett of the University of Southern California School of Law, writing in Bloomberg, reports that there is no existing research confirming instances of “predatory” acquisitions as a general phenomenon.
 
He points to a well-regarded paper conducted by scholars at the London School of Business and Yale School of Management, which defines “killer acquisitions” as those solely meant to choke off innovation and preempt a future competitor. In the pharmaceutical space, these scholars found that only 5.3 to 7.4 percent of all acquisitions could be characterized in this way. Israel’s competition authority examined acquisitions of Israeli firms by large foreign companies over a recent five-year period, and could not find even a single “killer acquisition.” Even under the London-Yale standard, that would mean that almost 95 percent of all acquisitions are not harmful. If they increase efficiency, they should be beneficial to the market, competition, and ultimately to consumers. Yet all of them under the current standard run the risk of falling under the rubric of being “predatory” and anti-competitive.
 
This makes no sense, as Barnett makes clear:
 
This exit-by-M&A pathway has been facilitated by the fact that regulators have generally viewed acquisitions of startups by incumbents as posing little risk to competition. The logic is straightforward.
 
If an emergent firm represents a small portion of a much larger market, the transaction is unlikely to increase the acquirer’s market power, and hence, consumer harm is unlikely.
 
Barnett speculates that startups will now have to look instead to IPOs and internal growth. This means that technologists will have to transform themselves into CEOs and marketing geniuses. Many gifted innovators are simply not good at such tasks, or able to find the right people to commercialize their innovations. How all this will shake out is not clear, but it is foolish in the extreme for the Biden Administration – and their antitrust Republican enablers – to pretend that these policies will boost innovation, create more jobs or benefit consumers.