Economic Analysis and Competition Policy Research

Home   •   About   •   Analytics   •   Videos

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

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

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

Not exactly.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

And there’s our answer. 

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

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

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

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

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

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

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

UHG: The Operator

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

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

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

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

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

UHG: The Participant

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

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

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

That’s a hairy list.

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

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

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

UHG: The Pipes

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

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

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

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

Where Do We Go From Here?

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

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

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

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

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

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.

The Justice Department’s pending antitrust case against Google, in which the search giant is accused of illegally monopolizing the market for online search and related advertising, revealed the nature and extent of a revenue sharing agreement (“RSA”) between Google and Apple. Pursuant to the RSA, Apple gets 36 percent of advertising revenue from Google searches by Apple users—a figure that reached $20 billion in 2022. The RSA has not been investigated in the EU. This essay briefly recaps the EU law on remedies and explains why choice screens, the EU’s preferred approach, are the wrong remedy focused on the wrong problem. Restoring effective competition in search and related advertising requires (1) the dissolution of the RSA, (2) the fostering of suppressed publishers and independent advertisers, and (3) the use of an access remedy for competing search-engine-results providers.

EU Law on Remedies

EU law requires remedies to “bring infringements and their effects to an end.” In Commercial Solvents, the Commission power was held to “include an order to do certain acts or provide certain advantages which have been wrongfully withheld.”

The Commission team that dealt with the Microsoft case noted that a risk with righting a prohibition of the infringement was that “[i]n many cases, especially in network industries, the infringer could continue to reap the benefits of a past violation to the detriment of consumers. This is what remedies are intended to avoid.” An effective remedy puts the competitive position back as it was before the harm occurred, which requires three elements. First, the abusive conduct must be prohibited. Second, the harmful consequences must be eliminated. For example, in Lithuanian Railways, the railway tracks that had been taken away were required to be restored, restoring the pre-conduct competitive position. Third, the remedy must prevent repetition of the same conduct or conduct having an “equivalent effect.” The two main remedies are divestiture and prohibition orders.

The RSA Is Both a Horizontal and a Vertical Arrangement

In the 2017 Google Search (Shopping) case, Google was found to have abused its dominant position in search. In the DOJ’s pending search case, Google is also accused of monopolizing the market for search. In addition to revealing the contours of the RSA, the case revealed a broader coordination between Google and Apple. For example, discovery revealed there are monthly CEO-to-CEO meetings where the “vision is that we work as if we are one company.” Thus, the RSA serves as much more than a “default” setting—it is effectively an agreement not to compete.

Under the RSA, Apple gets a substantial cut of the revenue from searches by Apple users. Apple is paid to promote Google Search, with the payment funded by income generated from the sale of ads to Apple’s wealthy user base. That user base has higher disposable income than Android users, which makes it highly attractive to those advertising and selling products. Ads to Apple users are thought to generate 50 percent of ad spend but account for only 20 percent of all mobile users.

Compared to Apple’s other revenue sources, the scale of the payments made to Apple under the RSA is significant. It generates $20 billion in almost pure profit for Apple, which accounts for 15 to 20 percent of Apple’s net income. A payment this large and under this circumstance creates several incentives for Apple to cement Google’s dominance in search:

The RSA also gives Google an incentive to support Apple’s dominance in top end or “performance smartphones,” and to limit Android smartphone features, functions and prices in competition with Apple. In its Android Decision, the EU Commission found significant price differences between Google Android and iOS devices, while Google Search is the single largest source of traffic from iPhone users for over a decade.

Indeed, the Department of Justice pleadings in USA v. Apple show how Apple has sought to monopolize the market for performance smartphones via legal restrictions on app stores and by limiting technical interoperability between Apple’s system and others. The complaint lists Apple’s restrictions on messaging apps, smartwatches, and payments systems. However, it overlooks the restrictions on app stores from using Apple users’ data and how it sets the baseline for interoperating with the Open Web. 

It is often thought that Apple is a devices business. On the contrary, the size of its RSA with Google means Apple’s business, in part, depends on income from advertising by Google using Apple’s user data. In reality, Apple is a data-harvesting business, and it has delegated the execution to Google’s ads system. Meanwhile, its own ads business is projected to rise to $13.7 billion by 2027. As such, the RSA deserves very close scrutiny in USA v. Apple, as it is an agreement between two companies operating in the same industry.

The Failures of Choice Screens

The EU Google (Search) abuse consisted in Google’s “positioning and display” of its own products over those of rivals on the results pages. Google’s underlying system is one that is optimized for promoting results by relevance to user query using a system based on Page Rank. It follows that promoting owned products over more relevant rivals requires work and effort. The Google Search Decision describes this abuse as being carried out by applying a relevance algorithm to determine ranking on the search engine results pages (“SERPs”). However, the algorithm did not apply to Google’s own products. As the figure below shows, Google’s SERP has over time filled up with own products and ads.

To remedy the abuse, the Decision compelled Google to adopt a “Choice Screen.” Yet this isn’t an obvious remedy to the impact on competitors that have been suppressed, out of sight and mind, for many years. The choice screen has a history in EU Commission decisions.

In 2009, the EU Commission identified the abuse Microsoft’s tying of its web browser to its Windows software. Other browsers were not shown to end users as alternatives. The basic lack of visibility of alternatives was the problem facing the end user and a choice screen was superficially attractive as a remedy, but it was not tested for efficacy. As Megan Grey observed in Tech Policy Press, “First, the Microsoft choice screen probably was irrelevant, given that no one noticed it was defunct for 14 months due to a software bug (Feb. 2011 through July 2012).” The Microsoft case is thus a very questionable precedent.  

In its Google Android case, the European Commission found Google acted anticompetitively by tying Google Search and Google Chrome to other services and devices and required a choice screen presenting different options for browsers. It too has been shown to be ineffective. A CMA Report (2020) also identified failures in design choices and recognized that display and brand recognition are key factors to test for choice screen effectiveness.

Giving consumers a choice ought to be one of the most effective ways to remedy a reduction of choice. But a choice screen doesn’t provide choice of presentation and display of products in SERPs.  Presentations are dependent on user interactions with pages. And Google’s knowledge of your search history, as well as your interactions with its products and pages, means it presents its pages in an attractive format. Google eventually changed the Choice Screen to reflect users top five choices by Member State. However, none of these factors related to the suppression of brands or competition, nor did it rectify the presentation and display’s effects on loss of variety and diversity in supply. Meanwhile, Google’s brand was enhanced from billions of user’s interactions with its products.

Moreover, choice screens have not prevented rival publishers, providers and content creators from being excluded from users’ view by a combination of Apple’s and Google’s actions. This has gone on for decades. Alternative channels for advertising by rival publishers are being squeezed out.

A Better Way Forward

As explained above, Apple helps Google target Apple users with ads and products in return for 36 percent of the ad revenue generated. Prohibiting that RSA would remove the parties’ incentives to reinforce each other’s market positions. Absent its share of Google search ads revenue, Apple may find reasons to build its own search engine or enhance its browser by investing in it in a way that would enable people to shop using the Open Web’s ad funded rivals. Apple may even advertise in competition with Google.  

Next, courts should impose (and monitor) a mandatory access regime. Applied here, Google could be required to operate within its monopoly lane and run its relevance engine under public interest duties in “quarantine” on non-discriminatory terms. This proposal has been advanced by former White House advisor Tim Wu:

I guess the phrase I might use is quarantine, is you want to quarantine businesses, I guess, from others. And it’s less of a traditional antitrust kind of remedy, although it, obviously, in the ‘56 consent decree, which was out of an antitrust suit against AT&T, it can be a remedy. And the basic idea of it is, it’s explicitly distributional in its ideas. It wants more players in the ecosystem, in the economy. It’s almost like an ecosystem promoting a device, which is you say, okay, you know, you are the unquestioned master of this particular area of commerce. Maybe we’re talking about Amazon and it’s online shopping and other forms of e-commerce, or Google and search.

If the remedy to search abuse were to provide access to the underlying relevance engine, rivals could present and display products in any order they liked. New SERP businesses could then show relevant results at the top of pages and help consumers find useful information.

Businesses, such as Apple, could get access to Google’s relevance engine and simply provide the most relevant results, unpolluted by Google products. They could alternatively promote their own products and advertise other people’s products differently. End-users would be able to make informed choices based on different SERPs.

In many cases, the restoration of competition in advertising requires increased familiarity with the suppressed brand. Where competing publishers’ brands have been excluded, they must be promoted. Their lack of visibility can be rectified by boosting those harmed into rankings for equivalent periods of time to the duration of their suppression. This is like the remedies used for other forms of publication tort. In successful defamation claims, the offending publisher must publish the full judgment with the same presentation as the offending article and displayed as prominently as the offending article. But the harm here is not to individuals; instead, the harm redounds to alternative publishers and online advertising systems carrying competing ads. 

In sum, the proper remedy is one that rectifies the brand damage from suppression and lack of visibility. Remedies need to address this issue and enable publishers to compete with Google as advertising outlets. Identifying a remedy that rectifies the suppression of relevance leads to the conclusion that competition between search-results-page businesses is needed. Competition can only be remedied if access is provided to the Google relevance engine. This is the only way to allow sufficient competitive pressure to reduce ad prices and provide consumer benefits going forward.

The authors are Chair Antitrust practice, Associate, and Paralegal, respectively, of Preiskel & Co LLP. They represent the Movement for an Open Web versus Google and Apple in EU/US and UK cases currently being brought by their respective authorities. They also represent Connexity in its claim against Google for damages and abuse of dominance in Search (Shopping).

Neoliberal columnist Matt Yglesias recently weighed into antitrust policy in Bloomberg, claiming falsely that the “hipsters” in charge of Biden’s antitrust agencies were abandoning consumers and the war on high prices. Yglesias thinks this deviation from consumer welfare makes for bad policy during our inflationary moment. I have a thread that explains all the things he got wrong. The purpose of this post, however, is to clarify how antitrust enforcement has changed under the current regime, and what it means to abandon antitrust’s consumer welfare standard as opposed to abandoning consumers.

Ever since the courts embraced Robert Bork’s demonstrably false revisionist history of antitrust’s goals, consumer welfare became antitrust’s lodestar, which meant that consumers sat atop antitrust’s hierarchy. Cases were pursued by agencies if and only if exclusionary conduct could be directly connected to higher prices or reduced output. This limitation severely neutered antitrust enforcement by design—with a two minor exceptions described below, there was not a single (standalone) monopolization case brought by the DOJ after U.S. v. Microsoft for over two decades—presumably because most harm in the modern (digital) age did not manifest in the form of higher prices for consumers. Under the Biden administration, the agencies are pursuing monopoly cases against Amazon, Apple, and Google, among others.

(For the antitrust nerds, the DOJ’s 2011 case against United Regional Health Care System included a Section 2 claim, but it was basically included to bolster a Section 1 claim. It can hardly be counted as a Section 2 case. And the DOJ’s 2015 case to block United’s alleged monopolization of takeoff and landing slots at Newark included a Section 2 claim. But these were just blips. Also the FTC pursued a Section 2 case prior to the Biden administration against Qualcomm in 2017.)

Even worse, if there was ever a perceived conflict between the welfare of consumers and the welfare of workers or merchants (or input providers generally), antitrust enforcers lost in court. The NCAA cases made clear that injury to college players derived from extracting wealth disproportionately created by predominantly Black athletes would be tolerated so long as viewers with a taste for amateurism were better off. And American Express stood for the principle that harms to merchants from anti-steering rules would be tolerated so long as generally wealthy Amex cardholders enjoyed more luxurious perks. (Patrons of Amex’s Centurian lounge can get free massages and Michelle Bernstein cuisine in the Miami Airport!) The consumer welfare standard was effectively a pro-monopoly policy, in the sense that it tolerated massive concentrations of economic power throughout the economy and firms deploying a surfeit of unfair and predatory tactics to extend and entrench their power.

Labor Theories of Harm in Merger Enforcement

In the consumer welfare era, which is now hopefully in our rear-view mirror, labor harms were not even on the agencies’ radars, particularly when it came to merger review. By freeing the agencies of having to construct price-based theories of harm to consumers, the so-called hipsters have unleashed a new wave of challenges, reinvigorating merger enforcement, particularly in labor markets. In October 2022, the DOJ stopped a merger of two book publishers on the theory that the combination would harm authors, an input provider in book production process. This was the first time in history that a merger was blocked solely on the basis of a harm to input providers.

And the DOJ’s complaint in the Live Nation/Ticketmaster merger spells out harms to, among other economic agents, musicians and comedians that flow from Live Nation’s alleged tying of its promotion services to access to its large amphitheaters. (Yglesias incorrectly asserted that DOJ’s complaint against Live Nation “is an example of the consumer-welfare approach to antitrust.” Oops.) The ostensible purpose of the tie-in is to extract a supra-competitive take rate from artists.

Not to be outdone, in two recent complaints, the FTC has identified harms to workers as a critical part of their case in opposition to a merger. In its February 2024 complaint, the FTC asserts, among other theories of harm, that for thousands of grocery store workers, Kroger’s proposed acquisition of Albertsons would immediately weaken competition for workers, putting downward pressure on wages. That the two supermarkets sometimes poach each other’s workers suggests that workers themselves could leverage one employer against the other. Yet the complaint focuses on the leverage of the unions when negotiating over collective bargaining agreements. If the two supermarkets were to combine, the complaint asserts, the union would lose leverage in its dealings with the merger parties over wages, benefits, and working conditions. Unions representing grocery workers would also lose leverage over threatened boycotts or strikes.

In its April 2024 complaint to block the combination of Tapestry and Capri, the FTC asserts, among other theories of harm, that the merger threatens to reduce wages and degrade working conditions for hourly workers in the affordable handbag industry. The complaint describes one episode in July 2021 in which Capri responded to a pubic commitment by Tapestry to pay workers at least $15 per hour with a $15 per hour commitment of its own. This labor-based theory of harm exists independently of the FTC’s consumer-based theory of harm.

Labor Theories of Harm Outside of Merger Enforcement

The agencies have also pursued no-poach agreements to protect workers. A no-poach agreement, as the name suggests, prevents one employer from “poaching” (or hiring away) a worker from its competitors. The agreements are not wage-fixing agreements per se, but instead are designed to limit labor mobility, which economists recognize is key to wage growth. In October 2022, a health care staffing company entered into a plea agreement with the DOJ, marking the Antitrust Division’s first successful prosecution of criminal charges in a labor-side antitrust case. The DOJ has tried three criminal no-poach cases to a jury, and in all three the defendants were acquitted. For example, in April 2023, a court ordered the acquittal of all defendants in a no-poach case involving the employment of aerospace engineers. (Disclosure: I am the plaintiffs’ expert in a related case brought by a class of aerospace engineers.) Despite these losses, AAG Jonathan Kanter is still committed as ever to addressing harms to labor with the antitrust laws.

And the FTC has promulgated a rule to bar non-compete agreements. Whereas a no-poach agreement governs the conduct among rival employers, a non-compete is an agreement between an employer and its workers. Like a no-poach, the non-compete is designed to limit labor mobility and thereby suppress wages. Having worked on a non-compete case for a class of MMA fighters against the UFC that dragged on for a decade, I can say with confidence (and experience) that a per se prohibition of non-competes is infinitely more efficient than subjecting these agreements to antitrust’s rule-of-reason standard. Again, this deviation from consumer welfare has proven controversial among neoliberals; even the Washington Post editorial board penned as essay on why high-wage workers earning over $100,000 per year should be exposed to such encumbrances.

Consumers Still Have a Cop on the Beat

If you take Yglesias’s depiction literally, it means that the antitrust agencies under Biden have abandoned the protection of consumers. But nothing can be further from the truth. Antitrust enforcers can walk and chew gum at the same time. The list of enforcement actions on behalf of consumers is too long to reproduce here, but to summarize a few recent highlights:

Presumably Yglesias and his neoliberal clan have access to Google Search, Lina Khan’s Twitter handle, or the Antitrust Division’s press releases. It only takes a few keystrokes to learn of countless enforcement actions brought on behalf of consumers. Although this view is a bit jaded, one interpretation is that this crowd, epitomized by the Wall Street Journal editorial board and its 99 hit pieces against Chair Khan, uses the phrase “consumer welfare” as code for lax enforcement of antitrust law. In other words, what really upsets neoliberals (and libertarians) is not the abandonment of consumers, but instead any enforcement of antitrust law, particularly when it (1) deprives monopolists from expanding their monopolies to the betterment of their investors or (2) steers profits away from employers towards workers. In my darkest moments, I suspect that some target of an FTC or DOJ investigation funds neoliberal columnists and journals—looking at you, The Economist—to cook up consumer-welfare-based theories of how the agencies are doing it wrong. All such musings should be ignored, as the antitrust hipsters are alright.

Your intrepid writer, when not toiling for free in the basement of The Sling, does a fair amount of testifying as an expert economic witness. Many of these cases involve alleged price-fixing (or wage-fixing) conspiracies. One would think there would be no need to define the relevant market in such cases, as the law condemns price-fixing under the per se standard. But because of certain legal niceties—such as whether the scheme involved an intermediary (or ringleader) that allegedly coached and coaxed the parties with price-setting power—we often spend reams of paper and hundreds of billable hours engaging in what amounts to navel inspection to determine the contours of the relevant market. The idea is that if the defendants do not collectively possess market power in a relevant antitrust market, then the challenged conduct cannot possibly generate anticompetitive effects.

A traditional method of defining the relevant market asks the following question: Could a hypothetical monopolist who controlled the supply of the good (or services) that allegedly comprise the relevant market profitably raise prices over competitive levels? The test has been shortened to the hypothetical monopolist test (HMT). 

It bears noting that there are other ways to define relevant markets, including by assessing the Brown Shoe factors or practical indicia of the market boundaries. The Brown Shoe test can be used independently or in conjunction with the HMT. But this alternative is beyond the scope of this essay.

Published in the Harvard Law Review in 2010, Louis Kaplow’s essay was provocatively titled “Why (Ever) Define Markets”? It’s a great question, and having spent 25-odd years in the antitrust business, I can provide a smart-alecky and jaded answer: The market definition exercise is a way for defendants to deflect attention away from the harms inflicted on consumers (or workers) and towards an academic exercise, which is admittedly entertaining for antitrust nerds. Don’t look at the body on the ground, with goo spewing out of the victim’s forehead. Focus instead on this shiny object over here!

And it works. The HMT commands undue influence in antitrust cases, with some courts employing the market-definition exercise as a make-or-break evidentiary criterion for plaintiffs, before considering anticompetitive effects. Other classic examples of market definition serving as a distraction include American Express (2018), where the Supreme Court even acknowledged evidence a net price increase yet got hung up over market definition, or Sabre/Farelogic (2020), where the court acknowledged that the merging parties competed in practice but not per the theory of two-sided markets.

A better way forward

When it comes to retrospective monopolization cases (aka “conduct” cases), there is a more probative question to be answered. Rather than focusing on hypotheticals, courts should be asking whether a not-so-hypothetical monopolist—or collection of defendants that could mimic monopoly behavior—could profitably raise price above competitive levels by virtue of the scheme. Or in a monopsony case, did the not-so-hypothetical monopsonist—or collection of defendants assembled here—profitably reduce wages below competitive levels by virtue of the scheme? Let’s call this alternative the NSHMT, as we can’t compete against the HMT without our own clever acronym.

Consider this fact pattern. A ringleader, who gathered and then shared competitively sensitive information from horizontal rivals, has been accused of orchestrating a scheme to raise prices in a given industry. After years of engaging in the scheme, an antitrust authority began investigating, and the ring was disbanded. On behalf of plaintiffs, an economist builds an econometric model that links the prices paid to the customers at issue—typically a dummy variable equal to one when the defendant was part of the scheme and zero otherwise—plus a host of control variables that also explain movements in prices. After controlling for many relevant (i.e., motivated by record evidence or economic theory) and measurable confounding factors, eliminating any variables that might serve as mediators of the scheme itself, the econometric model shows that the scheme had an economically and statistically significantly effect of artificially raising prices.

Setting aside any quibbles that defendants’ economists might have with the model—it is their job to quibble over modeling choices while accepting that the challenged conduct occurred—the clear inference is that this collection of defendants was in fact able to raise prices while coordinating their affairs through the scheme. Importantly, they could not have achieved such an outcome of inflated prices unless they collectively possessed selling power. (Indeed, why would defendants engage in the scheme in the first place, risking antitrust liability, if higher profits could not be achieved?) So, if we are trying to assemble the smallest collection of products such that a (not-so) hypothetical seller of such products could exercise selling power, we have our answer! The NSHMT is satisfied, which should end the inquiry over market power.

(Note that fringe firms in the same industry might weakly impose some discipline on the collection of firms in the hypothetical. But the fringe firms were apparently not needed to exercise power. Hence, defining the market slightly more broadly to include the fringe is a conservative adjustment.)

At this point, the marginal utility of performing a formal HMT to define the relevant market based on what some hypothetical monopolist could pull off is dubious. I use the modifier “formal” to connote a quantitative test as to whether a hypothetical monopolist who controlled the purported relevant market could increase prices by (say) five percent above competitive levels.

The formal HMT has a few variants, but a standard formulation proceeds as follows. Step 1: Measure the actual elasticity of demand faced by defendants. Step 2: Estimate the critical elasticity of demand, which is the elasticity that would make the hypothetical monopolist just indifferent between raising and not raising prices. Step 3: Compare the actual to the critical elasticity; if the former is less than the latter, then the HMT is satisfied and you have yourself a relevant antitrust market! An analogous test compares the “predicted loss” to the “critical loss” of a hypothetical monopolist.

For those thinking the New Brandeisians dispensed with such formalism in the newly issued 2023 Merger Guidelines, I refer you to Section 4.3.C, which spells out the formal HMT in “Evidence and Tools for Carrying Out the Hypothetical Monopoly Test.” To their credit, however, the drafters of the new guidelines relegated the formal HMT to the fourth of four types of tools that can be used to assess market power. See Preamble to 4.3 at pages 40 to 41, placing the formal HMT beneath (1) direct evidence of competition between the merging parties, (2) direct evidence of the exercise of market power, and (3) the Brown Shoe factors. It bears noting that the Merger Guidelines were designed with assessing the competitive effects of a merger, which is necessarily a prospective endeavor. In these matters, the formal HMT arguably can play a bigger role.

Aside from generating lots of billable hours for economic consultants, the formal HMT in retrospective conduct cases bears little fruit because the test is often hard to implement and because the test is contaminated by the scheme itself. Regarding implementation, estimating demand elasticities—typically via a regression on units sold—is challenging because the key independent variable (price) in the regression is endogenous, which when not correctly may lead to biased estimates, and therefore requires the economist to identify instrumental variables that can stand in the shoes of prices. Fighting over the proper instruments in a potentially irrelevant thought experiment is the opposite of efficiency! Regarding the contamination of the formal test, we are all familiar with the Cellophane fallacy, which teaches that at elevated prices (owing to the anticompetitive scheme), distant substitutes will appear closer to the services in question, leading to inflated estimates of the actual elasticity of demand. Moreover, the formal HMT is a mechanical exercise that may not apply to all industries, particularly those that do not hold short-term profit maximization as their objective function.

The really interesting question is, What happens if the NSHMT finds an anticompetitive effect owing to the scheme—and hence an inference of market power—but the formal HMT finds a broader market is needed? Clearly the formal HMT would be wrong in that instance for any (or all) of the myriad reasons provided above, and it should be given zero weight by the factfinder.

A special form of direct proof

An astute reader might recognize the NSHMT as a type of direct proof of market power, which has been recognized as superior to indirect proof of market power—that is, showing high shares and entry barriers in a relevant market. As explained by Carl Shapiro, former Deputy Assistant Attorney General for Economics at DOJ: “IO economists know that the actual economic effects of a practice do not turn on where one draws market boundaries. I have been involved in many antitrust cases where a great deal of time was spent debating arcane details of market definition, distracting from the real economic issues in the case. I shudder to think about how much brain damage among antitrust lawyers and economists has been caused by arguing over market definition.” Aaron S. Edlin and Daniel L. Rubinfeld offered this endorsement of direct proof: “Market definition is only a traditional means to the end of determining whether power over price exists. Power over price is what matters . . . if power can be shown directly, there is no need for market definition: the value of market definition is in cases where power cannot be shown directly and must be inferred from sufficiently high market share in a relevant market.” More recently, John Newman, former Deputy Director of the Bureau of Competition at the FTC, remarked on Twitter: “Could a company that doesn’t exist impose a price increase that doesn’t exist of some undetermined amount—probably an arbitrarily selected percentage—above a price level that probably doesn’t exist and may have never existed? In my more cynical moments, I occasionally wonder if this question is the right one to be asking in conduct cases.”

I certainly agree with these antitrust titans that direct proof of power is superior to indirect proof. Let me humbly suggest that the NSHMT is distinct from and superior to common forms of direct proof. Common forms of direct proof include evidence that the defendant commands a pricing premium over its peers (or imposes a large markup), as determined by some competitive benchmark (or measure of incremental costs), or engages in price discrimination, which is only possible if it faces a downward-sloping demand curve. The NSHMT is distinct from these common forms of direct evidence because it is tethered to the challenged conduct. It is superior to these other forms because it addresses the profitability of an actual price increase owing to the scheme as opposed to levels of arguably inflated prices. Put differently, it is one thing to observe that a defendant is gouging customers or exploiting its workers. It is quite another to connect this exploitation to the scheme itself.  

Regarding policy implications, when the NSMHT is satisfied, there should be no need to show market power indirectly via the market-definition exercise. To the extent that market definition is still required, when there is a clear case of the scheme causing inflated prices or lower output or exclusion in monopolization cases, plaintiffs should get a presumption that defendants possess market power in a relevant market. 

In summary, for merger cases, where the analysis focuses on a prospective exercise of power, the HMT might play a more useful role. In merger cases, we are trying to predict the profitability of some future price increase. Even in merger cases, the economist might be able to exploit price increases (or wage suppression) owing to prior acquisitions, which would be a form of direct proof. For conduct cases, however, the NSHMT is superior to the HMT, which offers little marginal utility for the factfinder. The NSHMT just so happens to inform the profitability of an actual price hike by a collection of actual firms that wield monopoly power, as opposed to some hypothetical monopolist. And it also helpfully focuses attention on the anticompetitive harm, where it rightly belongs. Look at the body on the ground and not at the shiny object.  

According to J.C. Bradbury, an economics professor at Kennesaw State, owners of professional men’s sports teams have received more than $19 billion in taxpayer subsidies this century. And according to a recent article in the Salt Lake City Tribune, men’s professional sports around the United States continue to ask for billions more. The root of the problem is monopoly, as explained below, and unless and until Congress addresses the root cause, citizens should alter their demands from local politicians.

A Game Only Men Get to Play

The taxpayer subsidy game, in which teams like the Washington Capitals threaten to leave their host city unless taxpayers fork over billions in subsidies, is very much a game that only men get to play. Politicians have never been willing to give billions of dollars to build stadiums and arenas for teams in women’s professional sports. Karen Leetzow, President of the Chicago Red Stars of the NWSL, would like that to change:

Women’s sports need to have a seat at the table. We need to be in the mix because otherwise we’re just going to end up chasing our tail around how to grow women’s sports. If you’re a politician, what better way for you to leave a lasting legacy in the state of Illinois or the city of Chicago than to do something that’s never been done, which is provide meaningful funding for women.

As Leetzow summarized the argument, “equity needs to be part of the conversation.”

One suspects that many sports economists would disagree with this statement. The disagreement isn’t about the word “equity.” The disagreement likely is based entirely on the nature of the “conversation.”

For decades, sports economists have objected to the entire conversation politicians and men’s sports leagues have about taxpayer subsidies. Politicians and team owners have consistently argued that spending billions to build a stadium or arena for men’s professional sports teams is justified in terms of economic growth and jobs. Economists who study this issue, though, have offered a very consistent academic response: This is bullshit!

Okay, the response involves a bit more. Essentially, a host of academic studies fail to find evidence that stadiums and arenas are capable of generating significant economic growth. In the end, economists consistently argue these billions in subsidies are just a transfer of money from ordinary taxpayers to billionaire sports owners.

These studies have been published for decades. And sports economists have screamed about this issue for decades. But all this screaming hasn’t turned off the taxpayer faucet. Men’s professional sports leagues have continued to ask for—and continued to receive—billions in taxpayer subsidies.

Diagnosing the (Monopoly) Problem

This leads to a question: Why hasn’t all the objective empirical studies by sports economists (and all the screaming) stopped the subsidies?  

If we move past the obvious explanation that people don’t really listen to economists as often as economists might like, we can do what people often do when life doesn’t go their way. We can blame someone!

In this case, the name of the person we should blame is William Hulbert. In 1876, Hulbert, then owner of the Chicago White Stockings (the franchise known as the Chicago Cubs today), launched the National League. Hulbert’s creation brought an “innovation” that today is employed by essentially all professional North American sports leagues: Following the advice of Lewis Meacham, an editor with the Chicago Tribune, Hulbert’s new league decided that each city would only get one team.

The National League was hardly a successful business in the 1870s. The vast majority of the first teams went out of business. So it’s possible that Hulbert and Meacham were simply trying to find a model that ensured the financial success of as many teams as possible in a struggling business. Regardless of what motivated Meacham and Hulbert to employ this innovation in the formation of the National League, this model seems to be the root cause of our current stadium financing problem.

Outside of New York, Los Angeles, and Chicago, most cities today still only get one team in each professional sports league. And because leagues completely control how many teams are in each league, some cities that could clearly support a franchise don’t get a team at all. Consequently, Hulbert’s innovation has led to a world where leagues and its owners have substantial monopoly power over fans (and monopsony power over players). If you want a team, you have to give the owners what they want. And what they want is billions in taxpayer subsidies.

Once again, the owners claim these subsidies create economic growth and jobs. And once again, sports economists scream they are lying. Building stadiums and arenas for them does not create economic growth and does not create jobs. Therefore, we are effectively giving these billionaires taxpayer handouts worth billions.

Ignoring the Economists

All of this is true. But from a politician’s perspective, none of this probably matters.  To see this, all one has to do is think back to January 13th of this year. On that day, the Kansas City Chiefs played the Miami Dolphins in a Wild Card playoff game. Given that this was January in Kansas City, the weather for the game was immensely bad. The temperature was -4 Fahrenheit with wind chills about twenty degrees colder. Not surprisingly, many fans suffered frostbite. And recently it was revealed, some of these fans actually lost fingers and toes.

Let’s think about that for a minute. Fans of football are so addicted to this product that they would risk amputation to watch their favorite team.

Chiefs fans are hardly the only sports fans who are emotionally attached to their team. When the Bills lost to the Chiefs the next week, the video of the Bills fan crying in the stands went viral.

Given this emotional attachment, it should not be surprising that when the Buffalo Bills asked taxpayers in New York to give them more than a billion dollars for a new stadium politicians couldn’t say no. The alternative was to say to the people crying in the stands that their team might not be in Buffalo anymore.

In the end, this is probably not about politicians believing a lie. This is really about teams having monopoly power and knowing that they have created a product that very much controls the emotions of their customers. Assuming we can’t compel sports leagues to permit more competition within a city we need to think about different remedies.

Perhaps we would be better off thinking about this story differently. Sports make people happy (or really sad!). In that sense, stadiums are like building city parks. No one argues that city parks are built to create economic growth. Cities build parks to make people happier. Stadiums very much serve the same purpose.

Therefore, maybe it is time for politicians to just be honest about why we are doing this. We are not using taxpayer dollars to create jobs. We are using these to ensure that the sports teams that make people happy (or sad) will continue to exist.

Of course, some people aren’t sports fans and therefore some people may not like their taxpayer dollars going towards this end. To those people, my response is simple: It is time to grow up and learn how democracy works. Government in a democracy reflects the preferences of everyone in that society. This means that sometimes the government does what you want. And sometimes, it doesn’t.

A Modest Proposal

What we should demand of our government is that it treats people equally (at least, that’s what I want!). If we are going to invest billions in men’s sports, we should at least be willing to invest millions in women’s team sports. Politicians only supporting men’s sports is simply wrong.

Yes, I am sure some economists may still scream we shouldn’t be giving taxpayer dollars to anyone. Seriously, though, that’s not going to stop. As long as sports leagues maintain their monopoly power, politicians are probably going to keep doing this. And that is true, no matter how much you scream.

So maybe we need to try screaming something else. Women’s professional sports are growing and the number of people these leagues make happy (or sad!) is growing rapidly. It is time for politicians to turn the conversation to equity and try and make these fans happy as well!

David Berri is a sports economics and professor of economics at Southern Utah University. Along with Martin Schmidt and Stacey Brook, he is the author of The Wages of Wins: Taking Measure of the Many Myths in Modern Sport (Stanford University Press 2006).

Right before Thanksgiving, Josh Sisco wrote that the Federal Trade Commission is investigating whether the $9.6 billion purchase of Subway by private equity firm Roark Capital creates a sandwich shop monopoly, by placing Subway under the same ownership as Jimmy John’s, Arby’s, McAlister’s Deli, and Schlotzky’s. The acquisition would allow Roark to control over 40,000 restaurants nationwide. Senator Elizabeth Warren amped up the attention by tweeting her disapproval of the merger, prompting the phrase “Big Sandwich” to trend on Twitter.

Fun fact: Roark is named for Howard Roark, the protagonist in Ayn Rand’s novel The Fountainhead, which captures the spirit of libertarianism and the anti-antitrust movement. Ayn Rand would shrug off this and presumably any other merger!

It’s a pleasure reading pro-monopoly takes on the acquisition. Jonah Goldberg writes in The Dispatch that sandwich consumers can easily switch, in response to a merger-induced price hike, to other forms of lunch like pizza or salads. (Similar screeds appear here and here.) Jonah probably doesn’t understand the concept, but he’s effectively arguing that the relevant product market when assessing the merger effects includes all lunch products, such that a hypothetical monopoly provider of sandwiches could not profitably raise prices over competitive levels. Of course, if a consumer prefers a sandwich, but is forced to eat a pizza or salad to evade a price hike, her welfare is almost certainly diminished. And even distant substitutes like salads might appear to be closer to sandwiches when sandwiches are priced at monopoly levels.

The Brown Shoe factors permit courts to assess the perspective of industry participants when defining the contours of a market, including the merging parties. Subway’s franchise agreement reveals how the company perceives its competition. The agreement defines a quick service restaurant that would be “competitive” for Subway as being within three miles of one of its restaurants and deriving “more than 20% of its total gross revenue from the sale of any type of sandwiches on any type of bread, including but not limited to sub rolls and other bread rolls, sliced bread, pita bread, flat bread, and wraps.” The agreement explicitly mentions by name Jimmy John’s, McAlister’s Deli and Schlotzky’s as competitors. This evidence supports a narrower market.

Roark’s $9.6 billion purchase of Subway exceeded the next highest bid by $1.35 billion—from TDR Capital and Sycamore Partners at $8.25 billion—an indication that Roark is willing to pay a substantial premium relative to other bidders, perhaps owing to Roark’s existing restaurant holdings. The premium could reflect procompetitive merger synergies, but given what the economic literature has revealed about such purported benefits, the more likely explanation of the premium is that Roark senses an opportunity to exercise newfound market power.

To assess Roark’s footprint in the restaurant business, I downloaded the Nation’s Restaurant News (NRN) database of sales and stores for the top 500 restaurant chains. If one treats all chain restaurants as part of the relevant product market, as Jonah Goldberg prefers, with total sales of $391.2 billion in 2022, then Roark’s pre-merger share of sales (not counting Subway) is 10.8 percent, and its post-merger share of sales is 13.1 percent. These numbers seem small, especially the increment to concentration owing to the merger.

Fortunately, the NRN data has a field for fast-food segment. Both Subway and Jimmy John’s are classified as “LSR Sandwich/Deli,” where LSR stands for limited service restaurants, which don’t offer table service. By comparison, McDonald’s, Panera, and Einstein are classified under “LSR Bakery/Café”. If one limits the data to the LSR Sandwich/Deli segment, total sales in 2022 fall from $391.1 billion to $26.3 billion. Post-merger, Roark would own four of the top six sandwich/deli chains in America. It bears noting that imposing this filter eliminates several of Roark’s largest assets—e.g., Dunkin’ Donuts (LSR Coffee), Sonic (LSR Burger), Buffalo Wild Wings (FSR Sports Bar)—from the analysis.

Restaurant Chains in LSR Sandwich/Deli Sector, 2022

ChainSales (Millions)UnitsShare of Sales
Subway*9,187.920,57634.9%
Arby’s*4,535.33,41517.2%
Jersey Mike’s2,697.02,39710.3%
Jimmy John’s*2,364.52,6379.0%
Firehouse Subs1,186.71,1874.5%
McAlister’s Deli*1,000.45243.8%
Charleys Philly Steaks619.86422.4%
Portillo’s Hot Dogs587.1722.2%
Jason’s Deli562.12452.1%
Potbelly496.14291.9%
Wienerschnitzel397.33211.5%
Schlotzsky’s*360.83231.4%
Chicken Salad Chick284.12221.1%
Penn Station East Coast264.33211.0%
Mr. Hero157.91090.6%
American Deli153.22040.6%
Which Wich131.32260.5%
Capriotti’s122.61420.5%
Nathan’s Famous119.12720.5%
Port of Subs112.91270.4%
Togo’s107.71620.4%
Biscuitville107.5680.4%
Cheba Hut95.0500.4%
Primo Hoagies80.4940.3%
Cousins Subs80.1930.3%
Ike’s Place79.3810.3%
D’Angelo75.4830.3%
Dog Haus73580.3%
Quiznos Subs57.81650.2%
Lenny’s Sub Shop56.3620.2%
Sandella’s51520.2%
Erbert & Gerbert’s47.4750.2%
Goodcents47.3660.2%
Total26,298.60230,629100.0%

Source: Nation’s Restaurant News (NRN) database of sales and stores for the top 500 restaurant chains. Note: * Owned by Roark

With this narrower market definition, Roark’s pre-merger share of sales (not counting Subway) is 31.4 percent, and its post-merger share of sales is 66.3 percent. These shares seem large, and the standard measure of concentration—which sums the square of the market shares—goes from 2,359 to 4,554, which would create the inference of anticompetitive effects under the 2010 Merger Guidelines.

One complication to the merger review is that Roark wouldn’t have perfect control of the sandwich pricing by its franchisees. Franchisees often are free to set their own prices, subject to suggestions (and market studies) by the franchise. So while Roark might want (say) a Jimmy John’s franchisee to raise sandwich prices after the merger, that franchisee might not internalize the benefits to Roark of diversion of some its customers to Subway. With enough money at stake, Roark could align its franchisees’ incentives with the parent company, by, for example, creating profit pools based on the profits of all of Roark’s sandwich investments.

Another complication is that Roark does not own 100 percent of its restaurants. Roark is the majority-owner of Inspire Brands. In July 2011, Roark acquired 81.5 percent of Arby’s Restaurant Group. Roark purchased Wendy’s remaining 12.3 percent holding of Inspire Brands in 2018. To the extent Roark’s ownership of any of the assets mentioned above is partial, a modification to the traditional concentration index could be performed, along the lines spelled out by Salop and O’Brien. (For curious readers, they show in how the change in concentration is a function of the market shares of the acquired and acquiring firms plus the fraction of the profits of the acquired firm captured by the acquiring firm, which varies according to different assumption about corporate control.)

When defining markets and assessing merger effects, it is important to recognize that, in many towns, residents will not have access to the fully panoply of options listed in the top 500 chains. (Credit to fellow Sling contributor Basel Musharbash for making this point in a thread.) So even if one were to conclude that the market was larger than LSR Sandwich/Deli chains, it wouldn’t be the case that residents could chose from all such restaurants in the (expanded) relevant market. Put differently, if you live in a town where your only options are Subway, Jimmy John’s, and McDonald’s, the merger could significantly concentrate economic power.

Although this discussion has focused on the harms to consumers, as Brian Callaci points out, the acquisition could allow Roark to exercise buying power vis-à-vis the sandwich shops suppliers. And Helaine Olen explains how the merger could enhance Roark’s power over franchise owners. The DOJ recently blocked a book-publisher merger based on a theory of harm to input providers (publishers), indicating that consumers no longer sit alone atop the antitrust hierarchy.

While it’s too early to condemn the merger, monopoly-loving economists and libertarians who mocked the concept of Big Sandwich should recognize that there are legitimate economic concerns here. It all depends on how you slice the market!

How many times have you heard from an antitrust scholar or practitioner that merely possessing a monopoly does not run afoul of the antitrust laws? That a violation requires the use of a restraint to extend that monopoly into another market, or to preserve the original monopoly to constitute a violation? Here’s a surprise.

Both a plain reading and an in-depth analysis of the text of Section 2 of the Sherman Act demonstrate that this law’s violation does not require anticompetitive conduct, and that it does not have an efficiencies defense. Section 2 of the Sherman Act was designed to impose sanctions on any firm that monopolizes or attempts to monopolize a market. Period. With no exceptions for firms that are efficient or for firms that did not engage in anticompetitive conduct.

This is the conclusion one should reach if one were a judge analyzing the Sherman Act using textualist principles. Like most of the people reading this article I’m not a textualist. But many judges and Supreme Court Justices are, so this method of statutory interpretation must be taken quite seriously today.

To understand how to read the Sherman Act as a textualist, one must first understand the textualist method of statutory interpretation. This essay presents a textualist analysis of Section 2 that is a condensation of a 92-page law review article, titled “The Sherman Act Is a No-Fault Monopolization Statute: A Textualist Demonstration.” My analysis demonstrates that Section 2 is actually a no-fault statute. Section 2 requires courts to impose sanctions on monopolies and attempts to monopolize without inquiring into whether the defendant engaged in anticompetitive conduct or whether it was efficient.

A Brief Primer on Textualism

As most readers know, a traditionalist approach to statutory interpretation analyzes a law’s legislative history and interprets it accordingly. The floor debates in Congress and relevant Committee reports affect how courts interpret a law, especially in close cases or cases where the text is ambiguous. By contrast, textualism only interprets the words and phrases actually used in the relevant statute. Each word and phrase is given its fair, plain, ordinary, and original meaning at the time the statute was enacted.

Justice Scalia and Bryan Garner, a professor at SMU’s Dedman School of Law, wrote a 560-page book explaining and analyzing textualism. Nevertheless, a basic textualist analysis can be described relatively simply. To ascertain the meaning of the relevant words and phrases in the statute, textualism relies mostly upon definitions contained in reliable and authoritative dictionaries of the period in which the statute was enacted. These definitions are supplemented by analyzing the terms as they were used in contemporaneous legal treatises andcases. Crucially, textualism ignores statutes’ legislative history. In the words of Justice Scalia, “To say that I used legislative history is simply, to put it bluntly, a lie.” 

Textualism does not attempt to discern what Congress “intended to do” other than by plainly examining the words and phrases in statutes. A textualist analysis does not add or subtract from the statute’s exact language and does not create exceptions or interpret statutes differently in special circumstances. Nor should a textualist judge insert his or her own policy preferences into the interpretation. No requirement should be read into a law unless, of course, it is explicitly contained in the legislation. No exemption should be inferred to achieve some overall policy goal Congress arguably had unless, of course, the text demands it.

As Justice Scalia wrote, “Once the meaning is plain, it is not the province of a court to scan its wisdom or its policy.” Indeed, if a court were to do so this would be the antithesis of textualism. There are some complications relevant to a textualist analysis of Section 2, but they do not change the results that follow.

A Textualist Analysis of Section 2 of the Sherman Act

A straightforward textualist interpretation of Section 2 demonstrates that a violation does not require anticompetitive conduct and applies regardless whether the firm achieved its position through efficient behavior.

Section 2 of the Sherman Act makes it unlawful for any person to “monopolize, or attempt to monopolize . . .  any part of the trade or commerce among the several States . . . .”  There is nothing, no language in Section 2, requiring anticompetitive conduct or creating an exception for efficient monopolies. A textualist interpretation of Section 2 therefore needs only to determine what the terms “monopolize” and “attempt to monopolize” meant in 1890. This examination demonstrates that these terms meant the same things they mean today if they are “fairly,” “ordinarily,” or “plainly” interpreted, free from the legal baggage that has grown up around them by a multitude of court decisions.

What Did “Monopolize” Mean in 1890?

When the Sherman Act was passed the word “monopolize” simply meant to acquire a monopoly. The term was not limited to monopolies acquired or preserved by anticompetitive conduct, and it did not exclude firms that achieved their monopoly due to efficient behavior.

As noted earlier, Justice Scalia was especially interested in the definitions of key terms in contemporary dictionaries. Scalia and Garner believe that six dictionaries published between 1851 to 1900 are “useful and authoritative.” All six were checked for definitions of “monopolize”. The principle definition in each for “monopolize” was simply that a firm had acquired a monopoly. None required anticompetitive conduct for a firm to “monopolize” a market, or excluded efficient monopolies.

For example, the 1897 edition of Century Dictionary and Cyclopedia defined “monopolize” as: “1. To obtain a monopoly of; have an exclusive right of trading in: as, to monopolize all the corn in a district . . . . ”

Serendipitously, a definition of “monopolize” was given in the Sherman Act’s legislative debates, just before the final vote on the Bill. Although normally a textualist does not care about anything uttered during a congressional debate, Senator Edmund’s remarks should be significant to a textualist because he quotes from a contemporary dictionary that Scalia considered useful and reliable. “[T]he best answer I can make to both my friends is to read from Webster’s Dictionary the definition of the verb “to monopolize”: He went on:

1. To purchase or obtain possession of the whole of, as a commodity or goods in market, with the view to appropriate or control the exclusive sale of; as, to monopolize sugar or tea.

There was no requirement of anticompetitive conduct, or exception for a monopoly efficiently gained.

These definitions are essentially the same as those in the 1898 and 1913 editions of Webster’s Dictionary. The four other dictionaries of the period Scalia & Garner considered reliable also contained essentially identical definitions. The first edition of the Oxford English Dictionary, from 1908, also contained a similar definition of “monopolize:”

1 . . . . To get into one’s hands the whole stock of (a particular commodity); to gain or hold exclusive possession of (a trade);  . . . . To have a monopoly. . . . 2 . . . . To obtain exclusive possession or control of; to get or keep entirely to oneself. 

Not only does the 1908 Oxford English Dictionary equate “monopolize” with “monopoly,” but nowhere does it require a monopolist to engage in anticompetitive conduct.

Moreover, all but one of the definitions in Scalia’s preferred dictionaries do not limit monopolies to firms making every sale in a market. They roughly correspond to the modern definition of “monopoly power,” by defining “monopolize” as the ability to control a market. The 1908 Oxford English Dictionary defined “monopolize” in part as “To obtain exclusive possession or control of.” The Webster’s Dictionary defined monopolize as “with the view to appropriate or control the exclusive sale of.” Stormonth defined monopolize as “one who has command of the market.”  Latham defined monopolize as “ to have the sole power or privilege of vending.…” And Hunter & Morris defined monopolize as “to have exclusive command over.”

In summary, every one of Scalia’s preferred period dictionaries defined “monopolize” as simply to gain all the sales of a market or the control of a market. A textualist analysis of contemporary legal treatises and cases yields the same result. None required conduct we would today characterize as anticompetitive, or exclude a firm gaining a monopoly by efficient means.  

A Textualist Analysis of “Attempt to Monopolize”

 A textualist interpretation of Section 2 should analyze the word “attempt” as it was used in the phrase “attempt to monopolize” circa 1890. However, no unexpected or counterintuitive result comes from this examination. Circa 1890 “attempt” had its colloquial 21st Century meaning, and there was no requirement in the statute that an “attempt to monopolize” required anticompetitive conduct or excluded efficient attempts.

The “useful and authoritative” 1897 Century Dictionary and Cyclopedia defines “attempt” as:

1. To make an effort to effect or do; endeavor to perform; undertake; essay: as, to attempt a bold flight . . . . 2. To venture upon: as, to attempt the sea.— 3. To make trial of; prove; test . . . . .

The 1898 Webster’s Dictionary gives a similar definition: “Attempt . . . 1. To make trial or experiment of; to try. 2. To try to move, subdue, or overcome, as by entreaty.’ The Oxford English Dictionary, which defined “attempt” in a volume published in 1888, similarly reads: “1. A putting forth of effort to accomplish what is uncertain or difficult….”

However, the word “attempt” in a statute did have a specific meaning under the common law circa 1890. It meant “an intent to do a particular criminal thing, with an act toward it falling short of the thing intended.” One definition stated that the act needed to be “sufficient both in magnitude and in proximity to the fact intended, to be taken cognizance of by the law that does not concern itself with things trivial and small.” But no source of the period defined the magnitude or nature of the necessary acts with great specificity (indeed, a precise definition might well be impossible).

It is noteworthy that in 1881 Oliver Wendell Holmes wrote about the attempt doctrine in his celebrated treatise, The Common Law:

Eminent judges have been puzzled where to draw the line . . . the considerations being, in this case, the nearness of the danger, the greatness of the harm, and the degree of apprehension felt. When a man buys matches to fire a haystack . . . there is still a considerable chance that he will change his mind before he comes to the point. But when he has struck the match . . . there is very little chance that he will not persist to the end . . .

Congress’s choice of the phrase “attempt to monopolize” surely built upon the existing common law definitions of an “attempt” to commit robbery and other crimes.  Although the meaning of a criminal “attempt” to violate a law has evolved since 1890, a textualist approach towards an “attempt to monopolize” should be a “fair” or “ordinary” interpretation of these words as they were used in 1890, ignoring the case law that has arisen since then. It is clear that acts constituting mere preparation or planning should be insufficient. Attempted monopolization should also require the intent to take over a market and at least one serious act in furtherance of this plan.

But “attempted monopolization” under Section 2 should not require the type of conduct we today consider anticompetitive, or exempt efficient conduct. Because current case law only imposes sanctions under Section 2 if a court decides the firm engaged in anticompetitive conduct,this case law was wrongly decided. It should be overturned, as should the case law that excuses efficient attempts.

Moreover, attempted monopolization’s current “dangerous probability” requirement should be modified significantly. Today it is quite unusual for a court to find that a firm illegally “attempted to monopolize” if it possessed less than 50 percent of a market.But under a textualist interpretation of Section 2, suppose a firm with only a 30 percent market share seriously tried to take over a relevant market. Isn’t a firm with a 30 percent market share often capable of seriously attempting to monopolize a market? And, of course, attempted monopolization shouldn’t have an anticompetitive conduct requirement or an efficiency exception.

Textualists Should Be Consistent, Even If That Means More Antitrust Enforcement

Where did the exception for efficient monopolies come from? How did the requirement that anticompetitive conduct is necessary for a Section 2 violation arise? They aren’t even hinted at in the text of the Sherman Act. Shouldn’t we recognize that conservative judges simply made up the anticompetitive conduct requirement and efficiency exception because they thought this was good policy? This is not textualism. It’s the opposite of textualism.

No fault monopolization embodies a love for competition and a distaste for monopoly so strong that it does not even undertake a “rule of reason” style economic analysis of the pros and cons of particular situations. It’s like a per se statute insofar as it should impose sanctions on all monopolies and attempts to monopolize. At the remedy stage, of course, conduct-oriented remedies often have been, and should continue to be, found appropriate in Section 2 cases.

The current Supreme Court is largely textualist, but also extremely conservative. Would it decide a no-fault case in the way that textualism mandates?   

Ironically, when assessing the competitive effects of the Baker Hughes merger, (then) Judge Thomas changed the language of the statute from “may be substantially to lessen competition” to “will substantially lessen competition,” despite considering himself to be a textualist. So much for sticking to the language of the statute!

Until recently, textualism has only been used to analyze an antitrust law a modest number of times. This is ironic because, even though textualism has historically only been championed by conservatives, a textualist interpretation of the antitrust laws should mean that the antitrust statutes will be interpreted according to these laws’ original aggressive, populist and consumer-oriented language.  

Robert Lande is the Venable Professor of Law Emeritus at the University of Baltimore Law School.

Over 100 years ago, Congress responded to railroad and oil monopolies’ stranglehold on the economy by passing the United States’ first-ever antitrust laws. When those reforms weren’t enough, Congress created the Federal Trade Commission to protect consumers and small businesses from predation. Today, unchecked monopolies again threaten economic competition and our democratic institutions, so it’s no surprise that the FTC is bringing a historic antitrust suit against one of the biggest fish in the stream of commerce: Amazon.

Make no mistake: modern-day monopolies, particularly the Big Tech giants (Amazon, Apple, Alphabet, and Meta), are active threats to competition and consumers’ welfare. In 2020, the House Antitrust Subcommittee concluded an extensive investigation into Big Tech’s monopolistic harms by condemning Amazon’s monopoly power, which it used to mistreat sellers, bully retail partners, and ruin rivals’ businesses through the use of sellers’ data. The Subcommittee’s report found that, as both the operator of and participant in its marketplace, Amazon functions with “an inherent conflict of interest.”

The FTC’s lawsuit builds off those findings by targeting Amazon’s notorious practice of “self-preferencing,” in which the company gathers private data on what products users are purchasing, creates its own copies of those products, then lists its versions above any competitors on user searches. Moreover, by bullying sellers looking to discount their products on other online marketplaces, Amazon has forced consumers to fork over more money than what they would have in a truly-competitive environment.

But perhaps the best evidence of Amazon’s illegal monopoly power is how hard the company has worked for years to squash any investigation into its actions. For decades, Amazon has relied on the classic ‘revolving door’ strategy of poaching former FTC officials to become its lobbyists, lawyers, and senior executives. This way, the company can use their institutional knowledge to fight the agency and criticize strong enforcement actions. These “revolvers” defend the business practices which their former FTC colleagues argue push small businesses past their breaking points. They also can help guide Amazon’s prodigious lobbying efforts, which reached a corporate record in 2022 amidst an industry wide spending spree in which “the top tech companies spent nearly $70 million on lobbying in 2022, outstripping other industries including pharmaceuticals and oil and gas.”

Amazon’s in-house legal and policy shops are absolutely stacked full of ex-FTC officials and staffers. In less than two years, Amazon absorbed more than 28 years of FTC expertise with just three corporate counsel hires: ex-FTC officials Amy Posner, Elisa Kantor Perlman and Andi Arias. The company also hired former FTC antitrust economist Joseph Breedlove as its principal economist for litigation and regulatory matters (read: the guy we’re going to call as an expert witness to say you shouldn’t break us up) in 2017.

It goes further than that. Last year, Amazon hired former Senate Judiciary Committee staffer Judd Smith as a lobbyist after he previously helped craft legislation to rein in the company and other Big Tech giants. Amazon also contributed more than $1 million to the “Competitiveness Coalition,” a Big Tech front group led by former Sen. Scott Brown (R-MA). The coalition counts a number of right-wing, anti-regulatory groups among its members, including the Competitive Enterprise Institute, a notorious purveyor of climate denialism, and National Taxpayers Union, an anti-tax group regularly gifted op-ed space in Fox News and the National Review.

This goes to show the lengths to which Amazon will go to avoid oversight from any government authority. True, the FTC has finally filed suit against Amazon, and that is a good thing. But Amazon, throughout their pursuance of ever growing monopoly power, hired their team of revolvers precisely for this moment. These ex-officials bring along institutional knowledge that will inform Amazon’s legal defense. They will likely know the types of legal arguments the FTC will rely on, how the FTC conducted its pretrial investigations, and the personalities of major players in the case. 

This knowledge is invaluable to Amazon. It’s like hiring the assistant coach of an opposing team and gaining access to their playbook — you know what’s coming before it happens and you can prepare accordingly. Not only that, but this stream of revolvers makes it incredibly difficult to know the dedication of some regulators towards enforcing the law against corporate behemoths. How is the public expected to trust its federal regulators to protect them from monopoly power when a large swath of its workforce might be waiting for a monopoly to hire them? (Of course, that’s why we need both better pay for public servants as well as stricter restrictions on public servants revolving out to the corporations they were supposedly regulating.)

While spineless revolvers make a killing defending Amazon, the actual people and businesses affected by their strong arming tactics are applauding the FTC’s suit. Following the FTC’s filing, sellers praised the Agency on Amazon’s Seller Central forum, calling it “long overdue” and Amazon’s model as a “race to the bottom.” One commenter even wrote they will be applying to the FTC once Amazon’s practices force them off the platform. This is the type of revolving we may be able to support. When the FTC is staffed with people who care more about reigning in monopolies than receiving hefty paychecks from them in the future (e.g., Chair Lina Khan), we get cases that actually protect consumers and small businesses.

The FTC’s suit against Amazon signals that the federal government will no longer stand by as monopolies hollow-out the economy and corrupt the inner-workings of our democracy, but the revolvers will make every step difficult. They will be in the corporate offices and federal courtrooms advising Amazon on how best to undermine their former employer’s legal standing. They will be in the media, claiming to be objective as a former regulator, while running cover for Amazon’s shady practices that the business press will gobble up. The prevalence of these revolvers makes it difficult for current regulators to succeed while simultaneously undermining public trust in a government that should work for people, not corporations. Former civil servants who put cash from Amazon over the regulatory mission to which they had once been committed are turncoats to the public good. They should be scorned by the public and ignored by government officials and media alike. 

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