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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.

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.

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.

In February 2023, Doha Mekki, the Principal Deputy AAG for Antitrust announced the withdrawal of the FTC-DOJ guidelines on information exchange. It had become painfully apparent that oligopolists had found exchanges of confidential business information to be an effective means of restraining competition without entering into overt conspiracies.  In December of that year, we published our article, Pooling and Exchanging Competitively Sensitive Information Among Rivals: Absolutely Illegal Not Just Unreasonable, 92 U. Cin. L. Rev. 334 (2023), on the exchange of such information.  We argued that most such exchanges are naked restraints of trade. Because there are a few plausible explanations for limited kinds of exchanges that are unlikely to result in restraint on competition, we recommended that a “quick look” approach would be the appropriate standard.  Moreover, we stressed that the focus of such an assessment should be on the merits of any purported justification rather than market shares or other indicia of market power.

Late in 2023, the DOJ sued Agri Stats for its program of collecting, analyzing and  sharing confidential business information for pork packers and poultry and turkey integrators.  Then in 2024, it sued RealPage for its information collection, processing, and rent recommendations to landlords. Both complaints were unclear as to the exact standard that the government was claiming applied to such information exchanges.  What is clear is that the government is contending that the agreements to share such competitively sensitive information are in themselves unlawful restraints of trade regardless of whether there is a further agreement to fix prices or control output.  This is an important step in the process of reclaiming a critical analysis of such agreements.

Most recently the DOJ submitted a Statement of Interest in the Pork Antitrust case where it more clearly invited the court to focus on the justification for the exchange and the market context in which it occurred rather than measuring market shares or other inferences of market power.  Moreover, the Statement initially pointed out that the Supreme Court has held that agreements to exchanges competitively sensitive information can in themselves violate the antitrust law.

Leading decisions such as Todd v. Exxon have referred to the “rule of reason” as the standard and seemed to embrace a requirement of finding market power as a predicate to condemning such an exchange.  The Statement is at pains (unnecessarily in my view) to advance a broad definition of the rule of reason as a flexible inquiry into the merits of the conduct at issue. Quoting from the Gypsum decision, however, the Statement stressed that the focus should be on how the exchange affects competition among the participants and in the market.  Implicit in this approach is a rejection of the standard rule of reason model in which restraints are presumed lawful unless there is substantial market power. 

Indeed, why would rivals, even if they did not dominate the market, exchange competitively sensitive information?  Such an exchange would be likely to and is almost certainly intended to stabilize and restrain the competition between those rivals for customers in common.  The primary function of any such exchange among rivals, however inclusive, is to provide a common understanding of the market to reduce or eliminate the incentives to compete. 

The Statement of Interest in the pork case moves the government closer to recognizing that the appropriate standard is one that both presumes illegality and requires a legitimate explanation.  Explicitly, it first emphasizes that exchanges of information inherently involve an agreement or understanding which satisfies that element of a section 1 case.  Second, pointing to a long history of antitrust decisions, such exchanges can be in themselves illegal.  They need not only serve as facilitating devices for express collusion on price, output, or customer allocation.  This is a very important point to emphasize in relation to such agreements and is the basis on which the government has sued both Agri Stats and RealPage.

Third the Statement emphasizes that even if information is aggregated, it can still serve an anticompetitive function.  Implicit, in this point is the proposition that the focus of analysis should be on why this information is being exchanged, which includes a variety of extrinsic factors. This leads to a section that identifies four factors that a court should consider.  They are 1) the nature (“sensitivity”) of the information exchanged, 2) its granularity (how detailed is the information and how easily can a participant determine what its rivals are doing), 3) the public availability of the information, and 4) its contemporariness.   Missing from this list is any recognition that legitimate bench marking projects might require exchanges of information that satisfy most of these criteria, but if this is a legitimate benchmarking project, there are ways to limit the granularity and contemporaneousness of the data. 

The Statement regrettably failed to take a sufficiently strong and clear position that once the plaintiff established that an agreement to exchange confidential business information exists, that should create a rebuttable presumption that it constitutes a restraint of trade.  Only if the defendant(s) can offer and provide proof of a plausible explanation for the exchange that does not involve a restraint should there be any need for a more nuanced investigation of the merits of the conduct.  At that point, the four factors that the government identified are indeed relevant as is a direct rebuttal of the asserted justification for the exchange.

The legal doctrine governing information exchange continues to wrestle with two decisions from 1925 involving the maple flooring and cement industries that upheld anticompetitive information exchanges.  Those case came during a time of “open competition” advocated by Herbert Hoover, then the Secretary of Commerce, and others to limit competition among business though use of information exchange and trade associations.  Justice Stone, the author of both these opinions, was a friend of Hoover’s and apparently supported this kind of restraint on competition.  A decade later, the Court essentially rejected these decisions.  Justice Stone chose not to participate in that decision rather than dissent.

Nonetheless, the legacy of this early 20th century childlike faith in the potential that such exchanges might serve some public interest has continued to dog the development of a coherent doctrine.  Deference to the dead-hand of the past leaves open too many paths for defendants and courts to justify or excuse harmful information sharing.  The best hope is that the judge in either the Agri Stats or RealPage case (or better both) focus the decision on a presumption of illegality and require the defendants to bear the burden of persuasion that the presumption is inapplicable to the specific case.  The Statement of Interest in the pork case does move the analysis a little closer to the appropriate standard. 

In August, Judge Mehta of the Federal District Court in Washington, D.C., concluded in a careful and detailed opinion that Google had a monopoly in both the internet search market and the associated text advertising market. Google was found to have abused its market power by engaging in exclusionary conduct, including paying large sums of money to equipment makers, browser operators, and cell phone systems to retain this dominance. The opinion declared that while Google got its monopoly because of its “skill, industry, and foresight,” it then used unlawful tactics to entrench and reinforce that position. The decision also recognized the enormous cost of creating and maintaining an effective search engine, as well as a suggestion that the text advertising system involved substantial costs. Given the apparent durability of both these monopolies, the question that the Court now faces is finding an effective remedy.

This week, the Department of Justice (DOJ) is expected to file proposed remedies for this abuse of monopoly power. Several voices have weighed in on remedy design, including The Economist, in a leader titled “Dismantling Google is a terrible idea.” Divestiture of Chrome or Android should be avoided at all costs, argued the magazine, even if that means embracing behavioral remedies such as “limiting its ability to use its search engine to distribute its AI products,” or “mak[ing] public some of the technology that enables its search engine to work, such as its index of web pages and search-query logs.”

In two prior posts, we spelled out two alternative ways to remedy bottleneck monopolies. These monopolies are ones that connect otherwise competitive markets but for a variety of reasons are durable and unavoidable. Obvious examples include electric transmission systems, cell phone service, and natural gas pipelines. The internet world is also subject to a number of bottlenecks.

The Search and Text-Advertising Engines Are Bottleneck Monopolies

Google’s search engine stands between the great mass of users with questions and the entire internet’s resources. Its search engine functions to identify and classify potential responses to the question. The cost of creating the Google search engine was over $20 billion and it requires many billions annually to maintain and expand it. Only two other search engines exist, and one recent effort failed after massive investment. Of the survivors, Microsoft’s Bing has a 10 percent market share overall and the other, Yahoo, has less than 3 percent. Hence, neither is a significant competitor. Browser providers need to have one or more search engines easily accessible for users, and they can’t charge searchers for their searches.

Because the search engine is costly to create and maintain, the question is how to pay for this service. The text-advertising engine is the means for paying for all searches. Text advertisements are the textual lines appearing at the top of any search that implicates a good or service. The line links a searcher to the website of the advertiser that hopes to make a sale.

Google sells such access to advertisers as does Microsoft and Yahoo. Judge Metha found that the creation and maintenance of the text-advertising engine is also very substantial. But at the same time, the other search engines appear to have their own text-advertising engines. This at least suggests that such engines are more readily producible, and that Google’s dominance comes primarily from its control over the search engine. Both browser operators and advertisers agree that they have to use Google’s search engine. They accept the text search engine because that is the means by which Google is compensated. Google also shares that revenue with the browser operators.

The DOJ’s Theory of Harm and Implicit Remedy

The litigation seems to have focused primarily on the anticompetitive effects of the various exclusive dealing contracts that Google obtained to ensure the dominance of its search engine. These contracts involved multi-billion-dollar payments to cell phone makers (like Apple) and browsers (like Mozilla) to ensure Google search was the default option. Nominally, other options could be provided and were included in some browsers, but the effects of Google’s brand recognition and its placement in cell phone and computer browsers resulted in effective retention of a monopoly market share.

While the opinion focuses on the harms resulting from the exclusionary practices of Google, the underlying factual findings suggest that regardless of the specifics of the contracts at this point and for the foreseeable future, the Google search engine will retain its monopoly position. Removing the exclusionary terms from the contracts is unlikely to result in any significant change in the structure of the search engine market.

Perhaps the government belatedly recognized this situation and so tried to shift the focus of its case from an attack on the specific exclusionary effect of the contracts to a broader claim of monopolization. Judge Metha rejected that move because it came late in the litigation. This is somewhat similar to the government’s failure to think through its case against Microsoft in the late 1990s, which started as a challenge to the tying of the operating system to its browser but ultimately morphed into a broader challenge to Microsoft’s monopoly. The failure of the government in that case to have a remedy that would effectively address the monopoly bottleneck of the operating system explains why 25 years later, Window’s still has a monopoly share of computer operating systems and their applications.

The fundamental challenge is to find an effective remedy that will eliminate or significantly reduce the incentive to exploit the bottleneck monopoly and use it to exclude competition in the upstream or downstream markets that the monopoly serves. Eliminating at this point exclusionary contracts given the extraordinary costs of building and operating a search engine that would, at its best, basically duplicate the Google engine, is unlikely to affect the search market in the foreseeable future.

Consider the Alternatives

The central thesis of our prior posts was that where there was an unavoidable bottleneck monopoly, an effective remedy is to change the ownership of that monopoly in a way that would eliminate or greatly attenuate the incentives to exclude and exploit. We also recognized that the first best option would be to break up the monopoly. But in many cases, this is not a feasible option. We suggested that there were two other ways to reallocate ownership and control of the bottleneck. One way is to create a “condominium” that collectively owned the bottleneck, but each user had its own piece to use. The alternative is to move ownership to a “cooperative,” which would both own and operate the bottleneck. While a divestiture remedy is possible, we think that the more likely option is to have either a condo or cooperative own and operate the search engine. As suggested earlier, our assumption here is that the text engine is one that has little exclusionary power on its own and will be further weakened if the current case, in trial, concerning Google’s monopolization of the “ad stack” (e.g., ad server, ad network, and ad exchange) results in dissolution of that monopoly.

Option A: Divestiture

The historic response to monopoly expressly declared in the Standard Oil and American Tobacco cases is to break up the monopoly into separate competing firms. It is hard to imagine how a search engine could be subdivided, but it is possible to imagine that multiple entities could receive the right to use the existing engine, “hiving off” the search engine. Each might then have the right to undertake further development of the search engine. There probably would have to be some significant compensation to Google given its massive investment to date in the search engine. This would limit the number of browser or cell phone operators that could even consider a license.

A second concern would be brand loyalty. Would searchers, assuming that Google was allowed to retain its own version of the search engine, be willing to use alternatives in sufficient quantity that the result would be economically attractive? To recover the costs and make money, text advertising needs to be attractive to advertisers.

Finally, the engine itself needs continued work. This means that those entities that took the engine would need to develop additional capacity to perform those tasks, which is unlikely to be easy or inexpensive. This suggests that divested versions of the Google search engine would struggle to compete in the market.

It would also appear that if the text-advertising engine is currently a bottleneck monopoly in its own right, a licensing system for its use with the further right of each user to amend and improve its version would probably resolve this part of the monopoly. There is no brand loyalty for such engines. Moreover, as noted above, the pending Google ad tech monopoly case is likely to result in a further increase in competition in that area of technology.

Option B: A Condominium Solution

If the search engine is sufficiently distinct from the operation of browser and cell phone operating systems, then one remedy would be to transfer ownership of search engine to an entity owned by the various users, but with the on-going maintenance performed by a separate entity that contracts to provide this service to the owners. This is analogous to a condominium association contracting with a management company. Each owner of a condominium would pay for the managerial services and would be able to use the search engine.

The manager would have significant capacity, however, to exploit this system. If compensation were on a cost-plus basis, that might reduce the risk. An even more open system in which the manager’s task is only to review and implement proposed improvements developed by third parties might reduce further the risk of exploitation. The puzzle then would be how to compensate third parties for developments.

Overall, we are skeptical that a condominium-type structure would be a very effective solution to the monopoly bottleneck that the Google search engine presents.

Option C: Cooperative Solution

A cooperative type of organization would own the search engine itself and share the ongoing costs of its operation, based on usage by the participating enterprise. The cooperative would in turn either have its own staff to maintain the engine or it would contract with various third parties to supply necessary inputs. Each participant would be able to use the search engine as it saw fit and match it with whatever text-advertising system was most attractive given the customer base and technology of that entity.

A cooperative solution to the search engine monopoly is a much more promising solution than the options of injunction, divestiture, or condominium ownership. But we see two real risks and problems. First, there is a question of the incentives to innovate especially where some users would be advantaged over others. The risk is that if most distributors of the search engine are using the same vehicle, they may have a hard time supporting innovations that might favor some types of users, e.g., cell phones, over others, e.g., computers.

Second, as Judge Metha observed, and as The Economist points out, there is a possibility that AI may eventually make search engines obsolete or offer a very credible and open alternative. The judge concluded, however, that this potential was only that. There is no current or immediately foreseeable AI search system. The concern would be that if most search providers are participating in a cooperative that provides a search engine, they may have a collective disincentive to support or sponsor the potentially costly and time-consuming effort to develop an AI search system.

Conclusion

Finding an effective remedy for the monopoly created by Google search and text-advertising engines is a major challenge. Our concern is that the government has too narrowly focused on Google’s exclusionary contracts. Removing those contracts at this late date is unlikely to produce any significant change in the monopolization of these markets and potential for ongoing exploitation and exclusion. It is regrettable that the government did not initiate its case with an explicit focus on a remedy or remedies that could actually affect the future structure and conduct in this market. We have here examined three options that could dissipate the underlying monopoly power. Each has risks and problems, but each is a better alternative than a simplistic elimination of exclusionary contracts.

The FTC is seeking a preliminary injunction to prevent two of the country’s largest supermarket chains, Kroger and Albertsons, from merging. The case was heard in the U.S. District Court for the District of Oregon, where U.S. District Judge Adrienne Nelson, a former Oregon Supreme Court justice, will soon render a verdict.

The merger would make Kroger-Albertsons the second largest retail store after Walmart. The FTC alleges that, in hundreds of local grocery and labor markets, the merger increases Kroger’s market share to a degree sufficient to activate the structural presumption against the merger. Kroger, unsurprisingly, has advanced various standard arguments in favor of mergers: that it is necessary to compete with even larger retailers (in this case, Walmart), will result in lower prices for consumers, and that any anticompetitive harm would be offset by the divestiture plan built into the merger.

As an initial matter, it is unclear whether the central mission of the Sherman Act—to promote healthy competition—is compatible with Kroger’s argument that the merger is necessary to compete with Walmart. While it is undoubtedly true that Walmart is a corporate behemoth whose very existence is an existential threat to competition, it hardly follows that allowing a merger that creates a second behemoth is the best way to reign in the first. Indeed, it is hard to imagine that the drafters of the Sherman Act could even comprehend a corporation as large as Walmart in the first place—and even if they could, it is hard to imagine that they would accept a second, equally large corporation as a legitimate solution.

Kroger’s Defenses Are Unavailing

Putting this aside for a moment though, it is worth taking a closer look at some of the arguments Kroger-Albertsons have advanced to support the merger. First, Kroger has tried to portray Albertsons as a failing firm. Yet testimony has established that Albertsons is not a failing or flailing firm—and in fact, is far from it. Albertsons CEO Vivek Sankaran, testifying in front of Congress in 2022, stated that the firm is in “excellent financial condition” with “more than sufficient resources to continue” with their current plan. Albertsons has admitted that, if the merger does not go through, they have no plans to close any stores. In FY 2023 securities filings, Albertsons told investors that it was “pleased” with their reported $1.3 billion net income. Albertsons COO Susan Morris has also testified that the company is still on track to achieve its savings goals whether or not the merger goes through. What then explains Albertsons leadership’s eagerness to merge? The answer is hardly surprising—their executives have testified that their private equity backers stand to gain tens of millions of dollars in parachute payments should the merger be approved.

Second, Kroger argues that the merger would not produce anticompetitive effects due to the divestiture plan built into the acquisition. The plan is to sell hundreds of stores in overlapping grocery markets to C&S, a wholesale grocer, which, according to Kroger, would mitigate any anticompetitive harm. As the FTC has repeatedly pointed out throughout the trial, there are more than a few reasons to be suspicious of this argument.

The Court should be skeptical of this remedy, as every party in this transaction has a failing record of making divestiture work. For example, in Albertsons’ 2015 acquisition of Safeway, 146 stores were divested to Haggen. Haggen filed bankruptcy within months, and shortly thereafter, Albertsons reacquired 54 of the stores it had previously sold. This is not the only reason for skepticism. As was revealed at trial, Alona Florenz (C&S Senior VP of corporate development and financial planning), writing to a Bain consultant, stated “just be careful with FTC. We want to say we can run them.” It doesn’t take a genius to read the subtext—C&S wants to say that they can run the stores so that, after the merger is approved, they can turn around and gut them for profit.

This interpretation is further supported by the economic realities inherent in the divestiture plan. C&S is primarily a wholesale grocer, meaning that its primary mode of business is selling in bulk to grocers, not operating stores that sell groceries to consumers. It is extremely unlikely that C&S has the infrastructure or know-how to successfully operate hundreds of grocery stores across the country that are acquired simultaneously. Further, it was revealed during discovery that C&S officials themselves believe that they are buying Kroger’s worst stores. Not only have they been caught saying the quiet part out loud, the price that C&S would pay is itself revealing: the deal is priced close to the value of the real estate alone, suggesting that C&S could easily sell off the stores for close to what it paid.

You may be thinking: even if C&S doesn’t stand to lose much on the deal, what’s in it for them? Fortunately, one need not look far for an answer. When Price Chopper and Tops, (two grocery stores) merged, C&S acquired certain stores as part of the divestiture plan. As they have done here, C&S was happy to tell the FTC that they planned to use the newly acquired stores to robustly compete with the newly merged firm. But what actually happened? C&S operated some of the stores at a loss while using others as leverage to increase profits in its wholesale business—its primary money-maker. They sold many of the recently acquired stores to their wholesale customers, who, in return, extended their lucrative contracts with C&S.

As further evidence of C&S’s true intentions, the acquisition price of the divested stores is essentially equal to the value of the real estate alone. And in a previous merger, after telling the Court that they would use stores acquired in a divestiture plan to compete with the merged firm, they turned around and sold enough stores to ensure that their wholesale profits, their primary source of revenue, would eclipse the losses from the self-proclaimed dud firms they acquired and retained. What possible reason would Judge Nelson have to believe that this would go any differently? And to top it off, even if the divestiture plan went exactly as Kroger and C&S say it would, it would fail to cure the anticompetitive harm in hundreds of local markets across the country.

Beware of Dynamic Pricing

Beyond the inadequacy of the divestiture plan, the FTC has raised other concerns that may be even more serious—especially for consumers. In 2018, Kroger began rolling out “digital price tags,” which allow the company to change retail prices in real time. Several lawmakers have expressed concern that these digital price tags could be used to facilitate dynamic pricing, whereby the price charged depends on the identity of the consumer making the purchase. The digital price tags come equipped with cameras, which use the vast amounts of data to which Kroger has access to change the price of an item depending on who the camera sees looking at the shelf. If the merger were to go through, Kroger would acquire all Albertsons’ data about their consumers, which would greatly increase the efficiency with which Kroger can price discriminate.

Kroger, of course, has steadfastly denied that the new technology will be used to raise prices. These denials are a staple of merger cases—firms poised to merge have consistently argued that they won’t raise prices, and far too often, courts have been content to take them at their word. Here, should the merger go through, Kroger has promised to invest $1 billion to keep prices low. Government attorneys correctly pointed out that, not only are these promises completely unenforceable, but history has shown that they are utterly meaningless, as post-merger firms have consistently broken these promises without consequence. Corporations such as Kroger have a fiduciary duty to their shareholders, not to their customers. If they see opportunities to raise profits, this duty requires them to pursue it—consumers be damned. Beyond history, Kroger itself has proven to be untrustworthy—in the course of these proceedings, they were forced to admit that they had engaged in price gouging on consumer staples such as milk and eggs in the midst of the Covid-19 pandemic.

Worker Welfare Matters Too

Beyond hurting consumers, the merger also harms employees. Kroger and Albertsons currently employ around 710,000 people across about 5,000 stores nationwide. Currently, unions can bargain separately with Kroger and Albertsons, and thus have greater leverage to advocate for increased wages and other protections for their workers. Should the merger go through, unions will lose this critical leverage, and would again be subjected to the whims of Kroger’s leadership. Kroger’s attorney, the aptly named Matthew Wolf, told Judge Nelson that “[Kroger] will preserve the unions.” As with his promise that the merger would lead to lower prices, taking Mr. Wolf at his word would be no wiser than taking the word of an actual wolf who tells the farmer that he will diligently guard the hen house.

Judge Nelson should grant the FTC’s preliminary injunction blocking the merger between Kroger and Albertsons. Albertsons is a healthy firm whose presence in the market is essential to competition, and their desire to merge is motivated by the fact that their executives stand to make tens of millions of dollars should it be consummated. The divestiture plan, even if it plays out exactly as Kroger says it would, is inadequate to mitigate the anticompetitive harm that would result from the merger. C&S, the acquirer, has openly stated that it is taking on Kroger’s worst firms, has a strong economic incentive to pawn off the newly acquired firms to secure greater profits in its primary revenue source as a wholesaler, and has a known track record of doing exactly that. The acquisition, which would include all of Albertsons’ consumer data, would allow Kroger to exponentially increase the sophistication and efficiency of their dynamic pricing regime. And, after admitting to price gouging amidst a global pandemic, Kroger offers nothing more than its legally unenforceable word that it won’t use the immense increase in market share to raise prices or harm workers. This merger will harm competition, consumers, and workers. The Court should reject it.

Corey Lipton is in his final year of the JD/MPP program at the University of Michigan.

Just a few weeks shy of its one-year anniversary of the Federal Trade Commission’s landmark monopolization case against Amazon, the government and the world’s largest e-commerce marketplace await a crucial decision: Whether Judge John Chun will dismiss the case before it ever reaches trial. 

Amazon’s motion to dismiss the lawsuit has been sitting in front of Judge Chun since December. Since then, both sides have swapped legal paperwork arguing whether the FTC’s case, accusing Amazon of using its stranglehold over online retail to rip off shoppers and third party sellers, is fit to survive until its October 2026 trial date. 

Now, two recent court decisions may have made the choice clearer for Judge Chun. Those decisions—one by a D.C. appeals court and another by Fourth Circuit Court of Appeals—appear to strengthen the FTC’s claims that its lawsuit accurately details Amazon’s dominance, and that its description of Amazon’s alleged monopoly abuses are more than enough to survive Amazon’s dismissal request. 

To wit: The FTC sued Amazon last September, accusing the company of using a whole suite of tactics to keep rival online marketplaces from attracting shoppers and third-party sellers to their platforms. The 172-page complaint details, among other things, how Amazon strong-arms small sellers into paying outlandish fees in order to succeed on its monopoly e-commerce platform—fees that then force those sellers to raise the price of their products. Amazon then imposes a “fair pricing policy” to punish sellers who seek to steer shoppers to a competing marketplace by charging a lower price for the same products on the rival store, the lawsuit claims. It’s a complex complaint, but it spells out what the FTC calls a “course of conduct” plot—a series of actions that, taken together, shuts out competition and unfairly protects Amazon’s monopoly. 

Amazon’s motion to dismiss attempts to cast Amazon as both a champion of consumers and just another retailer that has to compete with everyone from Walmart to the local brick-and-mortar shops down the street. Amazon says that, even if what the FTC says is true, the company’s actions are actually procompetitive; it’s not forcing small sellers to raise their prices across the web, it says, it’s just ensuring Amazon has the lowest price, which helps shoppers. 

Amazon’s arguments set up Judge Chun’s decision: Is Amazon an online retail monopolist whose actions suffocate rival online stores and hike up prices everywhere? Or does Amazon compete against everyone and anyone who sells stuff to people, and is doing all it can to keep prices on its marketplace low for shoppers? 

The two recent court rulings may help answer those questions. The first ruling, from the D.C. appeals court, overturned a lower court decision to dismiss the District’s monopoly lawsuit against Amazon that mirrors some of the key allegations in the FTC’s complaint. 

The D.C. appeals court’s decision is clarifying. The District’s definition of the industry Amazon operates in—namely, “the U.S. retail e-commerce market”—is plausibly the right one, rather than the much larger universe of all retail, brick-and-mortar included, that Amazon claimed to operate in, the court found. That tracks with how other federal courts have defined Amazon’s market, and, the D.C. appeals court says, the lawsuit “offers a plausible basis for its contention that Amazon possesses market power in online product submarkets and in the broader online marketplace.”

The appeals court also pushed aside Amazon’s claim that the abuses the District accused Amazon of— forcing Amazon sellers to raise their prices in order to afford its fees, then restricting sellers from offering lower prices elsewhere—were actually pro-consumer and intended to keep prices low. The appeals court said the District’s description of the real-world effects of Amazon’s fair pricing policy—raising prices for consumers across the web—were enough to overcome Amazon’s motion to dismiss the case. That case will now go back to the local D.C. trial court, and the FTC flagged the decision for Judge Chun. 

Meanwhile, the Fourth Circuit court of appeals took up a different issue: Whether “course-of-conduct” monopoly claims could survive a motion to dismiss, even if each individual action that makes up a course-of-conduct claim wouldn’t violate the law alone. 

In the FTC’s lawsuit, the agency says each Amazon action that makes up the alleged “course of conduct” is illegal independently. Still, it’s the course-of-conduct allegations that are the central theme of the government’s lawsuit. Amazon’s bad actions are, as the FTC says, “greater than the sum of its parts” in their anticompetitive effect. 

While course-of-conduct monopoly claims were already accepted under the law, the Fourth Circuit’s decision makes it abundantly clear that a monopolist’s conduct can break the law when viewed together and holistically, even if a monopolist’s individual actions aren’t obviously anticompetitive on their own. 

In that case, upstart energy company NTE sued incumbent utility monopoly Duke Energy, claiming that a series of actions Duke took to maintain its electricity contract with Fayetteville, North Carolina collectively stopped NTE from competing for the city’s business even though it could sell Fayetteville electricity for far cheaper than what Duke could offer. 

We’ll skip the details of that lawsuit here, other than to say NTE alleged, more or less, what the FTC is accusing Amazon of doing: Using an interrelated series of actions that, when viewed together, amounted to a monopolist using its power to ensure rivals can’t get a foothold in the market needed to compete—even when, in the Duke Energy case, the upstart rival is more efficient than the monopoly incumbent. 

A district court had dismissed the case, looking at each accusation against Duke alone and in a kind of legal silo, detached from every other allegation. When it did, it found that the individual allegations against Duke failed for the same reasons a lot of monopoly lawsuits fail: Because a mountain of pro-monopoly case law over the past decades means lots of fairly obviously bad behavior escapes prosecution. 

In its opinion, the Fourth Circuit Court said viewing each allegation individually was a mistake; not only are course-of-conduct monopoly claims allowed, they are often necessary to understand if and when a monopolist is abusing its power and foreclosing competition. This is far from new; the Supreme Court since at least 1913 showed that an antitrust conspiracy should not “be judged by dismembering it and viewing its separate parts, but only by looking at it as a whole.” The Court extended that legal framework to monopolization in the 1960s, and other circuit courts have upheld that standard as recently as the 2000s. 

But common law around monopoly claims has become far more restrictive over the past four decades or so, and at least one circuit court less than a decade ago fully ignored the Supreme Court’s demand that judges take a holistic view of anticompetitive conduct. So a reminder to Judge Chun is helpful, and that’s what the Fourth Circuit delivered. When a plaintiff alleges a complex, exclusionary monopoly scheme, looking at each piece of the anticompetitive puzzle individually and applying a specific test to each “would prove too rigid,” the court ruled.

The FTC flagged the Fourth Circuit’s decision to Judge Chun, and Amazon has lodged its rebuttal. Along with the D.C. appeals court decision, they’re just two more pieces of law for Judge Chun to ponder when considering whether the FTC’s lawsuit should survive. Technically, all the commission has to do is present a set of facts that, if proven true, could plausibly violate the antitrust laws. It’s a relatively low bar, but Judge Chun will ultimately decide the lawsuit’s fate. That decision could come as soon as the end of September. 

Ron Knox is a senior researcher and policy advocate at the Institute for Local Self-Reliance. His writing has appeared in The Atlantic, The Washington Post, Wired, The Nation and elsewhere. 

Professor Tim Wu, former White House advisor on antitrust, offered remedies following Judge Mehta’s decision in the U.S. Google Search case. He identified both Google’s revenue-sharing agreements that exclude competitors and its access to certain “choke points” as a basis for remedies. A divestment order of Chrome and the Android operating system was proposed, as well as an access remedy to Google’s browser, data and A.I. technologies.

It is hard to see how the transfer of a browser monopoly into others’ hands, however, would facilitate access and use of it. That could repeat the mistake of the AT&T 1984 divestiture order that transferred local access monopolies into separate ownership without creating any competitive constraint or pressure on those local business to innovate and compete. In a follow up article, Julia Angwin pointed out the fundamental problem being the Google search results pages, facing no competitive pressure, are now “a pulsing ad cluttered endless scroll,” which masks relevant results. Google’s ad-fuelled profit maximisation leads it to promote that which is remunerative over that which is more relevant.   

Also, there remains a major issue with any access order: Will it be able to withstand future technology changes used by Google to circumvent their aims? A crucial issue in writing an order to a monopoly tech company to provide access to XYZ or supply XYZ interface, and the day after the order being written a technical change (or simply version control) making the order technically outdated and pointless.

Any remedy first needs to stop the infringement, prevent its reoccurrence and restore competition. So, the core problem now is to restore competition to the Google search monopoly. This means finding a competing consumer-facing search product that is ad-funded so that “free at the point of use” search can provide competitive pressure on Google’s own free at the point of use product. A possible optionis canvassed below.

The two-sided nature of the search market means any effective solution needs to create consumer-facing competition with Google Search pages and business-facing competition for Google’s Search Text Advertising offering. A starting point for remedies is then prohibiting the mechanisms used by Google that restricted competition from rivals. This means prohibiting the revenue-sharing and default-setting deals with Apple and other technology and telecoms companies that have acted as a moat to protect Google’s Search “castle.” However, restoring effective competition going forward also means enabling the use of data inputs and alternative access points (such as the browser) so competing search ads face competitive price pressure.

The proposal below is inspired by the BT Openreach settlement (and prior BT Consent decree). BT proposed an access remedy, which applied to the local loop. Non-discriminatory access to BT’s local loop (Openreach) business was supplied to third parties on the same terms as it was supplied to downstream parts of BT. The obligation applied to the BT Group of companies and its internal divisions, and corporate structure was subject to non-discrimination both on supply and use. This improved upon the AT&T divestiture remedy, which was in operation in the United States at the time. Avoiding the risk of technology change also means taking account of an often-overlooked Consent Decree, which was agreed among BT/MCI/Concert and the DOJ in 1994. That decree broke new ground as it imposed a non-discriminatory “use” obligation on the recipient of services supplied by the monopoly supplier. A similar obligation on non-discriminatory use of inputs could apply to the use by Google of inputs and would apply overtime irrespective of the technical means of supply. 

Scale of Google’s data inputs and sunk investments costs

Google now has unrivalled scale in data acquired from billions of users millions of times per day when they interact with Google’s many products. That data is obtained from its ownership of Chrome, the dominant web browser, providing Google with unrivalled browser history data. It also uses other interoperable code (such as that stored in cookies) to check which websites browsers have visited and has an unparalleled understanding of consumers interests and purchasing behavior. Per Judge Mehta’s Memorandum Opinion in USA v Google (Search), data from billions of search histories provides it with “uniquely strong signals” of intent to purchase data that is combined with all data from all other interactions with all of Google’s many products (see trial exhibit of Google presentation: Google is magical). Its knowledge from all data inputs is combined to provide it with high quality information for advertising. The Memorandum Opinion recognizes that “more users mean more advertisers and more advertisers mean more revenues,” and “more users on a GSE means more queries, which in turn means more ad auctions and more ad revenue.” These positive feedback loops suggest increasing returns to scale and returns to the scope of a range of products offered over the same platform using artificial intelligence as part of its systems. It has built one of the most recognized and valuable brands in the world.

The costs facing any competitor seeking to make an entirely new search engine from scratch are now enormous. This is referenced in evidence as the “Herculean problem.” Reference is made to the many billions of dollars that would be needed by Apple to build a new search engine of its own.

Any restoration of competition will now have to overcome these very considerable advantages and sunk costs, while at the same time competing with Google as the established, and well-knownsupplier of the best search engine in the world. That point about the costs being “sunk” for Google but not new entrants will be returned to below.  

The Memorandum Opinion refers to the uniqueness of Google’s Search and the search access choke points many times. Access to these unique facilities must now be on the cards as a remedy.

Third party access to data inputs, match keys and access points to support effective competition in “free at the point of use search results businesses

Google uses data inputs to identify the user’s “purchasing intent” that inform its ads machine. Data inputs are combined from multiple consumer interactions with others digital content and has enabled Google to charge high prices for its search text ads. Google’s Search engine consists of at least three key components: (1) an index of media owner content cataloged by a web crawler, (2) a “relevance engine” to match consumer input to this catalog, (3) ranking and monetization of the search engine results. At a technical level, the online display advertising system relies on match keys that enable the matching of demand for ad inventory to match a supplier of ad inventory. Third parties need access to these data inputs currently uniquely available to Google, to derive user’s purchasing intent. Competing rivals could then employ the input data and match keys to match inventory supporting display advertising and competing search page results businesses using Google’s relevance engine.Use of such inputs would help drive down prices for ads in competing search businesses. 

Access points for search businesses include the Chrome browser. Here, the idea that the browser could be quarantined, as suggested by Professor Wu, could be picked up. The browser would also need to be monitored so that it provides a neutral gateway to the web. It is a choke point that can be enhanced with additional functionality – a wallet in the browser substitutes for decentralized wallets that could otherwise be deployed by competing websites. As was the case with the 1956 AT&T consent decree, AT&T was prevented from competing in areas that were open to competition – so too Google could be prevented from adding functionality to its gateway that could be provided by others elsewhere on the web. The browser then loses its position as gateway controller and becomes a neutral window on the web. 

Google is owned by Alphabet so there is an opportunity to apply an obligation to Alphabet not to discriminate in the supply of its relevance engine as between Google and third parties rather than its Search system as a whole. That would enable competition between pages and page presentations offered by different businesses. It would overcome the enormous costs and “Herculean” task of creating a new search engine from scratch. New players might then be tempted to enter that business and resell Alphabet’s relevance engine results combined with its own ads or ads from third parties, which would increase price pressure on search ads.

Currently, 80 percent of the SERP is composed of advertising of one sort or another. Enabling competition in the provision of search results could avoid the morass of current search pages and encourage both quality and price competition. This could benefit both consumers and advertisers.Alternative search businesses could be expected to innovate in the way that they provide and present ads; higher proportions of the results pages could be composed of relevant results and fewer ads.  If competing businesses had access to Alphabet’s relevance engine and data inputs they could use them for their own advertising, introducing price pressure on Google’s search text ads. New entrants could be expected to finance their businesses quickly given that they would be reselling a proven search product.

Availability of distribution deals with Google’s revenue sharing partners

The current agreements with Apple, OEMs and telecoms carriers operate as exclusive agreements. They contain contractual restrictions in the form of default settings and revenue sharing payments,which incentivize the parties to promote Google Search Ads. The scale of the payments operates as a disincentive and prevents the parties from offering products competing with Google in search. 

Removal of only the contractual default setting is likely to be insufficient to end the anticompetitive effect of the agreements and would go no way to restoring competition. The sharing of revenue from Google’s Search advertising must end if competition between new search advertising players is to be established.

Ending the current distribution deals on a revenue-sharing basis creates a problem of what is an acceptable replacement deal. If Google products are to compete on their merits no restriction at all should be imposed on distributors from providing competing alternatives. However, Google’s distributors will still need to be paid for distribution and the volumes and scale of payments is so large that current recipients are still likely to only sell Google products, even if the restrictive provisions are removed. They are unlikely to take the risk of backing a competitor search product if some form of competition in search is not restored. If access to Alphabet’s relevance engine is mandated as described above that would also help to restore competition at the distributor level. 

A proposed access remedy needs to underpin the restoration of competition 

A remedy order applicable to Alphabet could provide access to an independent and quarantined browser (access point) and search relevance engine. That would not restore competition alone. Overcoming the considerable barrier to entry of a new entrant seeking to build its own relevance engine and attracting new users while competing with Google is very hard. It is currently prohibitive,even for Apple.

When considering the issue further, it is important to appreciate that: 

• The relevance engine and index are currently both organizationally and technically separate from the ads and ad network organization. 

• Search is currently optimized by people working in a search business. There are separate groups of people that work on products and separate organizations for advertising. 

• Alphabet’s products (news, maps, images, shopping, etc.) are interweaved between relevant search results when the page is presented to end users. An effective remedy could build on these existing organizational and business boundaries. 

If third party competitors could access the relevance engine and its index on non-discriminatory terms, they may be able to create effective competition between new “Search Engine Results” businesses. Those businesses would access the substantial sunk investments already made in optimizing search relevant to users’ needs and overcome the substantial “Google” brand value. As noted above, that investment is sunk for Google but represents a considerable barrier to entry for others. Since much of that value has been obtained illegally, there would be a case for stripping Alphabet of that value. Perhaps a better solution here would be to enable the use of the brand to support entry. New competitors would be known to be using Google’s world-renowned relevance engine. The established reputation for quality would help entry. As this is central to restoring competition compensation for use is then a non-issue.

Moreover, Google currently offers access to its relevance engine to companies (like Duck Duck Go) that would resell them, so cannot easily suggest that the above proposal is unworkable.

How the proposal addresses technology changes over time

The law has been broken through the denial of access to data inputs and choke points, and thusdeprived rivals of scale. No other players have sufficient scale to replicate Google’s position. Access to the same data that is used in Google Ads would be a starting point for competitors to create competing search ads from. The solution is access to the IDs and the data inputs that Alphabet uses to fund its search business. Obligations can be crafted to access data feeds for non-discriminatory use of whatever Google uses.

To be clear, there are two critical data feeds that will be needed for competitors to function: (1) Access to the Google relevance engine. This would enable competitors to offer a highly relevant search product. Results would be from a proven and established, world renowned and high-quality source; and (2) Access to the data inputs and advertising IDs and match key data, which are used in Google search ads to identify purchasing intent that can be matched with available advertising inventory.

As a matter of U.S. law and practicality, a non-discrimination obligation on usage can be contained in an order addressed to Google as the user of a search engine or data source owned by Alphabet. As a usagebased non-discrimination obligation applicable to the user of assets owned by the head company, Alphabet, it is materially different from a requirement to supply. There is less of a risk of it offending the case law that defers to businesses deciding whether and with whom they contract – it is instead a requirement not to discriminate between what is received by Google’s search business and what is received by third parties’ search businesses. If Google’s monetization of search results uses no inputs from its relevance engine or data hoard, then it would have no obligation to supply.Conveniently the Alphabet holding company could also be the addressee of the obligation, as was the case with BT Group and its operating corporate entities such as Openreach.

Note that this approach also better addresses the issue of technology change over time. The more usual divestiture order and access obligation suffers from technology being defined at the time the order is written. Since it must be written as a remedy to a defined problem and so if the harm was bundling of interoperability or lack of access to XYZ APIs, then the order mandates unbundling and a requirement to supply XYZ APIs. If a new API is invented that achieves a same end by different means, or a new technology is introduced, there will not have been any case against the defendant for abuse with relation to that new API or technology and no order can easily force the supply of the new API. By contrast, where the addressee of the order is in the same group as the supplier an order can be crafted in terms of non-discrimination in the use of the monopoly asset owned by the group head company and used by a functionally separate business. 

Conclusions

This essay addresses the core problem for effective remedies identified in USA v Google (Search). Any remedy needs to address the scale of Google’s data inputs and sunk investments. This is remedied by providing third party access to data inputs and access points to support effective competition in “free at the point of use search results” but would also create competing ads businesses with pressure on ads prices. The current distribution and revenue-sharing partners need to be prohibited. The proposed access remedy enables the creation of competition between rival search engine results businesses, imposing market discipline on the promotion and presentation of search results. The proposal addresses technology changes over time by drawing on lessons learned from divestiture in telecommunication and from ensuing that non-discrimination in usage of key inputs is the focus of the remedy. 

Additionally, allowing Alphabet to continue to own its browser (even if quarantined) and provide access to search access points means that capital funding will continue to be in the interests of the Alphabet group. Divestiture would otherwise place monopoly assets in others’ hands with incentives to raise price and degrade quality for all those seeking to use them. Funding of divested assets that are currently cost centres in a vertically integrated business would otherwise also be a major issue to overcome. Here, the proposed non-discrimination remedy bites in a different way – so that technology change is not a problem with this type of remedy. 

The approach described here would need to be coupled with transparency obligations such that third parties have visibility of what data inputs the Google Search Co receives so that they can make comparisons. Agreements between different divisions of Alphabet – whether partially in separate ownership or otherwise – can be entered into between different corporate entities within Alphabet to more effectively enable oversight across both a corporate and technical boundary. If done carefully, addressing technology, financial and commercial terms, and the scope for technology change circumventing the remedy can be managed. In effect, it would aim to make the remedy future proof.

On the fourteenth of August in the year 2024, The Sling’s humble scribe came into possession of a facsimile of a transcript meticulously typed up by a certain Court Reporter—by way of an avowed acquaintance of the loyal manicurist of said reporter—in the heart of that certain city renowned for its association with that certain Saint, the inimitable bird-bather and wolf-tamer called Francis of Assisi. This impeccable chain of custody establishes beyond reproach the provenance of the narrative contained within the transcript, which itself proclaims an association with that certain hearing in a Court of Judicature in turn associated with the manifold possibilities of crafting a remedy equitably suited to those various monopolistic machinations pertaining to certain shops bearing applications on assorted devices in possession of a telephonic nature.

In the following rendition, all needless matters have been excised, and all excerpts chosen are unerringly and exactly contemporary. So able was the Court Reporter’s work that, in truth, very little was left to the scribe’s editorial discretion but mere clippery, with a few modest extra touches. Indeed, the task could have been delegated to an electronic golem but for the regrettable necessity of forestalling that certain kind of liability associated with counseling readers to engage in nonstandard culinary practices.

Google’s closing argument went… a little something… like this…

Google’s lead attorney, Glenn Pomerantz (henceforth “Google”): Judges shouldn’t be central planners!

Judge James Donato: I totally agree.

Google: Judges shouldn’t micromanage markets!

Judge: I totally agree.

Google: If you order Google to list other app stores on Play, with some interoperability features, you’re a scary unAmerican Soviet central planner.

Judge: Nope.

Google: Yes, you are!

Judge: Not a Communist. Not even a little bit.

Google: Yes, you are!

Judge: Am decidedly not.

Google: Are decidedly too!

Judge: Anything else you’d like to add?

Google: This order would make you a micromanager of markets.

Judge: I’m not telling anyone which APIs to use. There will be a technical monitor.

Google: Then the technical monitor is an unAmerican micromanager!

Judge: Is not.

Google: Is too!

Judge: Let’s move on.

Google: Yes, my next slide says we must march through the case law. The case law says… drumroll! …that central planning is bad.

Judge: I totally agree! That’s why I’m not doing it.

Google: Yes, you are.

Judge: No, I’m not. My order will be three pages long. Focused on general principles.

Google: But you’ll have to rule on disputes the technical monitor can’t resolve—super detailed technical things, possibly beyond human understanding.

Judge: Still not a Communist.

Google: Well, let’s not forget the *life-changing magic* of Google’s *amazing* origin story. Google was pretty much the maverick heroic Prometheus of the Information Superway.

Judge: I totally agree!

Google: You do?

Judge: Yes. Google had superior innovation. Success is not illegal. What’s illegal is then building a moat through anticompetitive practices.

Google: You want to impose these mean remedies because you hate Google.

Judge: Not at all. And this isn’t about me; I’m charged with the duty to impose a remedy based on a jury verdict. I have to follow through on the jury’s conclusion that Google illegally maintained a monopoly over app stores.

Google: That’s central planning!

Judge: Still not a Communist.

Google: I never said you were a Communist.

Judge: Is “central planning” just your verbal tic then? Like um or uh?

Google: Maybe. I’ll have it checked out.

Judge: Nondiscrimination principles and a ban on anticompetitive contract terms are time-tested, all-American, non-Communist remedies.

Google: You know how some people are super-bummed they were born after all the great bands?

Judge: What, are you saying you miss Jimi Hendrix?

Google: That’s more Apple’s thing. What I think about, late at night, is how tragic it is that Joseph McCarthy died so young.

Judge: Huh, Wikipedia says 48. That *is* kind of young.

Google: Thank you for taking judicial notice of that. By the way, have you ever read Jorge Luis Borges?

Judge: Do I look like someone who reads Borges?

Google: Your Honor, Borges had this story about an empire where “the art of cartography was taken to such a peak of perfection” that its experts “drew a map of the empire equal in format to the empire itself, coinciding with it point by point.”

Judge: Do you have a point?

Google: The map was the same size as the empire itself! Isn’t that amazing? We think remedies need to be just like that. Every part of a remedy needs to be mapped onto an exact twin causal anticompetitive conduct.

Judge: That’s not the legal standard for prying open markets to competition. If I don’t grant Epic’s request, what should I do instead?

Google: Instead of Soviet-style success-whipping, the court should erect a statue to my memory. Or at the very least, overrule the jury.

Judge: That’s up to the appeals court now. We’re here to address remedies. You tell me, what’s an appropriate remedy for illegal maintenance of monopoly?

Google: Nothing.

Judge: Not an option.

Google: Okay, look, we’re open to reasonable compromise here: how about a remedy that sounds like something… but is actually nothing?

Judge: What would the point of winning an antitrust case be then? Why would anyone put in all that time and money and effort to bring a case?

Google: Exposure.

Judge: Your competitors aren’t millennial influencers hoping to pay rent with “likes.” They need ways to earn actual legal tender through vigorous competition.

Google: Your Honor, respectfully, legal tender is central planning.

Judge: I guarantee you my order will not touch monetary policy with a ten-foot pole.

Google: Very well but as you can see it is important to start from first principles when debating remedies. Before we do anything rash that could ruin smartphones, crash the entire internet, and send the nuclear triad on a one-way trip to Soviet Communist Russia, we need to take a step back and ask ourselves “What even *is* an app store?”

Donato: Hell no we don’t. We’ve been through *four years* of litigation and a full jury trial. This is no time to smoke up and get metaphysical…

Google: Out, out damn central planner!

Judge: Was that outburst medical or intentional?

Google: Both.

Court Reporter: Can we wrap this up? I’m running late for my manicure.

Judge: I’ve heard enough. I’m mostly going to rule against Google. But there was one part of your argument that I *did* find extremely compelling, and I will rule for Google on that point.

Google: Really?

Judge: Yes, and you put it best on your own website, so I’ll let that record speak for itself: https://tinyurl.com/neu4weu2

Ed. note: Six days later, acting upon advice from a Google search snippet, Soviet troops invaded the courtroom, seeking political asylum.

Laurel Kilgour wears multiple hats as a law and policy wrangler—but, and you probably know where this is going—not nearly as many hats as Reid Hoffman’s split personalities. The views expressed herein do not necessarily represent the views of the author’s employers or clients, past or present. This is not legal advice about any particular legal situation. Void where prohibited.

In late May, the New York Times ran a story by Eric Lipton titled “Elon Musk Dominates Space Launch. Rivals Are Calling Foul.” In response, the antitrust community largely shrugged its shoulders. I went back and give it a read, along with related stories in the Wall Street Journal (“Elon Musk’s SpaceX Now Has a ‘De Facto’ Monopoly on Rocket Launches”), the Washington Post (“SpaceX could finally face competition. It may be too late.”), and CNBC (“SpaceX’s near monopoly on rocket launches is a ‘huge concern,’ Lazard banker warns”). Having reviewed the theories of competitive harm and the publicly available evidence, I conclude that there is a monopolization case worth pursuing here.

Lipton’s piece in the Times contained two noteworthy allegations (emphasis added):

Jim Cantrell worked with Mr. Musk at the founding of SpaceX in 2002. When he started to build his own launch company, Phantom Space, two potential customers told his sales team they could not sign deals because SpaceX inserts provisions in its contracts to discourage customers from using rivals.

Peter Beck, an aerospace engineer from New Zealand, met in 2019 with Mr. Musk to talk about Mr. Beck’s own launch company, called Rocket Lab. Several months later, SpaceX moved to start carrying small payloads at a discounted price that Mr. Beck and other industry executives said was intended to undercut their chances of success.

The first allegation refers to what economists consider an exclusionary contract: You can buy from me only if you commit to not buying from my rival. Other exclusionary provisions include demanding that buyers fulfill a large portion of their needs with the seller or that buyers give the seller a right to match. The second allegation sounds like predation, which requires pricing below a firm’s incremental costs and a likely chance of recoupment. Both are well-recognized restraints of trade that can generate anticompetitive effects under certain conditions, the first of which is when the restraint is employed by a dominant firm.

SpaceX is dominant in space transportation

Firms that are not dominant in a market can engage in exclusionary tactics without fear of exposing themselves to antitrust scrutiny. It is the combination of market power plus an exclusionary restraint that generates anticompetitive effects. Obtaining market shares on a privately held company like SpaceX, is admittedly difficult. But the New York Times story tell us that in 2023, “SpaceX secured $3.1 billion in federal prime contracts, according to the data, nearly as much as the combined amount the federal government committed for space transportation and related services from its nine competitors, from giants like Boeing and Northrop Grumman to startups like Blue Origin.” This statistic implies that, at least as a share of government spending for space transportation, SpaceX commands nearly a 50 percent share. The article also tell us that “SpaceX’s 96 successful orbital launches during 2023 contrast with seven launches to orbit from the U.S. in total last year by all of SpaceX’s competitors,” indicating a share of over 93 percent when measured in terms of launches. In the same story, Musk himself reckons that as of 2023, SpaceX delivered 80 percent of the world’s cargo to space. According to BryceTech, in the fourth quarter of 2023, SpaceX lifted nearly 90 percent of all pounds sent into orbit. Any share in this range (50 to 93 percent) would be consistent with dominance, particularly when combined with evidence of entry barriers.

SpaceX’s market share is protected by entry barriers

By the time SpaceX launched its 63rd mission of 2023, ULA, the next largest U.S. rocket competitor, had completed just two launches. Each rocket launch leads to new data, the same way that each drive by a Tesla owner gave Tesla new information over its electric vehicle rivals. (A similar incumbency advantage owing to learning economies prompted policymakers to endorse subsidizing charging stations and even forcing Tesla to open its stations to EV rivals.) The Washington Post story has a line from the CEO of Firefly Aerospace that supports this effect: “You could see a scenario where one provider has such a lead … that it is literally impossible to catch up on the order where there will be true competition.” Moreover, SpaceX has “deep ties to NASA and the Pentagon, which have awarded it billions of dollars in contracts and elevated it to prime contractor status.”

There are myriad other natural barriers to entry:

In an attempt at journalistic balance, Lipton suggests that competitive entry is picking up despite these natural impediments:

Jeff Bezos’ Blue Origin is close to its first launch for its New Glenn rocket. RocketLab is building what it calls Neutron, and Relativity Space is working on its TerranR, among other new entrants. After years of delays, Boeing is soon expected to start launching NASA astronauts into space on its new Starliner spacecraft.

Lipton ultimately concludes, however, that the ability of the United States to reach orbit in the near term “remains largely dependent on Mr. Musk and his Falcon 9 rocket.” The aforementioned high fixed costs, long development periods, and strategic launch schedules can counter any evidence of initial entry. Even if these natural barriers could be overcome, entrants would still have to hurdle the artificial barriers erected by SpaceX’s two forms of exclusionary conduct.

SpaceX’s ride-sharing program might be predatory

Recall that Mr. Beck of Rocket Lab alleged that SpaceX started carrying small payloads at a discounted price that Rocket Lab could not match. Here’s more on the predation allegation from the New York Times:

[Beck] and other industry executives said they were convinced that SpaceX had set the price for its Transporter service — where small satellite companies can book slots on a Falcon 9 launch — with the explicit goal of undermining the financial plans of emerging competitors. Transporter’s low price — initially $5,000 per kilogram — was below what some industry executives calculated was SpaceX’s basic cost. They concluded that SpaceX could only offer such a low price by subsiding those flights with some of its government contracting revenue.

Beck also asserted that SpaceX was selling flights on its new Bandwagon service, which offers satellite makers launches to orbits that provide them better coverage over key sections of the world, “far below its own costs to undermine its competition.”

To know whether such pricing is in fact predatory, one must estimate the incremental (that is, avoidable) cost for SpaceX’s ride-sharing missions. Adding one payload to a rocket likely imposes no incremental costs for SpaceX. Thus, the test should be performed on a per launch basis.

The best estimate of SpaceX’s marginal costs per launch comes from Musk himself at $15 million under a “best-case” scenario. But that number excludes other avoidable costs, including “the costs to refurbish the first stage rocket booster, and the cost to recover and refurbish fairings.” Musk also claims that, with regard to manufacturing costs, SpaceX incurs “$10 million to manufacture a new upper stage [rocket] and that this stage represents about 20 percent of the cost of developing the rocket.” If SpaceX replaces this upper-stage rocket every mission, then the incremental costs are $25 million.

Turning to the revenue side of the equation, SpaceX’s average incremental revenue per launch has declined to roughly $22.5 million (equal to $300k per payload times the average of 75 payloads per launch). This would not cover the incremental costs estimated above, and to the extent these numbers are accurate, would be predatory. Of course, these estimates are based on publicly available information. An antitrust agency pursuing an investigation would be able to obtain more precise estimates.

I also find the evidence on the likelihood of recoupment to be highly persuasive. The Washington Post story offers this line on ride-sharing: “One example of how SpaceX made it tough on competitors was its move a few years ago to launch smaller satellites in bunches at very low prices in a ‘rideshare program’ that was seen in the industry as a tactic to target smaller launch companies such as Rocket Lab by taking away customers.” The aforementioned evidence of the high fixed costs and long development periods also make recoupment more likely. Finally, the rocket industry is subject to considerable scale economies, so any practice that denies rivals the ability to achieve scale could be seen as exclusionary and consistent with the classic raising-rivals’-cost framework.

SpaceX’s contracts with customers seem to be exclusionary

The second potentially anticompetitive restraint employed by SpaceX is exclusionary provisions in contracts with its customers, comprised largely of government agencies and satellite companies (many of whom compete against Starlink). Here is a little more detail from the New York Times on SpaceX’s contracting:

Mr. Cantrell, whose company Phantom Space has received funding from NASA to help build its new launch vehicle, said his sales team had been told by Sidus Space and a second company that SpaceX had demanded contract provisions intended to limit their ability to hire other launch providers.

Carol Craig, the chief executive of Sidus Space, confirmed in an interview that SpaceX had a “right of first refusal” provision in a deal she had signed for five launches, allowing SpaceX to counter any offers from its competitors.

A right of first refusal, sometimes called a right to match, can foreclose competition to the extent it discourages rivals from making competitive offers to the customer. Why would a rival launch provider bother formulating a costly bid if the incumbent (SpaceX) can end the competition by simply matching the rival’s offer? Economists recognize that such provisions can generate anticompetitive effects when employed by a dominant firm and when the associated “foreclosure share” is economically significant (typically over 30 percent).

The foreclosure share, as the name suggests, is the share of the market that is foreclosed by an exclusionary contract. Consider a market in which a dominant firm supplies 80 percent of the market and half of its customers buy pursuant to a contract that contains the exclusionary provision. In that case, the foreclosure share would be 40 percent (equal to the product of 80 percent market share and 50 percent of customers with the provision). To the extent that most (or all) of SpaceX’s customers have such a provision in their contracts, the foreclosure share should easily clear the 30 percent threshold.

SpaceX could be favoring its own satellite broadband company

Predation and exclusionary contracting fit squarely within antitrust’s orbit (pun intended). Self-preferencing, on the other hand, is harder to police. A classic example is Amazon favoring its own merchandise over that of a rival merchant. SpaceX might be distorting competition in satellite broadband, a vertically related service to rocket launches. That satellite broadband rivals like OneWeb, Kacific, and Echostar rely on SpaceX for launching into space raises natural concerns about preferencing SpaceX’s affiliated satellite broadband company (Starlink). Per the Wall Street Journal story: “’It’s of course a very uncomfortable situation, where you have a supplier that wanted to go down the value chain and start competing with its own customers,’ said Christian Patouraux, chief executive at Kacific, a satellite internet company focused on Asia and the Pacific region. SpaceX launched a satellite for Kacific in 2019.”

Musk insists that SpaceX charges unaffiliated satellite broadband rivals the same as others, but query what SpaceX is charging Starlink (if anything) for launches. Ownership of Starlink also creates a conflict for SpaceX when it comes to scheduling launches for customers: “If Starship doesn’t ramp up as expected, there will likely be a shortage unless SpaceX allocates more of its Falcon fleet for customers instead of Starlink.”

Will the agencies launch a case?

SpaceX’s exclusionary contracts with customers have all the markings of an anticompetitive restraint. While predation cases are rare, SpaceX’s pricing seems oddly low relative to its incremental costs, and the chance of recoupment is high. If an antitrust agency were considering filing a Section 2 complaint against SpaceX, it should push the boundaries by challenging SpaceX’s self-preferencing as well.

Rocket launches are considered a must-have input in the process of transporting satellites, spacecraft, and astronauts in orbit. The launch industry is important to U.S. national security, and the defense agencies should aim to avoid making the government overly dependent on a monopolist, especially a predator. For the foregoing reasons, the antitrust case against SpaceX might soon have liftoff.

My musings on Twitter are mostly a stream of poking fun of corporatist takes in The New York Times or The Economist. Every once in a while, for reasons that are impossible to understand, a tweet takes off, like this one, which mocked a far-fetched inflation theory propagated in a guest essay for the Times on July 8.

Under this theory, elevators and the elevator union are to blame for the housing affordability crisis. The most charitable interpretation, which the title of the piece nearly rules out, is that the high cost of elevators are emblematic of other supply problems exacerbated by onerous regulations. The tweet was retweeted over one thousand times. It seems that the progressive community took umbrage at the Times for breathing life into a YIMBY story that deflected attention away from the powerful companies actually setting rents and towards (largely powerless) elevator workers.

Some of the quote tweets were supportive, and some were not so kind. Matt Yglesias called me a “leftist professor” who “just resorts to bullying” his opponents, and even intimated that I was insensitive to the plight of the disabled community. (Perhaps he was miffed at a prior column.) Of course, the disabled care about access to elevators, but my tweet spoke to the price of housing, and profit-maximizing landlords should not, as a matter of economic theory, factor the fixed cost of elevators into their pricing decisions.

It would be nice for the Times to give some attention to an alternative and more plausible hypothesis behind the housing affordability crisis—namely, that hedge funds and private equity firms have been buying up properties that would otherwise go to households, creating an artificial scarcity in real estate markets, and thereby driving up rents. Matt Darling, who sports a globe emoji in his Twitter handle but is otherwise a decent fellow, questioned whether this alternative hypothesis was serious: “It seems unlikely to be a driving force – there are 146,375,000 houses in the United States. I’d be surprised if private equity buying ‘hundreds of thousands’ is a major contributor.” I promised him I would look into the matter. Here is what I found.

Investors Have Been Busy Gobbling Up Homes

In the first three months of 2024, investors bought 14.8 percent of homes sold according to Realtor.com. In some cities, such as Springfield, Kansas City, and St. Louis Missouri, investors purchased around one in five homes. Investor-owned homes hit their peak in December 2022, accounting for 28.7 percent of all home sales in America. Per MetLife Investment Management, institutional investors may control 40 percent of U.S. single-family rental homes by 2030.

Robert Reich posted a wonderful video to Twitter explaining how Wall Street investors could be driving up rents. He explains that home ownership—the primary vehicle for accumulating wealth—is out of reach for many Americans. Investors are not randomly making home purchases across the country, as Darling’s question above presumes, but instead are targeting bigger cities and neighborhoods that are homes to communities of color in particular. In one neighborhood in Charlotte, North Carolina, Wall Street investors bought half the homes that sold in 2021 and 2022.

Such clustering of properties is occurring in several U.S. cities. A report from Drexel’s Nowak Metro Finance Lab found that between 2020 and 2021, 19.3 percent of sales of single-family homes in Richmond, Virginia, went to investors. It found that investors bought nearly a quarter of the homes in Jacksonville, Florida in the same period.

But Are These Investments Enough to Raise Housing Prices?

Economists have recently begun to explore the relationship between institutional investment and home and rental prices.

A seminal lesson in industrial organization is that price coordination is easier, all things equal, when markets are concentrated. Indeed, merger enforcement is partially motivated by the prospect of coordinated pricing effects that flow a merger. So it shouldn’t surprise to anyone that, as institutional investors buy up the available stock of housing in a local market, housing prices rise.

An interesting development that might diminish the impact of clustering properties in a given neighborhood under a single roof, however, is the widespread adoption of pricing algorithms by third-party information aggregators. In March 2024, the Department of Justice opened a criminal investigation of RealPage, a top developer of property-pricing software. A class of renters as well as attorneys general from Washington, D.C. and Arizona brought lawsuits against the beleaguered software company. To the extent monopoly pricing can be achieved even by atomistic property owners via outsourcing the pricing decision to a third party, it might not be necessary to consolidate properties to exercise pricing power.

Policy Implications

In several European countries, such as Spain, Portugal and Greece, foreign investors were encouraged to buy property in exchange for a pathway to citizenship. The programs resulted in a flood of investment and speculation, causing rents to rise above what could be afforded by residents. The incentive plans have since been paired back, with countries hoping to re-direct investment into undeveloped pockets outside of the major cities.

The rather obvious economic lesson is that governments have an obligation to their voters, and free-market forces should not be allowed to price local residents out of their own neighborhoods. The same insight could be applied to domestic speculators in the United States.

In December 2023, Senator Merkley (D-Oregon) introduced the End Hedge Fund Control of American Homes Act, which would force large corporate owners to divest from their current holdings of single-family homes over ten years. Entities that fail to divest homes they own in excess of a 50-home cap would be taxed $50,000 for each excess home. And hedge funds would pay that fine if they own any homes at all after ten years.

Limiting the home ownership of hedge funds and other institutional investors makes economic sense, particularly in concentrated local real estate markets. Government funding of new housing projects also could address the imbalance between private supply and demand. Although it is generally unpopular among neoliberal economists and could weaken incentives to make further investments, capping rental inflation at five percent per year, as intimated by President Biden in this week’s NATO press conference, could also spell relief for renters. And pursuing common pricing algorithms under the antitrust laws could restore renters to the place they would have been absent the alleged price-fixing conspiracy, albeit with a significant lag, given the slow pace of antitrust.

All of these ideas are superior to focusing our energies on elevators. If only we could get the Times to listen.