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From online banking to e-commerce, advances in technology have given consumers in the digital age new products and services. But the rise of the digital economy has been accompanied by the emergence of digital robber barons. Just as social media companies entrenched their dominance by making it hard for users to port their own content and connections to rival platforms, big banks restricted users’ access to their own financial data to cement their monopoly power. 

Data portability is the idea that users should be free to move their data to rival platforms. Before number portability was mandated by Congress in the 1996 Telecom Act and implemented by the FCC in 2003, cellphone customers faced high switching costs—imagine the hassle of informing your friends and family of your number—which limited churn and kept cellphone prices artificially inflated. Now big banks are up to the same tricks: To curb competition from newer and smaller companies, large financial institutions have restricted consumers’ data portability, by for example, making acts as basic as sharing personal financial data or transferring their own funds with a new institution a hassle.

Fortunately, the Consumer Financial Protection Bureau (CFPB) is initiating rulemaking that would facilitate enhanced consumer access to their financial data. Through a provision of the Dodd-Frank Act known as Section 1033, the agency can help take big banks to task and give emerging financial service providers a fair shot to compete. 

Like other corporate giants that have faced regulatory scrutiny, big banks aren’t going down without a fight. Bank Policy Institute (BPI), a lobbying group whose membership includes Wells Fargo and JPMorgan Chase, argued in a recent comment letter that strong Section 1033 rulemaking would fuel the rise of Big Tech in the financial industry. BPI’s angle is obvious here: CFPB director Rohit Chopra is a noted supporter of regulating Big Tech, and has scrutinized the tech giants’ encroachment into the payments sector while in office.

But BPI’s spin conveniently ignores that Big Tech has been pushing into the financial services industry largely in collaboration with—and not to compete against—big financial institutions. From Goldman Sachs’ partnership with the Apple Card to TikTok’s recently exposed collaboration with JPMorgan Chase, the giants of the financial and tech industries have a vested interest in shoring up their respective monopoly positions. That BPI member JPMorgan Chase is so eager to collaborate with TikTok, a Chinese-based company drawing increasingly intense bipartisan scrutiny and even calls for its ban in the United States, is just the latest and most galling example of these developments.

Contrary to the bank lobby’s self-serving narrative, strong Section 1033 rulemaking stands to foster innovation by giving emerging companies a fair shot to compete against entrenched incumbents in both industries. Indeed, Section 1033 rulemaking will help level the playing field by giving small players and new entrants the same right to access data that Big Tech can already get its hands on quite easily. 

This reality explains why consumer and competition advocates have long argued that strong Section 1033 rulemaking will help encourage competition in the financial services industry. In a 2021 comment before the CFPB, a coalition of consumer organizations led by the National Consumer Law Center argued that “Improved access to consumer-authorized data can benefit competition, which will benefit consumers.” Monopoly power comes at a grave expense to innovation, and at a time when consumers are increasingly interested in alternative relationships, this rulemaking will be a boon to the broader economy and consumer choice.

In the absence of strong Section 1033 rulemaking, access to financial services data risks being decided primarily through backroom dealmaking. It goes without saying that these informal arrangements stand to benefit mega-corporations like Google or Apple, not small players. After all, Google executives will never have a problem getting a meeting with Jamie Dimon, nor will TikTok leadership or the likes of Elon Musk. But emerging players and innovative startups are unlikely to have such opportunities, meaning that a lack of rulemaking will only entrench Big Banks’ gatekeeper status.

It would be a mistake to dismiss these concerns as merely hypothetical. As one recent example, big banks like Chase are fearful that direct account-to-account payment options will cut into their ability to profit off credit card transactions. In response, Chase is using its dominant position to steer consumers away from paying vendors directly from their own bank account. Without strong regulatory intervention, mega-corporations in tech and finance will continue to inhibit the growth of promising new ventures.

Shortly after becoming CFPB director, Chopra noted that “Big Tech companies are eagerly expanding their empires to gain greater control and insight into our spending habits.” He is correct.  With the agency finally initiating rulemaking on Section 1033 more than a decade after Dodd-Frank passed into law, Chopra must reject the bank lobby’s bad faith efforts to water down the rules. The CFPB should empower consumers to fully control their personal financial data in the interest of cultivating a fair and truly competitive financial services industry.

Morgan Harper is Director of Policy and Advocacy at the American Economic Liberties Project.

Four high-profile American freight rail derailments in four weeks — three of which involved rail cars carrying hazardous materials, with multiple chemical spills and fires — sounds like a lot. In fact, trains go off the rails in America’s railroad network about 20 times a week on average, so there have probably been dozens in February aside from the ones that made the news.

Unfortunately, America’s rail workers are all too familiar with the consequences of how the railroad industry has been operated over the past 30 years. Precision scheduled railroading (PSR) has made the difference. PSR is a business model focused on reducing overhead costs and generating returns for shareholders. Similar to many other business models driven by financialization, it’s effectively  a scheme by giant railroad operators to cut staff and backup resources, push the remaining equipment and personnel to the breaking point, and funnel as much of the cash as possible to Wall Street. And by increasing market concentration even further, the recently approved rail merger between Canadian Pacific (CP) and Kansas City Southern (KCS) promises to make the situation even more dire — for railroad workers, for the communities our rail lines pass through, and for the American economy.

After half a century of consolidation, America now has only seven Class I railroads, which own virtually all the long-distance track and operate almost all the freight traffic. Four of them alone control 83 percent of U.S. rail freight. And if the pending $30 billion CP-KCS merger is approved by the U.S. government’s Surface Transportation Board, the Big Seven will become only six.

In a January letter to the Surface Transportation Board, the U.S. Justice Department expressed “serious concerns about increasing consolidation” in the freight railroad industry that would result from the CP-KCS merger. In light of “the recent supply chain disruptions that have wreaked havoc on American consumers and businesses,” DOJ noted that the new combined railroad could deny commercial customers access to cost-effective and time-efficient routings, bar other railroads from interconnecting or raise their costs, and make anti-competitive coordination among railroads easier.

But the competitive risks of the merger are only part of the problem. The pursuit of profits through concentrated market power has led the large railroads to prioritize their shareholders, paying out more in buybacks and dividends (almost $200 billion) in the past dozen years than they spent on infrastructure improvements. The cash underinvestment in working conditions and safety has been paralleled by operational disinvestment, notably the shift to PSR.

Under PSR, to squeeze more money out of their railroads, these big companies have cut service to the bone while raising prices — at great cost to everyone but themselves. PSR forces workers into extended runs, on tight timetables, on longer and heavier trains. If the railroads got their way, those massive trains would be operated by a single crew member, rather than the current two. And that has led directly to the perilous state of the railroad freight network today — to conditions in which workers say trains are “more dangerous and harder to handle.”

Employee headcount across the rail freight industry has been cut by 28% due to PSR, according to a report from the nonpartisan Government Accountability Office. Freight customers say service under PSR is less reliable, and that’s because employees and equipment are being pushed to their physical limits, with no room in the system for mechanical failure, employee time off, or error of any kind. In the words of transportation consultant Karl Ziebarth, when something goes wrong, like a mechanical failure, “you can all of a sudden have a very expensive derailment.”

At the same time, the tight schedules and the length of trains inevitably means that following safety protocols may be impossible. As a Norfolk Southern employee put it, under PSR “the workers are exhausted, times for car inspections have been drastically cut, and there are no regulations on the size of these trains.” Jared Cassity, who works for a railroad union, says that railcar inspections often must be completed in under 60 seconds, not nearly enough time to identify and address problems.

The direct cause of February’s derailments are still under investigation. Regardless of the ultimate cause, it’s unlikely it could have been flagged in under a minute. But there’s no question that the dangers multiply as the length of trains, the weight of their cars, and the complexity of their cargoes increase. Average train length on the U.S. freight network has increased by 25% in ten years. The Norfolk Southern train had 150 cars and weighed 18,000 tons. During the incident, around 50 cars derailed. About 20 of those cars were likely carrying dangerous materials, including 14 carrying vinyl sulfide, all of which were on or near fire. (For reference, inhaling vinyl sulfide can be toxic.) A Norfolk Southern employee told CBS News that the train’s length had led to at least one breakdown in the days before the derailment, and said that, had the train not been so unusually large, “it’s very likely the effects of the derailment would have been mitigated.”

In the wake of the recent derailments, many have called for tighter government safety regulation. And it’s true that the Trump administration, bowing to Big Seven rail lobbyists, repealed a 2015 safety regulation that required electronic braking — similar to ABS on a car — to be installed on trains carrying certain types of hazardous cargo.  Steven Ditmeyer, a former senior official at the FRA, thinks that this enhanced braking system, had it been installed, would have mitigated most of the catastrophic effects of the Norfolk Southern derailment.

It’s certainly worth questioning why Pete Buttigieg’s Department of Transportation did not move to revisit the rule in the past two years. While reversing the deregulatory carnage of the Trump administration takes (a lot of) time, starting that rule writing process as early as possible is of paramount importance: Buttigieg is up against the clock because of the 2024 election and will be hard pressed to implement all the necessary safety measures before the next inauguration. Also, while Buttigieg asking Congress for more authority to levy fines and punish corporate misconduct is a positive step, it remains concerning that he is not using the full extent of his existing powers.

But, while more stringent regulation is certainly warranted, regulations and enforcement merely exist to align incentives – because, ultimately, safe conditions depend on what management decides to do. In their pursuit of PSR, safety is exactly what the Big Seven railroads aren’t providing. In their Environmental Impact Statement, the Surface Transportation Board found that the CP-KCS merger would increase hazardous cargo transportation along 141 of the 178 affected rail segments, totaling 5,800 miles of track in 16 states. The Board found that the merger, outside of organic growth, would lead to nearly 2 million new hazardous train cars moving across the country a year,  a staggering sum given the fallout of just 11 derailed hazmat cars in the East Palestine accident. And as PSR results in ever-longer and ever-heavier trains running on tight schedules, those increased hazardous cargoes are all at increased risk of derailment.

More industry concentration makes effective regulation harder. As firms increase in size, they gain more and more of a resource advantage over their regulators. One behemoth corporation can often hire more lawyers and cultivate more relationships with lawmakers in order to obfuscate enforcement measures than multiple smaller ones could. Even when efficiency gains may be real (far less frequently than claimed), the true consequence is not lower prices, but more corporate influence peddling and stock buybacks (which the railroads are infamous for).

Since 1980, the United States has gone from thirty-three Class I railroads down to only seven. As concentration increases, PSR is pursued ever more zealously; the entire point of mergers is to increase economies of scale. In practice that means investing even less money back into workers, equipment maintenance, and safety. If the companies didn’t think they could further decrease marginal operating costs, they wouldn’t want the merger. The CP and KCS merger is particularly dangerous because it will result in the only railroad with lines stretching from Canada to Mexico, which gives it a stranglehold on freight between the two countries. That further reduces incentives to maintain equipment and have adequate staff. If there’s no one else who can cater to the market, they can get away with the bare minimum. That translates to worse safety situations, higher prices, worse services, and worse working conditions.

To preserve economic competition, protect railroad workers, and safeguard the tens of millions of Americans living alongside our 140,000 miles of track, we need to halt the decline in safety and service standards that the freight railroads’ embrace of precision scheduled railroading has led to. At a minimum, the Surface Transportation Board needs to decline to approve the merger between Canadian Pacific and Kansas City Southern — and then we need the FRA, and Congress, to put into place stricter safety and operating regulations.

Dylan Gyauch-Lewis is a researcher at the Revolving Door Project.

Cartels run on collusion like a rocket runs on fuel. Therefore, if we can destroy the infrastructure that enables collusion, we can greatly deconcentrate markets. This begs the question: what exactly is that infrastructure?    

For a cartel to collude, it needs to have channels of communication among its constituents. For example, OPEC routinely holds meetings. Many publicly traded companies often preview pricing in earnings calls, potentially facilitating collusion. These types of channels are the infrastructure of collusion. Without infrastructure to enable it, collusion becomes more difficult. Of course, the more concentrated the market, the less infrastructure is needed for collusion. Instead, in very concentrated markets, even some inflation in inputs is enough of an excuse for parallel and disproportionate markups in prices. 

If we analogize a cartel to a many-legged spider, then consumers and workers are flies, and communication channels are the webbing on which consumers and workers are sacrificed for the nourishment of that spider. One explicit example of this phenomenon is the elite college cartel; scandalously, this cartel is a spider with a very strong web. This article examines a part of the webbing that enables sordid collusion among elite schools. This article then generalizes the lessons we can learn to markets beyond education.      

As you might already know, the elite college cartel has been exposed periodically in lawsuits. For example, there was the famous Ivy Overlap case of the 1990s where the DOJ accused the Ivy League and MIT of colluding on financial aid offers. Then there was the 568 class-action lawsuit of 2022 which accused an even broader cartel of elite colleges of colluding on financial aid. Most recently, merely days ago, there was another class-action lawsuit that accused the Ivy League of suppressing financial-aid for college athletes. Even beyond the lawsuits that have already been filed, there are all sorts of anticompetitive practices that have gone unchallenged. For example, in my upcoming book The College Cartel, I allege a hub-and-spoke cartel that creates an artificial scarcity of new seats at elite colleges. Yet the question remains: how do these collusive schemes get conceived?

It’s a hard question to answer. So, let’s start with a related but different question: how does a collusive scheme get aborted prior to deployment? In theory, a firm’s governance board is supposed to step in to check any corporate misconduct and criminality. Boards of directors are supposed to set the management team straight. But what happens when the governance board is asleep at the wheel? In these instances, the check against corruption and collusion disappears.

This key insight about the abortive power of governance boards might have been why Congress sought to legislate board makeup in the Clayton Act, specifically by prohibiting the same person from serving on the boards of two competing companies. It might also be why enforcing Section 8 of the Clayton Act, the provision that bans interlocking directorates, is such a big priority for Assistant Attorney General Jonathan Kanter. As one recent DOJ press release quoted Kanter as saying: “Enforcement of Section 8 will continue to be a focus for the division just as Congress intended…We will continue to enforce the antitrust laws when necessary to address illegal board interlocks.” Of course, Kanter has done more than issue press releases—the DOJ enforcement efforts have led to the resignations of at least thirteen directors from ten boards.

Importantly, the Clayton Act is a civil statute. Section 8 cases can be filed by anyone, and interlocking directorates are a per se violation of the Clayton Act. In other words, any of us, in the new antitrust movement, can find and file against interlocking directorates. We needn’t wait for the DOJ. This is why I’m working with a group of law students to deconcentrate the governance boards of elite colleges. In the case of the elite college cartel, persistent anticompetitive conduct has gone on for far too long. Enough is enough, and the elite college cartel needs to be purged of interlocking directorates, even if such a purge is only a partial solution.

I’m a student at Columbia Law School, and Columbia’s board of trustees has an interlock. Lu Li, chairman of the multibillion-dollar investment firm Himalaya Capital, is presently on the governance boards at both Columbia University and CalTech. By the way, remember the financial-aid price-fixing class-action I mentioned earlier? Well, both Columbia and CalTech are defendants in that litigation. Of course, it’s not just one man on two boards. Instead, interlocking directorates are a widespread problem in the elite college market. Take James S. Frank for another example. He concurrently serves on the Board of Trustees at both UChicago and Dartmouth. Again, both institutions are currently being sued for price-fixing. But my personal favorite example is none other than Carlyle founder David Rubenstein. He’s an interlocking director at three competing institutions: Mr. Rubenstein is on the governance boards at the UChicago, the Harvard Corporation, and Johns Hopkins. What’s more is that Mr. Rubenstein even used to be chairman of the board at Duke University. Coincidentally, Duke, UChicago, and Johns Hopkins are all being sued for price-fixing, and Duke has previously settled a no-poach wage-fixing case.

Lu Li, James Frank, and David Rubenstein are just a selection of the very many interlocks that exist in the elite college market. When it comes to elite colleges in America, we have a clear problem. In fairness, I’ll concede that these trustees are very accomplished and upstanding individuals. I’m not remotely arguing that they masterminded the allegedly collusive schemes for which elite colleges currently find themselves in court. Instead, my argument is more subtle. Their membership on multiple boards may have made them less likely to do anything to abort those allegedly collusive schemes precisely because they may have evaluated conduct from a more industry wide perspective. If any one of their presences made collusion even one percent more likely, then we need to act. This is why I’m working with other law students to bring these shadowy interlocks into the light. We’re going to file Section 8 civil cases. 

Of course, elite colleges are merely one market where interlocks are a problem. There are many others too. Biotechnology companies seem to have particularly incestuous boards. Interlocking boards might be a reality in myriad other sectors in which you have more expertise than me. In those sectors, I’d encourage you to take similar civil action on your own, for at least three reasons.  

First, interlocking directorates create a conflict of interest. When a board member sits on the board of two companies that compete in the same industry, they are likely to prioritize the interests of one company over the other. This creates a situation where one company has an unfair advantage over its competitors, and it can use this advantage to suppress competition. For example, Eric Schmidt was on the board of Apple, while Google secretly developed an Android alternative to the iPhone. This might have been an example where unfair access to information harmed one company while benefiting another. At least, Steve Jobs thought so

Second, interlocking directorates often lead to collusion. When board members of competing companies work together, they can use their positions to coordinate their actions and manipulate the market in their favor. This can take the form of price-fixing, wage-fixing, market-sharing, bid-rigging, or other such collusive practices. For example, while then Google CEO Eric Schmidt was on the board of Apple, Google agreed not to hire certain workers from Apple, thereby suppressing wages. This eventually led to a massive settlement by Apple and Google, which compensated workers at those firms.  

Third, interlocking directorates can limit innovation. When board members of competing companies work together, they may be less likely to invest in research and development that could lead to new products or services. Instead, they may focus on maintaining the status quo, which can stifle competition and limit innovation. This is especially grave in biotechnology, where less innovation means lives lost.

I encourage everyone reading this to find more interlocks and to file more cases. Change won’t come from anywhere else. The truth is that we are the ones we’ve been waiting for.

Sahaj Sharda is a first-year law student at Columbia Law School. He is the author of the forthcoming book The College Cartel.

Several antitrust commentators have noticed that, despite losing its challenge to block Meta from acquiring the leading maker of VR dedicated fitness apps, the FTC secured a victory for antitrust agencies in the sense that the opinion could rehabilitate the theory of potential competition in blocking future mergers. In full disclosure, I was the FTC’s economist in that challenge, so I won’t comment on the opinion, other than to note that (1) Steve Salop has opined that the court applied an excessive evidentiary burden in assessing Meta’s de novo entry absent the merger, and (2) Herb Hovenkamp has written that “the court made a detailed analysis of all the ways that Meta might have entered on its own, discounting all uncertainties in favor of the defendant.”

To review the bidding, potential competition is the concept that even if two companies are not currently direct competitors, there is a chance that the acquirer would enter the market occupied by the target absent the merger (or vice versa). If the acquirer would have entered with certainty, then permitting the merger harms competition by reducing the number of competitors by one, at least in expectation. Even if acquirer would have entered with some probability less than 100 percent, the mere threat of entry might impose a substantial check on the target’s price-setting power. And in a highly concentrated market, such a reduction in potential competition could lead to substantial competitive effects, including increasing the risk of coordinated pricing. Using pricing data for the merger of USAir and Piedmont, John Kwoka and Evgenia Shumilkina (2010) estimated that prices rose by five to six percent on routes that one carrier served and the other was a potential entrant.

A new tool in the agencies’ toolkit?

Now you won’t find the phrase “potential competition” in the DOJ’s challenge of JetBlue’s acquisition of Spirit. And most press reporting on the case has focused on the loss of actual competition, which would occur wherever JetBlue and Spirit have overlapping routes (150 routes according to the complaint at paragraph 31). Indeed, much has been made of the overlapping routes, such as those connecting Miami/Ft. Lauderdale and Aguadilla (Puerto Rico), where JetBlue and Spirit are on the only carriers providing nonstop service—that is, the merger is a merger to monopoly on those routes.

But the concept of potential competition is lurking in the background of DOJ’s complaint. Consider that paragraph 71 defines one set of relevant markets as “origin-and-destination pairs that JetBlue does not serve but where Spirit currently offers nonstop service or planned to enter with nonstop service as an independent.” In paragraph 34, the complaint asserts the merger would harm competition in “routes where Spirit has plans to start competing with JetBlue in the near future, and vice versa.” And the complaint notes at paragraph 6 that “over the next five years Spirit plans to add nonstop service to several routes JetBlue flies today.” These passages suggest that the DOJ plans to mount an attack on the potential competition hill. Presumably, the DOJ has acquired evidence of JetBlue’s and Spirit’s expansion plans that were hatched prior to the proposed merger. Eliminating a carrier that could expand into new markets is a loss in potential competition.

That potential competition theories are even mentioned in the DOJ’s complaint is noteworthy because prior DOJ merger cases haven’t spent much time there. And I’m not aware of consent decrees addressing the loss in potential competition. Indeed, in the go-go days of non-enforcement from Reagan to Obama, many decrees did not even care about actual overlap in city pairs when there were alleged out-of-market efficiencies.  

A feckless remedy for harms to potential competition

Merging parties are quick to offer a remedy that purportedly allays harms from a loss of actual competition—namely, divestitures. In this instant merger, JetBlue has offered to spinoff Spirit’s landing slots in New York, Boston, and Fort Lauderdale. The problem with landing-slot divestitures, as DOJ’s Doha Mekki pointed out in a press conference this week, is that they don’t guarantee a replacement of lost competition on a particular route. In other words, a third party could acquire the landing slot but elect not to serve the formerly overlapping route. And as Darren Bush explained on the latest episode of The Slingshot (minute 58), divestitures of landing slots often go to third parties (approved by the merging firms) that are not capable of replacing the lost competition; a successful airline requires a network of routes to achieve the requisite economies of scope, not just a handful of landing slots.

In contrast, there is no amount of divestiture that can address harms from the loss of potential competition. If JetBlue was reasonable capable of entering a market served by Spirit, the merger will prevent that from happening. If there’s any doubt about its capability to enter new markets, JetBlue entered the Boston-Atlanta route as recently as 2017. And while Spirit allegedly planned to invade certain JetBlue markets, we can’t know which markets would have been invaded. For these reasons, the theory of harm relating to potential competition can be more potent than one based on loss to actual competition, as divestitures are not a cure.

The merging parties might argue that entry by other carriers into the affected city pairs is as easy as pointing the nose of the plane. But airlines fear retaliation from other carriers, so that’s not likely.  And the industry has a history of crushing competitors that try to sneak in under the radar and build presence in city pairs, including via predatory pricing and other capacity shenanigans.

Alas, there is no mention of merger-related worker harms in the DOJ’s complaint, despite the history from prior mergers, such as the combination of US Airways and American West, which took ten years to integrate the union seniority list and faced serious problems protecting the workforce. Divestitures wouldn’t alleviate worker harms either.

Assisting the factfinder on entry probability in the absence of the merger

The assessment of a firm’s likelihood of entry absent a merger is tricky, however, particularly for folks who don’t spend a lot of time thinking about probabilities, let alone conditional probabilities. Let me try this analogy on you: A burglar has learned that you have something very expensive in your basement. Perhaps jewelry, or a collection of rare wines or baseball cards. The burglar is intent on taking your prized possession. Now imagine he tries entering your home by the front door, but the door is bolted. Does he give up? Not if he’s committed to taking what’s yours. Indeed, he will likely case the entire property until he finds an unsecured entry path. This means the probability of entering through say a side window conditional on not being able to enter through any other means is very high.

Consider a scenario where you’ve left the front door open when you went for a dog walk, the burglar tries the front door, and given your carelessness, he walks right in. And here’s the second probability lesson: That the burglar entered the front door says nothing about the likelihood of his entering the back door or window in a world where the front door was bolted shut! The reason is because the two entry pathways are mutually exclusive—once the burglar enters the front door, he will naturally abandon the other pathways. By the same logic, courts should attach zero weight to a defendant having abandoned de novo entry plans after having decided to enter through acquisition.

Let’s hope the factfinder keeps this lesson in mind when evaluating the record evidence of JetBlue’s and Spirit’s entry plans. When assessing the likelihood of de novo entry absent the merger, one must ignore any entry-related evidence after the merger has been hatched, as the merging parties will naturally abandon any plans to invade the other’s markets. There’s a ton of airline consumers depending on the court getting to the right answer.

I love eggs. I really do. There was a year in law school when I religiously made and ate an egg sandwich for breakfast every day. To this day, I believe an egg fried in olive oil until the yolks are jammy and the edges are crispy is a perfect food.

Since last year, though, my egg-loving style has been cramped. As everyone now knows, the price of eggs at the grocery store more than doubled in 2022, increasing from $1.78 a dozen in December 2021 to over $4.25 in December 2022. This 138-percent increase in egg prices far outstripped the 12-percent increase Americans saw in grocery prices generally over the same period. And some Americans have had it much worse, as average egg prices reached well over $6 a dozen in states ranging from Alabama to California and Florida to Nevada.

What’s behind the skyrocketing retail price of the incredible edible egg? Well, for one thing, the skyrocketing wholesale price of that egg. Between January 2022 and December 2022, wholesale egg prices went from 144 cents for a dozen Grade-A large eggs to 503 cents a dozen. This was the highest price ever recorded for wholesale eggs. Over the entire year, wholesale egg prices averaged 282.4 cents per dozen in 2022. When we consider that average retail egg prices for the same year were only about 3 cents higher at 285.7 cents per dozen, it becomes clear that the primary contributor to rising egg prices at the grocery store has been the dramatic increase in the wholesale prices charged by egg producers.

If this gives you hope that relief might be around the corner because you’ve heard something about a recent “collapse” in wholesale egg prices, sadly your hope would be misplaced. Despite this much-ballyhooed collapse, the average wholesale egg price has simply gone from 4-to-5 times what it was in January of last year to 2-to-3 times that number. If that weren’t enough, prices are expected to spike again when egg demand picks up in the run-up to Easter. Ultimately, the USDA is projecting that the average wholesale egg price in 2023 will be 207 cents a dozen—or only about 25% lower than the average price for 2022. So much for a collapse.

Are you wondering who sets these wholesale prices? Why, an oligopoly, of course. The production of eggs in America is dominated by a handful of companies led by Cal-Maine Foods. With nearly 47 million egg-laying hens, Cal-Maine controls approximately 20% of the national egg supply and dwarfs its nearest competitor. The leading firms in the industry have a history of engaging in “cartelistic conspiracies” to limit production, split markets, and increase prices for consumers. In fact, a jury found such a conspiracy existed as recently as 2018, and a wide-ranging lawsuit was brought just a couple of years ago accusing several of the largest egg producers (including Cal-Maine) of colluding to increase prices during the COVID-19 pandemic.

When asked about the multiplying price of their product, these dominant egg producers and their industry association, the American Egg Board, have insisted it’s entirely outside their control; an avian flu outbreak and the rising cost of things like feed and fuel, they say, caused egg prices to rise all on their own in 2022. And, sure enough, those were real headaches for the egg industry last year—about 43 million egg-laying hens were lost due to bird flu through December 2022, and input costs for producers certainly increased over 2021 levels. As my organization, Farm Action, detailed in letters to federal antitrust enforcers last month, however, the math behind those explanations for the steep increase in wholesale egg prices just doesn’t add up.

The reality, we argued, is that wholesale egg prices didn’t triple in 2022, and aren’t projected to stay elevated through 2023, because of “supply chain, ‘act of God’ type stuff,” as one industry executive has tried to spin it. Rather, the true driver of record egg prices has been simple profiteering, and more fundamentally, the anti-competitive market structures that enable the largest egg producers in the country to engage in such profiteering with impunity.

Is it really just profiteering? Yes, it’s really just profiteering.

According to the industry’s leading firms, rising egg prices should be blamed on two things: avian flu and input costs. We can stipulate for the sake of argument that, if a massive amount of egg production and, hence, potential revenue were lost due to avian flu, the largest producers would be justified in trying to recoup some of that lost revenue by raising prices on their remaining sales. Likewise, if there were a sharp rise in egg production costs, we can stipulate that producers would be justified in trying to pass them on to wholesale customers. But was there a nosedive in egg production? Did the cost of egg inputs multiply dramatically? Short answer: No, and No.

The bottom line on the avian flu outbreak is that it simply did not have a substantial effect on egg production. Although about 43 million egg-laying hens were lost due to avian flu in 2022, they weren’t all lost at once, and there were always over 300 million other hens alive and kicking to lay eggs for America. The monthly size of the nation’s flock of egg-laying hens in 2022 was, on average, only 4.8 percent smaller on a year-over-year basis. If that isn’t enough, the effect of losing those hens on production was itself blunted by “record high” lay rates throughout the year, which were, on average, 1.7 percent higher than the lay rate observed between 2017 and 2021. With substantially the same number of hens laying eggs faster than ever, the industry’s total egg production in 2022 was—wait for it—only 2.98 percent lower than it was in 2021.

Turning to input costs, it’s true they were higher in 2022 than in 2021, but they weren’t that much higher. Farm production costs at Cal-Maine Foods—the only egg producer that publishes financial data as a publicly traded company—increased by approximately 20 percent between 2021 and 2022. Their total cost of sales went up by a little over 40 percent. At the same time, Cal-Maine produced roughly the same number of eggs in 2022 as it did in 2021. If we take Cal-Maine Foods as the “bellwether” for the industry’s largest firms, we can be pretty sure that the dominant egg producers didn’t experience anywhere near enough inflation in egg production costs to account for the three-fold increase in wholesale egg prices.

Against the backdrop of these facts, the industry’s narrative simply crumbles. It’s clear that neither rising input costs nor a drop in production due to avian flu has been the primary contributor to skyrocketing egg prices. What has been the primary contributor, you ask? Profits. Lots and lots of profits.

Gross profits at Cal-Maine Foods, for example, increased in lockstep with rising egg prices through every quarter of the last year. They went from nearly $92 million in the quarter ending on February 26, 2022, to approximately $195 million in the quarter ending on May 28, 2022, to more than $217 million in the quarter ending on August 27, 2022, to just under $318 million in the quarter ending on November 26, 2022. The company’s gross margins likewise increased steadily, from a little over 19 percent in the first quarter of 2022 (a 45 percent year-over-year increase) to nearly 40 percent in the last quarter of 2022 (a 345 percent year-over-year increase).

The most telling data point, however, is this: For the 26-week period ending on November 26, 2022—in other words, for the six months following the height of the avian flu outbreak in March and April—Cal-Maine reported a five-fold increase in its gross margin and a ten-fold increase in its gross profits compared to the same period in 2021. Considering the number of eggs Cal-Maine sold during this period was roughly the same in 2022 as it was in 2021, it follows that essentially all of this profit expansion came from—you guessed it—higher prices.  

But is this an antitrust problem? Yes, it’s an antitrust problem.

On their own, these numbers plainly show that dominant egg producers have been gouging Americans, using the cover of inflation and avian flu to extract profit margins as high as 40 percent on a dozen loose eggs.

Some agriculture economists and market analysts, however, have questioned whether this price gouging should raise antitrust concerns. The dramatic escalation in egg prices over the past year, they’ve argued, has just been “normal economics” at work. Per Angel Rubio, a senior analyst at the industry’s go-to market research firm, Urner Barry, the runaway increase in wholesale egg prices was simply a function of the “compounding effect” of “avian flu outbreaks month after month after month.” These outbreaks repeatedly disrupted egg deliveries, he presumes, driving customers to assent to spiraling price demands from alternative suppliers. In a blog post on Urner Barry’s website, Mr. Rubio further hypothesized that jittery customers may have “increased their ‘normal’ purchase levels to secure more supply,” goosing up prices even higher.

There are several reasons to doubt this theory of the case. To begin with, Mr. Rubio’s analysis presumes that avian flu outbreaks caused significant disruptions in the supply of eggs even though, as discussed above, the aggregate production data suggests that was not the case. But let’s assume that there were supply disruptions, and that these disruptions did lead to a glut of demand for reliable suppliers, giving them pricing power. If that were the case, it would stand to reason that Cal-Maine—which did not report a single case of avian flu at any of its facilities in 2022—had an opportunity to sell a whole lot more eggs in 2022 than in 2021, and to sell them at record-high profit margins. But Cal-Maine didn’t sell a whole lot more eggs. It sold roughly the same number of eggs. If Mr. Rubio’s theory were right, why did Cal-Maine leave money on the table?

Once we start applying this question to the pricing and production behavior of the egg industry’s dominant firms more broadly, a whole variety of competition red flags start cropping up

The red flags—they multiply!

Let’s talk about pricing first. In a truly competitive market, one would have expected rival egg producers to respond to a near-tripling of average market prices with efforts to undercut Cal-Maine’s skyrocketing profit margin and capture market share. Alas, that did not happen. In researching Farm Action’s letter to antitrust enforcers, we found no evidence of aggressive price competition for business among the largest egg producers. Yet everything about the mechanics of egg sales suggests that they should be competitive. Wholesale customers generally buy their eggs directly from producers. Long-term or exclusive contracts for egg supplies are rare. And the price of eggs in each purchase is individually negotiated. In other words, for each delivery of eggs they need, a wholesale customer is in all likelihood free to shop around and give rival suppliers an opportunity to undercut their incumbent supplier. Given this fluid sales environment, how did Cal-Maine manage to raise prices so much that its profit margin quintupled in one year without any other major producer coming to eat its lunch?

Another head-scratcher has been how the industry has managed to throttle production in the face of sustained high egg prices. As early as August of last year, the USDA was observing that favorable conditions existed, both in terms of moderating input costs and record-high egg prices, for producers to invest in expanding their egg-laying flocks. Yet such investment never materialized.

Even as prices reached unprecedented levels between October and December of last year, the number of eggs in incubators and the number of egg-laying chicks hatched by upstream hatcheries both remained flat, and were even below 2021 levels in December. As the year drew to a close, the USDA observed that “producers—despite the record-high wholesale price—are taking a cautious approach to expanding production in the near term.” The following month, it pared down its table-egg production forecast for the entirety of 2023—while raising its forecast of wholesale egg prices for every quarter of the coming year—on account of “the industry’s [persisting] cautious approach to expanding production.”

Because of this “caution” among egg producers, the total number of egg-laying hens in the U.S. has recovered from the losses caused by avian flu outbreak of 2022 at less than one-third of the pace it recovered from the (relatively more severe) avian flu outbreak of 2015, according to data from the USDA’s National Agricultural Statistics Service. At its lowest point in the aftermath of the 2022 avian flu outbreak—in June of last year—the egg-laying flock counted a little under 300.5 million hens, or around 30 million (or 9%) fewer hens than it started the year with (330.8 million). For comparison, at its lowest point following the 2015 outbreak—which was also in June of that year—the egg-laying flock totaled 280.2 million and had nearly 35 million (or 11%) fewer hens than it did at the start of 2015 (315 million).

Figure 1. Chart of the total number of egg-laying hens in the U.S. on the first of every month between January 2014 and February 2023. Data derived from USDA National Agricultural Statistics Service. Credit: @BrightonCap (Twitter).

As you can see from the chart above (Fig. 1), in 2015, it took the industry less than 8 months to rebuild the egg-laying flock from its June low point; by the end of February 2016, producers had added over 30 million hens, bringing the total size of the egg-laying flock back up to 310.2 million. Contrast this pace of flock recovery between 2015 and 2016 with the pace of recovery we’ve seen over the past year. In the 8 months that have passed since June of last year, the industry has added less than 9 million hens—leaving the flock at an anemic 309.4 million at the start of February 2023.

On its own, this comparison shows that large egg producers almost certainly could have rebuilt their hen flocks in the wake of last year’s avian flu outbreaks much faster than they have. When considered alongside the fact that, in 2015, the monthly average wholesale price reached its highest point in August and never exceeded $2.71 per dozen, the sluggishness of the 2022-2023 recovery becomes objectively suspicious. According to Urner Barry, in 2015, wholesale egg prices rose 6-8% for every 1% decrease in the number of egg-laying hens caused by the avian flu; that is barely half the 15% price increase for every 1% decrease in hens observed last year. The monthly price for a dozen wholesale eggs in 2022 cleared the 2015 high of $2.71 per dozen as early as April, and stayed at comparable or higher levels through the rest of the year. And yet, egg producers have been “cautiously” adding hens at a third of pace they did in 2015-2016 since June of last year. What gives?

As Senator Elizabeth Warren and Representative Katie Porter noted in recent letters to dominant egg producers seeking answers about ballooning prices, producers appear to be “impervious to the basic laws of supply and demand.” This is the case not only in terms of their willingness to invest in new capacity, but also in terms of their willingness to utilize existing capacity. The rate at which hens lay eggs is the basic measure of flock productivity in the industry. Several factors can affect lay rates, including hen genetics and age, but within physical limits, producers can speed or slow egg-laying by their hens through nutrition, lighting, and other flock management choices. Yet, even as millions of hens were being lost to avian flu and eggs were fetching unprecedented prices last year, producers seemed to make choices that depressed, rather than maximized, their remaining hens’ lay rates.

The average table-egg lay rate reached its highest level ever (around 83.5 eggs per 100 hens per day) in the early, most severe, months of the avian flu epidemic—between March and May of last year—but then it nosedived. By June, the national average lay rate had dropped to about 82.5 eggs per 100 hens per day. This was consistent with seasonal trends in years past; it’s typical for lay rates to moderate as Spring turns to Summer. What happened after June, however, was curious. Normally, the average lay rate would start climbing again in July and stay on an upward trend through the end of the year, with the strongest lay rates often reported in the last 2 or 3 months of the year. In 2022, however, the opposite occurred. Lay rates flat-lined from June through the Fall before dipping to their weakest level in the last three months of the year. In other words, during the exact period when egg prices were hitting their stride—the last six months of 2022—the industry somehow managed to orchestrate a wholesale deviation from historical trends in the direction of getting fewer eggs out of the hens they already had.

If it walks like a cartel and swims like a cartel, maybe it’s a cartel?

Together, these dynamics of throttled production and unrestrained pricing are unmistakable red flags that deserve investigation by enforcers. Take Cal-Maine as an example again. They are the leader in a mostly commoditized industry. They presumably have the most efficient operations and the greatest financial power of any firm in the industry—allowing them to stand up hen capacity as fast as anyone and sell at competitive prices to capture unmet or up-charged demand. Instead of doing that, however, it appears they simultaneously abandoned price competition and refrained from expanding production to satisfy demand last year. This begs the question: What made Cal-Maine so confident that other large producers wouldn’t produce more eggs and undercut its prices? More to the point, why didn’t they?

Whatever the answers to these questions might be, this much is clear: Cal-Maine behaved as if its dominant position were entrenched, and its strategy worked. As rival egg producers have gone along instead of competing on price and production, the industry has been able to sustain elevated egg prices from one year to the next without any legitimate justification. Even as egg prices have started ameliorating this year, the USDA is still forecasting an average wholesale price for 2023 that is 70-to-80% higher than the 2021 average, suggesting that whatever “bottom” egg prices might reach this year will, in all likelihood, be at least an order of magnitude higher than 2021 levels.

This pattern of behavior by dominant egg producers over the past year is consistent with longstanding research beginning in the 1970s—from Blair (1972) to Sherman (1977) to Kelton (1980)—on how leading firms in consolidated industries “administer prices” to achieve higher-margin “focal points” during economic shocks and periods of high inflation. And, make no mistake, the egg industry is consolidated. While the top 10 egg producers control 53%—and Cal-Maine alone controls 20%—of all egg-laying hens in the U.S., these numbers understate concentration in actual egg markets. Smaller egg operations (the ones that control the other 47% of America’s hens) tend to produce specialty, not conventional, eggs for sale at premium price points; as such, they typically have neither the scale nor the capacity to supply national grocery chains with the conventional eggs bought by most consumers. Only the largest egg producers can fill this need—a fact that likely makes the submarket for conventional eggs sold to national customers substantially more concentrated than the total egg supply. Was it pure coincidence that prices barely climbed In the fragmented specialty-egg segment but skyrocketed in the consolidated conventional-egg segment?

The honest answer is that I don’t know. In the end, I’m just a country lawyer with a laptop and a love for fried eggs. But smart people at the Boston Fed, the University of Utah, and a few other places have recently shown—empirically, I’m told—that it’s easier for competitors to coordinate for higher profits during a crisis when their industry is concentrated. Maybe that’s what happened here. Maybe it’s not. The only people who can find out for sure—and get the American people some restitution if it is what happened—are the fine public servants at the Federal Trade Commission, the Justice Department Antitrust Division, and state Attorneys General offices across the country. They should do nothing less.


For nearly 12 months now, dominant egg producers have demonstrated their ability to charge exorbitant prices for a staple we all need for no reason beyond having the power to do it. The “philosophy” of our antitrust laws, as Justice Douglas once reminded his colleagues on the Supreme Court, is that such power “should not exist.” With hundreds of millions of dollars missing from Americans’ pockets to enrich the profits of a handful of robber barons in the egg industry, antitrust enforcers owe the public a duty to investigate, and to see to it that the nation’s laws are enforced—even against entrenched giants.  

Basel Musharbash is Legal Counsel at Farm Action, a farmer-led advocacy organization dedicated to building a food and agriculture system that works for everyone rather than a handful of powerful corporations. Basel is also the Managing Attorney of Basel PLLC, a mission-driven law firm in Paris, Texas, focused on the intersection of community development and antitrust law.

I have heard this story at countless antitrust conferences: If rivals speak of price fixing, best to spill water and walk out, because this way people remember you left (insert forced laughter here). I have heard it in a variety of presentations, with a variety of panelists taking credit for it.

Christine Wilson, the Trump-appointed commissioner of the FTC, considers her resignation letter in the Wall Street Journal to be spilling the water, an alert that something is terribly amiss. In her view, Chair Lina Khan’s tenure at the FTC has been one of lawlessness. Due process eliminated! Disregard for the rule of law! Her hyperbole is, well, Trumpian.

None of these are new complaints. I’ve addressed her claims of bias (and those of others) in The Sling. Mark Glick and I have addressed her claims of Marxism here. We have addressed her laments about non-compete rulemaking here. We have addressed her complaints about the scope of Section 5 here. Her latest accusations are tired reruns of past laments.

The real story is that Commissioner Wilson’s views of antitrust are increasingly becoming passe and reactionary, as the flaws of consumer welfare theory are exposed and its pro-monopoly, anti-enforcement legacy become solidified. It is fortunate that Commissioner Wilson, who has not yet resigned officially resigned, recognizes that the FTC is no longer a good fit for her way of viewing antitrust enforcement.

In throwing insults and accusations, however, Commissioner Wilson oversteps the bounds of decency and inflicts harm on the agency.

Commissioner Wilson’s Assertion of Bias

Commissioner Wilson argues that Chair Lina Khan’s prior writings create the “appearance of unfairness” in the Meta/Within matter and laments the Chair’s failure to recuse herself from an administrative proceeding that is now (and perhaps always was) moot, allegedly harming “due process” and “federal ethics obligations.” 

Yet the caselaw suggests that Chair Khan was on firm ground. In FTC v. Cement Institute, the Cement Institute challenged the FTC’s ability to be impartial (based on due process) because the agency had written reports to Congress discussing price fixing in the cement industry. The agency’s report was the basis of launching an investigation. So, of course, the Cement Institute sought to claim that such a challenge would violate due process. The Court rightly said no: “It is manifestly desirable that the terms of the commissioners shall be long enough to give them an opportunity to acquire the expertness in dealing with these special questions concerning industry that comes from experience.” But if Chair Khan’s FTC had written reports of Meta’s anticompetitive acquisitions, I suspect Commissioner Wilson would object even more strongly of bias.

That the pre-appointment vision of a pro-enforcement Chair should be held to a higher standard than that of an agency report signed by sitting commissioners is an odd argument. Per Commissioner Wilson’s logic, it is fine for a nominee to be sworn into the Commission with decades of experience defending companies against the antitrust laws, with visions of hamstringing the Commission to a narrow and falsely limited notion of a statute exactly mirroring other statutes in scope. It is also fine for a nominee to favor artificially limiting the scope of antitrust law based on now antiquated economics (consumer welfare theory) that was never contemplated by Congress at passage of the FTC Act. But it is somehow not fine for a sitting Chair to articulate her support of stopping the dominant platforms from swallowing the Internet before being appointed as Chair.

Beyond claims of bias, Commissioner Wilson spews insults and labels. She hurls inflammatory phrases like “bias” and “Marxist” and “critical race theory” in her loud exit and other writings. Despite the attempt to paste labels of unpopular political positions, SCOTUS has noted that there is a “presumption of honesty and integrity” in appointees. It is difficult to overcome this presumption, no matter how many times one smears an adversary wrongly and publicly.

Claiming bias in a regulator’s prior thinking and positions is a tired attack vector in administrative law. In the rulemaking context, prior writings and work by a decision maker were the basis of a legal challenge asserting bias—one the D.C. Circuit rightly saw as ill-conceived. In a case in which industry argued bias against a regulator seeking to ban drift gillnet fishing, who previously wrote against the practice, the court recognized bias “only when there has been a clear and convincing showing that the Department member has an unalterably closed mind on matters critical to the disposition of the proceeding.”

To Commissioner Wilson, Chair Khan’s research and prior thinking create a violation of due process against Meta and perhaps others. I have argued her prior research isn’t a violation, and have laid out why I believe it isn’t. To others, such as Matt Stoller, there are deeper connections to Commissioner Wilson’s assertions of bias that go beyond policy, including direct compensation from Bristol-Meyers Squibb. Others have labeled her a “naysayer.” I suppose it is not a violation of due process for a company to have a precommitted ally on the Commission. One might even call that “policy,” but Commissioner Wilson disagrees. So, what should we call the antitrust “naysayer” who exudes her own bias against government enforcement of the antitrust laws?

Commissioner Wilson argues that Chair Khan’s “appearance of unfairness” is the trouble. But throwing stones from a glass house has risks.  Is it mere coincidence that along with Commissioner Wilson’s letter, another editorial appeared in the Wall Street Journal on the same day and the following day along similar lines? Or was it a concerted effort with people outside the agency to attack the Chair? It has an “appearance of unfairness.” My point here is not to engage in ad hominem, but rather to show that spilling water does not require one to have evidence. One can merely label, blame, and spill water without it meaning anything at all.

A Disagreement Concerning Policy Is Not An Abuse of Power

What about the Chair’s allegedly ignoring years of experience and thinking that validate consumer welfare theory? Consumer welfare theory is not in the statute. It is an ambiguous term with multiple meanings and flaws, not entirely unlike the terms she objects to in her resignation letter (“nefarious.”). The consumer welfare revolution overturned 80-plus years of antitrust thinking. And, using Commissioner Wilson’s words, the new policy “contained no descriptions or definitions of these terms, many of which also lack context in the law.” Glass houses and stones more than water spilling here.

In other administrative realms, such a reversal is not a problem. For example, in labor law, the D.C. Circuit has said that “it is a fact of life in NLRB lore that certain substantive provisions of the NLRA invariably fluctuate with the changing compositions of the Board.” The case, Epilepsy Foundation, is one in which the Board expanded the Weingarten rule to allow non-union employees to have representation at a disciplinary meeting. The NLRB’s order has been reversed several times since and before the decision.

It certainly isn’t a problem for the Court, either, having not too long ago overturned 100-year-old precedent in light of a select reading of economics. I do not recall Commissioner Wilson having objections.

Commissioner Wilson worries that the Court will strip the FTC of its powers under the Major Questions Doctrine should matters such as the agency’s proposed non-compete rulemaking go before it. It certainly may be the case that SCOTUS will use major questions doctrine to block FTC actions (or other administrative agencies). Should all administrative agencies stop seeking to enforce the laws with which they are charged for fear of judicial activism?  That is certainly in line with the neoliberal agenda, but a terrible way to enforce laws.

Speaking of Honesty and Integrity

Commissioner Wilson is not a paragon of collegiality. She has at several points suggested those that disagree with her are Marxists. She has, in fact, presumed dishonesty and lack of integrity in her colleagues. This is because Commissioner Wilson wrongly equates consumer welfare theory with the “rule of law.” She states that “while our civics classes taught us to prize the rule of law, Marxists have a very different view.” She asserts that such rule of law is “above or outside of politics.” One wonders what effect constant ad homimen attacks from a Commissioner on the Chair has on FTC staff morale. After all, Commissioner Wilson admits that she and her staff spent “spent countless hours seeking to uncover [Khan’s] abuses of government power.”

“Rule of Law” is a convenient expression to highlight that which someone believes in law, without foundation. Statutes, for example, are law. But Commissioner Wilson is fine not enforcing some laws, such as Robinson-Patman. And plain text becomes ambiguous depending on one’s disposition. Or as she would put it—bias.

Or perhaps “rule of law” refers to the “science” of consumer welfare theory. But it isn’t science. It’s more of a religion. If it were science, there would be a recognition of the fundamental flaws of its principles, even on their own merits. There would be a recognition of the biases and inconsistencies of the theory. And it would be rejected, as it has been in much of economics (with the exception of antitrust).

Taxes on Mergers

Commissioner Wilson argues that under President Biden, the FTC has imposed a “tax” on all mergers by merely challenging certain mergers that were heretofore waved through. Never mind that a district court just sided with Meta, owner of the leading virtual reality (VR) platform, in the FTC’s attempt to block Meta’s acquisition of the leading VR fitness app. Were Meta’s expenditures on lawyers and economic experts tantamount to a tax? And when did the presumption switch that acquisitions, including by dominant platforms like Meta, are by default permissible? There is nothing in the statute to suggest so. But Wilson’s own bias suggests that such acquisitions should be presumptively competitive, and any other policy, including flipping that presumption, is therefore wrong.

Perhaps she thinks of consent decrees and orders as taxes as well. After all, it could be argued from Wilson’s perspective (and based on her own dissents) that remedies are not needed. Indeed, having to submit an HSR form is a form of tax. So is having to pay fees to attorneys and economists to justify a merger. So is having to litigate.

One could take this argument of taxation to an extreme. Perhaps it is best to rid ourselves of the whole antitrust endeavor, and the whole factory of lawyers and economists making money from corporations striving for efficiencies. Let’s get rid of the ABA antitrust section. It’s a tax on corporations and harms consumer welfare!

Spilling the Water

Commissioner Wilson’s resignation spills no tea. And the dryness of her regurgitated accusations suggests that there was no water left in the pitcher she spilled. Something is definitely amiss at the FTC. It is the constant attack from those who seek to maintain the status quo of pro-monopoly, pro-merger, and anti-enforcement (except in the most extreme of circumstances). Uncertainty of law with pro-business policy justifications allows the defense bar to continue making money. Rules banning conduct that hurts the economy, on the other hand, are “lawless.”   

Regardless, I wish the soon-to-be-departing commissioner well in her future endeavors. Nothing I say here would diminish my support for her in taking a future position, say with the U.S. Chamber of Commerce, or any other organization deeply defensive of the status quo. In my opinion, her views are antiquated and hostile to antitrust enforcement and to consumers generally.

I write this response to spill a pitcher of water on her resignation.

On Wednesday, the UK Competition and Markets Authority (CMA) provisionally concluded that Microsoft’s proposed acquisition of Activision could result in higher prices, fewer choices, or less innovation for UK gamers. It also released a set of proposed remedies to address the likely anticompetitive harms, including a mandatory divestiture of (1) Activision’s business associated with its popular Call of Duty franchise; (2) the entirety of the Activision segment; or (3) the entirety of both the Activision segment and the Blizzard segment, which would also cover the World of Warcraft franchise.

Assuming Microsoft won’t go for any structural remedy, the deal is likely on ice, and the U.S. Federal Trade Commission (FTC) would not have to bring any enforcement action against Microsoft. Although this is likely the right outcome from a competition perspective, the antitrust geeks (myself included) will suffer dearly from not getting to observe the theatrics around a hearing and the associated written decisions.

Setting aside Microsoft’s significant holdings in gaming studios, Microsoft’s attempted purchase of Activision can be understood as a vertical merger, in the sense that Microsoft sells its Xbox gaming platform (the downstream division) to consumers, in competition against Sony’s PlayStation and Nintendo’s Switch—and Activision supplies compelling games (the upstream division) for the various gaming platforms. The Xbox platform can be understood either as Microsoft’s traditional gaming console or as its nascent cloud-based Xbox Game Pass platform.

Challenges of vertical mergers have not been successful of late, prompting many scholars to call for new vertical merger guidelines. Among the suggested remedies would be a “dominant platform presumption,” advocated by antitrust law professor Steve Salop, which would shift the burden of proof to the acquiring firm whenever it was deemed a dominant platform.

It’s All About the Departure Rate

Input foreclosure is the term used by economists to describe how a vertically integrated firm—think post-merger Microsoft—might withhold a key input from distribution rivals, thereby impairing the rivals’ ability to compete for customers. When the theory of harm is input foreclosure, proof of anticompetitive effects largely turns on how special or “must-have” the potentially withheld input is for downstream rivals. Economists define the “departure rate” as the share of the rival’s customers who would defect if they could not access the withheld input. Under these models, anticompetitive effects also require that the downstream firm possess a significant market share.

In the Justice Department’s attempt to block AT&T’s acquisition of Time Warner in 2018, the agency’s economic expert leaned on an estimated departure rate generated by a third-party consultant. That third-party consultant originally produced results consistent with a low departure rate, suggesting that losing CNN would not cause too much customer defection, only to be changed to a high departure rate before being handed to the economic expert for incorporation into his work. Regardless of how the work was performed, it strained credulity that CNN was considered a must-have input by cable distribution rivals and their customers. Moreover, AT&T’s (local) share of the distribution market, even in its limited footprint, was not substantial.

In contrast, Microsoft wields a commanding share of gaming platforms, by some estimates as high as 60 to 70 percent of global cloud gaming, but only 25 percent of gaming consoles per Ampere Analytics. Call of Duty is considered a must-have input among gaming platforms, based in part on CMA’s analysis of internal “data on how Microsoft measures the value of customers in the ordinary course of business.” For modeling purposes, it still would be incumbent on the agency’s economist to measure the departure rate, and here it might be difficult to find a natural experiment—for example, where a platform temporarily lost access to Call of Duty—to exploit. As part of its investigation, CMA “commission[ed] an independent survey of UK gamers,” which could have been used to asked Call of Duty users whether they might leave a platform if they couldn’t access their favorite game. CMA noted that Microsoft has already employed a strategy “of buying gaming studios and making their content exclusive to Microsoft’s platforms … following several previous acquisitions of games studios.”

Microsoft has made commitments to Sony and Nintendo to continue releasing its new Call of Duty games for ten years. Yet such commitments are hard to enforce, and could be undermined through trickery. For example, Microsoft could offer access only at some unreasonable price, or only under unreasonable conditions in which (say) the rival platform also agreed to purchase a set of boring games, alongside Call of Duty, at a supracompetitive price. Without a regulator to oversee access, the commitment could be ephemeral, much like T-Mobile’s access commitment to Dish, to remedy T-Mobile’s acquisition of Sprint, which is widely recognized as a farce. Despite its disfavor of behavioral remedies, CMA noted in its notice of possible remedies that it would nevertheless “consider a behavioural access remedy as a possible remedy,” yet concludes that the agency is “of the initial view that any behavioural remedy in this case is likely to present material effectiveness risks.”

Microsoft reportedly entered into a neutrality agreement with organized labor, under which Microsoft would not impair progress towards unionization of Activision employees. Whatever benefits such an agreement might generate for workers, those benefits could not be used to offset the harms suffered by consumers in the product markets under Philadelphia National Bank. Unfortunately, the treatment of offsets is not as clear under monopolization law.

What Goes Around Comes Around

If CMA’s actions ultimately stop the Microsoft-Activision merger, the relatively weaker merger enforcement in the United States would get a pass. U.S. antitrust agencies are readying a revised and more stringent set of merger guidelines, which would bring U.S. standards in line with European authorities. In the meantime, the global reach of the dominant tech platforms—and thus exposure to foreign antitrust regimes—might ironically protect U.S. consumers from the platforms’ most audacious lockups.

Congressional Democrats managed to pass a few crucial measures during December’s lame duck session. One tiny fraction of the omnibus bill to fund the government was the Merger Filing Fee Modernization Act, a measure for which anti-monopoly advocates have long been pushing. 

The Act reforms the Hart-Scott-Rodino (HSR) filing fee structure, the program through which the Federal Trade Commission (FTC) and Department of Justice (DOJ) collect fees from corporations seeking to merge and gain federal approval. The HSR program takes significant resources to administer, and the number of companies seeking to merge has increased in recent years — between 2020 and 2021, filing more than doubled from 1,637 to 3,644, but the fee system had not been updated to account for increased burden upon the antitrust enforcers. Due to the Merger Filing Fee Modernization Act increasing the cap on fees, the Congressional Budget Office estimates that the new fees will result in $325 million in each of the first five years, with the two antitrust agencies splitting the fees and receiving $162.5 million each per year. 

Congress appropriated $430 million for the FTC and $225 million for the DOJ Antitrust Division for FY2023. These budgets represent only a 22.5% and 11.9% increase from FY2022, respectively, and fall well short of the agencies’ respective requests of $490 million and $273 million. Since 2010, when adjusted for inflation, the FTC has received only a $40 million increase and the Antitrust Division a measly $7 million extra, despite processing more than double the number of HSR transactions in 2022 that they did in 2010. The agencies didn’t request more funding because they’re greedy; they need more funding to carry out their enormous missions, and Congress should support the missions. 

The Merger Filing Fee Modernization Act, while an important reform, only increases what share of the FTC and DOJ Antitrust budget comes from HSR fees, and does not increase the overall budget independent of congressional funding. The recent flood of mergers (and higher valuations of those mergers) necessitates additional staff and resources at the agencies to properly review each transaction. Without more investment by Congress, the FTC and DOJ will remain pitifully short-staffed and under-resourced relative to the thousands of mergers and acquisitions that take place each year. 

The perpetual underfunding of antitrust regulation has been known for years. As anti-monopoly researcher Matt Stoller pointed out, “spending on antitrust today is about a third what it was throughout most of the 20th century, and with a much bigger economy today. To get back to the level of antitrust enforcement we had in 1941 would require increasing the budgets of the agencies by ten times.” 

And beyond the DOJ Antitrust and FTC’s edict to enforce competition, the FTC has another underfunded but crucial mission: consumer protection. 

The FTC’s Mission To Protect Consumers Is Just As Important As Protecting Competition

In 2022, the headlines were filled with stories of corporate misdeeds, oftentimes involving deceit of customers. The FTC has a legal mandate and enforcement power to crack down on many such businesses. Through Section 5 of the FTC Act, the FTC can take legal action against companies that engage in “unfair or deceptive acts.” 

The FTC has two options for enforcement under Section 5 — administrative and judicial. Administrative enforcement happens after a problem has already arisen. It involves a proceeding in front of an administrative law judge, who issues a cease and desist order if they find a given practice illegal under Section 5. It is then up to the FTC to determine whether the illegal practices warrant additional penalties, mainly through consumer redress or civil fines. Judicial enforcement, on the other hand, is a preventive measure used by the FTC while the administrative process is still underway. For example, the FTC can use judicial enforcement to enjoin a merger that will hurt consumers while the administrative judge is still determining its legality.

One of the FTC’s “top priorities” is to protect older consumers. A 2022 FTC report found that older Americans were more likely to be victims of scams and lost more money when being scammed. The best-known of these are telemarketing scams in which fraudsters convince people to transfer money by impersonating a friend or government agent, or convincing them they’d won a prize or lottery. The fraudsters can’t carry out these schemes alone — and the FTC is cracking down. 

FTC Chair Lina Khan has made good on the promise to prioritize cases that harm elderly Americans. In June 2022, the FTC filed a lawsuit against Walmart for its part in facilitating fraudulent transactions that targeted the elderly. The lawsuit alleges that Walmart’s money-transfer service routinely turned a blind eye to fraudulent transactions by not training their employees or warning consumers, thus allowing the scammers to collect the ill-gotten money. Over a five-year period, over 200,000 fraud-induced money transfers were sent to or from Walmart stores, costing consumers nearly $200 million. If the FTC is successful, Walmart will have to compensate consumers for the lost money, pay civil penalties, and be subject to a permanent injunction that forces them to end money-transfering practices that result in fraud.

While older consumers are more likely to fall victim to telemarketing scams, children are unknowingly being tricked by corporations to increase their profits. Epic Games, the video game company that owns Fortnite, was fined $520 million for numerous privacy violations and “deceptive interfaces” that resulted in users, many of whom were children, making unintended purchases. 

The FTC also cracked down on so-called “dark patterns” — underhanded tactics that companies use to squeeze more money from consumers including junk fees, misleading advertising, data sharing, and making it difficult to cancel subscriptions. The agency has prosecuted LendingClub, ABCmouse, and Vizio for these dark patterns, and returned millions of dollars to consumers. The public benefits greatly from this work, both by cracking down on shady schemes and putting money back in the victim’s pockets.  

Although it carries out work that clearly benefits everyday Americans, the consumer protection side of the FTC often gets less press than high-profile mergers and acquisitions. But Americans are weary of corporations deceiving them to make more money off their private information. According to a 2019 study by Pew Research, 79% of Americans are very or somewhat concerned about how companies are using their personal data. Enforcing laws we already have in place shows people how the Biden Administration can help them by reining in corporate misbehavior and putting money back in their pockets. 

In FY 2022, the FTC returned a total of $459.6 million to 2.3 million consumers who lost money to illegal business practices. These are material results demonstrating to people that the government can protect them from corporate shenanigans. And yet, the budget for FY 2023 underfunded the FTC by $60 million. The FTC’s budget request included funds for an additional 148 full-time staff members specifically dedicated to consumer protection, a worthy investment for addressing more of these complaints. Without the full amount of requested funds, it’s unclear how many staffers the FTC will be able to hire, but it certainly will not be enough.

The FTC should make bold requests for adequate staffing, and the Biden Administration should be willing to elevate any resistance from Congress. And don’t just take our word on why such a fight would be good politics – Biden’s prioritizing consumer protection in his State of the Union address demonstrates that he and his team see consumer protection as a political winner. 

Going After Dominant Firms Is Not Enough To Protect Consumers

As with antitrust enforcement, the FTC looks to “maximize impact” of its limited resources for enforcing data privacy by going after “dominant” and “intermediary” companies. While this makes the best of the situation, this approach means plenty of abuses are falling through the cracks formed by inadequate funding for enforcement. Compare this to how the Securities and Exchange Commission often targets well-known celebrities when they engage in petty financial fraud — these cases are relatively easy to prosecute and generate headlines that hopefully give the impression of a tough agency on the beat, but these are all ultimately efforts to make do with far too little.

The actions the FTC does take against privacy-violating corporations are isolated and have limited power to deter future misconduct. For example, in 2019, the FTC fined Facebook $5 billion for misleading users by sharing personal information to third parties without their knowledge. While the fine was the largest ever levied by the agency, Facebook was using this misleading tactic for seven years in violation of a 2012 FTC order following previous allegations of even more brazenly deceptive practices. 

And it is far from clear if the Trump-era FTC would have taken enforcement action but for the horrendous press Facebook generated for their relationship with Cambridge Analytica. Reliance on high stakes and high stress journalism is not a dependable basis of law enforcement – especially as journalism declines as an industry (ironically, in large part due to abuses by social media platforms). The fact that Facebook, one of the largest companies in the world, got away with deceptive data sharing for seven years also indicates that the FTC needs more resources to go after the dominant firms in addition to ensuring that smaller companies are not engaging in similar tactics. And the $5 billion fine, while historic, was a drop in the bucket for a company that hit a $1 trillion market cap not long after. 

The limited financial impact of historic fines would be true for other large corporations profiting off their customer’s information as well. As Marta Tellada of Consumer Reports pointed out, “fines alone will not reform [the] market,” and the tech giants view fines “as a cost of doing business.” 
And it’s not just Facebook which collects personal information on its users — today, 73% of companies in the United States do so, from small businesses to monopolies, with many opportunities for corporate malfeasance. When a potentially unfair or deceptive business practice becomes endemic across the economy, regulators cannot meaningfully “set examples” and hope the rest of the market complies. Yes, the FTC needs new rulemaking as well as congressionally-mandated tools for protecting consumers, but ramping up capacity in the meanwhile can tangibly benefit millions of Americans. The FTC needs the resources to properly enforce the laws it is already charged with carrying out.

Andrea Beaty is Research Director at the Revolving Door Project, focusing on anti-monopoly, executive branch ethics and housing policy. KJ Boyle is a research intern with the Revolving Door Project. The Revolving Door Project scrutinizes executive branch appointees to ensure they use their office to serve the broad public interest, rather than to entrench corporate power or seek personal advancement.

An analysis of public comments submitted to the FTC

In conjunction with its proposed ban on noncompete agreements, the FTC solicited comments on from any interested parties. Submission began on January 10 and, as of Friday, January 27, 2022, approximately 5,200 comments had been submitted. Fortunately, under the eRulemaking Initiative, the US Government has broadened public access to documents, permitting bulk download of comments pertaining to regulatory materials, including the FTC proposed ban on noncompete agreements.

Bulk download permits the output of all comments to a delimited text file, allowing the various fields including dates, individual and/or corporate entity submitting the comment (where available), state (again, where available) to be analyzed. Further, the comments field, which includes submissions up to 5,000 characters in length, permits text parsing for keywords such as type of employment, hourly wages, and other phrases of interest. Most importantly, the comments field reveals the submitting entity’s stance toward the proposed rulemaking.

This article describes my ongoing analysis of these data through January 27. Updated results will be uploaded periodically through the March 20, 2023 deadline for comment submissions.

As of January 27, the results:

  1. demonstrate overwhelming public support for the ban on non-compete agreements. Such support is consistent across individual states, underscoring bipartisan agreement on prohibiting such restraints of trade.
  2. highlight the ubiquity of such agreements and their ability to constrain both lower wage and higher wage labor
  3. reveal that medical professionals, including physicians, represent the single most vocal group supporting the FTC’s proposed rule and advocating for a complete ban on non-compete agreements. This result exposes the flaw in attempting to cabin the scope of the rulemaking to lower-wage workers. While arguments supporting non-compete clauses may appear least defensible when encumbering lower-wage workers, the comments indicate that the negative effects are no less pronounced on those earning higher wages, such as doctors and others in the healthcare field. Further, as myriad comments observe, such constraints can have negative spillover effects, such as entrenching monopsony power, raising healthcare costs, and lowering the quality of care.
  4. expose the incongruity of economic theory proffered by some in defense of non-compete agreements when juxtaposed against the real-world experiences of workers who labor under such restrictions.

The overall results including comments submitted through January 27, 2023 appear in Table 1 below. Overall, approximately 93% of comments reflect support for the FTC’s proposed ban. Determination of whether the respondent supported or opposed the FTC rulemaking proceeded as follows. Of the approximately 5,200 comments received as of January 27, I reviewed approximately 3,626 by reading or skimming each comment individually. The reminder were classified as 1) supporting the ban if they contained keywords such as “depress”, “oppress”, “trap”, “archaic”, “in favor”, “eliminate”, “monopoly” or 2) opposing the ban if they contain key phrases such as “to the state”, “overreach”, “object”, “oppose”, “protect small”, “damage small”, “hurt small”, “harm small”. The latter comments were interpreted to mean that the FTC’s rulemaking would hurt small businesses or infringe upon states’ rights. Individual review of the 3600+ comments informed the determination of the keywords and phrases used.

Table 1. Results

The overwhelming support for the FTC’s rulemaking banning non-compete agreements shown in Table 1 extends nationwide, with every state except Hawaii (n=2) indicating that the majority of commenters favor of the FTC’s proposed ban. Among states with at least 10 respondents, the lowest rates of approval were 78.9%, 80% and 81.8% for New Mexico, Utah, and South Carolina, respectively.

The figure below provides a daily breakdown of the percentage of comments submitted that supported the proposed ban on non-compete agreements. The results provide some evidence of coordination of responses in opposition to the FTC’s position. A substantially higher proportion of comments opposing the proposed rulemaking occurred during the 3-day period of January 20, 23 and 24 (the 21st and 22nd were weekend days so the data did not include comments on those dates), reaching a zenith on January 23.

I also analyzed the extent of support for the ban on non-competes by occupation, as reflected in the comments. By far the most common occupation listed referenced work as either a “physician”, a specialty therein (e.g., cardiologist, radiologist, etc.) or a generic description of the medical field. Other noted occupations included accounting (e.g., CPA), dentist, veterinarian, engineering, spa/salon, insurance, or restaurant-related work.

The support among physicians for the ban on non-competes was nearly unanimous. Approximately 98% decried the use of non-competes, citing their harm to physician careers, their families, as well as the negative impact non-competes have on quality of care.

Support for non-competes largely originates from owners of individual practices who expressed concern that their employees may leave and “open up shop across the street” and compete with them. However, even business owners overwhelmingly support the FTC’s proposed rule. Among comments that included terms such as “small business” or “small company(ies)” approximately 68.9% of comments favored the FTC ban, a nearly identical result when evaluating comments indicating ownership of a company (69.3% in favor of the FTC ban).

Many supporters of the FTC’s planned rulemaking vehemently rejected the restraints imposed by non-compete agreements, likening them to indentured servitude, slavery, and using evocative terms such as “toxic”, “chains”, “prison”, “trap”, “bully” and “exploit”. Of the 4653 respondents who supported the FTC’s ban (93.2% of total), approximately 730 (15.7%) used at least one of these terms in their comments.

Note: Ted Tatos is an adjunct professor of economics at the University of Utah and a testifying expert with EconONE Research. This analysis of responses to FTC comments will be updated periodically until the March 20 deadline.

The Federal Trade Commission recently announced it is proposing to ban non-compete agreements between employers and workers. We are of the opinion that much of the conversation about the FTC’s proposed rule, both in terms of its substance and its ability to promulgate, are muddled between differing concepts. Our takeaway is that there is no justification for non-compete agreements once one sets aside Trade Secret protection—a matter already protected by existing law. We also argue that arguments about why the FTC should avoid challenges to its authority are overbroad: Essentially, the argument that the FTC should shy away from rulemaking because of the “major questions doctrine” and the “non-delegation doctrine” suggest that no agency should ever attempt to do anything. Moreover, the FTC has the better argument on these issues.

No Legitimate Business Justification

For present purposes, we set aside non-competes that are part of the sale of a business, as well as trade-secret provisions. We focus solely on clauses that restrict post-employment labor market activities. We refer to these contract terms as post-employment non-compete agreements or non-compete agreements. In the case of a trade secret (not protected by a non-compete agreement but a trade-secret protection clause), a business may have a protectable intellectual property interest. To bring a misappropriation of a trade-secret case, the employer must come forward and identify the trade secret, show that (a) it has competitive significance, (b) the employer took reasonable steps to protect the secret, and (c) the employee misappropriated the secret. In such cases, the claimed business justification is put to the test.

That’s not the case with post-employment non-competes. One of the authors has practiced law in Utah for more than three decades, a state that vigorously enforces non-compete agreements. In nearly every case, the central issue is: What exactly is the legitimate business interest being protected? In our experience, there is no credible business interest that justifies a non-compete agreement. While many corporate lawyers and business litigators will fight to enforce a client’s non-compete, and we have done this as well, there is rarely if ever a credible case. Ironically, the attorneys themselves never agree to their own non-compete agreements, and the American Bar Association’s Model Rule 5.6 (“Restrictions on Right to Practice”) makes non-competes among attorneys and law firms unethical. Is it the case that law firms are somehow different and have no legitimate interests to be protected like other businesses?

States that enforce non-competes usually adopt some version of the Restatement (Second) of Contracts Section 188. Under the rule, the post-employment non-compete restraint cannot be greater than needed to protect the legitimate business interest. Our main point is that there is no legitimate business interest in an employment non-compete agreement. Any effort to define the geographic scope or the duration of the restraint is pure fiction. Lawyers who draft these agreements don’t define relevant markets or estimate the time it takes to depreciate some alleged goodwill. They simply draft the broadest language they believe they may get away with either because litigation is unlikely, or the local precedent provides a good faith argument. This is because, again, there is almost never a credible business interest to be protected in the first place.

So what possible reason could a business have for preventing former employees from working where they choose, independent of trade secret issues such as secret technology or client lists?  The classic answer appears in the lead Utah case where a clerk at a pharmacy through his hard work gains the trust of local patrons. The company claimed ownership in that goodwill.

How many situations are like this in today’s economy? According to a study by the Economic Policy Institute, roughly half of all businesses in the United States use non-compete agreements. It is not reasonable to believe workers at half the nations’ firms have acquired company-related customer goodwill sufficient to injure the company. American companies themselves do not seem to think so. Companies must report goodwill on their financial statements. Yet you will not find the list of their employees with non-competes reported as material sources of company goodwill. Indeed, if an employee does increase its employer’s goodwill with the public by their own efforts, why remove their bargaining power to increase their wages? The employee should be compensated for these achievements. Allowing the firm to appropriate the fruits of such efforts is the essence of “exploitation.”

One argument some businesses make is that the non-compete agreements are necessary to protect their investment in employee training. We find this argument particularly untenable. Non-compete incidence is rising among holders of professional degrees. A Ph.D. with a science background comes to a firm with significant human capital acquired over years at their own expense. The same is true of lawyers, accountants, and physicians. Often additional training occurs through professional organizations. For example, an accountant may receive training in valuation from the American Institute of Certified Public Accountants, or a lawyer may learn how to take a deposition at a National Institute for Trial Advocacy seminar. There are often continuing education requirements. The internal investments by firms in training are trivial in comparison, and what little there is to protect can be protected through trade-secret contract agreements. Such training may also not be valuable to other firms and may not lead to competitive injury. This seems particularly true at the lower end of the labor market. Learning the McDonald’s process may not be particularly useful at Burger King.

Moreover, investment in training takes place without non-compete agreements. It is unlikely that firms in California train less than other states. Law firms invest heavily in training without non-competes. There is no need to give employers the equivalent of an equitable stake in an employee’s human capital to induce training. We don’t allow banks to do this with student loans, and the same public policy should prohibit non-compete agreements as an incentive for training. In both cases, student loans and training will occur without the draconian “exploitation.”

Workers Generally Do Not Negotiate for Non-Competes

Even if there were a legitimate business interest in preventing former employee labor mobility, the Restatement further avers that such an interest can be outweighed by the hardship to the worker or the public. The FTC’s Supplementary Information accompanying its Notice of Proposed Rulemaking comprehensively reviews the economic literature relevant to these two points. The weight of the evidence from the economic studies show that non-compete agreements (a) lower wages, (b) increase racial and gender wage gaps, (c) harm entry and business formation because they impede labor mobility (one can speculate what would have happened if Shockley Semiconductor had non competes with the future Fairchild and Intel founders), (d) increase medical costs, and (e) may reduce innovation.

One of the most frustrating situations for an employee who becomes a party in a non-compete agreement enforcement action is to face a judge who views a post-employment non-compete as purely a contract issue. Early Chicago School law and economics encouraged this simplified thinking. The logic is that since there is a valid contract, and the employee voluntarily chose to execute it, it should be enforced (sometimes this is called the employee choice rule). This logic would only hold under conditions of perfect competition—that is, full information on both sides, equal bargaining power, and no issue of externalities impacting markets and the public. Most judges know this kind of thinking is pure ideology simply based on their knowledge of the common law. The common law itself recognizes that perfect competition is a fiction. The contract defenses of mutual mistake and frustration of purpose are because of asymmetric information. The defenses of unconscionability, duress, and necessity result from unequal bargaining power, and of course, restraints of trade are because of externalities.

To simply enforce a non-compete because it is in a contract, a judge must put on his or her ideological blinders and ignore the real-world factual record. In our litigation experience, employees learn about the non-compete for the first time after the job negotiations are completed and it is time to sign the paperwork. This often occurs after the employee has started the job. The non-compete is often in fine print and written in legal jargon. The contract terms are often presented as a nonnegotiable firm policy. If the worker wishes to negotiate, they are placed in a position where they must risk starting a major confrontation on their first day of work. And to adequately understand their rights will result in a long work delay. Thus, even if the employee might have not agreed ex ante to the non-compete agreement, by the time of the contract (or when they get around to reading the employee handbook), they agree ex post. According to the EPI survey, the vast majority of non-compete agreements are executed without any negotiation.

Answering Commissioner Wilson’s Dissent

This brings us to FTC Commissioner Christine Wilson’s dissent. True to form, she is most concerned that a rule against employee non-competes might harm “the business justification that prompted its adoption.” Of course, she never identifies or defends that business justification, Nonetheless, she knows that there must be something to be defended, and “unelected bureaucrats” shouldn’t interfere. Interestingly, elected officials seem to differ with Commissioner Wilson. Indeed, as noted by the FTC, three states already have rendered employee non-competes unenforceable, and many other states have limited their application. There is no identifiable trend in the other direction. The FTC proposed rule advances a sound policy that will promote economic development and the interests of consumers, workers, and new business formation.

Commissioner Wilson’s jurisdictional objection is that the FTC may not have the power to promulgate a rule against non-compete clauses. This is also the point recently made by Chicago law professor Randy Picker. They both imply that if legal challenges could occur, the Commission should censor itself in advance and give up on policies that improve welfare. For them, the potential protection the rule could afford workers (and ultimately consumers) is not worth the risk of a courtroom loss. We disagree both on the philosophy and on the merits. In connection with the merits, what cannot be disputed is that Section 5 of the FTC act covers non-competes. Binding precedent allows the FTC to bring cases under Section 5 that are covered by the Sherman Act. The Sherman Act prohibits contracts in restraint of trade. A non-compete agreement is a contract, and there is no doubt that the Sherman Act was meant to apply to common law restraints of trade.

The classic example of a restraint of trade is a non-compete agreement (and is where the name “restraint of TRADE” derives). Indeed, Justice White in the Standard Oil Case, which introduced the rule of reason, traces the common law of restraints of trade from Mitchel v. Reynolds, a covenant not to compete case. Because, in our view, post-employment covenants have no legitimate procompetitive purpose, they should be considered per se illegal. This was the view of the district court in Newberger, Loeb & Co. v. Gross, 563 F. 2d 1057, 1083 (1977) (“Restraint on postemployment competition that serve no legitimate purpose at the time they are adopted would be per se invalid”).

But courts in several cases have found that non-competes can protect interests in trade secrets and customer good will. For example, Aydin Corp. v. Loral Corp, 718 F 2d 897, 900 (1983). Therefore, at present the rule of reason is the norm. In our view, these courts have made an unjustified melding of trade secrets and post-employment non-compete agreements. Although a trade secret can be a legitimate interest, it is best handled by a separate contract clause, while the post-employment non-compete agreement is without any legitimate merit. Because of this confusion, post-employment covenants are analyzed under the rule of reason, and under this standard they inevitably fail. This is because it is virtually impossible to demonstrate a market effect emanating from a single or limited number of non-compete agreements, particularly where contracts include arbitration and/or non-class action clauses. In this legal context, Section 5 of the FTC Act can play a critical role. As the Supreme Court stated in FTC v. Brown Shoe Co, Section 5 “is particularly well established with regard to trade practices which conflict with the basic policies of the Sherman and Clayton Acts even though such practices may not actually violate these laws.”  384 US 316, 321 (1966).

On the FTC’s Legal Authority

The remaining issue is whether the FTC is authorized to promulgate a rule against employment non-compete contracts. There is great back-and-forth about whether the language of 6(g) of the FTC Act allows for unfair methods of competition rulemaking. The pre-Chevron doctrine D.C. Circuit decision in Nat’l Petroleum Ref’rs Ass’n v. FTC, 482 F.2d 672 (D.C. Cir. 1973), found such rulemaking authority.

In a nod perhaps to Justice O’Connor’s FDA v. Brown & Williamson decision, Commissioner Wilson notes that the Magnusson Moss Act (establishing Sisyphean barriers to Unfair Trade Practices Rulemaking) expressly carved out unfair methods of competition rulemaking. Commissioner Wilson suggests the reason is reliance on statements by FTC Commissioners and Chairs past disclaiming such authority.

Her argument faces two logical hurdles. The first is that the plain language of the FTC Act, which implies that that the agency has such authority: “From time to time classify corporations and (except as provided in section 57a(a)(2) of this title) to make rules and regulations for the purpose of carrying out the provisions of this subchapter.” To the extent we are all textualists now, it is surprising to see conservative flight to legislative history and former FTC Commissioner statements.

The second logical hurdle is that Chevron Doctrine is dead. Chevron in essence states that where a statutory provision is ambiguous, the Agency’s interpretation shall be given deference so long as that interpretation is reasonable. There is no discussion in Commissioner Wilson’s dissent of Chevron. One can only assume she believes the FTC deserves no deference.

Those are not the only precedents that appear to be ignored. Commissioner Wilson and others argue that it is improvident for the FTC to engage in rulemaking on this issue rather than adjudication. However, the Supreme Court has spoken on this issue as well. In “Chenery II,” Justice Murphy wrote (emphasis ours):

Problems may arise in a case which the administrative agency could not reasonably foresee, problems which must be solved despite the absence of a relevant general rule. Or the agency may not have had sufficient experience with a particular problem to warrant rigidifying its tentative judgment into a hard and fast rule. Or the problem may be so specialized and varying in nature as to be impossible of capture within the boundaries of a general rule. In those situations, the agency must retain power to deal with the problems on a case-to-case basis if the administrative process is to be effective. There is thus a very definite place for the case-by-case evolution of statutory standards. And the choice made between proceeding by general rule or by individual, ad hoc litigation is one that lies primarily in the informed discretion of the administrative agency.

It is entirely possible the Court will ignore its own precedent, but the FTC should not be so quick to do so like antitrust practitioners did with Philadelphia National Bank and other pre-consumer welfare decisions. The FTC should stick to protecting the public and not give deference to the Chicago School over controlling precedent.

The Constitutional Issues

Commissioner Wilson invokes Constitutional issues in apparent eagerness to eliminate her own agency’s authority. In doing so, she assumes that in any “major questions doctrine” (MQD) challenge to the FTC’s rulemaking the Supreme Court will rule against the agency. This is not an unreasonable assumption, given the MQD appears based on Judicial Activism to hijack Congressional intent and Agency autonomy and transfer power to the Supreme Court. Quite simply, according to the Supreme Court, the doctrine suggests that

there are extraordinary cases in which the history and the breadth of the authority that [the agency] has asserted, and the economic and political significance of that assertion, provide a reason to hesitate before concluding that Congress meant to confer such authority… Under this body of law, known as the major questions doctrine, given both separation of powers principles and a practical understanding of legislative intent, the agency must point to clear congressional authorization for the authority it claims.

But are all administrative rulemaking cases a major question? Are all rulemakings “extraordinary?” Is every rulemaking that benefits society destined to end in a MQD challenge?  If that’s the case, then no agency rulemaking is safe, and the argument that the FTC should not promulgate this rule should really be that no agency should promulgate any rule, despite decades of precedent to the contrary. And perhaps that is the end goal that her comments imply she would favor.

Finally, it could be the case that the Supreme Court will just end the administrative state altogether. Certainly Justice Thomas has signaled that way. The “non-Delegation doctrine,” as some would have it, would kill independent administrative agencies, and perhaps the administrative state altogether.

These issues are shared by all administrative agencies, not just the FTC. So to claim that such rulemaking might bring the downfall of the administrative state understates the argument: Any rulemaking might do so, if five justices decide to again ignore precedent to gain power to halt changes that protect the public.


It is telling that a notice of proposed rulemaking has created such ire. Firms rely on non-compete agreements to “unfairly exploit and coerce” workers by minimizing worker leverage, depress their wages, and protect non-existent interests. Trade Secret law already protects any relevant employer interests. But firms favor less competition in the labor market and in the output markets in which they operate.

And Commissioner Wilson is happy to help them. The Notice itself is keenly aware of the history Wilson lays out (and the administrative law she ignores). Warning an agency to do nothing because it will bring backlash by the Supreme Court is a well-established antitrust philosophy. It is one that needs to change.

Mark Glick is a professor of economics at the University of Utah. Darren Bush is a professor of law at the University of Houston Law Center. The views express here are those of the authors only, and do not represent the views of their respective institutions.

The recent debacle that saw Taylor Swift concert tickets surge as high as $22,000 has prompted the United States Senate to join antitrust authorities in reexamining the controversial merger that created Live Nation Entertainment (LNE), the corporation that mishandled ticket sales for the event. The deal, consummated in 2010, combined two already powerful firms —Ticketmaster, which dominated ticketing services for events, and Live Nation, which was the leading event promoter — into a near monopoly.

Critics predicted that LNE would abuse its market power in ways that hurt consumers, artists, and venues, and they proved to be right. Ticket prices, for example, have nearly tripled in the last two decades. In December, the company followed up its fiasco with Taylor Swift by botching ticket sales to a Mexico City concert by Bad Bunny, one of the world’s biggest pop stars, prompting calls for an investigation by Mexico’s president, Andrés Manuel López. Meanwhile, LNE has coerced artists and venues into using its ticket-selling services exclusively — a practice known as exclusive dealing that violates antitrust law.

Fortunately, it’s not too late for the federal regulators to remedy the mess. In addition to a lawsuit being developed by the Department of Justice (DOJ), the Federal Trade Commission (FTC) can use some of its long-neglected – but recently awakened – powers to create market-wide rules targeting LNE’s use of exclusive dealing, a predatory practice that garners little attention with headlines focused on Ticketmaster’s prohibitive ticket prices and botched ticket sales.

*          *          *

The story of the merger that created LNE illustrates almost every mistake the government can make in preventing monopolies. When it approved the merger twelve years ago, DOJ knew that Ticketmaster was already operating as a virtual monopoly, having captured 80 percent of the primary ticketing market.

DOJ also knew that Live Nation possessed significant power in the live entertainment industry. Live Nation was the leading concert promoter, whose role involves contracting the chosen venue, handling the advertising, and managing other production services. Live Nation managed a third of major concert events in the United States, and owned 75 concert venues.

Moreover, due to its position as the nation’s leading promoter, Live Nation was well positioned to develop its own primary ticketing service and challenge Ticketmaster. Soon after entering the primary ticketing market, Live Nation became the second most dominant firm in the industry, controlling 16.5 percent of ticketing sales.

Nonetheless, the Obama administration’s DOJ approved the merger, demanding only a consent decree (formal legal jargon for a settlement) that required LNE to agree to certain minimal conditions. LNE was required, for example, to (1) divest a small division of its company, (2) not share consumer information collected from its ticketing business, and most importantly, (3) not engage in any retaliatory or unfair practices, such as exclusive dealing. LNE would soon blatantly violate all three conditions.

Consequently, consumers, entertainers, and venue operators have had to endure the full brunt of the merged firm’s monopoly power. The New York Times detailed in 2018 how “Live Nation and its operations extend into nearly every aspect of the concert world,” further expanding its dominant position by withholding access to its events if its customers did not use Ticketmaster’s ticketing service.

LNE also uses its power to take more of a cut of the proceeds and, by virtue of shutting out venues that refuse to comply with LNE’s terms, limit an artist’s access to venues, even if that venue can offer better terms to the artist. Artists themselves are put in a position in which to avoid angering fans over unaffordable ticket prices, they have to reduce their own earned income from the event to ensure stable and fair prices.

LNE’s violations of its merger settlement were so blatant that the DOJ under Trump faced enormous political pressure to amend the consent degree with harsher terms, which it did. But these proved insufficient to infusing competition into the industry and major abuses continued.

Today, in addition to the abuses already described, LNE engages in kickback agreements to share its monopoly profits with venues to promise not to take their business elsewhere. Firms failing to submit to LNE’s demands can expect explicit or implicit retaliation against them by LNE cutting them off from all its services.

The hardball tactics have worked. As one lawsuit cogently describes, LNE has locked up over 70 percent of concert venues — numbering 12,000 individual locations — across the United States to exclusively use LNE’s Ticketmaster service, satisfying the significant foreclosure requirement in exclusive dealing law (typically at least 30-40 percent). Each contract is, on average, five to seven years long and sometimes exceeds ten years, satisfying the duration requirement in exclusive dealing law.

Exclusive dealing requirements like these are a centuries-old means of forestalling competition and building monopolies among businesses that sell to other businesses. They prevent a firm from choosing among different competing suppliers, thereby tending to make dominant suppliers still stronger. As I describe in a forthcoming law review article, exclusive dealing requirements restrict the freedom of businesses to select their suppliers or customers, as well as reduce and deter competition – making them “weapons of subjugation that allow dominant corporations to exert their power to maintain their control and be able to punish dependent firms.”

The antitrust laws, such as Section 2 of the Sherman Act, Section 5 of the FTC Act, and in some cases Section 3 of the Clayton Act, broadly prohibit exclusive dealing. LNE’s conduct also clearly violates the controlling Trump-era settlement, which explicitly restricts LNE from “Condition[ing] or threaten[ing] to Condition” its services in a manner that prevents venue owners from “contracting with a company other than [LNE] for Primary Ticketing Services[.]” Indeed, a class action lawsuit initiated in 2022 makes such assertions.

Additionally, other factors such as LNE’s monopoly power and the number of venues locked in by LNE’s exclusive arrangements make antitrust litigation likely to succeed. The ticketing and venue market has extensively high barriers to entry: there are only so many venues, and so many artists that draw massive crowds to fill up venues.

Supporters of the merger could counter by pointing to the fact that concert venues need ticketing service firms to have a proven record of reliability, experience, and scale to handle significant sales volume. Yet Ticketmaster’s recent mismanagement of Taylor Swift’s and Bad Bunny’s concert tickets show that LNE by itself could not provide the necessary level of service. Maybe if LNE faced more competition, it would improve the quality of its service.

Now that millions of Taylor Swift fans have discovered the evils of monopoly, a federal lawsuit against LNE would be bound to receive lots of press attention and wide public support. Initiating a federal lawsuit would also showcase that antitrust enforcement can directly rein in corporate power, and that it can provide tangible benefits to consumers — such as lower ticket prices, higher quality handling of ticket purchases, and increased open access to resale tickets. Moreover, a lawsuit would represent an implicit admission that settlements of the kind that was supposed to restrain LNE are not an earnest policy position that restrains dominant corporations and that litigation and remedies, such as structural breakups, should be the preferred enforcement route.

Antitrust litigation, to be sure, is costly, time consuming, and, more importantly given the current construction of the federal judiciary, unpredictable. Particularly over the last 40 years, reviewing courts have shown little hesitation in rewriting the rules to favor dominant corporations. Furthermore, because significant portions of antitrust litigation are based on a defendant-friendly burden-shifting framework known as the rule of reason, successful litigation against one company does not automatically translate into successful litigation against another corporation using similar market practices. Yet in this case, even if litigation fails, an even better solution is available.

Congress endowed the FTC with broad, delegated authority to enact economy-wide rules prohibiting unfair methods of competition. The FTC can use its power to enact a rule that would prevent the use of exclusive deals by dominant firms or when exclusive arrangements restrict access to an undue percentage of the market. A July 2020 petition to the FTC, signed by over 30 scholars and advocacy organizations, including my current employer, the Open Markets Institute, supports such a rule. The FTC’s recent proposal banning non-compete agreements using this latent power, reveals that the agency can initiate a similar proposal against exclusive deals.

A rule banning monopolistic and unfair uses of exclusive arrangements, like those employed by LNE, would have many benefits. A bright-line rule would provide exceptional clarity for businesses to know when exclusive deals are allowed. A rule would also avoid the currently onerous requirements of antitrust litigation by limiting the analysis courts would engage in.

As the Supreme Court once stated, clear rules “avoid the necessity for an incredibly complicated and prolonged economic investigation into… a particular restraint… an inquiry so often wholly fruitless when undertaken.” Clear rules also limit the unduly expansive prosecutorial discretion afforded to public enforcers. The FTC should act as quickly as possible to use it full powers. In the process it will not only uphold the role of law and fair marketplace but will win the gratitude of everyone who doesn’t want to pay monopoly prices to see their favorite entertainer.

Daniel A. Hanley is a Senior Legal Analyst at the Open Markets Institute. You can follow him on Mastodon

Disclosure: Daniel is employed at the Open Markets Institute, which along with 36 other organizations and scholars, petitioned the FTC to use its unfair methods of competition rulemaking powers to prohibit exclusive contracts.

Over the last year, three of the four current FTC Commissioners (one seat is vacant) have indicated an interest in renewed enforcement of the Robinson-Patman Act as a potential means of policing anticompetitive conduct. The most robust support has been voiced by Commissioner Alvaro Bedoya, who delivered a speech on the subject on September 22, 2022 at a Minneapolis event titled: “Midwest Forum on Fair Markets: What the New Antimonopoly Vision Means for Main Street.” Commissioner Bedoya titled his speech “Returning to Fairness,” and through three anecdotal case studies, expressed skepticism of the prevailing paradigm that “efficiency” is (or should be) the paramount goal of the antitrust laws. As Commissioner Bedoya pointed out, none of the Congresses that enacted any of the familiar antitrust acts invoked “efficiency” as their central purpose; indeed, none of them even mentions “efficiency” as a goal. Rather, he explained, those Congresses targeted “unfairness.” He summarized his views thusly:

Certain laws that were clearly passed under what you could call a fairness mandate – laws like Robinson-Patman – directly spell out specific legal prohibitions. Congress’s intent in those laws is clear. We should enforce them.

With Commissioners Khan and Slaughter having previously expressed similar sentiments, it is not surprising that opponents of a resurgent RPA have been quick to respond. On October 11, 2022, the American Action Forum published a “primer” titled “FTC to Use Robinson-Patman Act as an Antitrust Tool to Target Large Retailers,”[1] and a week later the Cato Institute published an article titled “The Zombie Robinson‐​Patman Act Doesn’t Deserve Revival.”[2]

These articles repeat a series of criticisms that will be familiar to anyone who has spent time with the Robinson-Patman Act (the “RPA”). For example, the article from the Cato Institute proclaims that “[b]y inhibiting more efficient firms from receiving wholesale discounts, the RPA therefore denied retail consumer savings in the form of lower prices,” and that “[i]f enforced again it would no doubt smother efficiencies once more, resulting in higher prices for customers.” The piece from the American Action Forum likewise expresses the concern that “expansion of the use of the RPA as an antitrust tool could have major implications for consumers,” because “[a]n RPA claim may ignore the efficiencies firms generate that come with scale,” such that “consumers will likely pay higher prices.” These criticisms echo those from former FTC Commissioner Noah Phillips, who testified to the House Judiciary Committee of the last Congress that an “unfortunate result [of the RPA] was that American consumers paid more money for groceries and household products that they use every day.”[3]

These recurrent criticisms of the RPA have echoed since the “Chicago School” of economic theory gained ascendance in the Reagan administration and have been repeated with such frequency and certainty that they have become truisms. One may then be surprised to learn that despite 40+ years of repetition, these familiar criticisms are entirely lacking in empirical support. As Commissioner Bedoya recognized, “some 86 years after its passage, there is not one empirical analysis showing that Robinson-Patman actually raised consumer prices.” Indeed, when one traces the lineage of these familiar criticisms back through the literature, he finds that the supporting citations (where citations are offered at all) are only to prior works voicing the same criticisms. And if one delves even further back, he will find that the criticisms did not originate in the work of economists at all, but in the works of laissez faire legal scholars. That is, the familiar criticisms largely originated in the writings of Judges Bork and Posner, and Professor Hovenkamp, all of whom stated the criticisms as axiomatic.[4] Perhaps now when a potential revival of the RPA is at hand, it is finally time to query whether the generally accepted condemnations of the RPA are valid to begin with.

1.      Are the companies that receive discriminatory pricing “more efficient”?

One might begin with the criticism that the Act prevents suppliers from giving favorable pricing to “larger, more efficient businesses.”[5] This criticism contains two (apparently unrecognized) assumptions: (1) that “larger” businesses obtain discriminatory pricing because they are more “efficient” and (2) that the Act prohibits discounts associated with actual efficiency.

As to the first, what evidence is there that suppliers grant preferential pricing to customers based on their “efficiency”? It’s a rhetorical question; the answer is “none.” Perhaps the proponents of this criticism don’t really mean demonstrated “efficiency,” but instead use “larger” as a proxy for “more efficient.” But if that’s what they mean, why do they feel the need to cloak bigness in the garb of “efficiency”? Surely they recognize that a customer like Walmart or Amazon is able to demand preferential pricing based purely on its largeness, with no regard to its “efficiency.” This same criticism of the RPA has been leveled for more than forty years, but I have read volumes of RPA literature and caselaw, and am not aware of any empirical study showing that big businesses are more efficient than small businesses in the only metric that is relevant to the RPA—the cost to the supplier of making sales to its customers.

In the real world, we have substantial reason to doubt whether it is more efficient for a supplier to sell to big businesses than to their smaller competitors. Our firm has litigated only two RPA cases where cost information as to the favored and disfavored purchasers has been produced in discovery. In these two matters, we learned (from the defendants’ own calculations) that because of Costco and Walmart’s exacting packaging and delivery requirements, it was more costly for the supplier to supply those giants than it was to supply their independent competitors. Nevertheless, both suppliers gave Costco and Walmart better pricing merely because the behemoths demanded it. While two is admittedly a tiny sample, it is also two-out-of-two. Before we adopt economic and public policy around the assumption that big businesses should be entitled to discriminatory pricing because they are “more efficient,” we at least ought to know whether it’s true.

Moreover, the RPA includes a specific provision that protects sales to firms that are actually more efficient. Under the “cost-justification” defense, “nothing herein contained shall prevent differentials which make only due allowance for differences in the cost of manufacture, sale, or delivery resulting from the differing methods or quantities in which such commodities are to such purchasers sold or delivered.”[6] In other words, where it is actually demonstrably cheaper for a supplier to sell to Walmart or Costco than to their smaller competitors, the RPA permits a lower price offer. The Act only prohibits discounts that cannot be justified as more efficient.

The response that the cost-justification defense is “virtually impossible” to meet is unconvincing.[7]  In all of my RPA reading, I have yet to see a cogent explanation of why it would be so hard for a supplier to demonstrate its cost savings to the recipient of a discriminatory price. After all, cost-of-goods-sold calculations represent a fundamental component of business accounting. The reason why the defense has been “virtually impossible” to meet in practice almost certainly rests with the challenged price having no supporting cost calculation as a basis in the first place. Where a supplier offers an arbitrary 20% discount to a favored customer, for example, no one should be surprised to find that it is “virtually impossible” for the supplier to cobble together data to show that it was cost-justified. But that does not condemn the defense; rather, it demonstrates that the supplier engaged in unjustified price discrimination.

2.      Does the RPA prohibit “discounting,” resulting in higher prices to consumers?

The Cato Institute article proclaims that the RPA “inhibit[s] more efficient firms from receiving wholesale discounts,” and that “[i]f enforced again it would no doubt . . . result[] in higher prices for customers.” These are two familiar and related criticisms—that the RPA prohibits “discounts,” and that the result is higher prices to end consumers.

The notion that the RPA “prohibits discounts” is merely a framing device to support the criticism. Section 2(a) says nothing about “discounts;” what it prohibits is “discriminating in price.” The RPA can only be framed as prohibiting discounts if one assumes that the supplier’s baseline price is the higher price it charges its disfavored customers. But why should the price that the supplier unilaterally sets be deemed the baseline? One can just as easily declare that the baseline price is the one that the supplier negotiates with a strong buyer; Walmart or Costco for example. Under that framing device, what the Act prohibits is charging illegally higher prices to smaller businesses.

The effect on prices to end consumers follows suit. As Commissioner Bedoya noted, it has never been empirically demonstrated that prohibiting price discrimination results in higher prices to end consumers. But even with the lack of empirical support, the assumption that RPA enforcement “would no doubt . . . result[] in higher prices for customers” depends on supposing that if suppliers are forced to sell to competing purchasers at a single price, it would be their higher list-price, rather than their “Walmart price.” But surely a supplier’s largest customers aren’t mere price-takers, who will settle for whatever list price the supplier announces. Undoubtedly they would bargain for a lower price, and when that bargaining process is complete, the smaller purchasers would benefit from the same lower price. This is because “[i]f the bargaining is done by the stronger of two buyers, then the lower price becomes the price paid by everyone.”[8] If that is true, then prohibiting price discrimination gives all buyers access to the favored price, and “would no doubt” result in lower consumer prices to more people.

Of course there are numerous complications to a simplistic view that the proper “but for” price is the one given to the favored purchaser, and that all purchasers would get that price if the RPA were rigorously enforced. Most obviously, it seems likely that a supplier uses the higher prices it charges to its disfavored purchasers to subsidize the low prices it gives to the favored. But that is hardly a reason to suspect that the RPA results in higher prices to consumers on average. Rather, it seems consistent with the RPA’s fears: that in a world that permits price discrimination, smaller businesses will find themselves subsidizing the profitability of their larger competitors. More to the point of this article, however, is that I have yet to see any of the RPA’s legal critics even consider any of these issues, let alone attempt to rigorously analyze them.

Nevertheless, real world observation of RPA litigation supports the view that the proper baseline price is the one given to the big buyer. While I cannot speak as knowledgeably about the FTC’s historic enforcement actions, I can say that out of the hundreds of private-enforcement RPA cases I have read, the plaintiff has always demanded to be given the lower favored price, not demanded that its competitor be required to pay the plaintiff’s own higher price. In other words, success in those cases “would no doubt” result in lower prices, not higher ones, as the critics proclaim. That pattern is supported by the cases our firm has brought where the settlement has included a price component. Never once has the lower price given to the favored purchaser been taken away; it has always been the case that that lower price has been extended to our client.

*          *          *

In his September speech, Commissioner Bedoya quite rightly observed that nothing in the RPA or its legislative history suggested that Congress was concerned with promoting “efficiency.” Indeed (and while Commissioner Bedoya sagely refrained from making the point) the Congress that passed the RPA did not even express the purpose of ensuring the lowest possible prices to consumers. The Supreme Court has recently reiterated that the judiciary “is not free to substitute its preferred economic policies for those chosen by the people’s representatives.”[9] But since the Supreme Court has already largely substituted its preferred economic policies for those chosen by Congress in the antitrust realm, I fear that Commissioner Bedoya is ceding unnecessary ground in exhorting “a return to fairness,” as if fairness and efficiency are antipodes. While Commissioner Bedoya’s reading of congressional intent is undoubtedly correct, I sense that the FTC will have better luck in any future enforcement actions if—in addition to emphasizing the plain language of the Act—it pushes back strongly on the familiar condemnations of the Act, by pointing out that despite their endless repetition, they lack any empirical support.

Mark Poe is a co-founder of San Francisco-based Gaw | Poe LLP. Mr. Poe and his co-founder Randolph Gaw are classmates of the 2002 class of Stanford Law School, who worked at Morrison & Foerster, Wilson Sonsini, and O’Melveny & Myers prior to founding their own firm in 2014. The firm frequently litigates Robinson-Patman Act cases on behalf of “disfavored” wholesalers who cater to convenience stores and independent grocers.

[1] See

[2] See

[3] See

[4] See Robert Bork, The Antitrust Paradox (1978); Richard A. Posner, The Robinson-Patman Act, Federal Regulation of Price Differences, American Enterprise Institute (1976); Herbert Hovenkamp, Federal Antitrust Policy: The Law of Competition and Its Practice (3d ed. 2005).

[5] Hovenkamp, n.5, § 14.6a1.

[6] 15 U.S.C. § 13(a).

[7] See n.5, Posner at 41.

[8] Daniel P. O’Brien, The welfare effects of third-degree price discrimination in intermediate good markets: the case of bargaining, 45 RAND J. OF ECON. 92, 100 (2014).

[9] Epic Systems Corp. v. Lewis, 138 S. Ct. 1612, 1632 (2018) (Gorsuch, J.)