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More than money: Solutions for reining in monopoly power

The thumbs up Like logo is shown on a sign at Facebook headquarters in Menlo Park, Calif. (AP Photo/Jeff Chiu, File)
The thumbs up Like logo is shown on a sign at Facebook headquarters in Menlo Park, Calif. (AP Photo/Jeff Chiu, File)

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This rebroadcast originally aired on February 18, 2022.

For antitrust reformers, the size and power of companies like Google and Facebook represent more than a threat to consumer welfare.

“They are competitors to the democratic state itself,” Matt Stoller, director of research at the American Economic Liberties Project, says.

Stoller says reining in monopoly power is critical to maintaining democracy.

“We have political freedoms, but on the commercial side, there is massive amounts of bribery and corruption and retaliation that is against the idea of living in a free society.”

This view has champions now at the FTC and Justice Department. But it’s also promising a lot. Can vigorous antitrust regulation meaningfully reduce inequality, and bring about a stronger democracy?

Today, On Point: The concluding episode of our special series More than money: The cost of monopolies in America discusses solutions for reining in monopoly power.


Matt Stoller, director of research at the American Economic Liberties Project. Author of the newsletter BIG about the politics of market power and antitrust. Author of Goliath: The Hundred Year War Between Monopoly Power and Democracy. (@matthewstoller)

Jack Beatty, On Point news analyst. Author of theAge of Betrayal: The Triumph of Money in America and editor of Colossus: How the Corporation Changed America. (@JackBeattyNPR)

Carl Shapiro, professor of the graduate school at the University of California, Berkeley.

Also Featured

Sen. Amy Klobuchar, Democratic senator from Minnesota. (@SenAmyKlobuchar)

Rohit Chopra, director of the Consumer Financial Protection Bureau. Former commissioner at the Federal Trade Commission. (@chopracfpb)

LISTEN: Hear our full interview with Sen. Klobuchar here.

Show Transcript

Part I

MEGHNA CHAKRABARTI: This is On Point. I’m Meghna Chakrabarti and welcome to the fifth and final installment of our special weeklong series, More than money: The cost of monopolies in America. All this week, we’ve been looking at the view ascendant now among key members of the Biden administration that corporate monopolies don’t just harm competition and consumers, they harm democracy.

To understand just how powerfully these reformers believe it’s time to revamp antitrust regulation, let’s pick up right where we left off yesterday. With the last words of the show uttered by Barry Lynn, executive director of the Open Markets Institute.

BARRY LYNN [Tape]: Well, what will allow us to recapture our foundational liberties is to empower every single citizen in the United States to understand what is the threat, which is that when you allow concentration of power over communications, Google and Facebook, power a concentration of power over the basic things of life. … If you look over here into this toolbox, what you see is this set of tools that Americans created over the course of 200 years, two centuries, to solve every one of these problems.

CHAKRABARTI: Lynn’s evocation of history is justified. In episode three of this series, we talked about the successes of the trustbusting progressive era. However, any time I hear anyone advocate a set of solutions quote ‘to solve every one of these problems,’ it also sounds more than a little bit like fairy dust.

So today we’re asking have antitrust reformers like Barry Lynn, like FTC chair Lina Khan, like Jonathan Kanter, head of the DOJ’s Antitrust Division — have they identified the right problem, but the wrong solution? Can modernizing how the U.S. regulates monopolies meaningfully reduce inequality? Can it meaningfully strengthen democracy? Can it actually make people more free? Well, joining us today, Matt Stoller is with us. He’s director of research at the American Economic Liberties Project and author of a newsletter called BIG. Welcome to you!

MATT STOLLER: Thanks for having me.

CHAKRABARTI: Jack Beatty joins us as well, he’s On Point’s news analyst. Hello there, Jack.

JACK BEATTY: Hello, Meghna. Hello, Matt.

CHAKRABARTI: So, Matt, I wonder if you could start by helping us get your specific take on what exactly it is that more vigorous prosecution, and regulation and that rethinking of what monopolies mean in the modern economy, why you and others believe that that can actually help things like inequality, and democracy and protect even people’s liberty?

STOLLER: It’s a great question. And I think it starts with the concept of fear. So if you talk to a lot of people in business these days, whether they are workers, whether they are entrepreneurs, engineers, whatever they are. Everyone except middlemen and financiers and monopolists, they are often afraid to speak out about what is going, in their corporations or in the markets in which they operate. And because of that, they can’t actually try to make changes to those markets and to those corporations. And they can’t fundamentally exercise their right to free speech, which we all ostensibly have in America.

But they are effectively censored by dominant firms who can retaliate against them, who can in some cases actively censor them. And that is a fundamental political problem. It is perhaps the fundamental political problem. Because if you can’t actually say, here’s what’s going on and here’s how to fix it. Then how can you actually propose policy solutions and enact them through our democratic institutions? So everything sort of stems from the raw power, the dominant firms, dominant middlemen, dominant financiers have in our economy.

And I mean, I can go through some of the elements of how monopolization induces inequality, regional inequality, political inequality, income inequality, asset inequality. But the fundamental, I think the way that I can see this — and I talk to business people all the time. It’s just some people can speak, can be their free selves. But most people have a powerful boss that doesn’t let them do that.

CHAKRABARTI: OK, so Matt, I’m going to want to hear some of those more specific analysis that you’re talking about regarding regional inequality, et cetera, in just a second. But Jack, jump in here. Your first response to what Matt Stoller is saying?

BEATTY: Well, I get it. I get this idea of the pervasive fear that employers can have over their employees. And yet, look at the exceptions. Didn’t we just have a whistleblower from Facebook come forward and surface the way in which this company has been exploiting fear among teenage girls about their weight and so on? I mean, that was a moment of revelation, that was a brave employee who came out and spoke. So I’m not saying that puts a hole in the idea that employers don’t exercise undue power. But it does show that there is a new vigilance, and a new willingness to challenge even some of the most powerful of these institutions.

CHAKRABARTI: Matt, go ahead.

STOLLER: Yeah. So I’m not talking about employer, employees or just that. I’m talking about everyone. Right? So I was lobbied once when I worked in the Senate by a company, they made a certain office equipment. And they were opposing the Staples Office Depot merger because they said, Hey, we have a company about 100 employees and we basically sell to Staples and we sell to Office Depot. And if they merge the guy at Office Depot, the 25-year-old who buys in our category of products, doesn’t like us, doesn’t really know much about it, but he doesn’t like us. And he will no longer buy from us. And that is the end of our company. And don’t tell anybody that we’re here, because they will retaliate against us. I mean, this is a wealthy guy who owns a medium-sized company.

And I said, Does anybody else in the industry feel this way? He said, Absolutely everyone does. And we’re all afraid. And I talked to people who run. I mean, I do reporting on a bunch of different areas. But you know, there is a monopoly, and I think the most interesting monopoly is over cheerleading. So there’s a company owned by Bain Capital called Varsity Brands that rolled up all the cheerleading contests in the U.S. And I talked to people who are coaches and entrepreneurs and gym owners and like, they’re always telling me. They’re like, Matt, don’t mention my name. But you have no idea how deep it goes, like it’s the CIA, right? And this is true in every industry.

It’s not just the tech industry. It’s not just employees. It is absolutely pervasive. It’s true among venture capitalists. And so you do see when you have massive, massive pushback against a company like Facebook, which has been doing really bad things for 15 years. And finally, you know, in 2020, 2021, you see a whistleblower come forward, but that really is the exception that proves the rule. When a company is really politically vulnerable, a very wealthy, very empowered person might come forward and say, Hey, we have some problems here, but that doesn’t speak to how most people in the economy actually operate. In fact, it speaks pretty much to the opposite. So the environment of fear is pervasive. It is dangerous and it is a direct result of the market power that firms have, and that monopolists have in our economy.

CHAKRABARTI: In December of 2021, in a Senate subcommittee hearing, the subcommittee on antitrust. Essentially, the chair of that subcommittee, Senator Amy Klobuchar, kind of in almost a passing offhand remark, echoed what you’re saying. Because she said, Yeah, sometimes I wonder if the same things going on in Congress. That her colleagues fear, have that same sense of fear. That it’s too risky to cross a monopoly, even as a member of Congress. And some of that might be one of the things that’s blocking sort of more rapid advancement of some pending legislation that could reform antitrust laws.

STOLLER: I mean, Zoe Lofgren, who you know, she’s a representative from Silicon Valley. But you know, she is very strongly in the camp of Google. And I believe one of the reasons that she is is because, you know, she says, if we don’t protect Google from antitrust, then they probably won’t be expanding more in my district. And I think that’s a very common problem that people have. You can just look at Amazon with their second headquarters. Where hundreds of cities, just mayors, just threw themselves at Amazon to get any commercial activity whatsoever.

And that’s sort of the positive way where he says, It’s an inducement. I’ll give you a second headquarters. But the negative aspect where he can take. Where all of these firms — and there aren’t as many firms as there used to be there because of mergers. Firms can threaten to leave. And so they have power over entire communities, which is very much like what we saw in the late 19th century. But we’re seeing it again today.

CHAKRABARTI: Jack does that that sway you a little bit more?

BEATTY: Well, it does. And another congressperson from Silicon Valley, Ro Khanna, is out with a new book in which he argues precisely that the concentration of of Big Tech in one place is bad for democracy. In this way that it it exacerbates the tension between country and city that is driving some of the fever of Trumpism. And he recommends that these companies spread out. And he points to Intel, which built a big factory in Ohio as an example of what needs to be done to to remedy the inequality of opportunity and of life chances between city and country. And he says it’s up to this industry to spread out, and share the wealth more broadly.

CHAKRABARTI: Now we’re just heading rather rapidly towards our first break. But Matt Stoller, I have to say, the fear within corporations. I’m kind of more aligned with what Jack has been saying, that that may be a problem that requires whistleblower reform. But I do want to hear more from you when we come back from the break about how you draw the line specifically to monopolies and regional inequality. And again, that bigger question about what impact does it have on the strength and well-being of American democracy? So we’ll continue to explore that when we come back.

Part II

CHAKRABARTI: This is On Point. I’m Meghna Chakrabarti. And today it’s our final episode in our special week long series that we’re calling More than money. Jack Beatty is with us. He’s On Point’s news analyst. And Matt Stoller joins us, as well. He is director of research at the American Economic Liberties Project. So Matt, then give me an example here.

What leads you to think that more vigorous antitrust regulation, prosecution and again, that expanded view of monopolies doing democratic harm. Say, we got all that. How would that then reduce a problem like income inequality? I mean, we’ve seen from history and actually even right now that radical income inequality does indeed weaken a democracy.

STOLLER: The simplest way to understand that is there’s been so much consolidation than most labor markets are now highly consolidated. Which is to say that when you try to get another job in a similar industry where you have a similar skill set, it’s often very hard because there aren’t other employers, or there are very few. So to take an example, in 2019, the Trump administration allowed two gold mines. The two biggest gold mines in Nevada, to merge. And immediately after merging, the combined company started paying its workers less. And got rid of the union and also started paying suppliers less. So not just workers, but also the suppliers to the gold mining outfit.

And that’s just very standard. What you see when there are fewer firms that employ, you just have less leverage as a worker to bargain for higher wages. So there are kind of two big trends that happened since the early 1980s. One is the attack on unions, which undermined the bargaining power of workers, by saying you can’t get together with your colleagues and bargain. And the other is the consolidation of leverage on the part of capital, where there are now just fewer employers to bargain with.

And both of those are pretty destructive to the ability of workers to bargain for better wages. And not just workers who are low wage, but also, you know, you’ve seen collusion against workers, engineers, high level engineers, in Silicon Valley, for example. There are no poaching scandals at firms like Google and Lucasfilm and others. So what you see is it has been consolidation of labor markets. And as a result, the share that’s going to capital has gone up, and the share that’s going to labor has gone down.

CHAKRABARTI: Now a point well taken. And it also, you know, makes intuitive sense. Because the very argument in favor of competition in any market, it works in the labor market, as well as you’re saying. But I would say, you know, on the ground, I can think of at least one example that doesn’t quite fit the pattern that you’re talking about, Matt. Because, you know, maybe it’s because they still have strong labor unions. We’ve seen huge consolidation in the airline industry right since, you know, for the past 40 years or so. But we still have pilots unions and flight attendant unions, for example, that as far as I understand and correct me, if I’m wrong, are still able to rather vigorously, you know, negotiate on behalf of their members, regardless of how much consolidation there’s been in the industry.

STOLLER: Unfortunately, while are unions, and they do have some bargaining power, the actual wages of pilots and flight attendants, they have nowhere near the amount of leverage and wage growth that they used to have. So in the 1960s, when you became a pilot for Delta, for example, they would put you in a room and say, OK, you know, give you an inspirational speech and say, all of you are going to become millionaires. It was known that was what was going to happen in that career path.

And in the early in the early 2000s, you saw a bunch of consolidation of airlines and bankruptcies. And then they said to the unions, You know, you’ve got to do a bunch of give backs. And now it’s, you know, there’s still unions, right? Pilots still have rights, but nothing like it used to be. Nothing like that security and nothing like that wage growth. And maybe you don’t think that pilots should have had that kind of bargaining leverage and that kind of wage capacity. But the fact is it has declined pretty dramatically, and I think that you would see that in a lot of consolidated areas.

CHAKRABARTI: I totally take your point. Jack, what do you think?

BEATTY: Well, I’m just wondering, I mean, I certainly see the connection between concentration and labor market rigidity. There are fewer employers with whom to bargain. But the connection to unionization seems to be an independent variable. That is quite apart from the size. In fact, you could argue that the concentration of industry should make unionization more tempting and quote easier. So I would argue that the fundamental problem … in regard to inequality, isn’t that the industries are concentrated. It’s that we have no labor law reform in this country.

It reached a high tide in the late 1970s, and couldn’t get through the Senate. And as a result, labor, you know, is hogtied. They can’t organize. And I look at the 1960s, real family incomes went up 41%. Unionization was 35%. I don’t know whether that’s a causal connection or not, but it sure looks like one. Whereas today, unions are less than 10% and real family incomes are flat or falling. And I just think that the issue of unions is a separate one from the issue of concentration. And that concentration could actually, if the laws were right, help unionization.

CHAKRABARTI: Matt, let me just add one quick thing to what Jack said. Because Jack talked about, it’s that labor laws more specifically might be the problem. I would also add that, you know, when we’re talking about the power of corporations. And you know better than anyone. In the political sphere, even if some of these companies, let’s say, were broken up. Or the markets were made more competitive, more vigorous. We still wouldn’t have campaign finance reform, for example. We still wouldn’t have major changes in how dark money flows through politics. So the same amount of money essentially might be flowing to Washington. And that will continue to damage democracy, no matter how much antitrust reform happens. What do you think about that?

STOLLER: Yeah, so these are both great points, and I think I often hear these kinds of arguments. And we’ve heard these kinds of arguments for a long time. So we just did a study that showed that firms who merge and become dominant. Almost immediately after they merge and combine operations, start spending a lot more on lobbying. And when markets become less concentrated, there’s more competition. Firms spend less money on lobbying. And the reason that they do this is because when you’re an executive, you have a limited amount of time. And when you face competition, you’re focused on your competition. And when you don’t face competition like, say, you’re Live Nation, Ticketmaster, you spend your time lobbying to maintain your monopoly. And you spend your time trying to find tax concessions and various other, you try to capture politics.

So competition just creates this dynamic where executives just cannot focus on politics as much. And so, you know, we see that in the data. The other argument from Jack, which I think, it often is a sort of standard idea that’s been held by the labor left since the early 1980s. Is that larger firms are easier to organize, and that the problem has always been labor law. And that’s nothing to do with monopoly. And that is actually not, historically, the anti-monopoly movement has always been about the labor movement. Senator Amy Klobuchar, her book has been about this. Senator John Sherman, when he passed the Sherman Act, said that, you know, the autocrat of trade could raise the price in the consumer and lower the wage to the worker, because it’s all about power. And when you have a big company like, say, John Deere, they can afford to just, you know, if one factory goes on strike, you can see this going all the way back to Carnegie.

If one factory goes on strike, but other factories can keep going, they can just wait out the workers. And that’s what you see, right? Big companies can break strikes really easily because they have the financial muscle to do that, whereas smaller companies just don’t have the financial muscle to do that. So the way to understand the problem of market power and antitrust in labor law, bankruptcy law, all of the campaign finance, is that they’re all part and parcel of what we call competition policy, or reducing the economic concentrations of power in our economy. Because economic concentrations of power corrupt our politics, they lower our wages. They raise prices. They censor us. They make it harder to be free citizens.

And so you have this whole, you know, as Barry Lynn said yesterday, you have this whole toolbox, which includes a lot of different things. But fundamentally, the problem is concentrations of power. And so, you know, it’s not a coincidence that in the 1960s, we had strong labor laws. And we also had incredibly strong antitrust enforcement, and we had more reasonable bankruptcy statutes. And we had more reasonable tax policies and all the rest of it.

It’s because the philosophy that they were operating under, which had come since the 1930s, was about reducing private economic concentrations of power. And it’s not a coincidence that in the 1980s, the Reagan administration attacked labor law vehemently, and completely relaxed antitrust laws so that the firms who were breaking unions could also combine with each other.

CHAKRABARTI: Well, Matt Stoller, director of research at the American Economic Liberties Project, thank you so much for joining us today.

STOLLER: Hey, thanks for having me.

CHAKRABARTI: So Matt’s putting forward a very passionate and persuasive argument about the ways in which essentially, we’re talking about power, right? The consolidation of power among a small group of a very large corporations. And therefore, as Matt describes, the reduction of power among the people, which is essential for the healthy functioning of a small D democracy. So antitrust reformers are looking to somehow through the law and through regulation, rebalance that power a little bit.

And one of the folks they have on their side, Matt Stoller mentioned, is Democratic Sen. Amy Klobuchar of Minnesota. Now, we spoke with her a little bit earlier this week. As I mentioned earlier, she is the chairwoman of a Senate Subcommittee on Competition Policy and also on the Judiciary Committee in the Senate.

And I asked her, ultimately, some of these laws that are being proposed in the Senate, some that are being advanced … are going to meet headwinds at the Supreme Court. Specifically because certain members of the Supreme Court, Justice Gorsuch, have declared themselves even before they ascended to the High Court as foes of the administrative state. So what’s going to happen when the rubber meets the road? And here’s how Senator Klobuchar responded.

SEN. AMY KLOBUCHAR: Look, I am the one senator that asked every single nominee about antitrust. And I am very well aware, especially in the case of Kavanaugh and Gorsuch, of their views. Although Kavanaugh, on one case, before the court, actually sided with … Justice Breyer and Kagan and others that are more in favor of, I believe, the original intent of the Sherman and Clayton Act.

So but overall, they are so conservative on antitrust. They literally said, raise our hand, look how we embrace the Bork doctrine, and so pick us for the court. And that’s what happened, one of many reasons. And so when I look at this, I think we need new laws. Because if we just go with the current laws, and we don’t go with the times and the changes we need to make, we’re just going to let them keep interpreting these laws in a more and more ridiculously narrow basis.

CHAKRABARTI: Now that’s just a sliver of my conversation with Senator Amy Klobuchar. It was quite a lively one because she cares a lot about antitrust, so you can hear the full, unedited conversation in our On Point podcast feed. So go to your podcast app and search for On Point, and definitely take a listen to that.

CHAKRABARTI: Well, let me turn now to Carl Shapiro. He’s a professor at the Graduate School of the University of California, Berkeley. And more importantly, he was formerly deputy assistant attorney general for economics at the Antitrust Division of the U.S. Department of Justice. Professor Shapiro, welcome to you.

CARL SHAPIRO: Hi, thanks for having me.

CHAKRABARTI: So, first of all, I’ve been starting this week asking everyone the fundamental question about what is their take, what is your take on this assertion from folks like Matt Stoller, folks like FTC chair Lina Khan, that a rethinking of how monopolies are regulated, and even prosecuted in this country, is essential to protecting democracy. Your thought to that?

SHAPIRO: Well, I live in the real world of antitrust enforcement. So I’m all for rethinking as an academic. I welcome that. But in the real world, we have a statute that says, for example, mergers are illegal, illegal if they may substantially lessen competition. And when you go to court, you have a case. T-Mobile, Sprint, for example, I testified on behalf of of the states who challenge that merger. It’s not about democracy. You don’t tell the federal judge, here’s what we need for democracy or our freedoms. I love the soaring rhetoric, but the real world, as you got to convince the judge that the merger will substantially lessen competition or may do so. So that’s an economic concept.

So I’m all about how do we move things in the right direction? I’ve been working for 25 years, since I first served in the Justice Department, to strengthen antitrust enforcement. And that’s a matter of, what is the case law? What do you convince a judge of, what are the economic evidence? And we do need stronger antitrust enforcement. But it’s got to be done in a way that reflects the reality of litigation. That’s how the Justice Department enforces the antitrust laws that go to court. I want to get to reality.

CHAKRABARTI: Professor Shapiro, though, we will over the remainder of the program today. But I’d also offer that the real world is what we make of it. It’s what we make it into, especially when it comes to how courts interpret the law. I mean, you know, thinking about the Sherman Act. There was a world before the Sherman Act and a world after the Sherman Act. And I think what Stoller and Khan and Lynn are all arguing for is that we need to reshape what the real world of the law is, in order to achieve a bigger goal here. And we just got 30 seconds before the break. So give me a quick response that we’ll pick up on the other side of the break.

SHAPIRO: That’s exactly what I’m trying to do. And I think we need to do. We need to convince the judges and move the case law in the direction to help, so the government can challenge more mergers successfully. And go after monopolies more successfully. And until you have new legislation, though, you have to work with existing case law and the judiciary. And there are ways to do that.

Part III

CHAKRABARTI: This is On Point. I’m Meghna Chakrabarti. It’s our final episode of our weeklong series that we’re calling More than money. We’ve been taking a look, all week long, at this notion held by several influential members of the Biden administration, that it’s time to rethink antitrust regulation in this country. Not just to protect consumers from harm, but to protect American democracy from harm. I’m joined by Jack Beatty. He’s On Point’s news analyst. And Carl Shapiro is with us, as well. He’s professor at the graduate school of the University of California, Berkeley.

So, Professor Shapiro, you’re talking about what happens in the real world after the soaring rhetoric has delivered. So let’s talk about a real world case. And I want to get your view on its efficacy right now. And that is the FTC’s decision to sue Facebook for alleged violations of the Sherman Act when it acquired Instagram and WhatsApp.

Facebook tried to stop that case from moving forward, but as we know recently, a court ruled that it can move forward. So this is kind of a big one. The FTC under Lina Khan is saying, OK, we’re going to do this. We’re going to push on certain current giant corporations. … What is your take on this case in particular?

SHAPIRO: Well, it’s clearly a big case. What the FTC is now seeking to do in court is to really challenge the two acquisitions by Facebook, the acquisition of Instagram and WhatsApp, which were around eight to 10 years ago. So if they’re successful, they might very well get Facebook to have to divest those services, which would be a big deal. But the case won’t go to trial for another year or two. It’ll be appealed. So it’s a merger case now, effectively a consummated merger that they’re trying to unwind. And I wouldn’t hold your breath because these things take time. So it’s fairly conventional in the sense that it’s a merger case. But of course, it’s a huge one.

CHAKRABARTI: And so is that the kind of real world approach, though, that you think might be effective in meeting, in advancing Lina Khan’s bigger goal about protecting democracy? Because Facebook is looked at directly as one of the chief threats when it comes to misinformation that weakens a democracy.

SHAPIRO: Well, because of Facebook’s enormous influence, yes. Anything you do with Facebook. And if you split them up, it would have important implications. It’s basically an important form of media. So it affects what people learn, what people perceive the world around them. You know, Fox News has a lot more impact, however, you know, in terms of people getting misinformation. Well, I shouldn’t say more. They both have a big impact. So, yes, that type of huge merger in that industry. Sure, it’s going to affect our democracy. But that’s not really what’s going to be in front of the court. In front of the court is going to be, Did it lessen competition?

CHAKRABARTI: OK, so I guess what I’d love to learn from you now, is you heard Matt Stoller. We’ve spent all week talking about this. I mean, what is it that you think that they’re missing? Because you’re saying that there’s some kind of disconnect between what they’re aiming for and what actually happens, as you said, in the real world.

SHAPIRO: Well, I guess there’s diagnosis and there’s a solution. Diagnosis, I agree with them that we need stronger antitrust enforcement. But the reality the evidence shows that in many industries, what we’re seeing is large firms are growing their shares by being efficient, by giving consumers what they want. Amazon is a good example of that. Wal-Mart was in an earlier day. And this is globalization. This is economies of scale. This is information technology changing. So those are very deep economic forces.

So I don’t think we want to push against those, that would reduce economic growth and overall well-being. So we need to recognize that a lot of the growth of large firms is a natural byproduct of the 21st century economy, and not try to fight against that. It’s worldwide. It’s not just the U.S., that’s something that Robert Bork mesmerized.

… It’s worldwide. So those are underlying economic forces we need to respect. Then the other thing is when I say the real world, to say, what do we actually want to do when we look at a merger? For example, we want to let smaller firms merge to be able to be more effective, and compete against bigger firms. Because they might get efficiencies from merging. I’m against an approach which Chair Khan has advocated since she’s been in office, that efficiency should not be counted at all in mergers. And I don’t see that. I think that’s not wise in terms of economic policy.

CHAKRABARTI: Jack, love to hear your take on this.

BEATTY: Well, I’m just wanting to get at this issue of efficiency. In her writings, in the Yale Law Review piece and also in the Harvard Law Review, Commissioner Khan makes the point that predatory pricing is something that courts have just said Oh no, we can’t even recognize that, that’s just efficiency. That’s just getting low prices.

And the sort of Borkian doctrine and the way in which it has colonized the judiciary or the legal profession at least, makes it almost impossible to argue that, say, Amazon has reached its peak of power through what looks like predatory pricing. The way she puts it is they approached publishers the way a cheetah approaches a gazelle. … Is that a relevant criterion anymore? And does that complicate the efficiency argument?

SHAPIRO: This is a great example of where I would differ with Chair Khan and many of the Neo-Brandeisian predatory pricing. So I agree that the courts have very greatly narrowed the scope in which predatory pricing can be challenged. This was the group decision in 1993. I’ve written about how to fix that and how to open the aperture and make it easier for plaintiffs to win. I describe this in my paper Antitrust: What Went Wrong, And How To Fix It. … We can do better here. The Supreme Court has put up too many hurdles. But take Amazon as an example. If a reasonable approach, we don’t want to stop firms from competing on price, even large, powerful firms.

We do want them not to do predatory pricing. I think there’s a widespread agreement and Khan’s paper, actually, I think would say this too, that we want for predatory pricing to be some notion of below cost. And you mentioned below cost. Well, Amazon, I’ve not seen evidence they’re pricing below cost. They are reducing their costs by negotiating hard with suppliers. But then when they sell the products, they’re not below cost. Amazon Prime is profitable, rather brilliant marketing strategy. So even if we were to fix the law, if you were. I don’t see that Amazon would be engaged in predatory pricing. They’re providing fantastic services to many consumers, especially during the pandemic.

CHAKRABARTI: I guess what I’m struggling with here is, are you saying, Professor Shapiro, that the consumer welfare standard is still an adequate tool by which to measure the harms that monopolies can do? Because that is a fundamental philosophical difference, then from the Neo-Brandeisians who all week we’ve been hearing. They say that it’s just inadequate because harm is not just how much you pay, or how few competitors are in the market. So help me understand your take, your view here.

SHAPIRO: So I advocate using the term, the Protecting Competition standard. I testified in front of the FTC at their hearings about this a few years ago. What I mean by that is, we want antitrust laws to protect competition. If we’re talking about consumers, that makes sure that we get lower prices and firms don’t collude to raise prices. Or have a big firm engaged in predatory pricing and jack up the price lead and harm consumers. But protecting competition is not just about consumers, it’s also about protecting workers. It’s about protecting farmers.

Matt Stoller mentioned the danger that if we have very few choices among employers, workers could be harmed. Around the time I was at DOJ, we brought a case against two chicken processors that merged because we thought they would depress what they were paying to chicken farmers, growers, they’re called, in the Shenandoah Valley in Virginia. So the goal is to protect competition.

It’s not just about consumers, it’s about competition as a process that we respect and we want  to deliver for all of us. And it’s not just about price or short, right? It’s very often about innovation. We don’t want dominant firms to be able to squelch competitors that would come in and shake things up and provide new technologies, new options. So we need to look longer term. We need to look dynamics. We need to look at innovation. Really got to think about competition as a process, not just prices.

CHAKRABARTI: OK, well, I want to just take a tiny tangent here for a moment. Because no matter what happens in the future, any changes at the federal level, regulatory forum, additional prosecutions, that’s actually going to have to happen. Professor Shapiro, as you know, through specific government agencies. So there is a question about whether those agencies are up to the task.

SHAPIRO: Well, the primary agencies are the antitrust division in the Justice Department and the Federal Trade Commission. One of the things I’m concerned about is that expertise and experience in these areas is being devalued now. And it’s the people at those agencies who have been litigating cases, investigating cases. We need them and we need more of them. And we need more resources for them. But they also need to use those resources wisely. So there seems to be bipartisan support for giving more resources to the antitrust agencies. I support that and I hope it’ll happen.

CHAKRABARTI: OK. Well, you know, we actually spoke with Rohit Chopra, who’s currently the head of the Consumer Financial Protection Bureau. And here’s what he told us.

ROHIT CHOPRA [Tape]: I think that the individuals who work at the FTC have been restrained and almost handcuffed by the political leadership, for decades. What I saw were people who wanted to actually go to court, and stop some of this misconduct. But all the time, they were pushed by commissioners to essentially take a pro-monopoly policy position.

CHAKRABARTI: And then he also told us that he believes an important part of restoring the American tradition of fighting anti-competitive abuses means investing in the FTC. But he also said that’s just one part of the solution.

CHOPRA [Tape]: We need to make sure that we have actual law enforcers running our agencies, and we certainly do when it comes to the new chair, Lina Khan. But we also may need new and updated laws. I saw firsthand how hard it is to combat illegal mergers and conduct. Monopolists and other dominant firms hire armies of lawyers and lobbyists and economists to fight the government. And we do need to make sure the deck is not stacked against the public.

CHAKRABARTI: Carl Shapiro, I’ve got one last question for you. Because I do hear you saying that there should be a way to move forward. That both controls monopolies or reduces their negative impact on the economy and society, but also won’t necessarily crash and burn in the courts, given the laws that we have now. So can you just take 30 seconds to describe to me like what is that? How to achieve that?

SHAPIRO: Well, first, I have to say I disagree with Rohit Chopra, I work with the FTC as their expert for litigation in the Staples Office Depot merger, the Qualcomm case, the activist case that went up to the Supreme Court to pay for delay for drugs, and the staff in all cases was pushing to develop the case, and those cases went forward. So that’s the history of the agency, and that should be continued. But more generally, what we need to do, we need to be smart.

For example, the agencies are revising the merger guidelines. I have a paper suggesting how to do that, with Nancy Rose at MIT. And you need to offer the courts ways to tighten things up, that is consistent with case law and good economics. And move the courts through the persuasive arguments that the agencies bring in, by litigating these cases smartly. Until we get new legislation, that’s how we can move forward. And it’s not a super fast process, but that’s what we’ve got, at least until Congress acts. And that’s what I’m fighting for.

CHAKRABARTI: Well, Carl Shapiro, currently a professor at the University of California, Berkeley. Professor Shapiro, thank you so much for joining us.

SHAPIRO: Thank you.

CHAKRABARTI: Jack, that’s it. We’ve only got two minutes left in this weeklong series. We covered a lot of ground. And so I’m just wondering, what do you come away with this idea of democracy and monopolies in America in 2022?

BEATTY: Well, I think the the vision that Lina Khan and her colleagues are pushing forth is consistent with Justice Brandeis’ vision that we need in America, freedom from public and private power. The American libertarian tradition only emphasizes public power, government surveillance, not getting warrants. Yet who are the big invaders of privacy today? Is it the government or is it Facebook that commercializes and makes money off our privacy, off our information?

So there’s this new form of power, against the individual. We have found out that in 75% of industries, there’s been concentration. I mean, and it’s in coffins and wireless carriers, sanitary paper products, soda, tires, you name it. Those are all serious matters. And they may impinge on inequality in the way that Matt says. Because there are fewer companies competing, but no danger is as grave. No threat to democracy is as grave as that opposed by the Big Tech. Because there we have this picture of what Shoshana Zuboff calls surveillance capitalism. They make money off our privacy. And that’s something the law may not be able to reach.

CHAKRABARTI: Or not yet, at least. Because that’s the whole thrust of what Lina Khan and other Neo-Brandeisians are saying, that the laws have to catch up to the market realities of today. So we’ll see what they do in the coming months and years. Jack Beatty, On Point news analyst. Jack, thank you so much for being with us all week long.

From The Reading List

BIG by Matt Stoller: “Google to Customers: Help Us Fight Against Stronger Antitrust Laws” — “Last week, Dave Dayen at the American Prospect reported on how Amazon is telling hundreds of thousands of merchants that it will have to kick them off of its marketplace if Congress passes antitrust law reform.”

BIG by Matt Stoller: “Mergers Ruin Everything” — “Today I’m writing about all the money and power in the world, which is to say, mergers.”

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