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The new rules of Monopoly


The United States invented the concept of antitrust in the 1890s: laws designed to keep corporate titans from squashing their competition and saddling consumers with inflated prices.

But the realities of U.S. antitrust enforcement have evolved a lot in the past 40 years — and the modern world of monopoly is much different from the board game that has taught generations of Americans about concentrated wealth. Huge tech companies like Google, Facebook, Apple and Amazon occupy many of the squares, leaving their rivals scrambling for a foothold. For consumers, the price is often $0 — except for the hidden costs, like a loss of choice or privacy.

Now a new breed of antitrust activists say it’s time to rewrite the rules again. And some are questioning the whole premise of the game.

Unlike many of the hottest issues embroiling Washington, the antitrust debate doesn’t break down along neat partisan or ideological lines. Supporters of sweeping change include progressive Democrats like Massachusetts Sen. Elizabeth Warren and Federal Trade Commission Chair Lina Khan, as well as conservative Republicans like Missouri Sen. Josh Hawley and Colorado Rep. Ken Buck, all of them facing resistance within their own parties.

If you thought you understood how Monopoly is played — and how the government and political players think about it — it’s time to take a stroll down the modern-day Mediterranean Avenue and Park Place.


What’s a monopoly anyway?

The U.S. passed its first major antitrust law, the Sherman Antitrust Act, in 1890. Thirteen years later, the progressive feminist Lizzie Magie invented a board game to explain the economic concept of a monopoly, where players who corner a market have the power to impoverish their rivals and customers.

Parker Brothers later bought and popularized the game, adding iconic graphics such as Rich Uncle Pennybags, aka the Monopoly Man — whose tuxedo, monocle and top hat were modeled after Standard Oil’s John D. Rockefeller.

In the same era, the Justice Department and the Federal Trade Commission played an aggressive real-life version of Monopoly. They brought major antitrust cases that broke up Standard Oil in 1911 and the movie studio and theater owner Paramount Pictures in 1948. Later they broke up AT&T’s Bell System monopoly in 1983, while waging less successful suits against IBM and Microsoft.

Despite more than 130 years of history, however, the U.S. has no clear definition of what a monopoly is, or when a monopolist crosses the line from vigorously competing for business to breaking the law.

Since the 1970s, the game in Washington has shifted: Federal courts have adopted a conservative strain of thought that questions the original idea that big equals bad, or that the aim of antitrust laws is to stop big players from getting bigger. That has solidified into a new antitrust orthodoxy — one that’s now facing increasing attacks in Washington.

The result is “a crucial intellectual divide that has to do with what you think the point of the law is,” said former Republican FTC Chair William Kovacic. The 2008 financial crisis “was a formative influence and still is. The vaunted genius of the capitalist system was shown to be a fiction. That creates an environment in which people are willing to rethink long-held beliefs.”

Add in the Covid-19 pandemic and its resulting supply chain problems, and the U.S. has the perfect environment for reconsidering the conventional approach to antitrust, said Kovacic, now an antitrust professor at George Washington University Law School.


Why this game is different

Monopolies have changed, along with what the biggest companies are buying. Google and Facebook don’t charge consumers money for their most popular services but instead collect vast reams of data on their users that they then use to help target online advertising. Amazon charges low prices, sometimes below what the goods cost to manufacture, but boasts of its top-notch customer service.

And by the time new contestants make their way to the game board, they often find that the big players already occupy the most lucrative squares.

The companies’ approaches have made them among the wealthiest corporations on Earth, with market values exceeding many nations’ economies, as well as a stranglehold on the consumer data that drives much of modern-day commerce.

Who’s playing the game now


The Traditionalists: “IT AIN’T BROKE”

This school of post-1970s thought was once the young upstart on the antitrust scene. Today it’s the ruling establishment. And its main yardstick for measuring a company’s effect on the markets is whether consumers pay high prices.

This idea, known as the consumer welfare standard, was created by Robert Bork, the conservative D.C. Circuit judge best known for his unsuccessful Supreme Court nomination battle during the Reagan administration.

Under this standard, the government should block corporate mergers that would lead to higher prices. But it should bless business deals that aim to increase efficiency, promote innovation or take other steps that would drive prices lower.

Based on this logic, federal enforcers and judges have OK’d mergers and buyouts that have shrunk the number of competitors in markets ranging from airlines and cellphone companies to cat food and caskets.

Under this view of the law, monopolies aren’t necessarily bad. Achieving a monopoly legally — and getting to charge high prices — is an important element of the free market because it encourages businesses to improve their products. While that might seem inconsistent with their intense focus on consumer prices, the Traditionalists almost always oppose government intervention in pricing decisions, preferring to let the market decide.

The law “seeks merely to prevent unlawful monopolization,” Justice Antonin Scalia said in a key 2004 court decision. “To safeguard the incentive to innovate, the possession of monopoly power will not be found unlawful unless it is accompanied by an element of anticompetitive conduct.”

Scalia’s admonition has translated into an oft-repeated motto: “Big isn’t bad. Big behaving badly is bad.”

For these Traditionalists, monopolies are often a sign of ingenuity and consumer preference. Antitrust enforcers and courts should avoid challenging businesses except in the most clear and egregious cases lest they stifle innovation.



Chamber of Commerce
Heritage Foundation
George Mason University Law School
Tech trade group NetChoice
Computer and Communications Industry Association




The Reformers: “MEND IT, DON’T END IT”

Policymakers and lawmakers in the Reform school believe the system has become too tilted in favor of big companies. They want to change the antitrust laws to make it easier once again to challenge monopolies — though without radical changes to the existing order.

“Our enforcement tools are getting rusty,” Sen. Amy Klobuchar (D-Minn.) wrote in a book published this year on the need for antitrust reform.

Klobuchar, the Senate’s top Democrat on antitrust, has introduced bills to change how courts interpret the law. Her Republican counterpart, Sen. Mike Lee of Utah, has likewise made the case for tightening the standards for government reviews of mergers and making it harder for monopolists to excuse their problematic conduct.

The antitrust debate needs to focus less single-mindedly on prices, they argue.

“Modern antitrust enforcement, and judicial decision making has become obsessed with … [an] economic extravaganza,” Lee said at a September speech before the Federalist Society. But economists “will measure what is susceptible to measurement and will tend to forget what is not.”

Most people in the Reform camp, including Lee, still embrace the consumer welfare standard. But they say the courts should broaden it to look at how mergers or business conduct affect values like choice, product quality or privacy — arguing that the Traditionalists’ approach helped lead to the growth of the mammoth tech companies.

“The whole business model in Silicon Valley is built on the idea that this is untouchable by the competition laws,” said Rebecca Allensworth, an antitrust professor at Vanderbilt Law School who focuses on technology and competition.

The Reformers also advocate for keeping the enforcement-based antitrust system in which the Justice Department and FTC go to court against alleged monopolists — though they want tweaks to the laws to make it easier for the government to win.

“The tools aren’t broken,” Allensworth said. “We just haven’t been using them correctly.”



Public Knowledge
Equitable Growth
American Antitrust Institute




The Anti-Monopolists: “BREAK THEM UP”

An even more aggressive Anti-Monopolist school of antitrust law has gained prominence under President Joe Biden, who picked two of its founders — Khan and new White House adviser Tim Wu — for top roles in the executive branch.

Admirers sometimes call these people the New Brandeis School, after former Supreme Court Justice Louis Brandeis. Critics have derided them as “Hipster Antitrust.” Unlike both the Traditionalists and Reformers, this crowd argues that antitrust laws were enacted not solely to ensure fair markets but to prevent the consolidation of corporate power and protect democracy.

The Anti-Monopoly school grew as a reaction to the 2008 financial crisis and concerns about “too big to fail” banks. In their view, concentrated corporate power is always bad and the government should seek to break it up.

“Fair dealing in the marketplace is a political right,” said Matt Stoller, director of research for the advocacy group American Economic Liberties Project. The Anti-Monopoly movement seeks to “make sure that people have rights in the marketplace, that they can enter lines of trade and have fair dealings with buyers and sellers.”

The Anti-Monopolists argue that the U.S. should return to the earlier trust-busting approach it took before Bork’s ideas gained sway — essentially, to the tradition that existed before the Traditionalists. Some, like Sandeep Vaheesan of the anti-monopoly advocacy group Open Markets Institute, want to reinstate merger rules from 1968 that explicitly called for blocking deals if they would lead to market shares above a certain size.

Unlike the other two groups, the Anti-Monopoly school believes antitrust law should focus less on economics and adopt more bright-line rules that make clear what conduct and mergers are allowed. The use of economics is the Anti-Monopolists’ biggest area of divergence from the Reform approach, which Stoller referred to as “diet-Bork.”

The Reformers still “want to have economists run everything. They just want different economists,” said Stoller. But economics is “an elitist language to exclude normal people from politics.”

This group also supports moving beyond reliance on suits against individual monopolists. Instead, it favors having federal and state agencies write new rules to limit problematic behaviors — a priority that Khan has identified in her role as FTC chair.

“If we have monopolies, it’s a sign we don’t have effective competition,” Democratic FTC Commissioner Rebecca Kelly Slaughter said. “I think there’s a big problem that needs big solutions.”

The Anti-Monopolist school isn’t solely made up of Democrats, though — it also includes support from some Republicans in Congress, who often allege that tech giants use their control of the market to censor conservatives. But that support tends to be idiosyncratic, said GW’s Kovacic, who falls into the Reformer camp. (Other prominent Republicans, including House Judiciary Committee ranking member Jim Jordan of Ohio, condemn the proposed antitrust changes moving through Congress as big-government meddling in the economy.)

“The Republican support is somewhat brittle in that it is exclusively focused on Big Tech,” Kovacic said. “It’s hard to see them voting for a sweeping transformation of the whole system.”



Open Markets
American Economic Liberties Project

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