Urbane Cowboys: Antitrust Abuse with Ashley Baker

Urbane Cowboys: Antitrust Abuse with Ashley Baker

Welcome:

Hello Americans. This is the Urbane Cowboys podcast with Josiah Neeley of R Street Institute and Doug McCullough of Lone Start Policy Institute. Good Day.

Josiah Neeley:

Welcome to the Urbane Cowboys podcast. I am Josiah Neeley with the R Street Institute.

Doug McCullough:

And I am Doug McCullough with the Lone Star Policy Institute.

Josiah Neeley:

Today we are going to be talking about antitrust. This is something that’s been in the news in a variety of ways recently and it’s kind of a smarty pants term that you hear a lot about it. People may be only vaguely aware of some of the basic concepts involved. So to discuss that with us, we have Ashley Baker, who is the Policy Director for the Committee for Justice. And the Community of Justice is also part of a coalition called the Alliance on Antitrust that advocates for the continuance for the consumer welfare standard. We’ll talk about what exactly that means in a minute, but first Ashley, welcome to the program.

Ashley Baker:

Thank you for having me.

Josiah Neeley:

And I should also say that way back in the day we had R Street gave you your start, so to speak. So you you’re a former, former R Streeter now gone out into the world to do brilliant things.

Ashley Baker:

I would say during my start. Yes, not my first start, but one of my starts. Yes, it was great. So you guys do great work.

Josiah Neeley:

Yes, so since this is an audio only podcast, you couldn’t see the air quotes when I said that I put around the words your start, but we’ll claim it. So I think maybe it would be useful for some of the viewers that are not in the weeds in this issue to just talk a little bit about what antitrust is. What’s the idea? We’ve had this law, the Sherman Antitrust Act, for over a hundred years. It’s a whole area of law. It’s very specialized. It’s very important, has something to do with business and monopoly, but what is it? What’s the point of antitrust.

Ashley Baker:

This is a subject of debate, and this is a debate that has been going on for the past 175 or so years. I’m sorry, 130 or so years, is what the point is of antitrust? Well, always you have the Sherman Act and the Clayton Act and also the FTC Act and the text is pretty short and vague. So over the years, what exactly the goal of antitrust really should be is something that has had to evolve in various ways through a lot of economic and legal learning and process. But at the end of the day, it’s really to protect the consumer from actual harm, not to protect the competition from other competitors. And that’s a big misconception. I think there’s a lot to say right now about what antitrust law is not. And the public debate really is guided by a lot of these things that really aren’t antitrust and that are problems completely divorced from the competitive process. But, antitrust is being seen as kind of a tool because there’s this broader presupposition that big is bad. So when being read antitrust is not a tool to use to keep companies from becoming too big or from becoming too powerful.

Josiah Neeley:

Yeah. So I actually, yeah, that was a trick question there. Sorry about that. But, cause you’re right, there is, there has been for decades and decades kind of dispute about what the overriding principle should be. Should it, I guess my, my vague recollection of from law school is that if you were to go back to the sixties and seventies courts and scholars and whatnot, thought of it more in terms of preventing a single or a small number of businesses from controlling all of a market or doing something, getting too big, as you say. And then there was the kind of revolution in thinking led by Robert Bork saying, I guess the tagline that I remember is that antitrust is about protecting competition, not competitors. You may have alluded to that in your answer there. So how are those two things distinct? Because you would think that, how can you have competition without competitors and if you have better competition. So what is kind of the practical difference between those two different ways of looking at it?

Ashley Baker:

Well, to go back to your points, by the way, about antitrust in law school. That reminds me a lot of something that Justice Scalia actually said during his Supreme Court confirmation hearing during 1986, he said in law school, I never understood antitrust law because as I later found out from reading the writings of those who do, I’m paraphrasing here, those who do not understand it, I should not have understood it because it didn’t make any sense then. And that was, when Justice Scalia was in law school. And that was before, before the revolution, the seventies and antitrust scholarship and before works if you trust paradox, so you’re right. It didn’t make much sense then. And it’s starting to not make a lot of sense now or at least a lot of the arguments and proposals are not making any sense. I see your question about the competitors and the kind of the process. One analogy is the European system is very different in how they deal with their closing date being, do you more so protect the competitors from other competitors? Whereas in the United States, we protect the consumer from harms to be competitive process that from the consumer. So it’s more focused about on those harms, whereas, you have another system of which, you can protect a company from competitors, but then you’re ending up with one insurance company and it’s really self-defeating, and it really leads to a lot of regulatory capture as well. So it’s more about the broader competitive process and it’s about how that process affects the consumer directly.

Josiah Neeley:

Yeah. The other thing that I remember from law school about antitrust, and this will kind of exhaust my knowledge of the subject almost. But I do remember a joke about the old system, which was that if, if one company had higher prices than their competitors that was evidence of market power. And so that was a violation of antitrust. If they had lower prices than their competitors, that was evidence of dumping or anti-competitive practice there. And if they had the same price, that was evidence of collusion. So, maybe that’s kind of part of the reason why that approach was abandoned is that anything that happens can be described as being nefarious at a certain level of abstractness.

Ashley Baker:

So there’s the expression of how, if, when economists look for a problem they find a monopoly problem. That’s one way of justifying those three ways are each ways of justifying it one way or another in the end, and usually kind of at the sub-surface level of that, there are other non-competition problems that are trying to be corrected by looking at the price and saying, aha, well, they offer lower prices, it’s a monopoly, or they offer higher prices or whatever the case may be. In the current debate, we have a lot of issues surrounding, for example, data privacy and workers’ rights and equality and content moderation, and you name it. Those are kind of the sub issues that are being now kind of surfacing in the antitrust to date that aren’t anti antitrust problems and shouldn’t be resolved with antitrust law. And that’s a bigger issue that we’re facing right now is using antitrust to remedy problems that are completely irrelevant to if you trust the law.

Doug McCullough:

Hmmm. Let’s talk about that a little bit. Cause I don’t think that, and just sort of as a Lone Star Policy Institute did join the Alliance on Antitrust. So, you know, we certainly believe in, in this cause, but let’s talk a little bit more about what the proper use of antitrust enforcement would be because, the idea isn’t to abolish antitrust, there is a proper role for it. There are areas where there are anti-competitive practices that should be, that there should be disciplined that there should be some type of enforcement on, can you kind of give some examples where there is proper enforcement, and then we can kind of talk about where maybe it’s being politicized and some of the standards are up for debate, but how does the process work? Who actually enforces antitrust claims? Who has the right to bring a claim?  Walk through that a little bit and what are some of the common fact patterns other than sort of this big moment of talking about breaking up big tech, what sort of the day to day antitrust world really look like?

Ashley Baker:

The question of who are the enforcers is particularly a messy one right now because there’s a lot of overlapping jurisdiction and we can get to that in a minute. A lot of the common antitrust cases are valid anti-trust cases and you have price fixing cases. A lot of these are really boring pieces and they don’t get any intention and you haven’t one in the poultry industry recently. And a lot of them are pretty cut and dry. And then there are also the issues of mergers and merger review. And that’s an interesting one because a lot of people just like to cite the fact that not many mergers are challenged and evidence of lack of enforcement of our antitrust laws. But if you look at too, there’s this other aspect where a lot of mergers don’t actually happen to begin with because they know that it might be challenged. So that’s our laws working in a way that’s a lot less invincible is the behavior that it prevents antitrust laws or any laws that meant just to be punitive. It’s also a deterrent to behavior that’s kind of as the fleet there. So it’s hard. There were a lot of cases that are not exactly these big tech related cases that don’t get public attention or don’t actually make it to court. A lot are settled outside of court. So we never really hear about them. I just thought of enforcement. We have interesting issues there in terms of the FTC and the department of justice, antitrust division, both have authority to enforce our antitrust laws. And we see right now we have to, we have each agency running two different investigations on tech companies. They kind of had to split up the companies, investigate them, which is a little bit ironic if you are claiming that companies are monopolies and there are so many that you have to split them between agencies. But my point really is that it’s led to a lot of bad outcomes. And sometimes that the FTC and the DOJ had not arrived at the same conclusion. And you saw that the Qualcomm Case, for example, which was actually just decided last week the FTC and the DOJ ended up on opposite sides of things there. And that’s not the first time that that has happened. And that also does undermine our ability to enforce antitrust laws when they really need to be enforced. When you have two agencies that are contradicting each other, then that really undermines the rule of law, the purpose of those laws.

Doug McCullough:

I think it’s one thing to point out too, is that there’s occasionally simply consent orders where there’s a particular practice that’s viewed to be anti-competitive and the corporation and the government will sort of come to terms and the corporation will simply say, okay, I’m not gonna engage in that practice anymore. And I guess the reason I think that’s important to bring up is, and I sometimes joke about this, about the response right now from certain circles is breakup big tech. And maybe there’s a little bit of hyperbole there, but the reality antitrust law has more remedies than simply good old fashioned trust busting where if there’s any problem, we’re just going to start breaking up your corporation. There’s a lot more nuance than, as Josiah said, it’s actually a pretty complex area of law that I think in the sort of the politics of the moment really gets lost of just how you know, that there is a full body of law, that it is complex, it’s nuanced. And now we’re trying to apply it to some, some new areas. But one of the things that as I was preparing for the show is reading a little bit on from the Brookings Institute. Now that’d be a leftist center organization. And one of the points that they made is, and I guess you would say this is sort of a contrary to, or a competing view of the consumer welfare benefit rule is they say that in addition to consumer welfare, the antitrust should be used to combat income inequality. What do you think? What do you think of that?

Ashley Baker:

Well, that’s certainly not a new argument. And you know, they didn’t call that kind of that’s the public interest view of antitrust or hipster antitrust as you would call it. And that takes us back to the 1960s and 1970s when antitrust was used for a whole variety of things. And that’s why this debate is so important right now, by the way, especially for conservatives is because, like you said, there’s a lot of history and there’s a lot of nuance and people aren’t looking at that, and they’re not looking at what would be lost and how we got to where we are over the past 130 years. And in the 1960s and 70s, then antitrust was being used for a wide variety of socioeconomic purposes. And eventually we did arrive at the consumer welfare center. That’s what led to the consumer welfare standard was the need for this neutral underlying standard, instead of just giving enforcers a roving mandate to use it to for incumbent quality or environmental purposes or any other area of law, they tried to give antitrust as the remedy and that led to uneven enforcement, courts were had an even decisions and Justice Potter Stewart said the only really consistency that he could find in antitrust litigation is that the government always wins. And that’s not even scenario.

Doug McCullough:

You know, we’re talking about the consumer welfare standard. And one of the things that I’ve thought about is there’s a certain idea of what that means to us, particularly conservatives of what we mean by consumer welfare in the context of antitrust. But for a casual listener, they may think about the fact that we have progressives like Elizabeth Warren that often advanced their agenda based on the idea of consumer protection. So at a high level, can you kind of explain the difference between what we’re talking about here as consumer welfare, maybe as opposed to what progressives are talking about when they talk about consumer protection? Obviously in a very different context, but I think conceptually, it may be an important distinction.

Ashley Baker:

Well, conceptually one of the left and now what’s some of the populous right to want to break up big tech are talking about is using antitrust for a wide variety of socioeconomic purposes that are justified by protecting the consumers and then using antitrust improperly as the remedy for that. So what we have with the consumer welfare standard is where its end goal of the antitrust system itself, around what rules of like why ability and procedural mechanism and presumptions are created. So it’s more of a broader system that said underlying principle that allows the law to be applied consistently. And it’s also, I think a lot of people don’t get into the consumer welfare standard of credit for is actually one of the bigger, one of the biggest success stories in the conservative legal movement. I think we see every other area of law, which like Tort Law has been completely ballooned by the left. You have environmental, product liability law, quality laws. All of that litigation has been controlled by the left and their social agenda and we have antitrusts that we’ve actually managed to reign things back in over the past 40 years and that’s a lot to throw away.

Josiah Neeley:

It does seem to me that while the legal decisions and analogy of scholarly discussion or whatever, antitrust, it’s mostly focused on economics, whereas most of the energy and motivation both on the left and right talking about antitrust these days, I think really has to do more with political stuff. Right? So, on the right, for example, people are very concerned about certain viewpoints being censored on social media, for example, or people being kicked off social media. And what effect is that gonna have on political campaigns or the broader political discussion. And then on the left, you do have a little bit of that too Elizabeth Warren and or whatnot, trying to think she wants more to be kicked off, but you also just have a general left-wing concern about the political power of large companies and influence on the political process. And you know I don’t know if antitrust is necessarily the right vehicle to address those sorts of concerns, but that really, while occasionally someone will make a gesture towards economic arguments it mostly seems like what’s driving people and the latest craze has to do with the political stuff that you’re…

Ashely Baker:

Ha! Go ahead.

Josiah Neeley:

Yeah, no, go ahead.

Ashley Baker:

I’d say you’re absolutely right. And if you look historically to the antitrust debate has often been kind of a microcosm of the broader political debate and other societal issues. I think a good example of that are the Microsoft investigations and the antitrust for the 1990s with Ralph Nader. And he explicitly said that this no longer is going to be a wonky, legal issue, but this is going to be political and you see that now too for a completely different set of reasons. And you’ve seen this with Elizabeth Warren and with breaking up banks and her campaign against Wall Street and also saw the 1960s and 70s where kind of all of this began, but the broader public debate does have its roots more at politics. And now you’re seeing that also on the right. And they’re very unhappy with these companies over decisions that these companies have made them. These are the sessions too, that I don’t necessarily agree with as a business decision. I think that antitrust is absolutely not the right remedy for concerns that were, for example, content moderation. It’s also really, if we’re talking about the political aspect of it being incredibly shortsighted, do you use it for giving forcers this mandate to use it for whatever political purposes, because at some point your party will not be in power anymore. And that won’t work out very well. I think on the right of center, this is a huge strategic blunder to get into populist antitrust. I mean, it’s so bad, it’s comparable if not worse than and now you have to be recently, which is your Harry Reed giving up the filibuster that did not work out very well for the Democrats and for the right of center it’s going to be more or less the same, but it’s also an issue too, of just weaponizing the law for purposes other than what that law is. And for political purposes, which is something that conservatives traditionally have very much been against.

Josiah Neeley:

So, recently, you did have hearings where the heads of the four big tech companies, Google, Facebook, Amazon, and Apple. So they testified, and there was a lot of Stroman Drag. What was kind of your take away from all of that? What did we learn from that, if anything?

Ashley Baker:

Well, it certainly wasn’t a productive hearing, nor was it designed to be, to be honest. They drug four CEO’s of some of the four largest companies in the United States out in front of television to ask them a lot of questions. And really, it was an opportunity for a lot of the members of Congress to air their grievances. A lot of the questions weren’t really questions or designed to be the discussion really ended up not being about antitrust. Whatsoever. We had one Republican member who very directly said that antitrust law should be used for antitrust. That was really great coming from him. Otherwise there was a lot of talk about content moderation mostly and about anti-conservative bias about privacy and about worker about inequality and workers’ rights coming from the left. And also those on the left have had the same concerns as those on the right about content moderation, by the way, they have been complaining just as much. And that’s one thing that’s a lot of people don’t point out. But, the outcome of the hearing, I don’t see there wasn’t really any constantly hearing that could wind itself to being relevant and a majority report by the house judiciary committee or any potential legislation. It was really far out left center field, and really was meant it seems more for publicity now, by the way, there are several members of the house judiciary committee who have been fundraising off of this directly, which is not surprising. But, it was not about antitrust at all. It was about a lot of issues that are not antitrust. And that gets at the core of what we were just discussing about using antitrust as a convenient regulatory tool for other problems that people have.

Josiah Neeley:

Yeah. So I know this is a little bit far afield, perhaps, but if antitrust is not the proper vehicle for dealing with some of these content moderation or data privacy issues, I mean, what is the alternative? How should our elected officials or other people public citizens address these sorts of things if antitrust is not the right area to go looking for an answer?

Ashley Baker:

Well, legislation is exactly how they should be addressing it. Well, whether or not they should pass legislation to do certain things. That’s another conversation, but this should be addressed legislatively. And a lot of these issues that are being now kind of merged into the antitrust debate, that’s happening as a result of legislative failures. We’ve had the debate over Section 230 for a couple of years now, and there’s been a failure to make any progress, any serious proposals to reform 230 or amend the text. I mean, there are probably ways in which Congress could find a way to amend 230 that’s not completely a publicity stunt or some sort of really radical proposal, but they have failed to do so and they’ve failed to pass privacy legislation as well. There’s any for two different reasons, I would say with privacy legislation that debates a little bit different. It’s not as much of the political football that the content moderation debate is, but this should be done by legislation and by potentially amending the statute.

Doug McCullough:

Alright. So I guess from my point of view, that would probably look a little bit more like, if we were to revisit to Section 230, that would be more along the lines of heightening the standards, the requirements for social media platforms to moderate content and maybe to have clearer appeals processes if they suspend someone or give more of a sense of an appeal process if you disagree with the way a social media platform were to operate and how they may be viewed as sensory. But that would be very different than the tools that are available under antitrust and I think that’s sort of what you’re alluding to.

Ashley Baker:

Right you will clarify legislative text, for example, to make it more clear when these liability exemptions apply and what behavior exactly is referring to. There are quite a few points there and in the texts of 230 that are admittedly very vague and that’s something that should be debated. This has absolutely nothing to do with antitrust though. It’s not a competition problem. This is completely statutory. And that’s something that Congress can go back and revise and resolve, and it’s their job to do so. And is Congress not doing their job and using antitrust as a convenient regulatory tool if they can rewrite antitrust laws to allow them to do that. And they have that tool.

Josiah Neeley:

On the legislative side of things. And I vaguely remember a time when Congress did pass legislation. So I guess it’s possible. Are there legislative changes that need or that should happen in order to clarify standards or update things or change things? Do we need any, as you mentioned, I think that, the Sherman Antitrust Act, I think it’s like less than a page. It may even be just one line as far as the statute goes. So, I mean, do we need legislation there to try and clear anything up, or is it just a matter of courts supplying case law and standards that are developed over time?

Ashley Baker:

It’s a little bit of both, and that’s why antitrust law is so complex as well. Because it was like you said, the Sherman Act and the Clayton Act are so incredibly short that its evolution over the years has been more evolved. It’s just to a section has evolved from being more textual to, because it can’t be textual to more functional. And therefore it’s kind of evolved through common law judicial interpretations. So the way that it was interpreted in the beginning obviously did not work for the first, you know, 10, 20 years after the passage of the Sherman Antitrust Act. So you have the way in which it has evolved in that long bruise by analogizing new situations to old ones. And then you have also, Congress has I’m thinking things, you also have Congress providing that sort of guidance under which the law is going to be applied. So it’s an issue of bills and there are some proposals out there right now in Congress that are particularly bad, actually. Some of those, the proposals are for bright line guidelines that would prohibit mergers, for example, above 10 or 20% market share across all industries. There’s some other aggressive merger prohibitions. One big proposal that has been floated has essentially inverting the burden of proof. Therefore it is on the company to prove that they are non-monopoly, which is very much against kind of some of the core tenets of the American legal system, I would say. And then there are also some that would allow antitrust exemptions for certain firms. And then there’s also just politicizing it more generally and statements about moving away from the consumer welfare standard and towards that public interest sort of standard in which it can be applied for anything I know Elizabeth Warren has had a bill out there that would do all of these things and move away from consumer welfare standard. Amy Klobuchar has one as well and hers is particularly, they’re both particularly radical. They’re both in what I call departure from the way that antitrust has operated under over the past forty years and I think because the debate has become so politicized and so high level and people are angry about all of these other problems they are more likely to not really evaluate those proposals as they should and evaluate the history of this.

Josiah Neeley:

So, let’s end by circling back a little bit, because I introduced you saying that you were with the Committee for Justice and then also the Alliance on Antitrust. So what is the Committee for Justice and what are, what do they do?

Ashley Baker:

So the Committee for Justice is a nonprofit. We were founded in 2002, and we initially worked on judicial confirmations, pretty exclusively, particularly during the Bush administration during the issues with his federal court nominees and the destruction of his nominees, they’re kind of heavy expanded beyond that. We focused on a lot of issues that are relevant to the Supreme Court and cases of the judiciary and also some administrative law. All of these issues that are kind of starting to intertwine issues that affected judiciaries and how our nominees are now going to be ruling on cases that are related to antitrust and cases that are related to tech. And the administrative state is obviously a huge issue right now as well. And those have kind of become our issue areas over the past four or five years and terms of where the courts are heading as well. So you see, it seems kind of like an odd combination of issues to work on, but over the past few years you’ve seen them really merge and combine and see how one affects the other, and can we progress as we do a lot of, we do a lot of writing on these issues. We write letters to Congress, we file Amicus briefs in cases. We just filed one in a CFAA case. We filed one in Google vs Oracle recently in supportive Oracle’s position actually. And we need drum most of the issues that are before the Supreme Court. And when recently we have started a project, it’s called the Alliance on Antitrust. And the Alliance on Antitrust is a coalition. It’s a coalition of conservative and free market groups that are concerned about the broader principles that are at stake here. And like I said before, what is being thrown away with a lot of these proposals to reshape antitrust law. It’s a group that really cares about the rule of law and not applying antitrust law for purposes other than antitrust and really wants to preserve Robert Bork’s consumer welfare standard and something I’ve seen a need for, for a long time ago. A lot of conservatives who are very much in disagreement with the populous position that we should just use antitrust as a hammer to solve all these other problems that conservatives have. And while we don’t deny that there are some problems with these tech companies it’s that age trust is not the solution to them. And a lot of conservatives are losing sight of conservative principles on when it comes to antitrust and are really taking positions that undermine the rule of law. So the point of the Alliance of Antitrust is kind of shines some light on the issue and talk about what is at stake and the history of antitrust law and why these solutions are really not good in the long term, also for the market or for Republicans and Libertarians as well.

Josiah Neeley:

All right. So our guest today has been Ashley Baker. Ashley, thank you very much for joining us.

Ashley Baker:

Thank you for having me.

Doug McCullough:

Thank you for joining us today. If enjoyed the show, we asked that you would subscribe, leave favorable reviews and tell your friends to tune into the Urbane Cowboys.

Listen to the full episode here.