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FTC Chairman Andrew Ferguson, freshly appointed by President Trump, made what seemed to be a stunning announcement. On X, he posted that the FTC and DOJ would continue to use the 2023 Merger Guidelines, as conceived by his predecessor, Lina Khan. This appeared to be a stunning victory for New Brandeisians, one that upset the usual group of people who get upset any time there might be a whiff of antitrust enforcement anywhere. 

New Brandeisians similarly rejoiced, glad that the work that they put into the Guidelines would continue to be recognized and utilized. 

On the other hand, to quote singer-songwriter Steve Earle, I was “just staring at the screen, with an uneasy feeling in my chest, I’m wondering what it means.”

Then the follow-up posts, at least to me, added some cause for concern:

That is a fair point. It is destabilizing to an agency to play political football with the Guidelines, although that has been done before. 

On the other hand, there has been some consistency throughout. The drive toward weighing efficiencies claims against merger-related harms is one example. A 1997 update to the Guidelines solidified those efficiency claims, and the 2010 Guidelines reinforced them. To the dismay of some progressives, the 2023 Guidelines did not abandon them. Indeed, there is some consistency in the current Guidelines, restoring the original HHI thresholds and keeping the efficiency rebuttal, against my wishes.

Chairman Ferguson is also right that the FTC has limited resources—a perpetual problem for antitrust enforcement agencies. And the Chair has shown his eagerness there, proudly proclaiming the end to the FTC’s DEI programs in response to President Trump’s executive order. Though it’s not clear how much money that will save.

And of course, the Chair is correct in the following post:

The FTC and DOJ have used the same Guidelines used by previous administrations. There is a reason for that: None of those administrations essentially altered the nature of merger review after 1980. 

My concern is a bit deeper. Because even short of retraction, it is always possible to simply abandon or ignore the Guidelines. One recalls the abandonment in the 1980s of the Non-Horizontal Merger Guidelines, as well as the abandonment of the potential competition doctrine (brought back to life by the FTC’s challenge of Meta’s acquisition of Within). For a period of time, the only good merger case to bring at the enforcement agencies was a horizontal one. 

But another reason one might not care about what the Guidelines say, and this may give some comfort to the anti-enforcement crowd, is that perhaps Chair Ferguson does not think the Guidelines are all that important. His post states, “Courts will not rely on guidelines that are transparently partisan either.” 

Chairman Ferguson in his “pitch document” for the position of FTC Chair stated he planned on ending “Lina Khan’s war on mergers.” He also stated that her investigations were “politically motivated.” In the same document, he asserts that most mergers “benefit Americans.”  Thus, it is hard for me to see that retaining the Guidelines—which his memo to staff suggests is just a reiteration of caselaw—is a huge win.

New Brandeisians may take comfort in Chairman Ferguson’s harshness toward “Big Tech” and his retention of the 2023 Merger Guidelines (for now). But I want to know if it is for the right reasons. Does his decision express a true admiration for antitrust enforcement or some deeper political calculus? For example, after the ABA issued a statement suggesting that the rule of law be followed, Chairman Ferguson prohibited FTC political appointees from speaking at ABA events:

While the ABA is definitely on the side of Big Tech, and the ABA Antitrust Section did in fact publicly oppose the American Innovation and Online Choice Act (AICOA)—a law designed to regulate self-preferencing by dominant platforms such as Amazon outside of antitrust laws—the ABA is hardly a radical left-wing organization, particularly the ABA Antitrust Section. So, it is reasonable to see this move as a punishment for the ABA’s message about the rule of law, not their support of Big Tech. 

Also are any other organizations beholden to the economic interests of parties with business before the FTC?  I notice it’s still totally fine for political appointees to speak at Chamber of Commerce, Federalist Society, or CPAC events, apparently.

Chairman Ferguson has also stated that President Trump should be able to fire FTC Commissioners at will.

This license to fire from the Chair, combined with the fact that Big Tech has supported President Trump in significant ways, suggests that New Brandeisians should not be prematurely signaling enthusiastic support for the Chair.

To wit, corporations and CEOs in tech, AI, and cryptocurrency have donated millions to President Trump, including Amazon, Meta, Google, Microsoft, Uber, Ripple (Crypto), Uber’s CEO,  Meta’s CEO, Apple’s CEO, and OpenAI’s CEO.  Thus, if the Chairman is calling the lawyers of President Trump’s leftist, it might not be anything other than a performative gesture.  And calling someone leftist is a performative gesture we’ve seen before.

Which raises some other concerns. It is possible to get the right answer for the wrong reason.

Is the Chairman truly pro-enforcement, and therefore against concentrations of economic power. If so, why is he wanting to halt the “war on mergers?” Why is he seemingly only worried about Big Tech’s economic power?  

For example, the Chairman seemed annoyed when Commissioner Bedoya called for an investigation into egg prices, noting the industry’s soaring profits. This blowback reinforces the notion that the Chair doesn’t object to the exercise of power outside of Big Tech.

The motivation for the Chairman’s recent actions matter. And we will not know for sure until we see whether the Chairman is prone to full hard-core enforcement, cheap settlements, or no enforcement at all.

Until then, it is mostly just tweets.

Imagine two business partners, Sue and Steve, form a company. The company finds success and is acquired by a larger competitor. After the sale has been consummated but before the payment has arrived, Sue seeks to dissolve the partnership, asserting that Steve does not deserve any of the proceeds from the sale. While the fair split of the proceeds might not be 50/50—perhaps Sue brought key assets to the venture or wrote the code that undergirds the company’s intellectual property—the notion that Steve deserves nothing seems patently unfair. After all, Steve was there at the formation of the company and made positive contributions to the company’s revenues and ultimately sale.

Now swap “Steve” with “employees” in the same hypothetical. Rather than share in any of the proceeds from the sale, Sue’s company fires its employees, depriving them of the chance to partake in any of the upside from the sale. Although the relationship between the partners is not materially different in the two examples, we seem programmed as a society to accept the horrible fate of zero upside for workers. And that’s wrong.

Before the success (or failure) of a firm is realized, the steady stream of paychecks to the workers is a risk born uniquely by the employer; the worker will continue to collect such payments so long as their employer is profitable or at least heading in that direction. But when profitability is no longer achievable, that bargain falls apart. In the employer-employee relationship, workers bear downside risk that their employer underperforms. Hence, when a company experiences failure, it is reasonable for that company to downsize its workforce to keep the doors open.

By contrast, when a company experiences success, downsizing its force appears counterproductive and tantamount to the misappropriation of the workers’ contributions. And, it bears a striking similarity to Sue’s patently unfair offer in the hypothetical above. Precisely quantifying workers’ value added (as opposed to owners) is no easy feat, but we can safely infer it is not zero. If workers understood that they also bore risk in the good state of the world—that is, when their employer was overperforming—then they likely would not have signed up for the original bargain. For example, they would have demanded additional compensation in the form of equity. This is basic economics: higher risk requires higher returns.

Since the start of the new year, the New York Times business section (which I follow quasi-religiously) has chronicled several episodes in which a successful firm has made massive layoffs of its workforce. To wit:

And so it goes. In this late-stage of capitalism, workers bear the risk when employers underperform and when employers overperform. If such opportunistic behavior by employers bothers the Times, it is not showing its feelings. By amplifying this news, however, the Times is unwittingly communicating these sacrifices to the firms’ investor overlords, who typically reward companies for slashing labor costs with higher stock prices.

Not only is firing workers during a boom unfair to workers, it is also a breach of the social compact. Workers should share in the upside when employers are profitable; instead, they are cut loose. This is no novel proposition after all. Look at the NBA’s collective bargaining agreement—the players share equally in the revenue increases and bear equal risk of the shortfall. Not so in much of the rest of corporate America, where the exploitative impulse allows employers to privatize the benefits of their innovations in the event of success, but socialize the dislocation costs regardless of the outcome, success or failure. Many displaced employees will likely collect unemployment insurance, paid for by taxpayers.

Heads employers win, tails employers win. This is not a fair bargain. And as a society, we should demand a different set of rules on behalf of our workers.

Back in 2011, ESPN and the NCAA agreed to a $34 million per year media deal that gave ESPN the right to broadcast championships in 29 different college sports. The list of sports included every single college sport played by women. As time went by, it became increasingly clear this media deal dramatically undervalued the rights to women’s sports. After all, in 2024 dollars, that 2011 deal would only be worth $47.6 million, or just $1.64 million per sport (equal to $47.6 million divided by 29 sports). A report commissioned by the NCAA itself in 2021 argued that the media rights to women’s college basketball alone were worth between $81 million and $112 million. 

In 2023, when the 2011 media rights deal was finally expiring, the NCAA had an opportunity to collect far more money. And in January of 2024, the NCAA proudly announced that this mission had been accomplished! NCAA President Charlie Baker told the Associated Press: “Yes, it’s a bundle, but it’s a bigger bundle that will be much better.”

Yes, that’s the quote. And yes, the NCAA agreed to a bigger and better bundle that is going to be much better!! Problem solved!

Not exactly.

When we delve into the numbers, however, we do see the agreement is technically bigger. Previously, the NCAA had a 14-year deal that paid $34 million per year, or $476 million across the entire agreement. The new deal is worth $920 million over eight years, or $115 million per year. Yet the new deal also covers 40 sports (up from 29 previously). So, it might look like the NCAA is now getting $2.875 million per sport (equal to $115 million divided by 40 sports). Or as Baker said, “bigger and better!”.

But the math doesn’t quite work as Baker’s quote suggests. Remember, the report given to the NCAA in 2021 said that women’s college basketball is worth between $81 and $112 million. The NCAA and ESPN ultimately didn’t agree with that value. Baker and the NCAA did hire a media consultant (Endeavor’s IMG and WME Sports) that “estimated about 57% of the value of the deal — or $65 million annually — is tied to the women’s March Madness tournament.”

That isn’t quite $81 million per year. But the people at Endeavor said they were pretty sure that the 2021 report overestimated the value of women’s college basketball. If we take Endeavor at their word (they didn’t show their math!), we learn something odd about all the other sports played by women. Remember, back in 2011, the NCAA sold the media rights to 29 sports for $34 million per year. Once again, in 2024 dollars, that worked out to $1.64 million per sport. If we believe Endeavor, then the right to women’s college basketball sold for $65 million and the rights to 39 sports that are not women’s college basketball were sold for $50 million ($115 million less $65 million). That means, all the other sports were valued at $1.28 million each in 2024 (equal to $5o million divided by 39).

And that means, according to the NCAA and its media consultants, the value of women’s volleyball, women’s gymnastics, and softball all went down from 2011 to 2024!

One has to wonder how that could be possible. After all…

To put all these numbers in perspective, the NHL averaged about 500,000 viewers per regular season game in 2023-24. And the Stanley Cup playoffs in 2024 averaged 1.8 million viewers per game. For these ratings, Disney (parent company of ESPN) and Turner (parent company of TNT) agreed to pay $625 million per year to the NHL. 

Remember, ESPN got all of women’s college sports—and much of men’s college sports (except for football and men’s basketball)—for just $115 million per year. How could the NHL package be worth five times what we see for women’s college sports? And how could the rights to men’s college basketball be worth $1.1 billion per year, while the rights to women’s college basketball are only valued at $65 million? After all, the women’s basketball final in 2024 actually attracted nearly four million more viewers than the men’s final.

And once again, how did the value of women’s volleyball, women’s gymnastics, and softball actually go down?

All of this suggests that the NCAA left quite a bit of money on the table. For people who have only heard the story about markets primarily told in ECON 101, this must seem impossible. It reminds one of a very old joke told by economists:

Two economists are walking down a street and see a $20 bill lying on the sidewalk. The first economist says, “Look at that $20 bill.” The second says, “That can’t really be a $20 bill lying there, because if it were, someone would have picked it up already.”

This isn’t exactly funny (economists aren’t known for their ability to tell jokes!). But this story does capture a fundamental idea for many economists. Decision-makers tend to be rational, and markets tend to be efficient. Therefore, money is not left on the table (or the sidewalk!).

This view isn’t just prevalent among economists. At least, a story that likely started with economists tends to be believed by people everywhere. If you tell someone that a leader in business made a mistake that costs millions, you will immediately be asked: “How is that possible?”

There is a very simple answer to that question. Human beings don’t always try their hardest and can make mistakes. And markets, which can at time force people to try harder and correct their mistakes, are often not very efficient. 

This is especially true when markets are not competitive. As Adam Smith observed back in 1776: “Monopoly… is a great enemy to good management.“

As economists have known for decades, the NCAA is a monopolistic cartel. One of the many problems with monopolies, as Adam Smith understood, is that the people who lead monopolies don’t have to be good managers.

This appears to be the story with how the NCAA sold the media rights to women’s college sports.At the very end of the article detailing the NCAA’s media right deal was this sentence: “The deal was also struck within ESPN’s exclusive negotiating window and never brought to the open market.”

And there’s our answer. 

Charlie Baker and the NCAA didn’t shop the rights to women’s college sports. Markets can be efficient when there is competition. But if you take away the competition, the power of markets vanishes.

In contrast to the NCAA, the NHL shopped their rights to multiple companies and got multiple offers. Baker and the NCAA didn’t get a very good deal because they only bothered to negotiate with one company (ESPN), leaving out potential bidders such as Turner, Amazon, and Netflix. Yes, the NCAA did get more for women’s college basketball. But it doesn’t look like they got as much as they could have. And one doesn’t have to be a math major to see that the NCAA managed to get less for women’s volleyball, women’s gymnastics, and softball than they were getting before. Apparently, no one with the NCAA managed to take a few moments to break out a calculator to see that this happened.

How is that possible? Once again, monopolies are the enemy of good management. If a small farmer in a competitive market makes a serious mistake, there is a good chance the farmer goes out of business. Competition can be a very harsh teacher.

But Charlie Baker and the NCAA are not small farmers. The NCAA isn’t going to go out of business because they failed to negotiate a very good deal for women’s sports. The NCAA will continue to exist and likely continue to tell us that women’s college sports doesn’t generate much revenue. Of course, that isn’t true. Women’s sports do, in fact, generate substantial revenue. But right now they are doing this for ESPN. As Lindsey Darvin at Forbes recently reported, by January, advertising for the broadcast of the women’s March Madness had already sold out. Advertisers know there are going to be millions of viewers for the women’s college basketball championship, and they definitely are willing to pay ESPN to address that audience.

But the women in college sports aren’t going to see all that money. Charlie Baker decided to leave it on the table and prove Adam Smith was right!

The shooting of its CEO has flung UnitedHealth Group (“UHG”) into the American zeitgeist, and there’s been no shortage of heated opinions on what to make of it. With the tragedy nearly two months behind us, perhaps we can now reflect, dispassionately, on the real diagnosis here: UHG has been monopolizing and “monopsonizing” American health care. Agreeing with that diagnosis would be Eric Bricker, M.D., who educates extensively about health care finance on his YouTube channel, AHealthcareZ. With its current market cap at nearly $500 billion—close to that of the rest of the top ten health care companies in America combined—Bricker concludes, “UnitedHealth Group essentially is health care in America.”

Indeed, UHG has gone well beyond its roots in health insurance to bill itself now as “a health care and well-being company.” UHG is the Amazon of American health care—like Amazon, it should be viewed as a multi-sided platform in the health care marketplace, where it dominates as operator, participant, and controller of the “pipes” through which much of health care flows. How so? And how to interpret this from an antitrust perspective? Let us count the ways.

UHG: The Operator

Let’s start with UHG’s roots as a health insurance company, UnitedHealthcare (“UHC”). UHC is in effect a financial middleman that operates a transactional network connecting suppliers with purchasers in the health care marketplace. The suppliers are physicians, hospitals, pharmacies, pharmaceutical companies, and the like. In America, the purchasers are largely the government (via Medicare and Medicaid) and employers, who sponsor health insurance for most of those not on Medicare or Medicaid.

As an intermediary, UHC benefits from what economists call “network effects”—the more suppliers and purchasers utilize its network, the more valuable its network becomes. After a series of horizontal mergers with other insurance companies over several decades, UHC now has the largest share (14%) of the highly concentrated commercial health insurance market. Its share is even greater (28%) of the also highly concentrated Medicare Advantage market, the market of private Medicare plans now accounting for over half of the Medicare market overall. UHC makes twice as much in this space as it does in employer-sponsored health insurance. Even in traditional Medicare, UHC dominates as AARP’s exclusive Medicare Supplement plan provider.

But UHC isn’t the only network-effect-exploiting middleman in UHG’s arsenal. Its other main subsidiary is Optum. Optum itself has three business branches: OptumRx, OptumHealth, and OptumInsight. Of the three branches, OptumRx is the cash cow: it is UHG’s pharmacy benefits manager (“PBM”). PBMs have been in the crosshairs of antitrust advocates for years now, and a whole antitrust-related post could be written on this subtopic alone. Suffice it to say here, OptumRx is the third largest of the three PBMs that control 80% of all prescriptions administered in America. And Bricker illustrates well how a PBM like OptumRx sits right in between purchasers and suppliers in prescription drug administration.

The trouble occurs when OptumRx serves two masters: (1) the employer/government who wants the PBM to negotiate the lowest price possible for a given drug; and (2) the drug manufacturer who pays the PBM various “fees,” aka kickbacks, for preferred placement on the PBM’s drug formulary—kickbacks that increase with increasing drug price. OptumRx also requires its PBM to use its own pharmacy for specialty medications, Optum Specialty Pharmacy. As a recent FTC study shows, those specialty medications are an increasingly growing profit center for OptumRx, with the markup on some of them exceeding 1,000 percent. Such conflicts of interest are endemic to the other major PBMs as well. When it comes to interacting with the powerful, concentrated PBMs, the conflicts of interest and restricted choices make for awfully poor quality. (Ask any physician who’s spent hours on the phone trying to get prior authorization for the PBM to cover a prescription, and you will get an earful of Kafkaesque misery.)

At any rate, UHG plays multiple sides of its multi-sided platform in other unique ways. In 2017, Optum acquired The Advisory Board Company and is now the third largest health care consulting firm in America. In this capacity, UHG now consults hospitals on how to get paid more—while its affiliate, UHC, negotiates with those very hospitals to get paid less. With its acquisition of Change Healthcare in 2022 (more on this below), UHG brought Change’s InterQual into its fold. InterQual is one of only two companies in America that control utilization management of hospital beds: how many paid “bed days” should be assigned to a hospitalized patient with a given diagnosis before the insurance payment is cut off. Conflict of interest strikes again, in a market that Bricker estimates at $400 billion per year in health care spend. That’s a huge market to have such concentration of economic power.

UHG: The Participant

We’re not done with UHG’s non-horizontal mergers. In the last decade, UHG has gone on a vertical-integration buying spree, specifically to occupy the health care marketplace not just as a platform middleman but also as a participant. As UHG’s participant arm, OptumHealth has entered the home health care space with its acquisition of the nation’s third largest home health provider (and also a large hospice provider), LHC Group, a merger that passed through initial scrutiny by the FTC. And OptumHealth now employs or is affiliated with the largest number of physicians in the country—90,000 and counting, or a tenth of all physicians in America.

UHG argues that its acquisition of physician practices aligns with so-called “value-based care,” whereby a health care entity bears risk through capitated payments from, say, the government as in Medicare Advantage plans; the entity then makes profits based not on volume of care but quality. But quality improvement may be more rhetoric than reality, as surfaced by local investigative reports of problems post-merger:

These investigative columns have uncovered the healthcare company’s oppressive physician employment contract; a disastrous phone system; urgent care upheaval; alleged double billing; copay confusion; a scathing internal survey; data privacy breaches; attorney general scrutiny; suspect COVID-19 testing charges; predatory marketing tactics; Medicare Advantage-related profiteering concerns; state lobbying efforts; a disconcerting doctor shortage; the troubling mix of healthcare with insurance services; the unethical banning of unwell patients; and the denial of patient medical records.

That’s a hairy list.

In addition, Bricker presents a “fable” that illustrates the risk of vertical foreclosure. An insurance carrier buys a physician practice, which formerly used Vendor A for a particular patient service that charged $300 per patient per day. After the acquisition, the insurance carrier replaces Vendor A with Vendor I, which the carrier owns—and charges the patient $800 per day. Not only that, the insurance carrier and physician practice had agreed on an earnout in which the practice would earn payments based on future profits of the practice post-merger. Having forced the practice to use the more expensive Vendor I, the carrier decreases practice profits and therefore the earnout. Double win for the insurance carrier. Double loss for the physicians and the employers/other billed insurance carriers financing the health care costs, as those costs rise. Hmm…is this fable the real story of UHG?

Texas and many other states forbid the corporate practice of medicine. Yet UHG’s quiet but aggressive gobbling up of physician practices skirts around the prohibition. And while the OGs of the practices do well in the sellout, the rest may just have to deal with decreased earnouts, pay cuts, increased patient loads, layoffs, onerous do-not-competes—in short, to use Cory Doctorow’s word—the “enshittification” of health care. No wonder physicians are burning out in droves, as these vertical integrations curtail their power.

The curtailing of physician power turns into a classic case of monopsony power. At least one health care organization has filed a lawsuit against UHG in California, alleging that, among other things, UHG’s control of the local primary care physician market unlawfully restricted physicians from working for competing networks and taking their patients with them. And as UHG’s monopsony power (along with that of the other big carriers) to push take-it-or-leave-it insurance contracts with independent physicians has grown, many of those otherwise independent physicians have banded together to set up “management service organizations,” in an attempt to increase countervailing power and negotiate better contracts. It’s an arms race to determine who will get a bigger share of the health care pie. The net effect?  Increasing prices and decreasing quality for those employers and their workers who seek health care.  

UHG: The Pipes

UHG increasingly controls not just the operation and participants of American health care, but also its transmission lines. In 2022, UHG made a bid to acquire Change Healthcare, a company that electronically processed billing claims and remittances between myriad health insurance carriers and the vast majority of hospitals and doctors in America. Change also ran a quarter of another pipe in health care: the “switch” software connecting pharmacies with plan information from all the PBMs, as well as processing the coupons pharmaceutical companies can issue directly to the patient for prescriptions filled at the pharmacy. Around the time of the proposed acquisition, Change had only one percent of the revenue of already gargantuan UHG. What Change had, nevertheless, was the valuable data in all those billing claims and remittances: patient IDs, provider IDs, diagnosis codes, procedure codes, and billed and allowed amounts—for ALL carriers, no less. That data could give UHG an advantage, for example, in quoting lower prices on commercial plans for fully insured employers with healthier employees, targeting lower-risk Medicare Advantage pools, or carving out a few expensive outlier physicians from the insurance network.

The DOJ tried to block the UHG-Change merger but failed. In its defense, UHG pointed to longstanding strict firewalls between Optum’s data analytics and UHC’s insurance underwriting that prevented access and use of sensitive claims information from competitor carriers. That and divestiture of one of Change’s claims edit products, a horizontal competitor to Optum, were enough to convince the district court to approve the merger.

But not all has been well. The February 2024 ransomware attack against Change left thousands of medical practices, hospitals, and pharmacies without incoming cash flow once claims processing shut down. At least one large clinic in Oregon, already in talks to merge with UHG, had to apply for and ultimately get emergency approval for its buyout after running out of cash. How convenient for UHG: as one headline aptly put it, “UnitedHealth Exploits an ‘Emergency’ It Created.”

In any case, will UHG’s so-called firewalls hold up over time? Are the pipes of the health care infrastructure UHG now controls “essential facilities” that should invoke that discarded stepchild of antitrust doctrine? At the very least, UHG has foreclosed any defense that there can be no intra-enterprise conspiracy here. As one researcher lauded, the secret to UHG’s power is that it has set up Optum as a fully autonomous, separate business with its own processes, resources, and profit streams, distinct from the insurance business. That sounds like a disunity of economic interest—which means any collusion, express or tacit, between the Optum and UHC subsidiaries of UHG would implicate Section 1 of the Sherman Act.

Where Do We Go From Here?

The DOJ did not appeal the district court’s judgment on the UHG-Change merger. But it appears the DOJ wasn’t done with UHG. In October 2023, the DOJ reopened an antitrust investigation into UHG’s business practices. And in November 2024, the DOJ along with Maryland, Illinois, New Jersey, and New York sued under a horizontal merger theory to block UHG’s proposed acquisition of Amedisys, the country’s largest home health and hospice provider. It remains to be seen what the antitrust stances of the DOJ and FTC will now be with the upcoming change in administration.

Whatever that change will bring, UHG is the Amazon warrior of the health care marketplace in America. As health care’s increasingly expanding operator, participant, and pipes, UHG reigns supreme over the exploding Medicare Advantage market. As UHG and the others big carriers continue to siphon Medicare Advantage volume away from traditional participants like hospitals, Bricker predicts those hospitals will have their go-to response: demand higher unit prices from the carriers on the commercial side. Who will subsidize those higher prices? The American employer and worker. And who gets hurt the most from the concentration of economic power in health care? Patients who can least afford it.

Sadly, all the charged rhetoric surrounding the UHG CEO shooting has distracted attention away from the real diagnosis here. What ails the American health care system is structural. It has everything to do with antitrust. And the American health care system is increasingly the UnitedHealth Group system.

With the cultural shift toward populism—whether conservative or progressive in bent—let’s hope that we can unite together and make our health care system less United.

Venu Julapalli is a practicing gastroenterologist and recent graduate of the University of Houston Law Center.

Skiers are an admittedly unsympathetic crowd. At least the jetsetters who fly around the country chasing the toniest resorts like Park City.  Local skiers, on the other, might not earn the same incomes as the jetsetters, but nevertheless must pay the same, lofty lift prices. Setting aside the welfare of locals, one can partly understand why antitrust enforcers have largely looked away as Vail Resorts gobbled up nearly 40 North American resorts in the last two decades.

  1. Breckenridge Ski Resort, Colorado: 1997
  2. Keystone Resort, Colorado: 1997
  3. Heavenly Mountain Resort, California: 2002
  4. Northstar California Resort, California: 2010
  5. Kirkwood Mountain Resort, California: 2012
  6. Afton Alps, Minnesota: 2012
  7. Mt. Brighton, Michigan : 2012
  8. Canyons Resort, Utah: 2013
  9. Park City Mountain Resort, Utah: 2014
  10. Wilmot Mountain Ski Resort, Wisconsin: 2016
  11. Whistler Blackcomb, British Columbia, Canada: 2016
  12. Stowe Mountain Resort, Vermont: 2017
  13. Crested Butte Mountain Resort, Colorado: 2018
  14. Mount Sunapee Resort, New Hampshire: 2018
  15. Okemo Mountain Resort, Vermont: 2018
  16. Stevens Pass, Washington: 2018
  17. Paoli Peaks, Indiana: 2019
  18. Hidden Valley Ski Resort, Missouri: 2019
  19. Snow Creek Ski Area, Missouri: 2019
  20. Attitash Mountain Ski Area, New Hampshire: 2019
  21. Crotched Mountain Resort, New Hampshire: 2019
  22. Wildcat Mountain Ski Area, New Hampshire: 2019
  23. Hunter Mountain, New York: 2019
  24. Boston Mills Ski Resort, Ohio: 2019
  25. Brandywine Ski Resort, Ohio: 2019
  26. Mad River Mountain, Ohio: 2019
  27. Alpine Valley Resort, Ohio: 2019
  28. Jack Frost Ski Resort, Pennsylvania: 2019
  29. Big Boulder Ski Resort, Pennsylvania: 2019
  30. Roundtop Mountain Resort, Pennsylvania: 2019
  31. Whitetail Resort, Pennsylvania: 2019
  32. Liberty Mountain Resort, Pennsylvania: 2019
  33. Mount Snow Resort, Vermont: 2019
  34. Seven Springs Mountain Resort, Pennsylvania: 2021
  35. Hidden Valley Resort, Pennsylvania: 2021
  36. Laurel Mountain Ski Area, Pennsylvania: 2021

Vail’s acquisition of Breckenridge, Keystone, and Arapahoe Basin in 1997 raised the ire of the DOJ, which compelled Vail to sell off Arapahoe Basin. (Arapahoe Basin was operated independently until it was acquired by Alterra, another firm engaged in a roll-up strategy, in 2024.) Park City and its neighbor resort, The Canyons, were rolled up by Vail in 2013 and 2014, respectively. If you can get over the ickiness of assisting wealthy skiers and see them instead as consumers, then there is a good policy basis for intervening in these markets.

Your intrepid reporter took his son to Park City in the first week of the New Year, only to be hit with the vacation crowds and a ski patrol strike. Thursday was bearable, at least until the early afternoon. By Friday, the resort imploded, with massive lines, protesting crowds, skiers hiking up the mountains, all leading to a social media avalanche. I was fortunate to have been interviewed by New York magazine on the indignities of Big Ski. The New York Times covered the strike ably, reporting on such nuggets as the 70 percent vacancy rate in Park City.

There are at least two problems with permitting ski monopolies. The first is that lift ticket prices will soar to astronomical levels, in this case over $300 for a weekend pass at Park City. The resort recognizes that jetsetters, after having purchased their flights, equipment, and hotel rooms, are not going to turn around and fly home because the ticket is $50 or $100 more than they expected. (The technical term is low elasticity of demand with respect to price.) Resorts have also figured out that higher lift prices drive the demand for season passes (a form of a bundle), which now fetch nearly $1000 per year. For a class paper, two of my students plotted the price of a Vail lift ticket against its acquisitions, and it’s pretty clear inflation took off around the time Vail acquired Park City and the neighboring Canyons circa 2013.

The second problem with a monopoly ski resort is that there is no constraint on the number of skiers and snowboarders in a given day. If several neighboring resorts competed against each other, then perhaps competition could break out on this non-price dimension (the time waiting in lift lines). The lack of any market discipline, however, leads to overcrowding at Park City, which can create safety hazards, as ski-patrol (when they are being paid competitive rates) can’t patrol every inch of the resort, and skiers (and snowboarders in particular) need space to avoid collisions. Unlike a sports venue, where the seats are limited by the capacity of the stadium, there is no constraint for a ski resort. And because skiers (consumers) bear the external costs of congestion, the resort cannot be counted on to regulate admissions.

Sam Weintraub details Utah’s visitation spikes and the associated infrastructure strain. He attributes part of the congestion problem to the fact that “resorts have not been able to properly handle” the demand from the unlimited passes. Regarding safety risks, some skiers at Park City “have claimed that they’ve had to step in to help injured skiers due to unacceptable response times, and that even in certain cases when patrol has arrived, they’ve come solo and without adequate transportation equipment down the mountain.”

Now an astute neoliberal might point out that the two problems identified here are in conflict, in the sense that higher (monopoly) lift prices are a way to combat the congestion problem. But the massive crowds (and crowding) at Park City during the holidays proves that the price, however inflated, is not pricing the externality correctly. And even if the higher price does address congestion in part, there is no reason why we must live this way. It would limit skiing to the super wealthy. And it would be tantamount to saying that environment regulation can be disregarded so long as we allow massive consolidation (and the attendant monopoly pricing) in the energy industry. (Per DealBook, “More M.&A. in the energy sector seems probable, given Trump’s support for the industry.”)

The solution to this clear market failure is two-fold. An antitrust authority, whether federal or state, or a group of private enforcers, should bring a case against Vail, seeking divestiture of those properties that contribute to Vail’s monopoly power over skiers and its monopsony power over workers or both. Economist Florian Ederer noted that for the first time in a while, output as measured by skier visits, has declined at Vail Resorts, which is consistent with the exercise of monopoly power. It bears noting that the FTC recently brought a case against a private equity firm in Texas that rolled up nearly every large anesthesiology practice under a similar scheme. (Two of my now settled cases, Varsity and UFC, entailed a roll-up of rival platforms as part of the challenged conduct.) An obvious bone of contention will be whether the relevant geographic market is local (under the theory that local skiers only visit neighboring resorts) or national (under the theory that jet-setters are willing to fly across the country). But given the massive roll-ups by both Vail and Alterra (owners of Deer Valley, Steamboat, Winter Park, among others), the ski markets are concentrated even at the national level.

The second solution is that some outside authority, whether the state, municipality, or the Forest Service—fun fact, Jimmy Carter ordered the Forest Service to stop regulating lift-ticket prices—should regulate the number of visitors (lift tickets plus pass holders) in a given day. Before you scream “communism,” note that restaurants and other local establishments must abide by capacity constraints, to prevent against overcrowding and the attendant safety risks. Hat tip to Jordan Zakarin for the analogy! A cap on the number of attendees would support a lower price for lift tickets, and thereby allow for a more diverse skiing clientele.

The alternative to my suggested interventions is to do nothing, and allow the market to dictate outcomes. It’s true that a strike broke the will of a stubborn monopsonist, causing it to cave on the ski patrols’ wage demands. But should we really depend on strikes to compel employers to pay a fair wage? Or bad press caused by overcrowding to discipline the actions of a monopoly ski resort? Why should we resort (pun intended) to such last-gasp methods—which cannot be invoked until we’ve reached a boiling point—when we have better tools in the anti-monopolist toolkit? 

The status quo, with labor strikes, spiking lift prices, and congestion, is clearly not socially optimal. Skiing is becoming unaffordable for many. In avoiding an intervention that might be perceived as assisting the wealthy, antitrust authorities might be inadvertently limiting skiing to a niche sport for the wealthy.

The election results present a puzzle of sorts. On the one hand, voters expressed deep resentment towards inflation, under the belief that Biden contributed to rising prices, failed to address them, or both. On the other hand, Trump’s signature economic policy is tariffs—on imports from Mexico to Canada and now Israel—which most economists believe will raise prices. Why are voters, who are ostensibly so sensitive to high prices, willing to give Trump a pass on an obviously inflationary policy?

When I have posed this puzzle on Twitter, the standard neoliberal voices—from Jordan Weissmann to Eric Levitz to Matt Yglesias (aka “The Vox Boys”)—suggested that my brain is small. (Yes, the same Levitz who leaned entirely on an economist to interpret a contract for the counterintuitive proposition that insureds were immunized from Anthem’s proposed and now-retracted policy to restrict anesthesia coverage.) The Vox Boys reckon that voters put everyday low prices above all else. To believe this, however, you must also believe that voters don’t understand the implications of tariffs or don’t believe Trump will follow through with his threats. This neoliberal explainer is fairly unsatisfying, however, as it requires one to believe that voters are stupid.

An alternative explanation, which infuriates the Vox Boys, is that while voters care about low prices, they also care about other things like preserving blue-collar manufacturing jobs or supporting local businesses. To wit, voters tend to punish Democrats for removing trade barriers: A 2020 American Economic Review paper showed “trade-impacted commuting zones or districts saw an increasing market share for the Fox News channel (a rightward shift) … and a relative rise in the likelihood of electing a Republican to Congress (a rightward shift).” This desire to protect local businesses animates much of the New Brandeisian movement, which rejects the consumer welfare standard in antitrust, by among other things, recognizing harms to workers or small businesses.

Following the advice of her corporatist advisors like Tony West, Harris elected to attack Trump’s tariffs from the right, highlighting how the tariffs could raise prices. Indeed, the Harris campaign tweeted a video of Washington Post columnist Catherine Rampell bashing Trump’s tariffs, a few weeks after Rampell called Harris’s price gouging proposal “communism.” These attacks moved exactly no one in Harris’s direction. And no wonder: The Democrats are supposed to stand up for labor, who are the biggest beneficiaries of tariffs, especially those who work in the tariff-protected industries. Progressive advocates like Zephyr Teachout were calling for a recalibration on the anti-tariff message, but were ignored. Another victory for the Vox Boys and Girls!

When I pointed out that Trump managed to purge the neoliberal free-trading ideology from his party’s platform, appealing smartly to voters who care about jobs as well as low prices, Levitz quote-tweeted a screen shot of his summary of a 2019 study (and a link to his Vox article), purporting to show that that American exporters that were most exposed to Trump’s tariffs on their inputs—think steel, aluminum, solar panels, and various Chinese goods—experienced lower export growth in 2018 and 2019 than exporters who were unaffected by the duties. Per the Vox Boys, tariffs create harms beyond higher prices.

Before getting into the details of the study, let me note two obvious things. First, from a political perspective, the welfare of large traders engaged in importing and exporting (aka “trading firms”) doesn’t get much play in election conversations; so this anti-tariff argument will again fall on deaf ears. Second, one can’t evaluate a tariff from a cost-benefit perspective without also studying the beneficiaries of the tariffs. By focusing on the welfare of trading firms, however, this study implicitly downplays the welfare of workers whose jobs were protected by the tariffs.

Regarding the merits of the underlying study (available here), the focus on the impact of Trump’s tariffs on exporter growth is curious. If larger or faster growing exporters were more exposed to the “treatment,” then their growth would be expected to slow relative to the “control” group (smaller exporters not exposed to Trump’s tariffs); it’s easier to “grow” from a smaller base. Indeed, the authors acknowledge the difference in the size of the two study groups at page 2:

We find that U.S. importers facing import tariff increases employed twice as many workers compared to the average importing firm and about nine times as many workers as the average firm. Similarly, we find that U.S. exporting firms facing retaliatory tariffs were more than three times larger than the average exporting firm. Thus, the tariff increases hit the very largest trading firms in the U.S. economy.” (emphasis added).

Figure 3 of the study shows that cumulative growth rate in exports for the treatment group exceeded the control group in the two years leading up to the tariffs, with the gap between the two shrinking in each month. It stands to reason that, even absent the tariffs, the growth rates of the two groups would have naturally converged. In fact, the two trendlines differed by approximately 10 log points in early 2016, with most exposed export sectors exceeding all other export sectors by a comparison of 3 log points to -14 log points, respectively. This difference shrank to nearly zero by the beginning of 2018. The reversal that occurred after January 2018 reflects a continuation of the opposing pre-tariff growth directions. Yet the use difference-in-differences (DID) estimation to recover a causal effect, as the authors of this study intended, critically rests upon the “parallel trend” assumption—namely, that had the treatment never occurred (i.e., tariffs had never been imposed), the relationship between the treated and control groups would have remained constant over time. But the authors casually mention parallel trends just once in a footnote, claiming “Figure 3 suggests parallel trends in the months prior to the trade war.” While that statement might be true for the few months right before the Trump tariffs, it ignores the plainly obvious longer trend of convergence. Violation of the parallel trends assumption can bias the estimated effect, undermining the researcher’s ability to ascribe a causal interpretation to the treatment.

Finally, the magnitude of the effect, assuming it’s properly measured, doesn’t sound debilitating for large exports. The authors find a decrease in “log points” of around one (slightly smaller in 2018, slightly larger in 2019), which can be interpreted as a percent change for small differences. By comparison, exports were growing by between four and six percent in the year leading up to Trump’s tariffs, per Figure 1. A decline of one percent in the growth rate of exports for the largest trading firms that import tariff-affected inputs might be a small price to pay for protecting jobs and domestic industries.

Focus on the jobs

Levitz also points readers to a 2019 staff working paper at the Federal Reserve as evidence that Trump’s tariffs harmed workers. Setting aside any infirmities in the estimation or interpretation of results, at least this study focuses on a meaningful outcome variable. The staff working paper purports to show that U.S. manufacturing industries more “exposed” to tariffs lose more jobs from rising input costs (channel one) and retaliatory tariffs (channel two) than jobs gained or preserved from import protection (channel three). Exposure to import protection for a given industry is measured as the share of domestic absorption of that industry affected by newly imposed tariffs; exposure to the other two channels is measured similarly. It follows that for any given industry, exposure along these three channels could vary dramatically.

This study also uses a DID method to uncover the effects of the tariffs. The authors note the “issue of differing trends across industries prior to the implementation of new tariffs”—an admission that parallel trends may not be satisfied—and seek to address it by (1) removing industry-specific trends in 2017, or (2) differencing out the pre-trend path for each coefficient. After these various contortions, they find that “shifting an industry from the 25th percentile to the 75th percentile in terms of exposure to each of these channels of tariffs is associated with a reduction in manufacturing employment of 1.4 percent, with the positive contribution from the import protection effects of tariffs (0.3 percent) more than offset by the negative effects associated with rising input costs (-1.1 percent) and retaliatory tariffs (-0.7 percent).” (emphasis added). But this begs the question: What single industry would make such an equivalent move on each of these channels? If China is expected of dumping (say) solar panels, and Trump slaps a tariff on solar panels from China, why would the solar panel industry (now exposed to the import protection channel) be equally exposed to (say) rising input costs?

It would have been helpful for the authors to identify the aggregate employment effect across the three channels for any given industry. Were there industries with net job gains resulting from Trump’s tariffs? To wit, if an industry was only exposed to the import protection channel—that is, no input costs were increased by other tariffs and there was no retaliation for the industry in question—the best estimate of the jobs effect would be positive! By showing the size of the coefficients of the three channels for equal shifts in channel exposure, however, the authors have made it difficult to assess the economy-wide effects as well. We only know (assuming the specification is proper) of the relative magnitudes of the employment effects given a one percentage point exposure to each of the three channels. Tariff bashers will interpret the coefficients as if they can be summed up, but that is only for a hypothetical industry that experienced the same increase in exposure across all three channels.

This is not meant to impugn the integrity of either study. All empirical studies can be criticized. Rather, it is meant to suggest that the Vox Boys have found two studies that tell their story of tariff-induced harms and have decided to pump them up. But neither study materially advances the economic argument against tariffs. 

In summary, the neoliberal critique of Trump’s tariffs finds little support in economics or among voters. The Vox Boys and Girls, who myopically focus on low prices over all other considerations, should be ignored. And Democratic Party should recalibrate their approach to tariffs, recognizing that, to be considered the party of labor once again, promoting labor interests should be their loadstar.

Haters sometimes accuse the Federal Reserve of being a shadowy cabal of private bankers that slipped loose from democratic oversight. But we at The Sling trust our patriotic central bankers, who have never had anything to hide. To help the Fed tell its side of the story, we submitted a Freedom of Information Act (FOIA) request to retrieve recent meeting minutes.

Readers may be surprised to learn that although the Fed has acquired a great deal of independent authority, in some circumstances it must consult with other financial regulators, including the Federal Deposit Insurance Corporation (FDIC). The FDIC’s five-member board includes the FDIC Chair, the Comptroller of the Currency, two members of the minority party, and, much to the Fed’s chagrin, the Director of the Consumer Financial Protection Bureau­ (CFPB)—an agency created in the wake of the Great Financial Crisis to protect consumers from financial scams and frauds. The CFPB is housed within and funded by the Fed, yet sometimes in its short history it has been led by a director who violates Fed norms by having different values and expressing different opinions than the Fed Chair.

The below meeting minute excerpts shine light on the internal operations of the Fed and its valiant efforts to rein in consensus-destroyer Rohit Chopra, the outgoing director of the CFPB.

Minutes of the Board of Governors of the Federal Reserve System

At its meeting yesterday, the Board discussed how the market-implied path for the federal funds rate forecasted certain headwinds to central bank hegemony (aka “bankocracy”). In particular, over the intermeeting period, options on interest rate futures indicated that market participants were increasingly exasperated with Rohit Chopra.

Such developments reflected elevated concerns among investors that Chopra would not only continue to penalize a broad range of business innovation by returning billions of dollars to swindled consumers, but would also decline to rubber-stamp the Fed’s Basel III endgame proposal to allow banks to hold only a single-digit percentage of capital as a cushion against potential losses. Congress had directed the Fed to impose these reserve requirements shortly after the Great Financial Crisis. That the process is still in the proposal stage over a decade later confirms what the Fed tells every interviewer: its biggest fault is being a perfectionist. The Fed is strongly committed to crafting every clause just right, and sometimes unweaves an entire tapestry at night to punish itself for typos and ward off inappropriate suitors. In any event, the Fed recently retained a new associate therapist; a development that warrants greater investor confidence in a declining VIX and short-term higher yields on its regulatory efforts. Members also concurred that although the Fed sets the price of money, it cannot reasonably be characterized as a “price control agency” because reasons. 

Market-based measures of exasperation were further articulated by one Board member who explained that Chopra’s un-collegial actions never would have been tolerated by past chairs: “Paul [Volcker] would have been shocked.” The Board then reviewed other deviations from consensus, such as Chopra’s decision to jeopardize national security by stopping financial institutions from stockpiling strategic junk fee reserves—a policy in marked tension with his professed goal of increasing capital reserves.

A second Board member remarked upon Chopra’s stellar credentials and their alignment with the Fed milieu: Harvard undergrad, Wharton MBA, and close relationships with “financiers, convicted felons, and everything in between.” The member likewise approvingly noted that so far, Chopra has not publicly questioned Supreme Court dicta retconning the existence of the Fed as Constitutionally sound based on the rigorous principle of being a “special arrangement sanctioned by history.” The member further recognized and commended Chopra’s benefits orientation sessions, which helped Board colleagues and staff sign up for the best available health and life insurance options, making Open Enrollment much less stressful. Perhaps as a gesture of good faith, Chopra could also set up a dollar movie night for the incoming staff?

Polite nodding ensued.

A third Board member recalled Chopra’s efforts to oppose political debanking, which encompassed legal action to advance free speech and due process in the banking sector.

Polite nodding ensued again.

Staff then interceded with an update: venture capitalists with a deep portfolio of stage-agnostic bank run expertise have just redefined “debanking” to encompass anti-money laundering requirements that target drug trafficking, terrorism, and fraud. Industry sentiment, as reflected by the whims of the world’s richest man, thus favored action to “Delete CFPB.”

Furrowed brows and smirks ensued.

Consistent with the shift in investors’ perceptions of the balance of risks, nominal Treasury yields across the maturity spectrum increased significantly. Credit quality remained solid in the cases of large and midsize firms, but deteriorated in other sectors. Delinquency rates for credit cards inched upwards. Market data, in other words, suggested aggregate dissatisfaction with Chopra.

A fourth Board member noted Chopra’s decisions to enact a rule that helps consumers easily switch banks, initiate a review of the FDIC’s merger policies under the guise of “financial stability,” and otherwise leverage the so-called “Chopra Doctrine,” a radical enforcement ideology that consists of actually reading a statute and then using it. Moreover, it was Chopra who first recruited Lina Khan to work at the Federal Trade Commission.

Anger and literal shaking ensued, as these actions transgress the most fundamental Fed consensus norm: the banker welfare standard.

Ultimately, Board consensus deemed Chopra “not a great culture fit” due to his “unreserved and sometimes devastating facial expressions.”

Board members’ ensuing discussion included consideration of options for enhancing Chopra’s understanding of institutional norms, including through collegial exchanges of kitchen utensils and educational water sports.

Given the unusual and exigent circumstances, staff were tasked with implementing the discussed actions on an expedited basis by January 20, 2025, as well as with memorializing the actions through videographic means to inform future CFPB directors about Fed norms. As Chopra himself has observed, institutions “must forcefully address” repeat offenders.

The Chair then adjourned the meeting with the standard ritual sacrifice of depositors at a tiny midwestern bank.

ATTENDANCE:

Jerome H. Powell, Chair

Four other Board members

Various associate directors and senior advisers

Several secretaries and lawyers

Emergency backup economists

Laurel Kilgour is a law and policy wrangler. The views expressed herein do not represent the views or sense of humor of the author’s employers or clients, past or present. This is not legal advice about any particular legal situation. Void where prohibited.

Many Americans are still in shock because our worst fears just came true: European regulators fined an American Big Tech firm a whopping one half of one percent of its annual revenue for violating some kind of “law.” To add insult to injury, radical American enforcers slipped loose from the adult supervision of the defense bar and have filed a volley of their own vindictive lawsuits over the last several years.

Sadly, the onslaught is taking a toll: to staff all of the new investigations, some dominant firms are now likely making do with outside counsel who bill under $2,600 an hour. This translates into skimpy and unimaginative legal defenses.

But protecting our national champions requires more than just copy-pasting now standard unconstitutionality defenses—which often foreshadow separate lawsuits alleging that the FTC’s commissioners and its administrative law judges are unconstitutionally protected from removal by the president—to see what sticks. That’s why we’ve painstakingly curated the following antitrust affirmative defense starter pack for cost-conscious in-house counsel. In giddy anticipation of a coming merger wave unleashed by lax federal antitrust enforcement, there’s no better time to throw merit to the wind and dissolve an enforcement agency or two altogether.

DEFENDANT’S AFFIRMATIVE DEFENSES

FIRST AFFIRMATIVE DEFENSE

(Statute of Limitations / Laches)

The FTC’s claims are barred, in whole or in part, by the fact that we hid evidence from them during the initial merger review process.

SECOND AFFIRMATIVE DEFENSE

(Separation of Norms)

This is not how enforcers did things in the four decades from the day Robert Bork founded the field of antitrust law up until those mean hipsters took over.

THIRD AFFIRMATIVE DEFENSE

(Non-Delegation Doctrine)

The FTC jeopardizes American liberty by delegating this case to lawyers. Only economists steeped in the hard science of cost-benefit analysis can be entrusted with first-chairing trials in this area of the law.

FOURTH AFFIRMATIVE DEFENSE

(Exceeding Hidden Statutory Vibes)

Although to the casual eye, the statute does not literally recite the words “consumer welfare standard,” we reserve the right to submit a supplemental expert microscopy report showing fine graphitic indentations consistent with that phrase on an original paper copy preserved by Robert Bork, Junior. In any event, the claims alleged in the Complaint impermissibly exceed the statute’s inherent vibes.

FIFTH AFFIRMATIVE DEFENSE

(Extratemporal Application of Old Law)

Only precedent dating after the New Deal era is valid, binding law. Accordingly, Brown Shoe (1962) has expired. But old cases that we like still remain valid. So Marbury v. Madison (1803) and that case declaring the exploitation of bakers to be the foundation of American free enterprise (1905) are still good law.

SIXTH AFFIRMATIVE DEFENSE

(Procompetitive Kickbacks)

Bribing our competitors not to compete could, hypothetically, set in motion a chain of events that precipitates world peace. Such procompetitive justifications benefit competition, consumers, sellers, and Mars colonizers alike.

SEVENTH AFFIRMATIVE DEFENSE

(Linguistic Existentialism)

Purported legal standards comprised of meaning-contestable units of language—also known as “words” and “phrases”—violate the Constitution. (Actually, the more Defendant thinks about it, the more Defendant suspects that Defendant’s own “separation of powers” and “non-delegation” doctrines might be void for vagueness and lack intelligible limiting principles. But no matter! That’s why Defendant splurged on the premium “kitchen sink level” affirmative defense package. Ultimately, Defendant is just happy to force federal enforcers to divert scarce resources to defending their very existence).

EIGHTH AFFIRMATIVE DEFENSE

(Hypothetical Monomaniacal Enforcer Test)

The FTC Chair flunks the recusal test we invented for the purpose of flunking enforcers. (We commend certain other Commissioners for preemptively recusing themselves despite the lack of any discernable conflict, and for delegating their authority to economist Mark Israel instead). In any event, our lobbyists are confident that the new Congress will ensure that the act of writing law review articles not commissioned by us will be punishable by deportation and disbarment.

NINTH AFFIRMATIVE DEFENSE

(Branch Errata)

Congress itself was probably just a typo, and must be dissolved to liberate the juristocracy.

TENTH AFFIRMATIVE DEFENSE

(Walker Doctrine)

We only destroyed millions of incriminating communications because California State Bar Member No. 122945 told us to. The “Communicate with Care” policy exemplifies the creative brilliance that Kent Walker brings to his job when advising lawmakers how to write their AI laws. Thus, barring Walker from the remedies phase of this case and from our public affairs efforts would harm innovation.

ELEVENTH AFFIRMATIVE DEFENSE

(No Authority to Proceed in Court)

The FTC lacks authority to pursue the claims alleged and relief sought in district court, because an agency intern once browsed the Terms of Service of Defendant’s parent company’s accountant’s app, which mandates arbitration of all claims. Failing to uphold this freedom of contract would violate the Fourteenth Amendment.

TWELFTH AFFIRMATIVE DEFENSE

(Big Escrow Check)

We reserve our right to reneg on the jury trial we demanded by writing an escrow check that is larger than the entire combined budget of all federal antitrust enforcers and waving it in their faces during voir dire.

THIRTEENTH AFFIRMATIVE DEFENSE

(Defamation)

Filing lawsuits against lawbreakers is mean and irreparably hurts our corporate feelings.

FOURTEENTH AFFIRMATIVE DEFENSE

(Rule 11/Twiqbal Immunity)

Rules about heightened pleading standards and minimum factual and legal bases for taking positions in court apply only to Plaintiffs, not Defendants, silly. (Unless we’re the Plaintiff).

FIFTEENTH AFFIRMATIVE DEFENSE

(Swimming Test, Pricking Test, Spectral Evidence)

Lina Khan is probably a witch (but we can’t know for sure until we subject her to the standard tests).

SIXTEENTH AFFIRMATIVE DEFENSE

(The Reverse Hostage Doctrine)

We’re not trapped in this lawsuit with Lina Khan; Lina Khan is trapped in this lawsuit with us. In fact, we’ll amend our counterclaims to name Lina in her personal capacity when she is replaced as Chair. This is a fight to the death.

SEVENTEENTH AFFIRMATIVE DEFENSE

(Wrong Enforcer Doctrine)

What, Jonathan Kanter filed this lawsuit?

Not Lina Khan?

Fine, then: Defendant admits that AAG Kanter knows the secret biglaw partner handshake, so we hereby stipulate to dismissal of the previous defenses, without prejudice. (We reserve all rights if later discovery reveals that an immigrant woman of color stole Kanter’s CM/ECF electronic filing credentials).

EIGHTEENTH AFFIRMATIVE DEFENSE

(South Pacific Doctrine)

Gonna wash that Part III adjudication right out of our hair.

NINETHEENTH AFFIRMATIVE DEFENSE

(Post-Election Enforcement)

Insofar as the current administration made antitrust “political” for the first time ever, thereby violating our due process rights, Defendant respectfully requests an immediate return to objective economic standards. Our experts have calculated that January 20, 2025 is the most economically auspicious day to drop all pending cases, and we reserve the right to file a motion in limine to enjoin any references to “Inauguration Day” as politicized and unprofessional.

TWENTIETH AFFIRMATIVE DEFENSE

(The Consumer Welfare Standard is Back, Baby)

Not that it ever went anywhere. The radical enforcers both cruelly took it away and never deviated from it. And we all agree on exactly what this objective and easily administrable test means, which is: we know it when we see it. Kind of like that other famous legal test…

TWENTY-FIRST AFFIRMATIVE DEFENSE

(Everyone Hates Matt Gaetz)

We applaud the incoming administration for rethinking its decision to nominate an Attorney General whose private indiscretions do not meet the bar for our moral standards. Our jubilation has nothing to do his obvious bias in favor of enforcing antitrust laws or the fact that his successor’s law firm lobbied for us.

TWENTY-SECOND AFFIRMATIVE DEFENSE

(State Ambush)

Allowing Plaintiff States to continue vigorous enforcement even after federal enforcers diverge in their efforts would be a shocking due process violation.

How could Defendant have known or prepared for this possibility, without any notice other than the listing of 38 distinct signature blocks on every filing as well as active State participation in every meet and confer session, deposition, and hearing for three years? Champagne-swilling Federalist Society boomers assure us that this kind of wanton federalism violates the unitary executive doctrine.

TWENTY-THIRD AFFIRMATIVE DEFENSE

(Denial)

This can’t be happening. Is Thomas on vacation? Did we dial the wrong yacht?

TWENTY-FOURTH AFFIRMATIVE DEFENSE

(Bargaining)

What if we agreed to probation overseen by the esteemed Commissioner Melissa Holyoak instead? Under the vigilant watch of such a fearsome enforcer, we might even be willing to pay a fine of three quarters of one percent of our annual revenue.

TWENTY-FIFTH AFFIRMATIVE DEFENSE

(Acceptance)

Okay fine, we admit that the few hot docs we forgot to destroy mean what they say. But we are still going to take this all the way to the Supreme Court—and then file a motion for relief from the judgment at the district court even after our petition for cert is denied. (Turns out we’re not very good at acceptance, and we had pocket change to spare on rolling the dice).

TWENTY-SIXTH AFFIRMATIVE DEFENSE

(Infinite Placeholder)

Whatever we come up with later, we were retroactively asserting all along, because we have always been at war against Oceania.

TWENTY-SEVENTH AFFIRMATIVE DEFENSE

(Almost Forgot: Failure to State a Claim)

The FTC’s causes of action fail to state a claim upon which relief can be granted.

Laurel Kilgour is a law and policy wrangler. The views expressed herein do not represent the views or sense of humor of the author’s employers or clients, past or present. This is not legal advice about any particular legal situation. Void where prohibited.

“When the best reading of a statute is that it delegatesdiscretionary authority to an agency, the role of the reviewing court under the APA is, as always, to independently interpret the statute and effectuate the will of Congress subject to constitutional limits.”

–SCOTUS, in Loper Bright Enterprises v. Raimondo.

The quote above raises a tension between consideration of what Congress willed and judicial notions of uncertainty. Statutes are always filled with ambiguity, and the will of Congress can be misinterpreted intentionally to create barriers to agency action. Those barriers conveniently can benefit the neoliberal agenda and big business.

That is my concern for the FTC. The FTC never basked in the sun of Chevron deference from SCOTUS, but that does notforeclose the possibility that Loper Bright will bring pain to agency endeavors, in favor of businesses.

For those not in the know, the Supreme Court’s Loper Bright decision overturned “Chevron deference.”  Under that doctrine, if Congress was clear as to the precise issue in question, then that was the interpretation of the statute from which the agency and the Court could not deviate. If the statute was ambiguous or if Congress left a gap for the agency to fill, however, a court was obliged to accept the agency’s interpretation if it was a reasonable one. 

Loper Bright rejected this notion of deference. The Court asserted itself to be the expert on statutory interpretation, and therefore it was not necessary to give any weight to the Agency’s interpretation, even where there is subject matter expertise—yes, the agencies hire economists to do cost-benefit analysis—and even where Congress expected the agency to interpret the statute. Loper Bright quite clearly suggests that the agency’s interpretation does not count. 

And what of delegations of interpretation? The Court states in Loper Bright that if there is an ambiguity in a statute, then the agency is not entitled to deference:

That is not to say that Congress cannot or does not confer discretionary authority on agencies. Congress may do so, subject to constitutional limits, and it often has. But to stay out of discretionary policymaking left to the political branches, judges need only fulfill their obligations under the APA to independently identify and respect such delegations of authority, police the outer statutory boundaries of those delegations, and ensure that agencies exercise their discretion consistent with the APA. By forcing courts to instead pretend that ambiguities are necessarily delegations, Chevron does not prevent judges from making policy. It prevents them from judging.

The hair-splitting between what is discretionary policymaking properly delegated to the agency and what is an ambiguity has, even prior to Chevron’s demise, fallen to the side of judicial intervention. Thus, this placeholder for proper discretionary authority is suspect. Just take two examples. In FDA v. Brown and Williamson, Justice O’Connor effectively barred the FDA from going after Big Tobacco, even after a recent game-changing discovery of how the execs had manipulated tobacco’s addiction. After the breakup of AT&T, Justice Scalia barred the FCC from eliminating tariff filings from AT&T’s competitors (doing so to halt AT&T’s barrage of strategies to delay entry of competitors). In each of those instances, the Court bent over backwards to protect business. Congressional purpose wasn’t important. 

So, after Loper Bright, it’s even easier to misinterpret Congressional intent, despite the quotations from the decisionabove. 

And that’s the game. Congress loses. SCOTUS and big business wins.

The FTC Act: Congress Mistrusts the Courts on Antitrust

Justice Kavanaugh cautions us to not read too much into Loper Bright. According to Bloomberg, he made the following remarks while speaking at Catholic University of America Columbus School of Law in September:

To be clear, don’t over read Loper Bright. Oftentimes Congress will grant a broad authorization to an executive agency so it’s really important, as a neutral umpire, to respect the line that Congress has drawn when it’s granted broad authorization not to unduly hinder the executive branch when performing its congressional authorized functions, but at the same time not allowing the executive branch, as it could with Chevron in its toolkit, to go beyond the congressional authorization.

If one believed this, one would think the FTC is therefore safe from SCOTUS overreach. Congress sought to remove the courts from the equation of antitrust, because they lacked expertise. Congress viewed the FTC as the overseer of how competition policy played out in the United States, removing that key function from the courts and DOJ enforcement actions. 

In considering passage of the FTC Act, Congress viewed the role of the courts in establishing competition policy with skepticism:

It is plain that the first question to be answered in considering what additional legislation upon the subject is necessary or desirable is a vital one, it is this: Should Congress attempt to maintain competitive conditions in the general interstate commerce of the country, where they still exist, and to restore such conditions where they have been destroyed, or should it accept the complete or partial overthrow of competition and resort to some other method of protecting the people against the power of combination and monopoly?

Congress questioned the wisdom of its initial foray into the world of competition policy, via the Sherman Act. While the goal of the FTC Act was to “maintain competition as an effective regulating force,” there were effective limitations on implementing such a policy. Looking for instances where they could find expertise in competition policy, Congress turned its eyes toward the English courts. As the Senate Committee on Interstate Commerce Report from 1913 states,

The Congress of 1890 very wisely borrowed the language of the common law and with it came the learning of the judges, who had from time to time declared and expounded it … the common law was that unreasonable, unfair, undue restraint upon or interference with competition or competitive conditions constituted a restraint of trade.

While the Senate looked approvingly on the English judges, it examined the U.S. courts with a bit more skepticism. In the eyes of the Senate, it was the separation of the stated policy of antitrust—maintaining competition as a regulating force—from its application in the U.S. courts that brought about their dismay, as will be discussed later. The Senate Report also described frustration with the notion that consolidation and combinations were inevitable. Instead, the Senate Report described the purpose of “maintaining competitive conditions,” and argued “when competitive conditions exist, there will be actual competition ….”

Thus, the purpose of the FTC Act was to place the scope of antitrust law interpretation squarely into the hands of the FTC and away from the courts. That scheme has been thwarted for ages, but Loper Bright brings additional complications directly in tension with the will of Congress. And, one might be mindful that there is still the clambering to upend administrative agencies altogether, as Justice Thomas hinted at in his concurrence in Whitman v. American Trucking.

Loper Bright: The Court Mistrusts Agencies (and Honestly, Congress)

Loper Bright flips the notion of expertise on its head, suggesting that the Court, not the agency, possesses the expertise to determine what the words of any administrative statute means.In that case, the statute was written to empower the National Marine Fisheries Service, a subsidiary agency of the United States Department of Commerce, to regulate fishing companies. But Loper Bright can be applied to any administrative agency, including the FTC. And the agency is powerless to overcome that interpretation, because Skidmore means whatever the Court feels it means. 

To preempt arguments that the Court was usurping power delegated to the agencies, the decision noted that Congress can always amend the statute to correct the Court’s interpretation:

The better presumption is therefore that Congress expects courts to do their ordinary job of interpreting statutes, with due respect for the views of the Executive Branch. And to the extent that Congress and the Executive Branch may disagree with how the courts have performed that job in a particular case, they are of course always free to act by revising the statute.

No, it can’t. Not the present day Congress. And the Court knows Congress is paralyzed. Hence the reason why Justice Kagan in her dissent suggests a power grab:

In one fell swoop, the majority today gives itself exclusive power over every open issue—no matter how expertise-driven or policy-laden—involving the meaning of regulatory law…. Its justification comes down, in the end, to this: Courts must have more say over regulation—over the provision of health care, the protection of the environment, the safety of consumer products, the efficacy of transportation systems, and so on. A longstanding precedent at the crux of administrative governance thus falls victim to a bald assertion of judicial authority. The majority disdains restraint, and grasps for power.

Even if Congress amended the statute, it can find itself ignored. One need only look to the amendment to the Tunney Act to see how quickly courts can completely ignore the will of Congress, for whatever made up reason. In the case of the Tunney Act, the DC Circuit believed that it would raise separation of powers concerns to not compel judges to enter consent decrees. Never mind that a decree is a judicial function. Never mind that courts reject plea bargains all the time. This is somehow different, and Congress can be ignored to avoid the Constitutional issue the court just manufactured. The point is: Courts are comfortable ignoring Congress. And when they do so, Congress seldom has the stomach to engage in multiple rounds of amendments. One quickly knows how this game ends.

If you don’t buy that one, consider the notion of an efficiencies rebuttal, which one finds nowhere in the Clayton Act. Lower courts developed that doctrine out of thin air, with the help of the administrative agencies that developed the notion. But wait, isn’t that the kind of rogue agency action Loper Bright is supposed to defend against?  Apparently not. Because it favors business.

Of course, one could argue the saving grace is “Skidmore deference.” Skidmore basically says that a court may give whatever weight to an agency pronouncement that it deserves—a position that the Court adopts in Loper Bright:

We consider that the rulings, interpretations, and opinions of the Administrator under this Act, while not controlling upon the courts by reason of their authority, do constitute a body of experience and informed judgment to which courts and litigants may properly resort for guidance. The weight of such a judgment in a particular case will depend upon the thoroughness evident in its consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.

Skidmore also doesn’t save the Agency’s interpretation, and it doesn’t save Congressional purpose or intent. As Justice Scalia points out:

Justice Jackson’s eloquence notwithstanding, the rule of Skidmore deference is an empty truism and a trifling statement of the obvious: A judge should take into account the well-considered views of expert observers. . . . It was possible to live with the indeterminacy of Skidmore deference in earlier times. But in an era when federal statutory law administered by federal agencies is pervasive, and when the ambiguities (intended or unintended) that those statutes contain are innumerable, totality-of-the circumstances Skidmore deference is a recipe for uncertainty, unpredictability, and endless litigation. To condemn a vast body of agency action to that regime (all except rulemaking, formal (and informal?) adjudication, and whatever else might now and then be included within to day’s intentionally vague formulation of affirmative congressional intent to “delegate”) is irresponsible.

The bottom line of the Court’s perversion of the statutory scheme is that it does not matter what Congress expresses in the statute. Nor does Congressional intent matter. Language is always ambiguous, and the Court here asserts it is the sole arbiter of what that language means. I have written before of the way in which judicial power has contorted progressive law to support powerful business interests. The Court stands ready to do so again.

After years of inflation-driven concerns over the state of the economy, it seems that the mythical soft landing has been achieved; things aren’t perfect but inflation is down without the United States hitting a recession. The labor market has weakened some in recent months, but is still largely okay and the Federal Reserve has started cutting rates in a move to ease downward pressure on employment. In 2022, Bloomberg Economics put the odds of a recession within the next year at 100 percent. Two years later and not only has there not been a recession, but inflation is down, interest rates are going down, and recent GDP growth has been higher than it was for the previous decade. 

Over the last several months, while this situation was crystalizing, many have credited Federal Reserve Chair Jerome Powell with achieving the once-mythical soft landing. That’s a mistake. There are multiple reasons why the Fed has been ineffective at best at wielding monetary policy in its recent inflation fighting. Such an explanation doesn’t fit the available empirics—or its advocates’ own model of how interest rates work.

The issue is especially salient because many of Powell’s defenders, including neoliberal economists and pundits, cling to the view that inflation was driven by demand-side factors. This spending-is-to-blame philosophy conveniently exonerates businesses for having any role in driving inflation. If demand-side explanations can be excluded, then attention would shift back to supply-based theories of inflation, including price gouging and coordinated price increases. And that would lead to very different policy implications.

A Brief History Lesson

Let’s rewind to when the fight over monetary policy was heating up in 2022. A variety of different economic shocks have hit the United States: the worst pandemic in a century, major emergency stimulus, brittle supply chains, and a land war in Europe (between Russia—one of the world’s major oil producers—and Ukraine—one of its major grain producers) have all rocked markets in just two years. Then, corporations in concentrated markets seize on the pricing mayhem to pad profits, extending inflationary pressures. At this point, such rent-seeking is well documented. That includes work from researchers from at least three regional Federal Reserve Banks (Boston, San Francisco, and Kansas City), the Bank of Canada, the International Monetary Fund, and the European Central Bank.

Because of this suite of shocks, inflation spiked more aggressively than it had for decades. That spike prompted the Fed to begin a major series of interest rate hikes to attempt to rein in price increases. This whole time there’s a back and forth among economists and pundits on what caused inflation, how long it would last, and what to do about it. 

On one side you had Team Transitory, who said that the cause was a bunch of exogenous shocks, inflation wouldn’t last all that long, and we should wait things out because inflation will naturally subside and using monetary policy risked hurting workers.

On the other was what I called Team Crash The Economy, who said that the cause of inflation was fiscal stimulus leading to excess spending, price growth wouldn’t return to normal on its own, and the Fed should aggressively hike interest rates to cool the economy—including destroying millions of jobs. Larry Summers infamously called for ten percent unemployment while lounging on a beach. 

In retrospect, Team Transitory was largely correct about the causes; fiscal stimulus played a role, but wasn’t responsible for most of inflation. Technically, Team Crash The Economy was right on the timeframe question, but the reasoning behind why inflation lasted a long time was demonstrably incorrect. Conversely, Team Transitory was technically wrong about the timeframe, but the reasoning was at least partially true. 

But then there’s the big question of what the solution was. Both teams have taken victory laps: Team Transitory back in 2023 when inflation eased, except for a few lagging variables (housing, wages) and commodities (oil) that kept overall measures high; and Team Crash The Economy over the summer, when they pointed at decreased inflation and credited Jerome Powell and the Fed for the result. 

The Econ 101 Model

The intro macro model for the relationship between inflation and interest rates is largely just an inverse relationship. As interest rates are eased, businesses face cheaper borrowing costs, inducing them to scale up operations, creating new jobs. Then when the labor market tightens, it creates a “wage-price spiral.” As people get paid more, they spend more, leading suppliers to scale up again, further tightening the labor market, leading to higher wages, and on and on. In this econ 101 telling, the key link between inflation and interest rates is those pesky workers demanding higher wages, which create a cycle of increasing demand. That’s why the solution is a form of “demand destruction,” forcing consumers to consume less (by making credit more expensive) in order to reduce demand-side pressure on prices.

So if a central bank finds itself making monetary policy using this framework in an inflationary environment, what does it do? It hikes rates, making borrowing costs prohibitively high, which leads firms to stop expanding and, if the costs increase enough, to actually shrink their business via measures like layoffs, putting an end to wage increases, or even shuttering entirely. And then as wages stagnate (or, in extreme cases, decrease), there’s less demand, so prices don’t continue their rapid increase (or, in extreme cases, fall). 

Within the econ 101 frame, this makes sense and is the obvious choice. But in the real world, it didn’t fight inflation. Nearly every step of that theoretical model can be observed and empirics clearly do not show the proscribed pattern. On top of that, there are blatant theoretical holes in that narrative.

Let’s start with unemployment as the key channel to impact inflation. If the textbook econ 101 model is correct, we should be able to see it in a few different datasets. The unemployment rate (Figure 1) should go up as the Fed began raising rates in March 2022, and should correspond to a rise in initial filings for unemployment insurance (Figure 2) and a fall in job vacancies (Figure 3) and new job creation (Figure 3(a)). 

Figure 1: Unemployment rate (blue, left) and effective federal funds rate (red, left) vs. date.

Figure 2: Initial unemployment insurance claims (blue, left) and effective fed funds rate (red, right) vs. date 

Only one of those trends is borne out by the data. Job openings have declined, and the monthly change (Figure 3(a)) has been lower recently. It’s worth noting, however, that the number of job openings is still historically high, above anything pre-pandemic. Plus demand destruction requires a decrease in real spending power, which a change in job openings alone won’t do.

Figure 3: Total job openings (blue, left) and effective federal funds rate (red, right) vs. date.

Figure 3(a): Monthly change in job openings (blue, left) and effective fed funds rate (red, right) vs. date. 

No dice. But maybe what happened is that work prospects got bad and that led a lot of people to exit the labor force entirely. Except that didn’t happen either. The labor force participation rate (Figure 4) has remained below 2019 levels, but reached its post-pandemic relative maximum of 62.8 percent in August 2023, the month at the end of the Fed’s rate hikes, and remained steady since. 

Figure 4: Labor force participation rate (blue, left) and effective fed funds rate (red, right) vs. date.

Now let’s expand the intro model a little bit to see if there are factors that could be a viable channel to get from rate hikes to a fall in inflation. When the Fed increases rates, there are a bunch of things that should be expected to happen as a result of higher borrowing costs:

  1. Private investment (Figure 5) should fall, reflecting firms being unable to afford expanding with less access to credit.
  2. Consumer expenditures (Figure 6) should fall, reflecting their lines of credit (including personal loans, mortgages, car loans, and credit cards) costing more to use and wage growth slowing.
  3. Personal savings (Figure 7) should decrease as people eat into savings as a substitute for consumer credit. The savings rate (Figure 8) should fall, as more personal income is diverted directly to consumption to cover for using less credit. 

Any of these could potentially be a mechanism for monetary policy to lower aggregate demand. 

Figure 5: Real gross private investment (blue, left) and effective fed funds (red, right) vs. date.

Figure 6: Real consumption expenditures (blue, left) and effective fed funds rate (red, right) vs. date.

Figure 7: Personal Savings in nominal billions of dollars (blue, left) and effective fed funds rate (red, right) vs. date

Figure 8: Personal savings rate (blue, left) and effective fed funds rate (red, right) vs. date.

Yet exactly none of those causes are reflected in the data. (Total personal savings looks at first glance like it dipped, but it actually increased and stabilized during the course of the rate hikes.) If demand destruction does occur, it would presumably be through some combination of those factors. If there’s no loss of jobs, no drop in investment or consumption, and no change in personal savings rates, how exactly does increasing interest rates lead to lower inflation?

The short answer, at least in this case, is that it probably didn’t. This entire model of monetary policy presupposes demand-side causes of price increases, which were only a minority of the post-Covid inflation. 

Inflation Doesn’t Capture the Full Cost of Living

That isn’t to say that the Fed’s rate hikes did nothing to impact workers and consumers. They actually made things worse. One long standing debate from the past couple of years is why public sentiment has remained negative on the economy even as most indicators have been broadly positive. A big part of that sentiment gap can be explained by differences in how lay people and economists use the same word. In an everyday sense, “inflation” means a rise in cost of living. But in economics, “inflation” is a change in the price level of a fixed basket of goods compared across time. That creates tension in how we discuss inflation; it’s atechnical measure that is often used in a general sense. 

That meaning gap wouldn’t be a huge issue if the technical measure was a consistently good proxy for how people experience changes in the cost of living. There are prices that are important to the cost of living, however, that are excluded from the basket used to measure inflation. Chief among them is the cost of borrowing. 

From a mechanical point of view, excluding interest rates on consumer credit is very reasonable; if they were to be left in, then it would muddle the relationship between interest rates and inflation since inflation would be defined as a function of interest rates. While it makes sense for technical economic analysis, this exclusion makes measures of inflation a poor approximation of the actual situation people experience.

Consumers experience higher interest rates on their access to credit as a sort of inflation. After all, it makes their lives more expensive. As a result, people’s lives can get more costly even in the face of easing inflation. (Not to mention that lower inflation still doesn’t represent a drop in prices.) 

Put everything together and you get a story that goes something like this: multiple shocks, mostly, though not entirely, stemming from disruptions to supply usher in a major episode of inflation. As supply constraints eased, inflation fell. Although not before many unscrupulous firms took advantage of the situation by raising prices by more than their costs increased.

Meanwhile, neoliberal economists like Jason Furman and Larry Summers publicly pressured the Fed into hiking rates in an attempt to elevate unemployment and usher in demand destruction. Jerome Powell and the Fed ultimately did so, which made consumer credit more expensive, in turn that kept consumer confidence low because even though inflation was easing, it didn’t feel like it. Through those higher borrowing costs, the Fed has been responsible for eroding consumer confidence, threatening democracy, and slowing the green energy transition. 

Yet what the data indicate is that these trends happened in parallel; over similar timeframes but not with a causal relationship between them. The expected changes to unemployment, investment, consumption, and personal saving are all missing. Absent those channels, there isn’t a link that gets from higher interest rates to lower inflation. It’s entirely possible that there is a causal channel somewhere, but until it’s identified and explicated, there is no reason to defer to the econ 101 model. 

Particularly given the stink that neoclassical economists made about evidence for sellers’ inflation, they should be held to a similar standard for their crediting of the Fed for lower inflation and implicitly putting the blame on consumers and workers. The data just don’t fit their model. 

It’s always better to be a monopolist. “Ruinous competition” is a drag on a company’s profits, particularly when slothful incumbents are forced to compete on the merits. In the case of banks, competition on the merits means increasing rates on deposits for customers with sizeable savings or decreasing overdraft fees for customers with limited funds.

Last week, the Consumer Financial Protection Bureau (CFPB) finalized a rule that requires financial institutions, credit card issuers, and other financial providers to unlock a customer’s personal financial data—including her transaction history—and transfer it to another provider at the consumer’s request for free. It marks the CFPB’s attempt to activate dormant legal authority of Section 1033 of the Consumer Financial Protection Act. Officially dubbed the “Personal Financial Data Rights” rule, or more casually the “Open Banking” rule, the measure was greeted by those in the budding anti-monopolist movement with glee.

Indeed, FTC Chair Lina Khan, the ultimate champion of competition, tweeted an endorsement of the CFPB’s new rule.

But it wasn’t all rave reviews. The Open Banking rule was also greeted by a swift lawsuit from the Bank Policy Institute (BPI), alleging that the bureau exceeded its statutory authority. The lawsuit also claims the rule risks the “safety and soundness” of the banking system by limiting banks’ discretion to deny upstart banks access to transaction histories. Based on its website, BPI’s membership includes JP Morgan Chase, Bank of America, and Barclays, or what I will call the “incumbent banks.” And JP Morgan’s Jaime Dimon is the Chairman of BPI. Why are the incumbent banks so angry about being compelled to share these transaction histories with upstarts, when such data are arguably the property of the banks’ clients in the first place?

When I first heard about the CFPB’s new rule, I didn’t understand why I needed a regulatory intervention to play one bank off another. For example, after being offered a high CD rate by a scrappy bank, I asked my stodgy bank to match it, only to be ignored by my stodgy bank; I proceeded to write a check from the stodgy bank to the scrappier rival. But having studied the issue, I now understand the particular market failure that the rule seeks to address.

The Rule Would Induce More Aggressive Offers by Upstart Banks

When an upstart bank seeks to pick off a customer from an incumbent bank, the upstart would prefer to extend the most aggressive offer possible, as an inducement to overcome any switching costs that customer might incur. (Fun fact: When interest rates were regulated and interest on checking accounts was banned, banks used to compete by offering toasters to customers at rival banks!) Today’s competitive offer by a rival bank might include a host of ancillary services or “cross-sales” alongside a checking account, such as a credit card, a loan, a line of credit, and payment services. The terms of such offers are governed by the customer’s creditworthiness.

And that’s the catch—the incumbent bank and only the incumbent bank has access to the customer’s transaction history, which includes nuggets like your history of maintaining a balance, overdraft tendencies, and relative timing of payments to income streams. The scrappy upstart, by contrast, is flying blind. And this granular information cannot be obtained through the purchase of a credit report.

Economists refer to such a predicament as “asymmetric information,” and in 2001 three economists even won a Nobel prize for explaining how such asymmetries lead to market failures. In the absence of this information, when formulating its offer, the upstart bank must assume the average tendencies of the borrower based on some peer group, or even worse, it might hedge by assuming the borrower’s creditworthiness is slightly worse than average. As a result, the competitive offer is unnecessary weaker than it could be, and too many customers are sticking with their stodgy (and stingy) bank.

(A fun digression: Some employers inject provisions into a worker’s employment contract that create similar frictions to substitution, which relaxes competitive pressure on wages. You’ve likely heard of a non-compete, which is the ultimate friction. But you may not have heard of a “right-to-match” provision, which gives the incumbent employer a right to match any outside offer from a rival employer. Because the rival employer knows of the provision, and because it’s costly for the rival to formulate an offer, most rivals will give up and the employee never enjoys the benefit of competition.)

The purpose of the Open Banking rule is to induce more aggressive offers by upstart banks and thereby overcome the switching costs associated with changing one’s bank. Put differently, it juices the part of the fin-tech community that seeks to assist consumers, which likely explains the narrow opposition to the rule from incumbent players only. Suppose the customer’s switching costs are $100 and the (weakened) offer from an upstart would improve the customer by $90; under those circumstances, the customer stays put. But if the rule can induce more aggressive offers, boosting the customer benefits of switching to (say) $200, the customer moves. Or she now, with a powerful offer in hand, credibly threatens to switch banks and her stodgy bank improves her terms.

The Open Banking Rule Could Generate Billions in Annual Benefits

The economists of the CFPB have tried to value what this enhanced competition might mean for bank customers. At page 525 of the rule, in a section titled “Potential Benefits and Costs to Consumers and Covered Persons,” the economists explain their valuation methodology:

First, those consumers who switch may earn higher interest rates or pay lower fees. To estimate the potential size of this benefit, the CFPB assumes for this analysis that of the approximately $19 trillion 207 in domestic deposits at FDIC- and NCUA-insured institutions, a little under a third ($6 trillion) are interest-bearing deposits held by consumers, as opposed to accounts held by businesses or noninterest-bearing accounts. If, due to the rule, even one percent of consumer deposits were shifted from lower earning deposit accounts to those with interest rates one percentage point (100 basis points) higher, consumers would earn an additional $600 million annually in interest. Similarly, if due to the rule, consumers were able to switch accounts and thereby avoid even one percent of the overdraft and NSF fees they currently pay, they would pay at least $77 million less in fees per year.

Hence, bank customers who switch banks due to more robust competitive offers made possible by the Open Banking rule would benefit by $677 million per year, based on very conservative assumptions about substitution. And this estimate does not include benefits created for those customers who stay put but nevertheless benefit from the mere threat of leaving. The economists explain that competitive reactions by incumbent banks could lead to a doubling of the aforementioned benefits, to the extent that interest rates on deposits of the non-switchers increase by a mere one basis point. Those benefits would be a transfer from incumbent banks to consumers.

Beware of Fraud Arguments

The Open Banking rule requires that a bank make “covered data” available in electronic form to consumers and to certain “authorized third parties” aka the upstart banks. Covered data includes information about transactions, costs, charges, and usage. The rule spells out what an authorized third party must do to get the covered data, as well as what the “data provider” (aka the incumbent bank) must do upon receiving such a request. The data provider will run its normal fraud review process upon receipt of a data request. Indeed, CFPB even included a provision that states when the data provider has a “legitimate risk management concern,” that concern may trump the data sharing rule.

So any claim that the BPI lawsuit is motivated to protect consumers against fraud or to ensure the safety and soundness of the banking system seems farfetched. The more likely motivation for the challenge is that the Open Banking rule will spur competition among banks, and hence put downward pressure on the incumbent banks’ hefty margins. To wit, JP Morgan Chase, America’s biggest bank, has thrived in a rising rate environment, posting record net income figures since 2022. As the CFPB economists estimate, the rule could raise rates on deposits and reduce rates on overdraft fees, cutting into these record margins. In a similar vein, the CFPB’s new rule might spark competition in the nascent payment system market. Some large banks would like to build their own payment systems (think BoA’s Zelle). By compelling the incumbent banks to share their customers’ transaction histories, however, the Open Banking rule reduces the costs for a scrappy entrant to build a competing payment system. If pay-by-bank gets going, it will be a threat to the incumbent banks’ lucrative credit card and debit card interchange fees. And that threat alone provides billions of reasons to sue the CFPB.

As Google faces aggressive scrutiny from the Department of Justice—with the search trial moving to the remedies phase and the ad tech trial moving to closing arguments—there’s an elephant in the room that many antitrust watchers are failing to see: YouTube. 

With the platform’s presence on our phones, the part it plays in our online searches, its rapid invasion of our living rooms, and the volume of advertising it serves us, YouTube is an increasingly unavoidable part of our lives. We and other observers have called it “the third leg of the stool that supports Google’s monopoly.” Separating the video giant from the rest of the Google behemoth makes sense as one of the remedies for Google’s decades of monopoly behavior and would reshape the digital landscape for the better—ultimately benefiting consumers, shareholders, and smaller companies in a market newly opened to competition.

Judge Amit Mehta is currently considering what remedies to impose after ruling against Google in August in its landmark search engine antitrust trial. Requiring divestment of one or more business units, like YouTube, is one of his options. A second big antitrust trial, with the government alleging Google illegally controls the advertising technology market, is already underway; and here, too, if the government prevails, divestment would be an option. In the interest of market competition and consumer choice, YouTube—which is intimately bound up with Google’s domination of both sectors—should be among the Google units to be spun off.

Google dominates search with more than 80% of the market, giving it an effective monopoly on the flow of internet information. But YouTube by itself has been recognized as “the world’s second-largest search engine,” handling an estimated 3 billion searches per month. As one commentator noted, after YouTube was founded in 2005, it was “purchased just over a year later by none other than Google, giving it control over the top two search engines on this list.” Another commentator noted recently in the New York Times that, “The gargantuan video site is a lot of things to a lot of people—in different ways, YouTube is a little bit like TikTok, a little like Twitch and a little like Netflix—but I think we underappreciate how often YouTube is a better Google. That is, often YouTube is the best place online to find reliable and substantive knowledge and information on a huge variety of subjects.”

Especially for many younger people, who increasingly prefer video content, YouTube is already the search engine of choice. For these reasons, the European Union recently classified YouTube not only as a large online platform, but a large online search engine.  And because YouTube is so tightly integrated with Google Search, it doesn’t represent true competition. 

Right now, Google faces little pressure to innovate because it dominates nearly every business it’s in; and when it does innovate, it does so with an eye toward further cementing its complete control of the internet. Google’s recent “innovations” have significantly degraded the Google Search experience, as the company increasingly curtails linking to external sites and instead imposes a “walled garden” strategy that keeps you interacting only with Google’s own content instead of the content you really want. The collateral damage is vast, not only to consumers, but also to content publishers, news organizations, and a variety of other third-party businesses that depend on Google traffic for revenue.

Separating YouTube from the rest of Google would shake up the search, ads, and video markets, and—freed from the market imperatives of a giant corporate parent—could take YouTube development in new directions, with the scale, resources, and user base to challenge Google to compete on features and quality. This would yield more diverse content that better meets user needs, and new opportunities for smaller players to enter the market and innovate. 

By owning supply (ad inventory) and setting the terms of demand, Google has been able to charge inflated prices for online advertising while funneling disproportionate revenue to itself and YouTube. Internal communications confirm Google knows their ad fees are roughly double the fair market rate, which one employee admitted is “not long term defensible.” But when you own the entire market, you can charge whatever you want, and Google’s vertical integration has killed competition and put the squeeze on advertisers and publishers. Numerous companies have blamed Google for putting them out of business; new startups that try to break into the business find it tough going. 

An independent YouTube would enable the new video company to go head-to-head with Google and negotiate its own deals with advertisers. This would likely lower the fees that Google charged advertisers, increase transparency in how digital ads are bought and sold, create more opportunities for advertisers to effectively reach more target audiences through more platforms, and also open up space for smaller ad tech companies to thrive. 

All of this would unlock significant new shareholder value. An independent YouTube’s unique market position and strong brand identity would make it a highly attractive investment, pushing its valuation higher than it is today; analysts have speculated that it could be worth up to $400 billion on its own. Its video-based business model is sufficiently different from Google’s core business of search, so it could attract a different class of investors with different expectations, allowing it to grow more independently and with greater strategic flexibility. And a smaller and more nimble Google would likely provide better returns to its own shareholders.

In short, it’s time to face the elephant in the room, and require Google to spin off YouTube into an independent entity positioned to be a market counterweight. This would be a win-win-win-win: for advertisers, publishers, competitors, and consumers. And it would kick one leg out from under the stool that props up Google’s internet monopoly, which has done too much market damage in too many ways for way too long.  

Emily Peterson-Cassin is the Director of Corporate Power at Demand Progress, a national grassroots group with over nearly one million affiliated activists who fight for basic rights and freedoms needed for a modern democracy.

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