Over the weekend, someone forwarded me a tweet by George Mason economist Alex Tabarrok, who claimed that not one but two new studies provide conclusive evidence that higher minimum wages are a bad thing. Although this tribe shows little sympathy for the plight of workers and despises unions in particular, I thought it was worth digging into the evidence in support of their positions.
Tabarrok’s tweet pointed to his post in Marginal Revolution, which cited two NBER working paper studies, with Jeffrey Clemens, an economist at UC San Diego affiliated with the Hoover Institute, serving as the lead author for both. The first study, from July 2025, purports to show that California’s increased minimum wage for certain workers in the fast-food industry (AB 1228) caused employment in California’s fast-food industry to decline by 2.7 percent. The second study, from March 2026, purports to show that AB 1228 caused food-away-from-home (FAFH) prices in California’s to increase by 3.3 percent. Based on these findings, Tabarrok concluded: “So the policy effectively taxes low-income consumers generally to raise wages for a subset of low-income workers, while eliminating jobs for another subset. Your mileage may vary but I don’t see this as a big win for workers.”
I respectfully disagree. That a higher minimum barely decreased jobs is not dispositive of the policy’s welfare effects on workers. Accepting the findings of the first study, 97.3 percent of California workers affected by AB 1228 benefited from the intervention via higher wages. We balance harms and benefits all the time—think cost-benefit ratios. That’s how policymakers make decisions. We know vaccines have some side effects, but we take them anyway because the benefits outweigh the risks. If a higher minimum wage improves the welfare of workers on net, then the policy should be embraced as a big win for workers.
Clemens et al. (2025) find that employment in California’s fast-food sector declined by a scant 2.7 percent relative to employment in the fast-food sector elsewhere in the United States from September 2023 (when the AB 1228 was enacted, but not yet effective) through September 2024. The wage increase did not actually go into effect until April 2024, just a few months before the end of their study window. The authors would have you believe that California fast-food employers stopped hiring in anticipation of a future wage increase.
Setting this issue to the side, and accepting their estimated effects, out of every 1,000 workers affected by the minimum wage increase, 973 workers earned more per hour and kept their jobs. The authors estimate on page eleven that fast-food pay increased in California by roughly $4 per hour, from $16 to $20. Such an hourly increase would translate into $7,200 more per year for every worker who kept their job (at 1,800 hours per year) after AB 1228 came into effect. Before addressing the welfare losses incurred by the disemployed, that’s a welfare gain of roughly $7 million per every 1,000 workers affected by the policy (equal to 973 workers x $7,200 per year).
On the other side of the ledger, 27 workers per 1,000 affected lost their fast-food job because of the intervention. In a potential Pareto sense, so long as the roughly 973 “winners” from the policy (per every 1,000 affected) could compensate the 27 disemployed with (say) $100,000 annual awards and still be better off—with awards totaling $2.7 million—there is no doubt that the policy was welfare-improving for workers on net (a surplus of $4.3 million to the winners after compensation). With the benefit of hindsight, fast-food workers would have overwhelmingly voted for the wage increase. In Tabarrok’s words, this was a “big win for workers.”
It’s hard to put a figure on the losses, and losing a job is absolutely horrible. But the 27 workers (per every 1,000 affected) who are priced out of the market by the minimum wage increase might find work at the formerly prevailing wages in unaffected industries—recall the law affects only fast-food establishments. Or they might collect welfare payments for a stint. In a world with a better safety net, their welfare would be ensured. So their harms might be mitigated. But even with our intolerably weak safety net, workers collectively are better off by an overwhelming margin, even if the results of the Clements et al. study withstand scrutiny.
Moreover, Clemens and his co-authors acknowledge at page two that two prior studies found little-to-no employment effects from AB 1228:
Because of its relative novelty, this policy has already attracted some analysis. Reich and Sosinskiy (2024) assess AB 1228’s effects on fast-food wages and prices, and use preliminary CES data to examine employment, finding no adverse impact. … Sovich and Hamdi (2025) analyze the effects of AB 1228 using anonamyzed [sic] payroll data from Equifax, which covers 5,000 large employers across the United States. Their analysis focuses on relatively large establishments and finds evidence of offsetting declines in turnover and hiring that net to modest if any impact on employment. (emphasis added)
So now we have three studies on point. Averaging across the three implies a de minimis employment effect from AB 1228 (equal to 2.7 percent divided by three or less than one percent on average). But if you go by Tabarrok’s tweet, it seems that Clemens et al. are the only folks who have weighed in here, they are channeling God, and God tells us that a minimum wage increase is bad for workers.
Balancing worker gains against consumer losses
It’s possible that even if workers benefited on net from AB 1228, consumer welfare losses owing to purportedly higher FAFH prices could swamp the net gains to workers. Before examining the evidence in the companion study, my inclination is to resist such a balancing, as there is no objective way to weight gains to one group (workers) against losses to another (consumers). (Outside of two-sided platforms, antitrust law disallows such balancing for the same reason.) The purpose of raising the minimum wage is to level the playing field for workers in their dealings with dominant employers—that is, it is a pro-worker tool. That some of the worker gains from higher wages come via the employers (via reduced profits) while the residual comes via consumers (via pass-through of a higher wage bill) is to be expected. To wit, Reich and Sosinskiy (2025) estimate that roughly two-thirds of the wage increase from AB 1228 was passed through to consumers in the form of higher prices, meaning that employers absorbed the remainder via lower profits—consistent with the monopsony employer model.
Notwithstanding my views on balancing, the companion price study potentially overstates the impact of AB 1228 on FAFH prices at fast-food restaurants. Here, the treated group are four metropolitan statistical areas (MSAs) in California and the control group consists of 17 MSAs outside California; the BLS only tracks 21 MSAs nationwide for this index. The authors note at page five that “Limited-service and full-service meals together account for over 93 percent of the FAFH basket, with limited-service restaurants comprising approximately 50 percent of the index.” (emphasis added). To the extent that limited-service restaurants serve as a proxy for fast-food, this implies that nearly half of their treated group were not directly affected by AB 1228. If prices increased among full-service restaurants around the implementation of AB 1228 for reasons unrelated to the treatment, their model would attribute that price effect to AB 1228. Anticipating this critique, the authors are quick to credit full-service price effects as “spillovers” from the limited-services segment. The FAFH index also includes deliveries like DoorDash; its drivers sometimes do not even make minimum wage, as they get paid by the order.
Among Tabarrok’s evidence that a minimum wage hike increases prices—or what he calls a “new consensus on the minimum wage”—is a 2020 paper by Renkin, Montialoux, and Siegenthaler, which finds that a ten percent minimum wage increase results in a 0.36 percent increase in food prices. Thus, increasing the minimum wage from $7.25 to almost $8.00 would raise a $100 grocery bill to a whopping $100.36. That negligible increase in the bill is about half of the worker benefit for a single hour of work. Tabarrok is cherry-picking the literature that just barely suggests some negative effects from minimum wage increases. It bears noting that the federal minimum wage has not been raised in almost 17 years. Imagine the outcry among libertarians if the federal government actually made an effort to address income inequality.
Finally, Clemens et al (2026) argue at page three that “an implication of price pass-through is that minimum wage increases function in part as a regressive consumption tax, with costs borne disproportionately by lower-income consumers who spend a greater share of income on affected goods.” But the minimum wage increase is exactly aimed at benefiting those lower-income consumers in the first place. And why exactly are they looking only at the distributional effects on minimum wage rates? Why do they never look at the distributional effects of stock buybacks or executive pay?
An anti-worker bias?
Clemens is a small-government conservative. He has been affiliated with the Hoover Institute since 2021. He contributes to CATO books, co-authors essays about the minimum wage with Michael Strain of the American Enterprise Institute. He’s also the director of the Center for Economic Policy Analysis within the UC San Diego economics department, where in his mission statement, he discusses “how the role of housing supply (or lack thereof) in driving the housing affordability crisis” aka corporatist abundance propaganda. Now there’s nothing wrong with a conservative weighing in on the minimum wage debate. But we should understand where he is coming from, and we should be particularly curious as to whether any of his funders benefit from this research. After all, less pay for workers means greater profits for employers!
Labor economists recognize that in the presence of monopsony power, the imposition of a minimum wage can actually increase employment. When the wage is set moderately above the monopsony price, the intervention is a pure win for workers; there are no losers, only winners. In these cases, the minimum wage serves as a countervailing force against the employer’s buying power, compelling the employer to share more of the marginal revenue product and employ more workers. Even under the monopsony model, a sufficiently large increase in the minimum wage above the monopsony wage might cause the employer to reduce work opportunities, creating winners and losers. Based on the three studies on point, AB 1228 likely did not disemploy any workers, consistent with the monopsony model.
In any event, to assess the net welfare effect on workers, one must weigh the losses of the disemployed against the significant gains to the workers who kept their jobs but now earn $4 more per hour. Using the 2.7 percent employment effect estimated by Clemens et al., AB 1228 appears to be a big win for workers. Let’s celebrate it!
Big Tech is reeling from a pair of recent trial court decisions holding Facebook parent company Meta liable for creating an addictive, abusive service that substantially resulted in adverse mental health impacts for the plaintiffs. In one case, the New Mexico attorney general prevailed in a $375 million lawsuit over Meta’s facilitation of child sexual exploitation. In the other, a California jury found Meta helped to cause a young woman’s thoughts of self-harm and body-image issues.
After years of social media companies running amok—helping to abet genocide, skew elections, and breed radical political polarization—these cases offer many a glimmer of hope that the law might still bind our age’s mega-corporations. And, right on cue, The New York Times opinion section’s resident scold David French arrived at the scene to fret about how the decisions might lead to “open season on the platforms.”
French’s argument, at least when it is not merely aping the somewhat more thoughtful Mike Masnick at Techdirt, is woefully incomplete. French does not even consider the evidence and arguments in the actual trial—prefering to speak in broad flourishes—and advances an articulation of free speech so expansive that it could potentially preclude any regulation of online platforms at all. First Amendment considerations are important and justify serious debate, but they cannot simply exempt Big Tech from all other legal considerations, including countervailing standards of protected speech and product liability. That speech is involved does not short circuit all other legal considerations; every invocation of “expression” does not magically preclude every other law on the book from applying.
From digital town square to editor
Let’s begin with the legal questions that French advances. French’s entire argument is that (a) the speech being disseminated through social media is legal and so (b) any product liability theory is an infringement on the social media sites’ First Amendment rights.
That, though, is quite debatable. The speech being disseminated is actually only mostly legal; it also frequently includes fraud, incitement to violence, and defamatory speech. Last year, a Reuters’ investigation uncovered that Meta actually internally sanctions a degree of fraud in service of hitting their own revenue goals. The platforms are generally not considered responsible, however, for the dissemination of speech that exists outside of the First Amendment’s protections because of a landmark 1996 law that defines online platforms as distinct from publishers.
French somehow manages to make it through his entire column without so much as a reference to Section 230 of the Communications Decency Act of 1996, the single most important legal authority for defenders of social media seeking to argue on free speech grounds. Section 230 establishes that forums and other online hosting platforms are not a type of publisher. Before 1996, any attempt at moderation opened online platforms to claims that they were acting as publishers, making them responsible for the content that they disseminate. So the CDA of 1996 included Section 230 to avoid punishing companies for attempting to police the content on their platforms and encourage a degree of oversight.
The inherent contradiction arises when companies do actively choose to act as publishers. When Elon Musk’s charred remnants of Twitter opt to boost right-wing talking points and suppress left-wing accounts, it is actively promoting some content over others based on the company’s own preferences, rather than a content-neutral distribution of all views that meet the firm’s guidelines. So the real question is whether social media companies are functioning as the “modern-day town square” or instead are engaging in an editorial role. And the obvious answer is that they are largely doing both.
There are reasonable arguments about how the internet is reliant on Section 230 to exist in the shape that we are all familiar with, and about how product liability-based theories of harm like the ones articulated in Meta’s recent losses could be an end-run around its protections. Yet French makes no real attempt to make those points at all. Rather, he opts for the most tedious, generic type of “free speech” deflection, merely invoking the First Amendment without thinking through how it might work at all.
The argument from Masnick that French cites does include a hint of this analytical work. There are valid points around the burden of proof used, whether this functionally neuters Section 230, and whether there is a standard of product liability that can be counterbalanced against free speech rights. But French uses the First Amendment as a fig leaf to avoid arguing the decision on the merits. In particular, there are multiple points where he outlines exceptions to freedom of expression but gives literally zero thought to whether Meta’s actions might fall into any of these buckets. In particular, if Meta’s algorithm is designed specifically to boost speech that engages in true threats or defamation, then it could be held liable under those circumstances. In the New Mexico case, Meta was explicitly being sued for distributing child sexual abuse materials, one of the exceptions French cites.
When speech can be regulated
At the core of this issue are two different legal standards surrounding speech on social media, sometimes complimentary and sometimes contradictory: (1) a standard of editorial discretion, spelled out in Moody v. NetChoice, where an industry trade association unsuccessfully argued that under Section 230, the internet platforms it represented could not be regulated by Texas and Florida laws for biased moderation practices, and (2) the protections for content hosting articulated in Section 230. The former, a 9-0 decision, ruled that curation must be understood as an editorial exercise, while the latter establishes that content moderation itself is not an editorial exercise of the platform’s speech. Section 230 means if I post something defamatory on Bluesky, for example, the defamed party cannot sue Bluesky for hosting it.
This creates an obvious grey area around where types of promotion and design decisions cross over from moderation to editorial functions. And there are important and interesting discussions to be had there!
Yet French has nothing much to say about that, opting instead to gloss over the balancing act that the law is doing.
There are also important legal questions about how far the dissemination mechanisms for speech are shielded by virtue of their association with protected speech. For instance, a newspaper boy who breaks your window by throwing a newspaper through it cannot simply invoke the fact that they were delivering legally protected speech to avoid liability. Likewise, Meta cannot create a system that harms users and be exempt from basic consumer protection and product liability standards.
The catch is that Meta’s delivery system is colorably harmful because of the effect of the speech being delivered; it may be that the information distribution itself is more than most people can handle.
Here’s the crux of French’s argument, again mimicking Masnick:
A social media site isn’t a bottle of alcohol or a cigarette. It’s not delivering a drug. It’s delivering speech. Sometimes that speech is silly and harmless. Sometimes it is toxic and harmful. Sometimes it’s educational or inspiring. But it’s all speech, and in America speech traditionally can only be blocked, censored or regulated in the narrowest of circumstances.
That is, strictly speaking, not true. We regulate speech all the time: RICO and conspiracy provisions, contractual restrictions on expression, fraud, defamation, intellectual property protections, and many many more limitations exist. The First Amendment is not a get-out-of-jail-free card.
For reference, here is the corresponding quote from Masnick:
Lots of people (including related to both these cases) keep comparing social media to things like cigarettes or lead paint. But, as we’ve discussed, that’s a horrible comparison. Cigarettes cause cancer regardless of what else is happening in a smoker’s life. Lead paint causes neurological damage regardless of a child’s home environment. Social media is not like that. The relationship between social media use and mental health outcomes is complex, highly individual, and mediated by dozens of confounding factors that researchers are still trying to untangle. And, also, neither cigarettes nor lead paint are speech. The issues involving social media are all about speech. And yes, speech can be powerful. It can both delight and offend. It can make people feel wonderful or horrible. But we protect speech, in part, because it’s so powerful.
Many smokers don’t get cancer, actually. And I, despite not smoking, got a rare type of cancer in my lung in my mid-20s. All of these harms are about increasing the probability of bad outcomes, not single-handedly causing them. Cancer risk is also mediated by dozens of “confounding factors that researchers are still trying to untangle” including genetics, immune system health, age, and exposure to all manner of things.
Notifications, the algorithm, and other design choices are different from content
Social media is certainly a different beast than alcohol or cigarettes or lead paint, but the analogy misses how the use of social media is distinct from the content of social media. Neither Masnick nor French engage with specifics from the case that are content-agnostic, of which there are several. Both insist that the design features being litigated are necessarily a type of second-order expression because they depend on the entertainment value of the underlying content. But there are a number of issues with that argument.
For one, it simply ignores examples of practices designed to foster a behavioral addiction that are not direct mechanisms of content distribution. For instance, the plaintiff focused significantly on the role of notifications. The plaintiff in KGM v. Meta reportedly received notifications throughout the day from Instagram and Facebook, giving her a “rush” and inducing her to seek bathroom breaks to check them.
Similarly, a targeted algorithm is a design choice that has addictive properties irrespective of the underlying content. Although better content makes the platform more addictive, the design features around recommendations and endless scrolling have addictive properties all on their own. Saying that the algorithm can’t be considered addictive because it relies on a functional layer of content is like saying that alcohol can’t be considered addictive on its own because it relies on a glass to be consumed.
Moreover, while the algorithm itself has some measure of protection as editorial speech under Moody v. NetChoice, if that protection owes to the editorial standard, it opens the door for holding the companies directly accountable for the harms of their speech, including addiction.
This is actually a point French directly agrees with:
For example, just two years ago, I wrote in defense of a federal appellate court decision holding that TikTok was potentially liable for algorithmically suggesting the so-called blackout challenge to a 10-year-old girl who later tried the challenge (which involves voluntarily choking yourself) and died. In that case, TikTok’s algorithm proactively suggested the challenge to the young girl. She did not search for it. As I argued at the time, TikTok should be treated in the same way that we’d treat an adult who urged a child to try a potentially fatal activity. But that’s not what the California case was about. In that case, the fundamental argument was that the design caused an addiction, not that specific speech caused direct harm.
Exactly! TikTok, Meta, and other social media companies should be held responsible for the legal consequences of design functions in the same way that other parties are held responsible for editorial decisions. And that is what the cases are doing, working out how far free speech for design choice extends and then, where it is a matter of editorial expression rather than broad content-dissemination, holding the platforms accountable using general product liability law.
The First Amendment simply cannot be understood as granting carte blanche to any publishing distribution function as long as it delivers speech. While film studios have a right for their art not to be banned, they don’t have a right to lace the popcorn with cocaine to keep you coming to the theater.
“I realized that ‘success’ for nearly all tech platforms meant things like maximizing the amount of time you spend with their product, keeping you scrolling as much as possible, or showing you as many ads as they can.”
— former Google employee, James Williams, explaining why he quit the company years ago
Suppliers owe a duty of care to their consumers. The duty of care applies to ensure every product and service does not cause harm. The supplier of a carbonated drink, a food producer, and a social media platform are all subject to the duty of care.
Manufacturers owe a duty to design products that do not pose foreseeable risks of harm. A defect in design occurs when the product falls below the standard of a reasonable manufacturer in ensuring safety and reliability. Manufacturers also have a duty to warn users of foreseeable risks associated with their products. This duty may overlap with statutory safety obligations under product safety regulations and consumer protection laws. Consumers have a legal right to expect that products they use, or purchase, will not cause them harm.
Social media addiction
Humans are social animals, wired to pursue experiences including friendly interactions in exchange for a reward of a dopamine release in our brain, which pushes us to repeat behaviours. On top of that, behaviours can be acquired through the association between an environmental stimulus and a naturally occurring one. Pairing a product with a naturally occurring stimuli such as catchy music or beautiful scenery can elicit a positive emotional response towards the product. The design of social media platforms, and the evolving algorithms, is rooted in user engagement. Someone posts a photo on Instagram and gets “likes” in return. This reward hacks the brain’s social system where positive strokes are part of community reinforcement, and social standing that causes them to post again, add more “friends,”, like their friends’ posts, and so on, in a spiral of reinforcement. The reinforcement generates feelings of wanting to keep looking at the feed. Those feelings, particularly the feeling of “missing out” when not regularly checking the feed, is what the platforms use to ensure user engagement and return, creating an ideal opportunity to promote, target, advertise and sell products to people.
A positive reinforcement such as the like button on social media platforms is a reward, encouraging behaviour to generate attention. Psychologists call the type of learning in which voluntary behaviours are shaped by reinforcements “operant conditioning,” essentially a reinforcement mechanism that can increase specific “positive” behaviours.
Consumers are not consciously aware this training is taking place, nor are they aware of the risks, nor have they had the consequences brought to their attention by way of clear notices or warnings in language that they understand. Facebook, Instagram, TikTok, YouTube among other platforms exploit human behavior, compete for consumer attention, and, as KGM v Meta et al. and New Mexico v Meta proved, breach statutory duty and are liable for negligence and negligence to warn.
Some studies have shown that people with frequent and problematic social media use can experience changes in brain structure similar to changes seen in individuals with substance use or gambling addictions. The reinforcement of behaviour to return to social media is creating a type of psychological and chemical addiction that platforms dismiss as “engagement.” The addiction of users to social media, particularly of young adults and children whose lifespan lays ahead, is beneficial for platforms who need to gather and sell data for advertising.
Children are most at risk
In addition to the concern that addictive-by-design algorithms are harmful to society in general, our children are most at risk.
In the United States, studies show that up to 95 percent of youth ages 13-17 use a social media platform, and almost 40 percent of children ages 8-12 use social media. From a young age, children and teens have been and continue to be exposed to to inappropriate content on social media that relates to suicide, bullying, exposure to nudity, sexual, and violent content.
Children may be also exposed more than adults to illegal and inappropriate content including misinformation, bullying and contact with predators; teens are exposed to three times more nudity than adults on social media.
Between ages 10 and 19, children undergo a highly sensitive period of brain development; risk-taking behaviours reach their peak, well-being experiences the greatest fluctuations, and mental health challenges such as depression typically emerge. During this period, brain development is especially susceptible to social pressures, peer opinions, and peer comparison.
Frequent social media use may be associated with distinct changes in the developing brain in the amygdala (important for emotional learning and behaviour) and the prefrontal cortex (important for impulse control, emotional regulation, and moderating social behaviour), and could increase sensitivity to social rewards and punishments. An early exposure to technologies and social media in children interferes with cognitive development and emotional regulation.
Social media can provide a sense of connection for some. Yet some social media platforms show live depictions of self-harm acts like partial asphyxiation, leading to seizures, and cutting, leading to significant bleeding. Studies found that discussing or showing this content can normalize such behaviours, including through the formation of suicide pacts and posting of self-harm models for others to follow.
Nearly half of all adolescents aged 13–17 said social media makes them feel worse. Nearly 60 percent of adolescent girls say they’ve been contacted by a stranger on certain social media platforms in ways that make them feel uncomfortable. More than 1 in 10 adolescents have showed signs of problematic social media behavior, struggling to control their use and experiencing negative consequences.
The abuses and exploitation of children in the digital environment are a human rights issue, explicitly protected in the Convention on the Rights of the Child. A platform’s inability to protect children from viewing harmful content, such as information relating to suicide, self-harm and sexual content, which is occurring on platforms owned by Google and Meta, is a violation of the Convention.
Pointing fingers at victims and parents
Meta’s own internal studies under “Project MYST” found parental controls do not curb compulsive use. This study reportedly found that children who had experienced “adverse effects” were most likely to get addicted to Instagram, and that parents were powerless to stop the addiction. Mark Lanier, lawyer for the plaintiff in KGM v Meta et al. showed during the trial that Meta’s internal communications compared the platform’s effects to pushing drugs and gambling.
Pushing blame and responsibility on victims and parents looks to be an attempt by the platforms to ignore or deflect attention from the duty of care imposed by law on them to the benefit of their users. Breach of duty requires only that harm was caused negligently.
The internal documents disclosed in Meta’s litigation, alongside whistleblower testimony, now appear to be indicating that the platforms appreciated the risks and went ahead regardless of the consequences.
The defendants attempted to argue that KGM had pre-existing mental health problems that were not caused by the platform itself and that she consented to the terms of use.
One vital element that is often overlooked because of the “one-size-fits-all” nature of the service on offer is that children do not legally have the ability to provide consent. In most jurisdictions, the legal age of majority for entering contracts is 18. While those under 18 can sometimes enter contracts such as for necessities where they benefit, they cannot be held responsible for any debt they owe. Notices of use presented by platforms for “click here” consents by minors are hence irrelevant to the duty of care.
Duty of care is owed to all, and platforms cannot benefit from their victims’ vulnerabilities under tort law. As established in Koch v. US (2017), the platforms still bear full responsibility for the consequences of their wrongful acts. In any given population, some will be more resilient than others and some will be more likely to be harmed than others.
In addition, when it comes to discharging the duty of care, the person who is signing up to payment and who is the bill payer are usually the parents of the children affected. It is difficult to suggest that they have provided properly informed consent to their children being harmed if there are no warnings from social media about the effects of its use.
In the UK, groups are calling for properly informed consent and providing warnings to children and parents alike on the effects of using social media, including the impacts of the design of its algorithm. Mumsnet, a London-based internet forum, has called for an under-16s social media ban with a cigarette-style health warning, claiming that “three hours or more social media a day makes teens more likely to self-harm,” that teen phone addiction doubles the risk of anxiety, that social media use can increase the risk of eating disorders in young people and that addictive social media use in teens is linked to higher risk of suicidal behavior. Mumsnet has proposed packaging that would look like this:
A Mumsnet billboard ad, part of its Rage Against the Screen campaign. Photograph: David Parry/PA. The Guardian.
The irrelevant defense of “free speech”
It’s obvious that in most personal injury cases, “freedom of speech” is not a defence. In a car crash where someone was drunk driving and hits a pedestrian at a crossing, it would be odd for the driver of the car, when confronted with a civil suit for damages, to claim he was talking on the phone at the same time and hence exercising the right to free speech and that in some way that may have contributed to the lack of care an attention to driving, and should be excused.
While bogus as a defense, in the example above the point is at least relevant. It is clearly relevant to the level of care and attention the driver is paying to the pedestrian. In the context of social media, the right of the platform to exercise its right to express itself freely its substantively irrelevant to its duty of care or the discharge of that duty of care.
It has nevertheless been used as a procedural torpedo to prevent state-level cases and legislation from reaching their natural conclusion. Under U.S. law, any freedom-of-speech issue that is raised must be dealt with as a matter for the federal, not state courts. Constitutional matters cannot be decided by states, only by federal courts.
When state legislatures attempt to protect minors from the documented harms of social media, those efforts are frequently met with resistance from Big Tech–backed advocacy groups. NetChoice, for example, has repeatedly challenged child‑safety legislation on First Amendment grounds.
Representing the likes of Google, Meta, OpenAI, X, and TikTok, NetChoice claims it exists to keep the internet “safe for free enterprise and free expression.” In reality, it has used that mandate to prioritise corporate freedom, repeatedly challenging online child-safety laws under the First Amendment.
In NetChoice v. Yost (Ohio), the organization argued that Ohio’s Social Media Parental Notification Act violated free‑speech protections. The Act required minors under the age of 16 to obtain parental consent before creating a social media account. In April 2025, a U.S. District Court held the law unconstitutional and permanently enjoined its enforcement. The State appealed the decision, and as of February 4, 2026, the case is pending before the Sixth Circuit: in the meantime the harms continue while what is a procedural challenge finds its way (slowly) through the court system, as, presumably was the intent of those behind the Net Choice challenge.
Another tactic used by Big Tech is to rely on Section 230 of the Communications Decency Act, which was introduced as new entry protection by the Clinton administration in the 1990s to help fledgling internet businesses get off the ground. It provides limited federal immunity for online platforms that operate as mere conduits for others content, and prevents courts from treating them for liability that would otherwise be incurred as the “publishers or speaker” of content created by other users of the network. This provision has shielded companies such as Google and Meta from some civil claims arising from publisher liability for third-party content, limiting their accountability. KGM v Meta et al. simply took the old duties enshrined in the common law and applied them to new products and services, demonstrating that those duties apply to all in society.
While the free speech argument distracts from the harm caused and the duty of care of platforms at law, it misses the point of the wider public interest that are also at stake. In response to President Trump’s claims that Europeans are engaging in “censorship” when they require platforms to remove illegal content, Margaret Vesthager, former vice president of the European Commission, along with her colleagues, argued that “the accusation of censorship ignores what is at stake”. Vesthager, et al wrote:
There is a profound difference between regulating infrastructure and regulating speech. When we require platforms to be transparent about their algorithms, to assess risks to democracy and mental health, to remove clearly illegal content while notifying those affected, we are not censoring. We are insisting that companies with unprecedented power over public discourse operate with some measure of public accountability.
As we have set out above, the platforms digital systems “engage” with and affect everyone. They do that in ways that have been shown to be harmful, and which may breach their duty of care. Adults are allowed in our society to do dangerous things. But that does not discharge a duty of care on a platform that provides a dangerous product without explaining how its use can be harmful.
On any analysis a minor cannot give consent, let alone consent to being harmed.
Neither KGM. v Meta et al. nor New Mexico v Meta seek to ban social media for adults (or children) solely on the basis of its content, but rather the addictive design of a system that engages people in ways that ensure they feel deprived and need to keep checking if they do not know what is happening on their social media accounts.
Framed as a clash between freedom of expression and regulation, something simple is revealed: Big Tech’s corporate speech is being protected, overriding state laws designed to safeguard children. Combined with First Amendment claims, this tactic reflects a broader strategy by Big Tech: exploiting legal loopholes and procedural tactics to evade accountability, at the expense of children’s safety and democratic state action.
No lesser standard for social media
In sectors like toys, transport, and medicine, the United States and many other countries worldwide take a safety-first approach; products must meet safety thresholds before reaching consumers, with protections in place until proven safe.
Even in America, the tide appears to be turning. At a Senate Commerce hearing in January, Texas Senator Ted Cruz said, “Big Tech loves to use grand eloquent phrases about bringing people together. But the simple reality and why so many Americans distrust Big Tech is you make money the more people are on your product, the more people are engaged in viewing content, even if that is harmful to them.”
Communications devices have only recently become social media platforms that mine people for data. Harm to children is often difficult to know about as they have nothing to compare their experience to; in the world of children, barrages of harmful online content could be “normal.” It is perhaps understandable that the harms being suffered have not been known or understood by the grown-ups.
Now we know.
The tech sector is responsible for 15 percent of global GDP, with TikTok, Meta, Apple and Alphabet among the most valuable and profitable companies in the world. They can afford to take more care, and they should. When it comes to precautionary standards, social media should not be subject to a lesser standard than other industries in our economy.
The Tunney Act, a law that gives judges authority to overturn corrupt merger settlements, has never been used to overturn a corrupt merger settlement. Amid an unprecedented wave of brazen corruption at Trump’s Justice Department, a San Jose federal court seems poised to assert itself, with potentially vast implications.
Regular readers of The Sling will already be familiar with the backstory, although I will offer a rosier outlook than my friend and Tunney Act expert Darren Bush. In January 2025, a mere ten days into Trump’s current term, the Justice Department filed a lawsuit to block the $14 billion merger of Hewlett Packard Enterprises (HPE) and Juniper, the second and third largest providers of wireless network services to large institutions like hospitals, universities, and government agencies.
What might have ushered in a bipartisan era of rigorous antitrust enforcement instead became mired in scandal. On the eve of trial, the Justice Department settled the case over the objections of career staff in the Antitrust Division who had sought stronger terms. That internal conflict led to the ouster of two senior antitrust enforcers. Various other lapses of enforcement, including the DOJ’s recent settlement with Live Nation, have cemented broader public sentiment that if you want to make a deal in D.C., all you have to do is pay the right person to pull the right levers.
This would all be more embarrassing for the Trump Administration if there were actual accountability for abandoning the rule of law. And I’ll get to that. But the novelty of the Trump Administration thus far is not the fact that it bends to corporate power—a bipartisan feature of administrations going back decades—but the brazenness of it all, which has the effect of rendering it banal. That banality is a dangerous predicament, fueling a broader sense of nihilism and helplessness.
A Judge pushes the limits of his authority to thwart corruption
Under these circumstances, the question of whether a federal court can stand up to Trump corruption, relying on a law adopted by Congress to compel it to do exactly that, is more than an isolated test of the adequacy of a single settlement. Rather, it is a critical test of the structural underpinnings of our democracy. More than preserving competition in the relevant market for enterprise-grade wireless local access network (WLAN) services, the Tunney Act review of the HPE-Juniper settlement will determine whether Trump has ongoing carte blanche to unilaterally eviscerate confidence in our government’s enforcement of the antitrust laws—or any law for that matter—free from the havoc wreaked by lobbyist interlopers on behalf of powerful corporations.
This past Monday, I drove myself to San Jose to watch the parties’ final arguments over the adequacy of their settlement agreement. The main legal debate over the Tunney Act is the extent to which the court is obligated to defer to the Justice Department’s judgment as to the adequacy of the settlement. Both the D.C. Circuit and Ninth Circuit Courts of Appeal have long hamstrung the courts’ oversight authority by adopting a policy of deference to prosecutorial discretion.
But as Henry Su, counsel for the Justice Department, began his argument, Judge Casey Pitts struck at the absurdity of restraining judicial authority under the guise of a statute designed to expand it:
“Is the standard under the Tunney Act that I have to conclude that something, no matter how inadequate it might be, is better than nothing? Is that the standard?”
The rhetorical implication is “no.” Even where courts have adopted a policy of deference, they have retained authority to reject settlements that make a “mockery” of the judicial system. But the question is a provocation as much as it is a source of frustration for the court. How can it be that the court would be unable to reject a settlement that is inadequate on its face? How can federal courts so casually reject agency regulations designed to rein in corporate abuse, while cowering under their own authority to curb corporate corruption?
Over the course of the next two hours, Judge Pitts posed additional questions that seemed to reveal disbelief that the proposed settlement was designed to restore, much less preserve, competition in the market. Moreover, Judge Pitts seemed at a loss to think of any merger consent decree that had adequately preserved competition in the relevant market. Of both the Justice Department and HPE, he asked:
“Can you think of a case where a merger was allowed on certain conditions, and the government looked back and said, ‘yeah that looks great, there’s competition in the market’?”
When the Justice Department failed to come up with one on the spot, Judge Pitts offered an example of a merger settlement that had not restored competition: the 2010 consent decree that paved the way for Live Nation’s acquisition of Ticketmaster, now being tried as an illegal monopolization case by the states in the Southern District of New York. And the Justice Department has again attempted to settle that case for meager behavioral restrictions and nominal divestitures. Just one week prior, Judge Subramanian called the circumstances surrounding the Justice Department’s attempted settlement of the matter “mind-boggling.”
Nor did it help HPE’s cause when its counsel offered the 2013 merger of US Airways and American Airlines as a merger settlement that had preserved competition. That settlement is widely, if not universally, condemned as a disaster for the airline industry. Further, it was the product of a similar flavor of political interference by then-Chicago Mayor and Obama acolyte Rahm Emanuel. At the time, the New York Times called the settlement “baffling.” Then-Attorney General for the State of Texas Tom Horne called it “a gross miscarriage of justice and an outrage that the case was dropped.” A 2016 report by ProPublica revealed that Emanuel’s letter on behalf of a cabal of Mayors was written by a lobbyist for the airlines, an unfortunate parallel to allegations that the settlement at issue in these Tunney Act proceedings was written entirely by HPE.
HPE fared little better when parrying against Judge Pitts’ indictment of the settlement. HPE’s lawyer boasted that the settlement required the divestiture of HPE’s “Instant On” business—“a full WLAN business, including contracts, customer relationships, and 100 employees. It’s a $30 million WLAN business.” Judge Pitts fired back, “But the overall business is $4.6 billion.” When HPE’s counsel characterized the mandatory licensure of its “Mist AI Ops” technology as giving up HPE’s “secret sauce,” again Judge Pitts pushed back: “But this is a license to something that will remain HPE’s property.”
It’s not hard to see the gears turning in Judge Pitts’ head, and it’s little reach to suggest that he wants to reject this settlement as inadequate on its face. That’s not a certainty, given that Judge Pitts still has his hands tied by the Ninth Circuit. But doing so would be a stinging indictment of a Justice Department that is exposed on multiple fronts, with little to show for all of its early-term chest-puffing.
“If there was ever a merger where the Tunney Act was meant to be useful, it is this one.”
The inadequacy of the settlement itself is to say nothing of the glaring allegations of corruption that tainted its process. Counsel for the State of Colorado, which has led a team of States intervening to protect the public interest, hammered those allegations. On June 5, 2025, HPE and Juniper met with enforcers at the Justice Department’s Antitrust Division to discuss a potential settlement, and the Antitrust Division rejected it. After that, the Antitrust Division was iced out of all settlement talks. “If they want to disagree with the Antitrust Division, that’s fine, but they went around everyone who knew anything about this case,” argued Arthur Biller on behalf of the State of Colorado.
Biller continued by detailing how HPE and Juniper even circumvented their own litigation counsel, Gibson Dunn and Freshfields, and hired lobbyists including Mike Davis, William Levi and Arthur Schwartz to pull political levers. When lawyers at the Antitrust Division rejected HPE’s initial proposed settlement, HPE went over their heads and wrote the settlement document itself. As Biller put it, “It’s not reasonable, principled decision-making. It is patronage, quite frankly.”
In doing so, a handful of lobbyists brought the entire Antitrust Division to its knees. “The influence Davis and Levi had over these peoples’ jobs was not theoretical,” Biller argued. “They got [former head of the Antitrust Division Abigail Slater] and two senior enforcers fired.”
“And when you combine those disputed facts, along with the egregious circumstances by which the settlement was reached, if there was ever a merger where the Tunney Act was meant to be useful, it is this one.”
At the close of the hearing, Judge Pitts took the matter under submission and indicated he’d issue a decision soon. If Judge Pitts rejects the settlement, as I predict he will, the Justice Department can negotiate a new, stronger settlement, proceed with litigating the case, or perhaps most likely, attempt to dismiss the case altogether. Doing so would leave the States on the hook, once again, to enforce the law amid rank abandonment by the federal government. By now, they’re getting pretty good at it.
It is a strange and exciting thing to see any legislative effort to bolster antitrust enforcement. But Senator Klobuchar’s bill to bolster the Tunney Act is special. Congress enacted the Tunney Act in 1974 to prevent the Department of Justice (DOJ) from resolving antitrust cases through consent decrees that inadequately protected competition or the public interest.
My coauthor and friend, John J. Flynn, was special counsel and Consultant for the Senate Antitrust Subcommittee of the Senate Judiciary Committee at the time the Tunney Act was drafted. In light of the DOJ’s prosecution of Microsoft in the late 1990s and early aughts (and its less than stellar settlement with Microsoft), John and I wrote about the problems in judicial interpretation of the Tunney Act, something I again did after John’s passing and after the 2004 amendment to the Tunney Act. That’s 23 years of watching my friend’s work be corrupted, misinterpreted, and rendered almost meaningless. When courts ignore the will of Congress, change ought to come faster than that.
Thus, I strongly endorse this bill. I write to explain why. I also write to emphasize that this bill is not a perfect bill. Yet I feel with greater time and deliberation, it could yield something that vastly improves the Tunney Act. Because I am not constrained by the legislative process, my viewpoint represents a best-of-worlds scenario, and not necessarily the most pragmatic of worlds.
Nonetheless, in my opinion, this bill remedies some long-standing issues.
What the Bill Does Well
To begin, the bill more clearly delineates the powers of the courts versus the powers of the executive branch. The statute was intended to ensure independent judicial review of proposed settlements once the executive branch invoked the jurisdiction of the federal courts. Over time, the courts—particularly within the District of Columbia Circuit—have developed a body of common law that treats Tunney Act public interest review as meaningless and highly deferential to the executive branch. These decisions have relied heavily on theories of prosecutorial discretion even after the filing of a civil complaint. This interpretation misconstrues the separation of powers—perhaps purposefully. Prosecutorial discretion governs whether to investigate or file suit; it does not govern the judicial act of entering a decree that carries the force of law. Despite Congress’s attempt to correct the D.C. Circuit’s line of cases via the 2004 amendment to the Tunney Act, courts continue to rely on D.C. Circuit precedent to aggrandize the executive branch at the expense of Article III of the Constitution.
Second, to the extent that agencies have engaged in sycophantic surrender of their independence to the president, and seek to serve as executive branch agencies, it makes sense that the FTC be subjected to the same requirements as the DOJ. I have explained how the establishment of “sister agencies” is a gross misreading of the FTC Act, and the structure we currently have would have been better served with a true independent and expert agency. Notwithstanding that concern, harmonization of consent judgment standards brings administrative parity. Moreover, the lack of independence proclaimed by the current FTC Chair suggests the potential for greater executive branch influence, perhaps at the behest of parties.
Third, the bill is motivated in part by increasing reports of White House involvement in the negotiation of antitrust settlements. Without disclosure, courts and the public cannot assess whether consent decrees reflect independent legal judgment or political influence. This is not singularly a President Trump concern (see examples under Democratic governance in the airlines) although it is more frequently a concern with this administration.
Finally, current practice often allows merging firms to close transactions before judicial review is complete, effectively mooting Tunney Act scrutiny and limiting a court’s remedial options. The bill addresses this problem directly, by requiring the parties to hold assets separate pending Tunney Act review. One of my long-time complaints has been parties (perhaps rightly) assuming entry of the decree and merging, with the blessing of the DOJ.
Where the Bill Could Be Improved
This does not mean this bill is perfect. There is much work that can and should be done to improve this bill.
For starters, the bill could stand an even clearer articulation of the powers of the courts versus the powers of the executive branch. Antitrust enforcement includes the investigation, decision to file a complaint, or closing the investigation. In contrast, the decision whether to enter a consent decree, reject a consent decree, or entry of a decree after litigation of a case to final judgment using the equitable powers of the court are judicial functions.
This is the separation of powers that typically occurs with judicial decrees. For example, my second Tunney Act article described how courts have the power to reject plea bargains. There is no reason for the Tunney Act to allow for greater executive encroachment on the judiciary (apart from perhaps the wealth of the parties, which is not a good reason).
The figure below further delineates the difference between application of a court’s equitable powers and Tunney Act review, as it would appear in a Section 2 case, for example.
Moreover, this bill does not address the “fix it first” issue. A “Fix it first” typically involves merging parties identifying an anticompetitive risk and proposing to remedy the issue prior to an antitrust investigation. However, another potential method is for the DOJ to negotiate a “fix it first” in problematic avoidance of Tunney Act proceedings. That would be a deliberate circumventing of the Tunney Act process, and this bill does not cure that concern. I have other reservations about this practice beyond the scope of the Tunney Act.
There is still a question of what happens if the D.C. Circuit courts continue to ignore Congress. While this bill makes it harder for them to use Constitutional Avoidance to suggest Congress really didn’t mean what it says, this bill is sufficiently clear that if the courts wish to continue down this path, they raise the risk of asserting courts rejecting any type of settlement—including plea bargains—is unconstitutional.
There is still a question of what happens when a remedy is proposed to a broadly worded complaint, as happened in the American Airlines merger. There, a broadly worded complaint was filed, then the case settled with minimal remedies that did not cover the scope of the complaint. Ultimately, the court could reject the decree on that basis. That may lead to very narrowly written complaints in litigation when the complaint is not written alongside the proposed final judgment (i.e., in anticipation of litigation).
Finally, there needs to be a clearer delineation of when a court exercises its equitable powers versus when it is engaged in Tunney Act review. As in the case against Microsoft, the court erroneously limited the scope of its powers despite the case having already been litigated to final judgment. The Tunney Act does not apply to fully litigated cases, and attempting to shoehorn fully litigated cases into the Tunney Act limits the equitable powers of the court.
In sum, I hope this bill passes, with improvements. Although it won’t save democracy, the bill can restore some meaningful judicial review to an increasingly politicized area of law and perhaps foreclose some windows of corruption.
My works on the Tunney Act:
Darren Bush, The Abdication of Judicial Responsibility and Authority in Consent Decrees and the Dismissal of Congressional Intent by the Judiciary: The Implications of the Misuse of the Tunney Act in the D.C. Circuit, 63 Antitrust Bull. 113 (2018).
John J. Flynn & Darren Bush, The Misuse and Abuse of The Tunney Act in the Microsoft Cases: The Adverse Consequences of The “Microsoft Fallacies,” 34 Loy. U. Chi. L. J. 749 (2003).
Darren Bush, No, The Tunney Act Won’t Save Democracy, The Sling (August 13, 2025).
Zillow is dominant in the market for online rental listings—more formally known as Internet Listing Services (ILS)—which are used by renters to search for and find their next rental home or apartment. Zillow controls over half of this market, per its own estimates. According to Comscore’s visitor-traffic analytics, Zillow overtook CoStar (owner of Apartments.com) in 2022 to become the nation’s leading ILS platform. Redfin, which ranks third, acquired RentPath(owner of Rent.com and ApartmentGuide.com) in 2021.
Zillow competes with online rental platforms in the sale of advertising to property managers of multifamily units. At least in theory.
Just as many branded drugs have paid off generic entrants not to compete, Zillow has tried to maintain its dominance in ILS by paying off Redfin directly, which has drawn the ire of antitrust authorities. In September 2025, the FTC filed a lawsuit against Zillow and Redfin, claiming the companies engaged in an unlawful arrangement not to compete. According to the complaint, Zillow provided Redfin with $100 million and additional compensation in exchange for Redfin’s withdrawal from the ILS market. As part of its deal with Zillow, Redfin allegedly agreed to terminate existing advertising contracts, cease competing in the multifamily advertising space, and act solely as a distributor of Zillow’s listings. The FTC contends that this arrangement extinguished direct competition between the two companies, potentially leading to higher costs and less favorable terms for advertisers of multifamily units.
A recidivist offender
Seemingly unconstrained by antitrust law, Zillow now appears to be using a proxy to exclude another entrant, Homes.com, in yet another market that Zillow dominates—online real estate listings.
In investor documents, Zillow notes that it controls nearly two-thirds of the U.S. real estate audience share for listings. Smaller competitors in this market include Realtor.com, Redfin, and Homes.com.
In the market for online real estate listings, Zillow boasts that its is 2.5 times larger than its nearest competitor, Realtor.com.
Zillow exercises its market power over agents, by charging a premium over the competitive commission rates. Multiple class actions allege that Zillow charges agents commission rates nearly double the industry norm, and it steers homebuyers toward its in-house mortgage products.
So what’s the latest scheme to induce exit by a rival? Enter D.E. Shaw, a large hedge fund that owns significant stock in Zillow. D.E. Shaw is running a campaign, potentially at Zillow’s behest, to demand that Homes.com exit the market for online real estate listings. In a letter to CoStar’s board on February 4, 2026, citing performance issues, the hedge fund insisted that CoStar “develop an alternative strategy for Homes.com that involves exiting, spinning off, divesting, or dramatically reducing spending on the business to breakeven by 2027.” D.E. Shaw’s demand follows on the heels of an identical demand by Third Point in January 2026, another hedge fund that held approximately $184 million in Rocket Companies, the owner of Redfin, as of the fourth quarter of 2025.
The conflict of interest is not subtle. D.E. Shaw holds approximately $204 million across Zillow, Opendoor, Rocket/Redfin, Compass, and Anywhere Real Estate—every significant residential real estate portal and portal-adjacent business that competes directly or indirectly with Homes.com. These competitors stand to benefit if Homes.com exits the real estate listings market, leading to windfall gains for its investors. Neither D.E. Shaw nor Third Point disclosed these competing interests anywhere in their activist letters.
The antitrust concern here has a name: common ownership. Landmark research by José Azar, Martin C. Schmalz, and Isabel Tecu found that common ownership in the airline industry drove up ticket prices by an estimated three to seven percent, and parallel research found similar effects in commercial banking. Although the mechanism differs, the result is the same: investors or platforms with ownership interests across rival firms leverage that position to dampen competition between them.
The competitive threat that Homes.com poses to Zillow
When a homebuyer clicks “Contact Agent” on Zillow’s website, research suggests the buyer is typically not connected to the listing agent but routed to a buyer’s agent who pays Zillow for the lead through commission sharing. Zillow then steers borrowers toward Zillow Home Loans, its affiliated mortgage lender, with agents reportedly required to hit referral quotas to maintain platform access. Under its Flex program, Zillow collects referral fees of up to 40 percent of the agent’s commission (well above the industry norm of 25 percent). when a transaction closes. Those costs are ultimately passed through to buyers and sellers in the form of higher commissions and less flexible pricing. Independent research has found that borrowers using Zillow Home Loans pay thousands more on average, with disparate impacts on veterans, low-income borrowers, and Black borrowers. Similarly, when Rocket acquired Redfin, company explained how it began funneling customers toward Rocket Mortgage. In contrast, when homebuyers click on “Contact Agent” on Homes.com, the buyers reach the listing agent directly, and there is no affiliated mortgage lender.
The competitive threat that Homes.com poses to Zillow is not merely a matter of market share. It is a matter of business model. That distinction creates downward pressure on agent costs across the market. Remove an alternative business model, and Zillow’s pricing power over agents—and by extension, over consumers—faces no meaningful check. Moreover, the anticompetitive effects are the same regardless of whether the hedge funds are acting at the behest of Zillow and Redfin, or instead are acting purely in pursuit of their own financial interests.
Whether Homes.com succeeds on its merits is ultimately a question for the market to answer, not for conflicted hedge funds to dictate. The question for regulators is narrower and more urgent: when investors hold nine-figure stakes in a dominant platform’s competitors, every one of which monetizes consumers through lead diversion, commission sharing, or mortgage steering, while simultaneously using activist pressure to eliminate a well-capitalized challenger, does that conduct warrant the same scrutiny the government has already applied to Zillow’s direct efforts to exclude a rival? The DOJ and FTC have the tools. The common ownership scholarship points the way. Americans, many of whom currently struggle to afford the housing market deserve enforcers willing to ask the question.
Anger. That’s been the most frequent and obvious reaction to the Justice Department’s baffling and embarrassing decision this week to settle its monopoly lawsuit against Live Nation. After years of evidence that Live Nation, the largest artist manager and concert promoter in America, in coordination with its in-house event-ticketing monopoly Ticketmaster, consistently ripped off fans and bullied venues and artists, the government’s case had finally made it to trial—only to end a week after it began. How could a company that has so blatantly abused its outright power in the live music industry for so many years, earning scorn from artists, independent venues owners, and consumer advocates, get off with the most cursory slap on the wrist?
The settlement has been messy at the least. The Department of Justice (DOJ) settled the lawsuit without informing either the judge or its lead litigator on the case—a decision Judge Arun Subramanian said showed “absolute disrespect for the court.” The settlement came just weeks after Trump-affiliated lobbyists forced the former head of the DOJ’s Antitrust Division, Gail Slater, out of her job, and after those same lobbyists spent many months working to convince top Department officials to settle the Live Nation lawsuit before a jury could decide the company’s fate. It was easy to predict how this lawsuit would turn out.
But amid the Trump administration’s observable corruption and Keystone-cops level of stumbling over itself to get this settlement done, it’s worth thinking about why this particular kind of settlement rarely works, and why breaking up monopolies like Live Nation is the better, and often only, solution to the core problems of monopoly power.
Under the settlement, Ticketmaster will cap some of its notoriously high fees at amphitheaters and open its platform to third-party ticket resellers like Stubhub and SeatGeek. Live Nation, meanwhile, will allow venues that contract with the company to use ticketing services other than Ticketmaster for a percentage of their events, and will limit exclusive contracts between venues and Live Nation to four years. Live Nation will also sell off around a dozen of the 400-plus venues it owns, and pay $280 million to the Plaintiff States.
The settlement is getting poor reviews
Those with a dog in the fight against Live Nation and Ticketmaster aren’t happy with the deal. Stephen Parker, head of the National Independent Venue Association, rightly points out that the reported $280 million Live Nation will pay out to the States is a fraction of what the live music monopoly rakes in from concert goers and venues over a year. The payout, Parker says, “is the equivalent of 4 days of their 2025 revenue, which means they could potentially make it back by this Friday.” Meanwhile, the settlement’s requirement that Ticketmaster host rival platforms could empower scalpers and secondary ticketing sites, “which would likely exacerbate the price gouging potential for predatory resellers and the platforms that serve them,” Parker says.
United Musicians and Allied Workers and The National Consumers League also objected to the deal. “Allowing Live Nation to keep Ticketmaster without meaningful structural remedies would squander a rare opportunity to restore competition to the live entertainment marketplace,” National Consumers League executive John Breyault says in a statement.
The settlement likely won’t work, not just because it’s barely a slap on the wrist for the most powerful company in live music history. It won’t work because settlements like this almost never work — and the government surely knows it.
A history of failed behavioral remedies
There’s maybe no better example of a failed conduct remedy than what the government required in the original Live Nation/Ticketmaster merger 15 years ago. In 2010, antitrust enforcers from the Obama administration ignored the chorus of music industry and consumer critics warning about the unchecked power of a merged Ticketmaster and Live Nation. They approved the deal over these objections, subject to some promises that the combined company wouldn’t force venues to use Ticketmaster in order to host Live Nation artists and tours (or what antitrust recognizes as a “tie-in”). Eight years later, Live Nation was found to have violated that remedy so flagrantly that even the first Trump administration was forced to take action. But rather than sue the company to break it up, they made Live Nation double-promise that it wouldn’t abuse its monopoly again.
Nothing changed. According to sworn testimony at trial, Live Nation in 2021 threatened the Barclays Center, a major live event venue opened in 2012 and home to the NBA’s Brooklyn Nets, with withholding major concerts and tours after the venue ditched Ticketmaster for a different ticketing platform. The testimony, from former Barclays Center head John Abbamondi, described exactly the kind of monopoly conduct critics feared when the companies merged, and that the DOJ banned for a second time just one year before Abbamondi got his first “offer you can’t refuse” call from Live Nation. The conduct remedy failed, and then failed again. A few years later, Jonathan Kanter and the Biden DOJ had seen enough, and sued to break up the company.
This settlement appears destined to fail as well, for the reasons conduct remedies often do. The proposed behavioral fixes to Live Nation’s monopoly power do nothing to address the structure of the company, which is the thing that gives it the power and motivation to dominate every corner of the live music industry. So long as Live Nation controls Ticketmaster, it will want to compel the many hundreds of major artists it manages and the tours it organizes to use Ticketmaster. The milquetoast guardrails the settlement creates around venue and artist choice in ticketing platforms do nothing to change the interrelated nature of Live Nation’s business.
That’s why conduct remedies in monopoly cases are exceedingly difficult to enforce. Stopping a monopoly from doing monopoly things is expensive and time-consuming for everyone involved — enforcers, the courts, and the company itself. There’s the inherent information asymmetry between the monopoly and the government, forcing the government to assign a team of people to monitor the company, and use subpoena power when necessary, to essentially litigate the remedy for years until the settlement’s rules expire, after which the company can again abuse its monopoly and wait for enforcers to catch on.
As antitrust scholars John Kwoka and Spencer Weber-Waller point out, conduct remedies directly conflict with a monopoly’s very nature. If abusing power benefits a company’s bottom line, as it does Live Nation’s, the company is going to do whatever it can to work around the settlement’s rules to continue that abuse, either in full or some reduced version of it. Conduct remedies force the government to fight against nature itself.
Breakups strike directly at the heart of monopoly power. If Live Nation no longer owns Ticketmaster, it has no ability or reason to force venues and artists to use it. Its ability to tie a ticketing platform to popular artists and tours ends then and there. There’s no court-appointed monitor necessary, no compliance program needed. Breakups are effective, direct, and permanent.
The government’s failure to end Live Nation’s monopoly structure has animated critics of the settlement, and forced states to continue to litigate. “We will keep fighting this case without the federal government so that we can secure justice for all those harmed by Live Nation’s monopoly,” New York Attorney General Letitia James said in the wake of the settlement news.
DOJ’s settlement with Live Nation, presumably at the behest of White House operatives, is more like a presidential pardon than something that will make live music competitive again. The government is asking a serial monopolist to play nice when it has never played nice before, then assigning a monitor, perpetually in the dark about what Live Nation is actually doing, to enforce the deal. Even if Live Nation fully abides by the settlement’s rules, in eight years everything goes back to the way it was. The settlement offers no solution and no relief.
Now, it will be up to state enforcers to demand a breakup, which is the only remedy that can, once and for all, end Live Nation’s monopoly abuse. Artists and venues are counting on the states’ success.
You don’t have to be an economist to recognize that we are living through an era of diminished competition. You simply must open your eyes and ears. And wallet. Whether paying for airline tickets, groceries, health insurance, concert tickets, ski passes, or video streaming services, consumers have experienced a consistent rise in prices, making things less affordable.
In most facets of our lives, we are confronted by a dominant firm (or two if we’re lucky) plus a fringe set of competitors. Airline passengers typically face two alternatives per route—as of 2018, the average HHI on a route before considering common ownership was just below 5,000, implying two equal-sized carriers. Amazon accounts for over 40 percent of all online retail sales revenue in the United States. Two federal district courts found that Google monopolizes both the search and ad-tech industry, respectively. Social media users congregate on a handful of platforms like Facebook/Instagram or TikTok. Four hotel conglomerates (Marriott, Hilton, Hyatt, and IHG) have acquired formerly independent resorts. Ridesharing is provided by just two companies. Visa, Mastercard, and American Express account for nearly all credit cards issued in the United States. The pattern is hard to miss. Even in markets that are not concentrated, the use of common pricing algorithms can effectuate monopoly outcomes.
So it was striking to see a new paper in the Journal of Political Economy by economists Carl Shapiro and Ali Yurukoglu contending that the current record does not show a weakening of competition—and that many troubling trends are best understood as competition at work. As explained more fully below, their methodology for assessing the evidence would never yield to a finding of increasing concentration in the economy, either because there will never be enough data, or because they can invent just-so stories that are consistent with the evidence. In other words, their methodology seems very rigorous and impressive but cannot detect economy-wide changes in concentration or price/cost markups. It would be akin to assessing climate change by insisting on measuring every millimeter of the earth; because you never have the requisite data, you can never say anything.
For context, Shapiro was the Deputy Assistant Attorney General for Economics of the Antitrust Division of the Justice Department under Obama. Shapiro famously told Congress in 2017 that the reason there was little-to-no enforcement against monopolists during his tenure was that there were “precious few” meritorious cases to bring. Like many others who “served” as regulators and later found comfortable landing spots at expert services firms that defend mergers, Shapiro has since consulted to Amazon, Apple and Google—each of whom has been a defendant in a monopolization case brought the antitrust agencies after Shapiro left. Shapiro also terminated an engagement with the FTC (in a monopolization case against Facebook) under Lina Khan’s leadership.
It is thus not entirely surprising that Shapiro would publish a paper purporting to find no “widespread decline in competition” in the United States. Shapiro’s position in this paper is entirely consistent with his laissez-faire approach as an antitrust “enforcer.”
Shapiro’s co-author, Yurukoglu, made a name for himself by publishing a paper in the prestigious American Economic Review in 2012 that purports to show that bundling of cable networks is economically efficient. The paper finds that average consumer surplus from a forced movement from bundling to a-la-carte pricing would decline. An earlier version of the paper released in 2008, however, came to a different conclusion, more attuned to the concerns of the anti-monopoly movement: “Mean consumer surplus [from a-la-carte pricing] increases by an estimated 36.5% and cable industry profits decrease by an estimated 30.6% as households still receive the networks they value highly, but pay a lower monthly bill.” (emphasis added). Defending exclusionary conduct by dominant firms is helpful in getting published in top-tier economics journals.
Rejecting the Growing Body of Evidence on Concentration
In one swoop, Shapiro and Yurukoglu (hereafter “S&Y”) dismiss the growing body of empirical literature, but also the tangible, lived experience of market consolidation. They claim:
The research underlying these claims [of declining competition] has not generally followed the approach usually taken in the field of industrial organization to evaluating market power, which involves looking at individual firms, markets, or industries in some detail to understand the forces driving change and to detect any anticompetitive conduct or mergers. Instead, these claims are about the US economy overall on the basis of evidence at scale, by which we mean aggregated data available across many industries. (emphasis in original)
Per S&Y, heterodox economists who write in support of the declining competition hypothesis are not following the exacting rules developed by certain members of the industrial organization (IO) community, consisting mostly of professors at elite universities. These particular experts, whose pro-monopoly positions are amplified in The Economist and other defenders of neoliberalism, have conveniently designed a research heuristic that precludes using industry structure as a means to predict prices (or price/cost markups), under the rationale that industry structure is “endogenous” to the price-generating system. Indeed, the structure-conduct-performance paradigm reigned supreme for decades until the new empirical IO framework took over and banished all such studies from publications. Now an economist gets published by writing things like “Within the field of industrial organization, the structure-conduct-performance approach has been discredited for a long time.”
What S&Y seem to be complaining about here is that economists who write in support of the declining competition hypothesis rely on industry-level aggregated data, as opposed to transaction-level data for a given defendant in an antitrust case. But use of industry-level data occurs in academic research for good reason—researchers can’t subpoena transaction-level data from a company, as can a private or public antitrust enforcer. S&Y insist that concentration metrics are not informative unless they are applied to a relevant antitrust market, or a collection of goods that are close economic substitutes. In any event, the examples of declining competition in tech industries provided above, including the two federal court decisions finding monopolies in search and ad-tech are sector-specific; we don’t need an independent concentration study to confirm what has already been found. Moreover, because antitrust markets are generally narrower than industry-wide metrics—a relevant antitrust market is defined by the smallest set of services over which a hypothetical monopolist could exercise power—it follows that these papers likely understate the level of concentration in the relevant antitrust market.
Celebrating Concentration
S&Y turn the mounting evidence of concentration on its head, suggesting that winner-take-all markets actually benefit consumers through vigorous competition on the merits:
As we assess the empirical evidence and identify key areas for future research, we find it useful to contrast the decline-in-competition hypothesis with the much cheerier view that many of the changes we have seen in the structure and performance of US industries represent healthy competition that has delivered benefits to the public. We call this the “competition-in-action” hypothesis. For example, if a few “superstar” firms in an industry grow by delivering greater value to customers on the basis of their superior ability to adopt and use new technologies that involve higher fixed costs and lower marginal costs, we would expect both concentration and price/cost markups to rise, along the lines developed brilliantly by Sutton (1991, 1997).
Notwithstanding that Shapiro consults to many of these “superstar firms,” the authors are reducing structural transformation to a purely technological and cost-based story. Omitted in this vigorous defense of corporate behemoths like Apple, Amazon and Google are network effects, intellectual property regimes, tax arbitrage, labor suppression, financializaton, regulatory choices, and political lobbying—as if none of these things play any part in shaping market outcomes and enabling durable market power. For example, Uber seized the ridesharing market in large part by engaging in regulatory arbitrage, misclassification its drivers as independent contractors and evading requirements to buy taxi licenses.
Sticking with ridesharing, S&Y oddly cite to a recent paper by Castillo (2025) as evidence that “sophisticated pricing algorithms serve to increase consumer and total surplus.” Castillo’s findings relate to Uber’s practice of surge pricing. Of course, S&Y make no mention of the various ongoing litigation against firms that use a common algorithm to fix prices, including the RealPage and Yardi litigation. A closer look at Castillo’s findings reveals that the findings are not as glowing as S&Y indicate:
Welfare effects differ substantially across sides of the market: rider surplus increases by 3.57% of gross revenue, whereas driver surplus and the platform’s current profits decrease by 0.98% and 0.50% of gross revenue, respectively. Riders at all income levels benefit. Among drivers, those who work long hours are hurt the most, especially women. (emphasis added)
In other words, any benefits to riders come at the expense of drivers, particularly women. To S&Y, this outcome provides some societal benefits. Apparently, harm to workers, in their view, justifies some modicum of cost savings to Uber riders. One might remember that the NCAA recently tried this same economically bankrupt “consumer benefit” argument to justify its “amateurism” restraint in Alston, which resulted in losses at the District Court, Ninth Circuit, followed by a 9-0 thrashing from the Supreme Court.
S&Y assert that rising concentration at the industry level is just as consistent with their “competition-in-action” hypothesis as with the decline-in-competition hypothesis. But how can these IO economists confidently assess that dominant firms are “delivering greater value to customers on the basis of their superior ability to adopt and use new technologies,” rather than obtaining their dominance by exploiting loopholes, leveraging political influence, or engaging in exclusionary conduct? Indeed, many of these corporate leviathans acquired their way into power. Google’s acquisition of DoubleClick made Google dominant in the ad stack. Facebook acquired Instagram to maintain its hold over social media. Amazon has made 117 acquisitions since 1998, including Alexa Internet, Audible, Zappos, Quidsi, Whole Foods, and Ring. As demonstrated by Kwoka (2017), since the 1990s, U.S. companies have been free to pursue most horizontal mergers and can only expect real scrutiny, let alone a challenge, from the agencies at very high levels of concentration. Bogus (2025) explained, via a case study of General Electric, how firms and an economy centered on M&A and financial engineering tend to neglect welfare-increasing, long-term undertakings like investment and R&D.
Put differently, S&Y claim that concentration evinces competition on the merits, ignoring all of the non-meritorious–and often anticompetitive–ways many firms have achieved dominance. We should reject their premise because winning does not prove the game was fair.
And regardless of how markets became so concentrated—competing on the merits or via anticompetitive conduct—employers in concentrated markets can exercise power over both consumers and workers. A new study in the Journal of Economic Perspectives shows that in concentrated markets, workers receive lower pay that is equal to a roughly eight percent decrease in their lifetime consumption. More on this in the section (below) on the declining labor share.
Rejecting Evidence of Growing Price/Cost Markups
After dispensing with the evidence on growing concentration, S&Y turn to inventing alternative stories to explain the evidence on growing markups. “Our reservations are based on problems with both measuring and interpreting trends in price/cost markups.” As I write this essay, the amount of pre-tax profit generated per every dollar of operational expense has increased from around five cents per dollar for much of the 20th century to over 20 cents per dollar in recent years. As S&Y even acknowledge, “a widespread increase in markups would warrant further examination as to its underlying causes, especially if observed in conjunction with a widespread rise in profits.”
S&Y state that “Simply observing that price/cost markups rose as revenue was reallocated to firms with higher markups does not help us distinguish between the decline-in-competition hypothesis and the competition-in-action hypothesis.” Yet when making inferences about market power, the means by which (historically) high markups were secured doesn’t matter. As Shapiro appreciates, having worked in antitrust matters, market power is defined as the ability to raise prices over competitive levels, often proxied by marginal costs. So if marginal costs fall, as S&Y speculate, but prices don’t fall to those lower cost levels as a result of competition, that too is an indication of market power.
S&Y try to debunk the findings of De Loecker, Eeckhout, and Unger (2020), which used Compustat data to estimate price/cost markups for publicly traded firms. De Loecker et al. found that revenue-weighted average markups have risen from around 1.21 in 1980 to 1.61 in 2018—consistent with the declining competition hypothesis. S&Y assert that the fancy econometric modeling in the paper provides “essentially the same” result as using the weighted average ratio of revenue to cost of goods sold (COGS), and that COGS might include many costs that economists consider fixed costs. They conclude that what De Loecker et al. are “actually measuring is something more like a scaled version of the firm’s operating profitability than its price/cost markup.”
So what? To assert that this related measure of markups is economically meaningless, one would have to demonstrate that the way publicly traded companies record COGS has changed dramatically over time, by for example, increasingly moving fixed costs outside of COGS and into other categories, thereby artificially inflating the observed markup. But S&Y never even assert this tendency; if firms’ tendencies to treat certain fixed costs as COGS has remained roughly constant over time, this critique is irrelevant. Finally, to cast further doubt on the findings in De Loecker et al., S&Y cite Conlon et al. (2023), who claim that De Loecker’s markups at the sector-level do not correlate with sector-level price indexes as measured by the Bureau of Labor Statistics. Again, what is this testing? The lack of correlation could occur for myriad reasons, including having too few observations within a sector to study or failing to control for other variables that might affect both series. For example, Table 1 of Conlon et al. show that in five of twelve sectors studied, the number of observations in the univariate regression of PPI growth on the markup growth was below 100; in three other sectors, the number of observations was below 200. As Conlon et al. acknowledge, “This [lack of correlation] does not necessarily imply that no such correlation exists because our analysis is subject to many caveats.”
Spinning Evidence of the Declining Labor Share
S&Y also casually dismiss the notion that a declining labor share indicates declining competition, “given that there are many competing explanations for the decline of the labor share (Grossman and Oberfield 2022), that the pattern seems to be global (Karabarbounis and Neiman 2014), and that many of the same measurement issues that exist with markups and concentration apply to the labor share.” S&Y neglect mentioning any contrary findings, such as Wilmers (2019), who used panel data on publicly traded companies to show that dependence on large buyers lowers suppliers’ wages and accounts for ten percent of wage stagnation in nonfinancial firms since the 1970s.
An economist can easily construct a different story to fit a fact pattern, especially when he can assume the equivalent of no gravity. For example, MIT economist Autor has argued that superstar firms just happen not to utilize (or pay) labor as extensively as the firms they displaced; hence, when superstars take over an industry, the labor share falls. S&Y seize on this explanation, as if they were channeling the gospel. One might wonder, then, why the largest tech firms engaged in a no-poach agreement to suppress competition for worker and thus reduce their pay, as evidenced in the In Re High Tech Antitrust Litigation. And if Autor’s speculation had merit, then why do the largest tech firms now engage in the practice of acquihiring, a de facto acknowledgment of the importance of labor?
There are other reasons to be skeptical of the “superstar” theory for a declining labor share. Consider a not-so-hypothetical fact pattern: Workers at Promoter A (the largest promoter) capture 30 percent of event revenues, workers at Promoter B capture 40 percent of event revenues, and workers at Promoter C capture 50 percent of event revenues. Platform A acquires Platform B outright, and then forecloses Platform C from hiring its workers via non-compete agreements. Platform A reduces its wage share to 20 percent and industry-wide wage share falls to (say) 25 percent. When the industry was less concentrated, Platform A’s workers enjoyed the option of taking their talents elsewhere, which forced Platform A to pay 30 percent. When that outside option was extinguished via acquisition and exclusionary conduct, however, workers were forced to work at a single platform, which allowed Platform A to push down its wage share. Autor (and presumably S&Y) could argue that “superstar” Platform A just happens to pay its workers a low wage share. But the reason why Platform A can pay a lower share is precisely due to the lack of competition. Put differently, employers aren’t assigned a wage share by some exogenous force. The wage share they pay is a function of the labor market in which they compete for talent.
Moreover, that the pattern of a declining labor share “seems to be global” does not undermine the declining competition hypothesis. One would suspect that similar patterns of consolidation or exclusionary conduct by dominant firms (or both) are happening around the world. It reminds one of a standard efficiency defense put forward by dominant firms in antitrust litigation: “My smaller competitors are doing it too. Ergo, it must be competitive!”
Policy Implications
As MIT economist Nancy Rose elegantly explained in Senate testimony in 2021, the debate over what to make of rising markups and concentration misses the point:
There is ongoing and robust debate over the measurement and implications of both aggregate trends and the “winner-take-most” economics of many digital markets. Empirical economists have jumped enthusiastically into this fray, and I discuss the strengths and limitations of this work in my 2019 paper, “Concerns About Competition.” But it would be a mistake to think that the evidence of a competition or competition policy—problem rests solely or even primarily on how these debates are resolved. … But aggregate concentration and mark-up trends or empirical industry studies are far from the only source of evidence on our growing competition problem.
As centrists focus on social conflicts like “wokeism” to divert attention away from our widening inequality problem, IO economists like S&Y have fabricated a distraction to deflect attention away from the obvious failures of competition.
Despite rejecting the decline-in-competition hypothesis, S&Y still purport to “favor strong antitrust enforcement,” though it’s not clear why antitrust would be needed if we are living in a competitive world as they claim—without market power, a single firm cannot effectuate anticompetitive outcomes.
S&Y oddly reject the notion that antitrust can curb a dominant firm’s ability to influence our politics: “Furthermore, very different policies [from antitrust] are used to directly control the political power of large companies, notably the rules regarding campaign finance, lobbying, and media ownership.” By preventing firms from rolling up entire industries via merger enforcement, or by compelling conglomerates to divest key assets previously acquired during the remedies phase of a monopolization trial, antitrust can precisely limit a firm’s political power. Again, one doesn’t have to be an IO economist to observe the CEOs of Amazon, Apple, Google, Meta, and Microsoft seated behind President Trump at his inauguration.
In summary, S&Y make bold claims at the outset of their paper, such as “We explain that the empirical evidence relating to concentration, markups, and mergers does not show a widespread decline in competition.” (emphasis added) But their actual analyses don’t support this claim. What they are really saying in the paper is that it is unclear whether the increase in concentration or price/cost markups are due to a decline in competition or competition in action, and that further research is needed. The paper is effectively click-bait for policy wonks. And by writing this 3,000-word review, I’ve fallen for it.
Monopolization comes in many flavors. As we have seen over the years, firms use assorted and creative methods to acquire or maintain dominant positions. Exclusive dealing, predatory pricing, and tying are some of the competitively suspect practices familiar to antitrust lawyers and economists. But the courts have made clear the list of “anticompetitive” or unfair practices that are actionable under the Sherman Act is not a closed set. Deception and other tortious conduct, for instance, can constitute illegal conduct. Given the elasticity of antitrust law, union-busting fits within the Sherman Act’s prohibition on monopolization and should be challenged by public and private enforcers. A class action lawsuit (Mizell v. UPMC) filed by health care professionals in 2024 against UPMC, the dominant hospital system in Western Pennsylvania, offers an excellent vehicle for expanding the scope of monopolization law and competition policy.
Under well-established antitrust doctrine, monopolization has power and conduct elements. To show a violation of the anti-monopolization section of the Sherman Act, plaintiffs need to demonstrate that the defendant has monopoly power and that this power was acquired or maintained through improper conduct, as opposed to “a consequence of a superior product, business acumen, or historic accident.” Firms that acquire their monopolies through the latter methods are at liberty to enjoy the fruits of their market dominance. But firms that use improper means to obtain or perpetuate a monopoly are not so free, and they can face the force of the courts’ broad equitable and legal remedial powers, including radical restructuring. This distinction between permissible and impermissible paths to monopoly reveals one implicit function of the antitrust laws: Pressure firms to grow and succeed by developing “superior product[s]” instead of other less salutary means.
Critically, what constitutes improper conduct is not cast in stone. Courts have applied the concept dynamically and elastically over time. In United States v. Microsoft, the D.C. Circuit wrote, “the means of illicit exclusion, like the means of legitimate competition, are myriad.” In this spirit, the Supreme Court has ruled that practices like deception can constitute illegal monopolization. For instance, in a 1965 decision, the Court ruled that procuring a patent through fraud on the U.S. Patent and Trademark Office can constitute illegal monopolization.
An interesting expression of this theme came in a 2002 decision from the Sixth Circuit. In Conwood v. U.S. Tobacco, the court affirmed a jury verdict in favor of a smokeless tobacco maker that had faced an onslaught of property destruction and theft by the dominant manufacturer. Conwood persuaded a jury that U.S. Tobacco had, among other practices, destroyed its product racks and removed its products at convenience stores and other retailers. While the conduct did not resemble a traditional antitrust violation, the court nonetheless held it ran afoul of the Sherman Act. Rejecting U.S. Tobacco’s argument that tortious conduct could never violate the antitrust laws, the unanimous three-judge panel ruled that it could in “rare gross cases.” Further, tort law did not displace the Sherman Act: “merely because a particular practice might be actionable under tort law does not preclude an action under the antitrust laws as well.” The court concluded the U.S. Tobacco’s misconduct “rose above isolated tortious activity and was exclusionary without a legitimate business justification.”
Expanding the Scope of Unfair Competitive Practices
Given this body of precedent, antitrust practitioners and scholars should treat union-busting as another type of illegal conduct that is actionable under Section 2. Firms that fire union organizers and thwart unionization and other concerted action by workers violate the National Labor Relations Act (NLRA). In other words, union-busting firms violate their employees’ federal statutory rights. Moreover, these scofflaw firms obtain an unfair and illegitimate advantage over rivals that comply with their legal duties under the NLRA, impairing their rivals’ ability to compete effectively in the associated product market. A firm that respects its workers’ right to organize typically has higher wages and overall labor costs than a rival that doesn’t—a major determinant of competitive success in a labor-intensive field like health care. An unscrupulous firm with this ill-gotten cost advantage can undercut high-road rivals and capture market share. This is not competing and succeeding through superior efficiency but competition through lawbreaking. When done by a monopolistic firm, union-busting can help cement the firm’s market dominance and prevent law-abiding competitors from growing.
The University of Pittsburgh Medical Center (UPMC) stands accused of monopolistic conduct of this nature. In Mizell v. UPMC, health professionals currently and formerly employed by the health system are challenging the monopolization and monopsonization of the markets for hospital care and hospital employees, respectively. The bulk of the complaint is focused on UPMC’s serial acquisitions of hospitals and other health care facilities in Western Pennsylvania.
The class action also alleges unfair practices that have given UPMC an unfair competitive edge over rivals. Among these practices are union-busting: UPMC has consistently sought to thwart its workers’ attempts to form unions. The complaint states: “UPMC has faced 133 unfair labor practice charges since 2012 and 159 separate allegations. Approximately seventy-four percent of the violations related to workers’ efforts to unionize, indicating a system-wide suppression of unionization activity.”
This pattern of union-busting has enabled UPMC to maintain a significant and illegitimate competitive edge over its rival in the downstream product market, Allegheny Health Network, many of whose employees are unionized and covered by collective bargaining agreements. Through its alleged union-busting in violation of federal law, UPMC maintains an unfair cost advantage over Allegheny Health Network. As a result of its unfair competitive conduct, UPMC can offer lower rates to payors and patients and maintain its dominant position.
In a 2024 statement of interest in Mizell, the Department of Justice (DOJ) credited union-busting as a potential monopolization theory. The DOJ succinctly described why this conduct is injurious to competitors and potentially runs afoul of Section 2: “[A]nti-unionization tactics by a monopsonist arguably limit unionized rivals’ ability to compete profitably by lowering UPMC’s costs relative to the rival’s.” Union-busting is not an instance of lower costs through superior productive efficiency, but rather lower costs through violation of law.
Why Stop at Labor Law Violations and the Sherman Act?
The UPMC example has broader implications for antitrust law and competition policy. Should federal and state enforcers start treating violations of generally applicable laws as competition problems? As discussed above, such lawbreaking is harmful to the expressly protected class—private-sector workers in the case of the National Labor Relations Act— and also to competitors that comply with the law. Congress appreciated the connection between employment conditions and competition when it enacted the Fair Labor Standards Act (FLSA). In establishing a generally applicable federal standard on wages and hours, Congress declared that underpaying and overworking employees “constitutes an unfair method of competition in commerce.” In line with the DOJ’s statement of interest, the drafters of the FLSA understood that firms can obtain an unfair competitive edge through labor exploitation.
Lawbreaking should be conceived of as not just potential monopolization under the Sherman Act but a broader competition policy concern. In adopting the language of the FTC Act, Congress’s use of “unfair method of competition” in FLSA shows the shared lineage between antitrust and labor. Today, flouting the law, including labor and employment statutes, is a clear competitive strategy for many firms, notably in Silicon Valley. To use one example, Uber acquired its dominance in the ride-hailing business, in part, by misclassifying drivers as independent contractors (and also refusing to acquire cab licenses), while law-abiding rivals faced higher operating expenses. Employers should be disabused of the belief that they can succeed and profit by busting their workers’ unions or depriving them of statutory labor and employment rights entirely.
As I lay out in a forthcoming article in the American University Law Review, the FTC, in a future administration, should challenge large-scale lawbreaking as a competitive strategy. The FTC can protect honest businesses and channel business strategy in socially beneficial directions, such as improvements in operational efficiency, investment in new production capacity, and research and development. In a 2024 essay, then-FTC Commissioner Alvaro Bedoya and his Attorney-Advisor Max Miller called on the FTC to challenge large-scale worker misclassification as an unfair method of competition.
While it lacks a private right of action and the treble damages remedy, the FTC Act has certain advantages over the Sherman Act. Under Supreme Court precedent, the FTC can attack not just traditional violations of the Sherman and Clayton Acts, but also practices that it deems “against public policy for other reasons.” Although the scope of public policy is contestable, federal statutory law undoubtedly constitutes public policy. Further, the broader substantive scope of the FTC Act means that the FTC can challenge large-scale lawbreaking by non-monopolistic firms. The FTC should not target any and all lawbreaking and duplicate the work of other federal agencies. Borrowing from the Conwood decision, the FTC instead should concentrate on instances that rise above isolated misconduct and represent a critical part of a firm’s competitive methods.
Two of the three principal federal antitrust laws are elastic by design. Whereas Congress restricted specific practices such as exclusive dealing and price discrimination in the Clayton Act, the drafters of the Sherman and FTC Acts opted for broad, open-ended language. They understood that attempting to catalog all unfair competitive practices in a statute would be futile. Businesses and their counsel are ever inventive and always looking for new sources of competitive advantage, licit and illicit. The class action against UPMC shows that union-busting is an important competitive tactic. This conduct is harmful to workers and to competitors that respect their workers’ right to organize. The NLRB exists to protect workers from unfair labor practices. To complement the labor agency’s work, the courts and FTC should use their competition powers to protect honest firms from their low-road rivals and pressure businesses to compete in more socially advantageous ways.
In December, Dennis Romboy and Art Raymond of Deseret News reported that the University of Utah’s board of trustees approved a first-of-its-kind private equity deal between the school and Otro Capital to fund athletics.
The decision to partner with private equity appears to be based on a crude assessment of the contributions (revenues and expenses) that can be traced directly to sports, which ignores the value added from the promotion of the university via athletics. And not counting that value added is a huge mistake. A few days ago, University of Utah upset #22 ranked West Virginia in women’s college basketball. Even if no one paid to see this game (2,352 reportedly were there), the University of Utah still reaped a huge promotional benefit when ESPN reported on the game.
Before delving deeper into the University’s mistaken reasoning, one first has to know what sort of business Otro Capital is seeking to fund. Let’s start with some basic stats about the University of Utah. In 2024, the University of Utah reported total operating revenues of $7.3 billion. That same report indicated the university had total operating expenses of $7.8 billion. But with a reported $1 billion in non-operating revenue, one could argue the University of Utah was profitable.
Of course, it was not. The University of Utah is a non-profit business. So, it is incorrect to talk about such a business in terms of profits and losses. Any excess revenues the institution earns are not paid out to owners or investors. Instead, these revenues are used to further the institution’s mission.
In many ways a non-profit institution is just like any other business. The university primarily sells educational services to its customers. To produce these services, people are employed and paid wages. But after all the revenue and expenses are tabulated, there is no individual to claim the profit. And because no one is there to claim a profit, the University of Utah – unlike many for-profit businesses like Otro Capital – is not seeking to maximize profits.
Although the primary business of the University of Utah is education, it also produces other products. One of these is college sports (in which Otro Capital would like to invest). This business gets quite a bit of media attention. But it is actually a very small business financially.
In January 2025, the institution reported that it sponsored 20 different athletic teams. And these teams generated $110 million in revenue (but spent a little more than that). Or to put it differently, athletics at the University of Utah generated about 1.3 percent of the revenues for the business.
Although it is only a small part of the operation, athletics at the University of Utah works just like their education business. Athletics brings in revenue to the institution. To generate these revenues, people are hired and wages are being paid. And at the end of the day – because the University of Utah is still a non-profit – it is inappropriate to talk about the university athletics in terms of profits and losses. Again, there is no one to claim a profit so the University of Utah is definitely not seeking to maximize profits with respect to athletics.
A history of student-athlete exploitation
All that being said, historically there has always been one major difference between athletics and the rest of the university. The product created by athletics is produced by student-athletes and historically the NCAA restricted the pay of these individuals to the cost of attendance. Consequently, the pay of other employees in athletics, such as coaches, tended to be somewhat inflated.
But after the Supreme Court ruled against the NCAA in 2021 (by a 9-0 vote!) in National Collegiate Athletic Association v. Alston, the compensation of college athletes can now go far beyond the cost of attendance. Of course, now universities must find money to pay the athletes.
Back in 2024, I argued the obvious solution was to simply pay the coaches less. So far, this obvious solution has generally been ignored. It appears schools want to keep paying college coaches far beyond what school revenues suggest is reasonable and also find additional money to pay the athletes.
One solution is to keep asking boosters to pay the bill. Mark Cuban does seem quite happy to give millions of dollars to Indiana University. But this massive investment isn’t making Cuban any richer. He has no claim to the Indiana Universities’ athletic revenue. All he gets for his money is the happiness created by a national football championship.
Although it is possible a university can always find a booster who is satisfied to give money to a business just for the chance to be happy, the marriage between the University of Utah and Otro Capital is a different way to go. Otro Capital isn’t giving money to the school just to increase its happiness. Otro Capital – as a private business – is presumably trying to maximize its profits.
So, why would a university that doesn’t seek to maximize profits (because they don’t exist for the organization) want to team up with an organization that we suspect primarily cares about maximizing profits?
A solution in search of a problem
Apparently, decision-makers at an institution with $8 billion in revenue seem to think one program (athletics) spending $17 million more than the $110 million revenue it generates is a problem. But is the solution to this very small problem creating a partnership with private equity?
We do not know for sure the motivations of the people leading Otro Capital. But let’s imagine that once upon a time they listened to the Friedman Doctrine. In 1970, Milton Friedman explained this doctrine in a column for the New York Times. The Friedman Doctrine is effectively captured by the last paragraph of the column:
But the doctrine of ‘social responsibility’ taken seriously would extend the scope of the political mechanism to every human activity. It does not differ in philosophy from the most explicitly collective doctrine. It differs only by professing to believe that collectivist ends can be attained without collectivist means. That is why, in my book Capitalism and Freedom, I have called it a ‘fundamentally subversive doctrine’ in a free society, and have said that in such a society, ‘there is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.’
Yes, Friedman is arguing that corporations should only focus on profits and do not have any social responsibility.
This sentiment is hardly original to Friedman. The famed financier J.P. Morgan once famously said during the Robber Baron Era: “I Owe the Public Nothing.”
These five words didn’t make Morgan immensely popular with the general public at the time. The inability of the Robber Barons to consistently behave in a way that people considered “socially responsible” eventually led to a political backlash that included the enactment of significant government regulation, a much more substantial social safety net, and tax levels far beyond anything seen in the history of the nation.
Of course, all that happened before the Friedman Doctrine was printed in the New York Times. Since 1970, substantial efforts have been made to lower taxes, limit government welfare programs, and reduce regulation. Today, people in business are generally not foolish enough to repeat those five words from J.P. Morgan in public. One suspects, however, that many people in business very much believe the Friedman Doctrine.
The dangers of private equity
And that is why it may be quite dangerous for the University of Utah to work with a private equity firm. A private equity firm is likely interested in the explicit revenues that University of Utah athletics currently generates. Because football and men’s basketball are two of the oldest sports (that have also benefitted from decades of investment and media attention), most of the athletic revenue is generated by those two teams.
But the other 18 sports teams also contribute to the success of the university. And this is true even if they never generate much revenue and never create a return for Otro Capital.
Although college sports do not generate much explicit revenue, sports are often the primary way these institutions advertise themselves to prospective students, alumni, and the general public. Every time the women’s basketball team or gymnastics team is in the news, the University of Utah is promoted. And this is a significant contribution in value to the University, even if it is hard to measure. It would be immensely expensive for a university to purchase an equivalent level of advertising.
Athletics also can promote the general mission of the institution. In the United States, women account for 58 percent of college students. Imagine a world where the primary method universities employed to advertise their institution (i.e., college sports) only involved men. This might make recruiting and retaining women as students a bit difficult. And a university without students isn’t really creating much social benefit.
Perhaps the people who lead Otro Capital can be made to understand all the things sports does for the University of Utah. Of course, that seems unlikely when we consider how little the University of Utah understands what sports does for the school.
Remember, this move seems motivated by the “losses” that decision-makers at the school think exist in an athletic department at a non-profit institution. If the University of Utah understood what athletics does for the school (i.e., advertising the institution), those “losses” wouldn’t seem so important and this marriage between a non-profit and for-profit institution wouldn’t be necessary.
In the end, private equity might help the University of Utah eliminate its “losses” in the athletic department. But if Otro Capital is only interested in profits (i.e., if they follow the Friedman Doctrine), the University of Utah is likely going to lose far more than it gains.
This week, to much fanfare, Google introduced its new Universal Commerce Protocol (UCP). UCP was developed in collaboration with multiple retail partners, including Target and Walmart.. UCP involves artificial intelligence (AI) agents (i.e., programs that can perform some tasks autonomously) in the shopping process (aka, agentic commerce). Simply put, instead of searching for a specific product on the web, finding your preferred location, then going there to perhaps purchase it, you can perform the entire transaction within Google’s AI Mode through UCP.
Google’s announcement was met with immediate (and frankly, warranted) skepticism and concern, particularly given recent court decisions finding Google has engaged in anticompetitive conduct in both search and display advertising. Lindsay Owens, Executive Director of The Groundwork Collaborative (whose recent research on price discrimination by Instacart’s shopping algorithms prompted congressional calls for an investigation) raised concerns regarding the potential for UCP to result in supracompetitive consumer prices. Her two-part viral tweet appears below.
The concern here is less with upselling, which occurs ubiquitously, but rather more with the potential for data collected from consumers’ AI prompts to motivate price discrimination by creating or amplifying existing market power.
Google’s Defense Made Matters Worse
Google immediately denied such claims in an attempt to mollify any concerns that UCP would lead to consumer harm. But, in doing so, Google did the exact opposite. Look carefully at the highlighted text.
If you’re familiar with the ongoing Ad Tech litigation against Google, as well as the pricing parity cases against Amazon, you might have reacted with more than just a little surprise. This looks A LOT like the very same conduct for which both Google and Amazon have been accused of violating the antitrust laws. Simply put, the highlighted text reflects a most-favored nations agreement: merchants cannot sell the same product at a lower price elsewhere than the price at which they sell on Google. This reflects a reduction in choice.
Notably, in NCAA v. Board of Regents, the Supreme Court noted that widening choice reflects a procompetitive outcome. Consistent with this view, courts adjudicating the ad tech antitrust matters have recently found a similar policy that Google implemented with respect to display advertising to constitute anticompetitive conduct. The specific Google practice there is called Unified Pricing Rules (UPR). In the district court’s August 5, 2024 Memorandum Opinion, Judge Brinkema described UPR as “a policy that prohibited publishers using DFP [DoubleClick for Publishers] from setting higher price floors for AdX [Google’s ad exchange] than for other exchanges…Unified Pricing Rules also prohibited DFP publishers from setting higher price floors for Google AdWords demand than for demand from other ad networks or demand-side platforms.”
Google’s own description indicates that it implements a similar policy with respect to Google Shopping—namely that merchants cannot advertise lower prices on other platforms (including their own sites) than on Google. But in the ad tech case, publishers indicated that they had good reason to reject such a policy. In finding that UPC constituted anticompetitive conduct, the court explained,
But in implementing Unified Pricing Rules, Google simultaneously took away publishers’ ability to set higher price floors on AdX than on third-party exchanges, which was a primary tool that publishers had used to maintain revenue diversity and to mitigate Google’s dominance of the ad exchange market. Publishers viewed Unified Pricing Rules as not in their best interests, but felt stuck using DFP given its tie to AdX. Unified Pricing Rules is another example of Google exploiting its monopoly power and tying arrangement to restrict its customers’ ability to deal with its rivals, thereby reducing its rivals’ scale, limiting their ability to compete, and further compounding the harm to customers. Under these circumstances, Unified Pricing Rules constituted anticompetitive conduct because it involved Google using its coercive monopoly power to deprive its publisher customers of a choice that they had previously exercised to promote competition.
In the ad tech case, Google could have chosen to compete on the merits rather than imposing UPR. It could have reduced its AdX take rate to motivate publishers to choose its exchange. Instead, it chose an anticompetitive course of action (UPR).
The same concept applies here. A seller’s ability to set different prices across sales channels can benefit consumers. For example, suppose one shopping platform offers lower fees to sellers, just as some ad exchanges offered lower take rates than AdX. Sellers can take advantage of those lower fees and pass on the benefits to consumers in the form of lower prices. In turn, this places pressure on rival platforms to lower their own fees and offer consumers the same benefits. Similarly, if sellers can avoid such costs, they can offer lower prices on their own sites. This is how competition works. Imposing price parity requirements as Google indicates it that it does, avoids such competition, to the detriment of consumers.
This article focuses on Google, but Amazon has also previously implemented a price parity policy. Amazon dropped this policy in Europe in 2013, after facing multiple investigations from European competition authorities. (See FTC 2nd Amended Complaint ¶275.) Though it also abandoned the policy in the United States in 2019 after facing legislative pressure, particularly from Sen. Richard Blumenthal (D-CT), Amazon continues to face antitrust suits based on implicit enforcement of such policies. The FTC has alleged that Amazon implicitly enforced this policy “through an internal mechanism called Select Competitor – Featured Offer Disqualification” (See FTC 2nd Amended Complaint ¶277.). In other words, sellers who did not abide by the price parity policy could lose their Buy Box eligibility. For more information on how the Buy Box works and its role in algorithmic pricing, you can see my recent piece on The Sling on this topic.
Google’s public acknowledgment that it imposes a price parity policy seems at best an unforced error, thought it may also signal its confidence that its conduct can escape the “anticompetitive” label in this case. Google might argue that it does not have monopoly power in shopping, particularly given Amazon’s presence. But Google does have monopoly power in search advertising. UCP will integrate with AI Mode in Google Search, where Google continues to test ads. Google has also added Direct Offers, a new Google Ads pilot that “allows advertisers to present exclusive offers for shoppers who are ready to buy — like a special 20% off discount — directly in AI Mode.”
Leveraging Its Search Monopoly into Online Shopping
Google already serves ads in its other AI-powered search product, AI Overviews (the AI-generated summaries that appear above search results) as well as AI Max for Search. The competitive concern here are twofold: (1) that Google will leverage its market power in search to the online shopping industry and (2) the remedies contemplated in the Google search case, specifically the expectation that AI would begin to dilute Google’s market power in search, may prove less effective than anticipated, if at all.
Specifically, the competitive concern would arise because, as mentioned, Google is the dominant search engine, and it now offers AI Mode in Search, which uses Google’s family of Gemini LLMs. AI Mode allows a more in-depth, “conversational” interaction between an individual and the AI-powered Gemini-3 model. It is worth noting that Google already knows a lot about individual users from products other than search: Chrome, Gmail, Google Fiber, and so on. As Google itself has acknowledged, it “draws insights from across your Google apps to provide customized responses from Gemini.”
The information people feed into Gemini, ChatGPT, and other LLMs provide more information about that user, valuable data that allows platforms to monetize their user base. Take, for example, the OpenAI commercials of the sort (“let ChatGPT plan your vacation”, or “use ChatGPT to schedule your day”). The intent here is to integrate AI into every facet of life, maximizing a platform’s opportunities for commercial extraction. OpenAI’s Sam Altman provided perhaps the emblematic example of this goal when he told Jimmy Fallon “I cannot imagine figuring out how to raise a newborn without ChatGPT,” as though humans have not been doing this very same thing for millennia.
Suppose you type in your agentic commerce-empowered AI chatbot that “I’m looking for lightweight running shoes with a carbon plate and support for pronation” instead of “I’m looking for running shoes.” An LLM can glean more important information from the former than the latter, which in turn informs that back-end machine learning algorithms. (For more about how such algorithms can result in tacit algorithmic collusion, you can check out my new paper on this topic here.) The former description suggests you’re a serious runner, likely a racer, who is familiar with various purpose-designed shoe features. It can then “upsell” you on other products that similar individuals have purchased. You can see Google acknowledging this below.
Learning individual preferences “on a deeper level” from user interactions allows Google to build out your consumer profile more accurately. This practice also preys on information asymmetries. While some may regard LLM outputs as ground truth (note the tendency of Twitter posters to ask “hey grok is this true), platforms such as Google can exploit that misunderstanding. After all, consumers acting more financially responsible and making better decisions doesn’t keep the lights on in the data center, nor does it pay for those new NVIDIA Blackwell chips. It’s worth remembering Google’s own warning: “Generative AI is a type of machine learning model. Generative AI is not a human being. It can’t think for itself or feel emotions. It’s just great at finding patterns.”
Amazon’s AI Shopping Tool Also Inflicts Harms
Of course, agentic commerce has some ostensible appeal. Cross-platform checkout can potentially save time or otherwise improve comparison shopping (absent the price parity restraint that Google imposes). But such attempts by Amazon have met with mixed results. Businesses reprimanded Amazon for using its AI shopping tool through its Shop Direct program to list products on its site without their permission. Shop Direct allows potential customers to browse offerings from brands sites directly on Amazon. The individual can then complete the purchase by clicking the “Buy for Me” button, which prompts the AI agent to purchase product on the shopper’s behalf.
The problem arose when the AI agent attempted to purchase items that the shop does not even sell or when the seller does not even participate in the Amazon program. Hitchcock Paper, a stationary company in Virginia explained in an Instagram post,
I fiercely believe this is why we shouldn’t let AI control things with no human backup or accounting. Amazon should not be beta testing faulty programs on small businesses without ANY way for us to seek help when it inevitably goes wrong. @sellonamazon, unknowingly involving my business in this program – then requiring me to pay to get help – is deceptive and wrong.
Other sellers noted that Amazon’s AI agent attempted to buy discontinued products from third party sellers though Shop Direct, indicating that this was not an isolated incident but a program that affected sellers more broadly. Such practices point to another source of consumer and seller harm: platforms’ misuse of agentic commerce can impose transaction costs on sellers, which eventually translate into higher prices for consumers.
Amazon itself is not immune to the vagaries of agentic commerce. In November 2025, Amazon sued Perplexity, an AI-powered answer engine that operates the Comet web browser application. Comet AI incorporates agentic AI functionality, enabling it to take actions on users’ behalf, including placing orders on Amazon’s store. Amazon alleges that Perplexity did not identify its AI agents as such, and that Perplexity set up Amazon Prime accounts, enabling users to make purchases on Amazon and take advantage of Prime features without paying for them.
Agentic commerce makes many promises. Whether these actually manifest themselves remains to be seen. The outcome will depend, at least in part, on whether platforms engage in good-faith efforts to improve consumer experiences, or instead turn to exploitative practices that mirror those already challenged under antitrust statutes. If anything, consumers and sellers have cause for concern.
Housing prices are up, and would-be homeowners are shifting to rental units. The inventory of homes for sale is shrinking because investors are buying up properties with cash offers. Investors then rent the homes to households who cannot afford mortgages. Many feel that the American dream of homeownership is slipping away. Building more homes won’t alleviate the problem if those additions are not in the right location or if investors buy them first.
To address this pinch, right after the New Year, President Trump called for Congress to cap the holdings of institutional investors in the housing market. A very reasonable idea, so long as it is implemented correctly.
Within days of the president’s announcement, the New York Times Opinion section featured an essay titled “The Landlords Are Not The Problem,” noting that institutional investors collectively own “less than 1 percent of the nation’s single-family homes—and less than 5 percent of single-family rentals.” That figure presumes that the relevant geographic area for studying investor pricing power is the nation. But housing investors are not randomly acquiring properties across the nation. Instead, they are selectively acquiring properties in neighborhoods to maximize their pricing power. This purchasing strategy, sometimes called “rentlining,” entails buying homes that are most likely to permit rent extraction from tenants who lack options. Measuring investor ownership using the nationwide housing stock as the denominator artificially deflates the true investor share of the markets in which they operate.
The Wealth Defense Industry Strikes Back
President Trump’s proposal sent members of what Matt Stoller aptly calls the “wealth defense” industry into overdrive. Jay Parsons, former chief economist of RealPage, was quick to tout a study by the American Enterprise Institute (AEI), a libertarian think tank that has been one of the loudest opponents of recent federal and state efforts to restrict investor homebuying. The AEI report, from August 2025, estimated that institutional investors owned a small share of single-family homes when looking at the national, county, and even zip code levels. That report offers the following analysis of single-family home ownership:
Institutional ownership of single-family homes is highly concentrated and varies significantly at the county level. Just 162 counties (or 5% of U.S. counties for which Parcl Labs data are available) account for 80% of all institutionally-owned homes, according to Parcl Labs data. Yet not a single county has a share greater than 10%…[E]ven in metros that have received significant media attention for their more pronounced investor presence, such as Atlanta (4.2%), Dallas (2.6%), and Houston (2.2%), these investors do not dominate any single neighborhood[…] In Atlanta, for instance, the highest institutional investor share in any ZIP Code is 12.4%, while half of its ZIP Codes have a share below 1.5%. No ZIP Code in Houston has an institutional investor share of over 10%[.]
Although this analysis may inspire faint hope as far as it shows that institutional investors haven’t yet taken over most U.S. housing markets, this analysis misses two valid concerns of affordable housing advocates: (1) concentration can be caused by large local players, regardless of their national or statewide holdings, and (2) neighborhoods, not zip codes, are the relevant geographic market.
Institutional Investors Aren’t the Only Source of Pricing Power
The current policy discourse has poorly defined the valid concerns about institutional housing investors. In recent bills proposed to regulate institutional investors, these investors are generally defined as an owner of one hundred or more residences. For example, Florida’s House Bill 1593 regulates the home-buying of a business that “has an interest in more than 100 single-family residential properties in this state.” The AEI report quoted above uses the same one-hundred-home designation. This definition misses the crux of the pricing power issue.
No housing advocate or economist has ever drawn a bright red line at one hundred units as the threshold for corporate pricing power. When scrutinizing the ability of businesses to coordinate and set artificially high prices, economists measure the overall concentration of the relevant market, regardless of the asset portfolio of the participants. Moreover, sometimes different firms that purchase homes are subsidiaries of a larger firm, so a firm may appear to be a small investor but actually be just a tentacle of a larger corporate entity.
In this instance, a more accurate analysis of pricing power examines which local housing markets are controlled by a few big players, rather than analyzing arbitrary ownership thresholds. Owning just five homes in the same neighborhood reasonably conveys investor status, regardless of whether the owner is an institutional investor.
Taking this more expansive view of market concentration allows us to measure pricing power in individual housing markets regardless of national (or statewide) asset portfolios.
Measure Neighborhoods, Not Zip Codes
A second issue with AEI’s claims is that market power must be evaluated in a relevant geographic market. The Merger Guidelines compel us to ask, how much contiguous real estate would a hypothetical landlord have to acquire in order to raise rents over competitive levels? Although zip codes can be a useful and relevant unit of observation, zip code boundaries do not necessarily reflect the areas within which a renter or homebuyer considers their options. A medical student at University of Miami who lives in the trendy Brickell neighborhood for easy access to the metro station (and a short ride to the medical campus) would not consider any apartment in the 33130 zip code as a substitute.
To study this issue, we focused on Atlanta, as the AEI study provided institutional market shares by zip code there. Fulton County provides a map of all official neighborhoods in Atlanta, which we combined with a dataset containing all tax parcels in the county to identify all single-family homes in Atlanta by neighborhood.
Because there are approximately four times as many official neighborhoods as zip codes in Atlanta, neighborhoods provide a more narrowly defined set of smaller geographic housing markets relative to AEI’s zip code analysis. Furthermore, renters and buyers both seem more likely to deliberately target neighborhoods rather than zip codes when searching for their next home.
Neighborhood Market Power Analysis
We assembled a dataset of approximately 75,000 single family homes in Atlanta. We identified homes owned by an LLC or other business entity, and we also identified “investor owners,” which we define as homeowners who own at least five homes within a given neighborhood. The vast majority of investor owners are business entities. In line with AEI’s research, we find that investor owners hold a small share of homes in most Atlanta neighborhoods.
While AEI asserts that investor owners do not hold over 12 percent of homes anywhere in Atlanta, we identified Atlanta neighborhoods where investor owners held larger shares of single-family homes. Investor shares of the housing stock are especially large when we exclude owner-occupied homes from the analysis, considering only those homes that are currently empty or occupied by renters.
A prominent example is Historic Westin Heights/Bankhead, a neighborhood just outside of Atlanta’s downtown. Bankhead’s single-family housing stock is dominated by Canopy Development Group, which holds 11 percent of all homes in the neighborhood and 17 percent of homes that are not owner-occupied. (According to its website, Canopy “is leading the largest land and property acquisition effort in Atlanta’s Westside Beltline area.” Per the Atlantic Journal-Constitution, Canopy “has used anonymous limited liability corporations to buy up large portions of west Atlanta’s impoverished English Avenue neighborhood.” While Canopy has developed properties as well, it obtained its status via acquisition.). Mechanicsville, named for the mechanics who worked on the rail line, is another neighborhood community with substantial investor ownership, with investors holding 14 percent of all homes and 24 percent of homes that are not owner-occupied.
We identified three other Atlanta neighborhoods with at least 350 single-family homes where at least 10 percent of homes that are not owner-occupied are owned by investors.
It is worth noting that three of the five neighborhoods highlighted by this analysis (Bankhead, Collier Heights, and Capitol View) are among the “Beltline” neighborhoods, communities adjacent to a major urban renewal project. The Beltline project has displaced many long-tenured homeowners in Atlanta, making their former homes available to large-scale landlord investors.
High Shares in a Neighborhood Are Consistent with Direct Evidence
Given the low investor shares at the zip code level (implying lack of pricing power), and given the high investor shares in certain neighborhoods, one can look to direct evidence of investors’ pricing power to resolve the dispute. If investors can be shown to inflate rents, then the narrower geographic market is consistent with the direct evidence of pricing power.
There is a large and growing literature demonstrating the inflationary effect of these types of institutional holdings on rental prices in local housing markets. A July 2020 working paper from St. Louis Fed economists investigated the effect of institutional investors —defined as “entities who purchase multiple housing units under the name of an LLC, LP, Trust, REIT, etc.” — on rental prices. The economists found that institutional investors increase the price-to-income ratio of rental properties, especially in the bottom price-tier. In an antitrust court, such evidence would be considered “direct” evidence of the pricing power of institutional investors, which obviates the need to define a market, estimate share, and infer market power through high market shares.
In another study of rental pricing, Watson and Ziv (2021) analyzed the relationship between ownership concentration and rents in New York City, finding that a ten percent increase in concentration is correlated with a one percent increase in rents. This finding suggests that policymakers should be concerned about concentration of ownership, regardless of whether concentration is comprised of institutional investors or smaller investors.
These findings importantly hold even when looking within individual neighborhoods over time. Using mergers of private-equity backed firms to isolate quasi-exogenous variation in concentration of ownership at the neighborhood level, Austin (2022) found that shocks to institutional ownership cause higher prices and rents. This finding suggests that the association between institutional ownership and higher prices isn’t merely selection bias (institutional investors happening to invest in hot housing markets).
Neighborhood Ownership Caps Make Sense
Although AEI and other housing concentration skeptics are correct that regulating corporate landlords is not a silver bullet to address the ongoing affordability crisis, their analysis and rhetoric understate the reality of housing investor ownership.
A landlord does not need to own one hundred properties in a state to contribute to the concentration of economic power. Corporate landlords target neighborhoods where homes can be purchased cheaply and rented out profitably because renters in that area have limited choices. These renters’ options are limited in part because this targeted approach creates market power in the neighborhood-level housing market.
Landlords, especially those owning many homes in a single community, are part of the housing crisis, especially in rentlined communities like Bankhead in Atlanta. Regulating the accumulation and exercise of market power will always be part of a holistic solution to market failure. Our analysis suggests that a modest cap on the share of rental properties in a neighborhood that a single investor could own—say, of five or ten percent—could weaken the grip of investors and give renters some much-needed relief.