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Review of Industrial Organization

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20-03-2019

Antitrust in the Internet Era: The Legacy of United States v. A&P

Authors: Timothy J. Muris, Jonathan E. Nuechterlein

Published in: Review of Industrial Organization | Issue 4/2019

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Abstract

Critics from both the right and the left claim that modern antitrust doctrine, rooted in consumer welfare, is inadequate to handle the challenges of the twenty-first century economy. They express nostalgia for 1960s antitrust, when the field had no clear objectives and cases were decided on impressionistic notions of “fairness” and good corporate citizenship. This article exposes the intellectual void at the heart of this new populist movement and begins by following Justice Holmes’ tenet that “a page of history is worth a volume of logic.” More than 80 years ago, the A&P grocery chain was a vertically integrated retailer that made use of unprecedented scale and innovation to offer consumers a wider range of products than the competition and at lower prices. Yet A&P’s very success, which came at the expense of smaller and less efficient competitors, triggered a backlash: first from Congress, in the form of the Robinson–Patman Act, and then from the Justice Department, in the form of successful prosecution under the Sherman Act. These attacks on A&P bear an eerie resemblance to attacks today on leading online innovators. Increasingly integrated and efficient retailers—first A&P; then “big box” brick-and-mortar stores; and now online retailers—have challenged traditional retail models by offering consumers lower prices and greater convenience. For decades, critics across the political spectrum have reacted to such disruption by urging Congress, the courts, and the enforcement agencies to stop these American success stories by revising antitrust doctrine to protect small businesses rather than the interests of consumers. Using antitrust law to punish pro-competitive behavior makes no more sense today than it did when the government attacked A&P for offering consumers too good a deal on groceries. In addition, antitrust doctrine does not need an overhaul. It is shaped by many economic perspectives, follows no one “School,” and is flexible enough to address any monopoly abuses in today’s economy. It is also well-calibrated to serve its central function: promoting consumer welfare. It does so not only by prohibiting conduct that harms consumers in the long run, but also by avoiding interference with conduct that might appear problematic to non-economists but that demonstrably benefits consumers over time. Antitrust remains a work in progress, but it is far superior to any alternative that the critics propose.

previous article The Dubious Antitrust Argument for Breaking Up the Internet Giants

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The World’s Most Valuable Resource Is No Longer Oil, But Data, The Economist, May 6, 2017.

See, e.g., Marshall Steinbaum, The Consumer Welfare Standard Is an Outdated Holdover from a Discredited Economic Theory, Roosevelt Institute (Dec. 11, 2017); Russell Brandom, The Anti-Monopoly Case Against Google: A Conversation with Open Markets’ Barry Lynn, The Verge (Sept. 5, 2017); see also Lina Khan, Amazon’s Antitrust Paradox, 126 Yale L.J. 710, 716 (2017).

U.S. Senate Democrats, A Better Deal: Cracking Down on Corporate Monopolies and the Abuse of Economic and Political Power 1 (July 2017); see also David Weigel, Breaking from Tech Giants, Democrats Consider Becoming an Antimonopoly Party, Wash. Post, Sept. 4, 2017.

Daniel Kishi, Time for a Conservative Anti-Monopoly Movement, The Am. Conservative, Sept. 19, 2017; see also Robert Verbruggen, Google, Facebook, Amazon: Our Digital Overlords, Nat’l Rev., Dec. 12, 2017.

E.g., Khan, supra note 2, at 723–736 (discussing, inter alia, Utah Pie Co. v. Continental Baking Co., 386 U.S. 685 (1967), and Brown Shoe Co. v. United States, 370 U.S. 294 (1962)). In Brown Shoe, the Supreme Court rejected a merger between a shoe manufacturer and a shoe distributor because (inter alia) the merger “foreclosed” competitors from a tiny percentage (2–5%) of the relevant markets, which were unconcentrated. The Court acknowledged that such consolidation can be “beneficial to consumers” but ultimately deemed it more important “to promote competition through the protection of viable, small, locally owned business[es]” even though “occasional higher costs and prices might result from the maintenance of fragmented industries and markets.” 370 U.S. at 344. In Utah Pie, the Court upheld a treble-damages award against national frozen pie manufacturers for selectively reducing prices in the Salt Lake City market to undersell a local company that occupied two-thirds of the market there. 386 U.S. at 702. As one Yale scholar observed at the time, the case illustrated the Court’s “disregard for the central purpose of antitrust, the promotion of consumer welfare through the promotion of a competitive market process.” Ward S. Bowman, Restraint of Trade by the Supreme Court: The Utah Pie Case, 77 Yale L.J. 70, 70 (1967).

Barry Lynn, No Free Parking for Monopoly Players: Time to Revive Anti-Trust Law, The Nation, June 8, 2011.

Heather Timmons, The Tiny, Passionate Group Battling Google, Facebook, and Amazon’s Grip on US Minds and Wallets, Quartz, Nov. 16, 2017. A broad variety of publications have analyzed this movement, some critically and some less so. See, e.g., Greg Ip, The Antitrust Case Against Facebook, Google, and Amazon, Wall St. J., Jan. 16, 2018; Scott Galloway, The Four: The Hidden DNA of Amazon, Apple, Facebook, and Google (2017); Eve Smith, The Techlash Against Amazon, Facebook and Google—and What They Can Do, The Economist, Jan. 20, 2018; Steven Pearlstein, Is Amazon Getting Too Big?, Wash. Post, July 28, 2017; Franklin Foer, Amazon Must Be Stopped, The New Republic, Oct. 9, 2014; Kevin Maney, Big Tech: Hate Amazon, Apple, Facebook and Google? Get in Line, Newsweek, Nov. 6, 2017; Peter Coy, How to Tame Google, Facebook, Amazon, and Apple, Bloomberg, Nov. 29, 2017; see also James Heskett, Is It Time to Break Up Amazon, Apple, Facebook, or Google?, Harv. Bus. Sch. Working Knowledge (Dec. 6, 2017), https://hbswk.hbs.edu/item/is-it-time-to-break-up-amazon-apple-facebook-or-google?cid=wk-rss.

New York Trust Co. v. Eisner, 256 U.S. 345, 349 (1921).

See, e.g., United States v. Microsoft Corp., 253 F.3d 34 (D.C. Cir. 2001) (en banc) (per curiam).

See Top 100 Retailers: The Nation’s Retail Power Players 2018, Stores, https://stores.org/stores-top-retailers-2018/(visited Jan. 21, 2019) (noting that Walmart has nearly four times Amazon’s retail sales revenues).

A&P was so central to mid-century American life that John Updike made it both the setting and the title of his best-known short story. See John Updike, A&P, The New Yorker, July 22, 1961, at 22. When Updike died in 2009, one journalist remarked: “I remember reading his short story ‘A&P’ in high school. Of course, everybody remembers reading ‘A&P’ in high school. It is perhaps Updike's most widely anthologized work, this brief, bright jewel of a story about a young grocery clerk and his pointless act of gallantry.” Julia Keller, John Updike at the A&P, Chi. Trib., Feb. 1, 2009.

Marc Levinson, Monopoly in Chains: Antitrust and The Great A&P, 12 CPI Antitrust Chron. 2, 4 (2011) (“Levinson CPI”).

Id.

Report of the Federal Trade Commission on the Wholesale Marketing of Food 160 (June 30, 1919).

Marc Levinson, The Great A&P and the Struggle for Small Business in America 83 (2011) (“Levinson”).

This is a fundamental tenet of any market economy, as illustrated by the famous Edgeworth Box. See generally Thomas M. Humphrey, The Early History of the Box Diagram, 82 Econ. Q. 37 (1996).

In absolute terms, A&P’s cost advantages were modest. See Morris Adelman, A&P: A Study in Price–Cost Behavior and Public Policy 140–43 and app. IV (1959) (“Adelman”). But that was enough to make a competitive difference in this narrow-margin business featuring highly price-sensitive consumers. See Levinson, supra note 15, at 104.

Levinson, supra note 15, at 92.

Id. at 265.

Id. at 105.

Id. at 92.

Levinson CPI, supra note 12, at 4.

See Hugh Hansen, Robinson–Patman Law: A Review and Analysis, 51 Fordham L. Rev. 1113, 1123 (1983).

15 U.S.C. § 13(a), (b).

Woodman’s Food Mkt. v. Clorox Co., 833 F.3d 743, 746 (7th Cir. 2016), cert. denied, 137 S. Ct. 1213 (2017).

Levinson, supra note 15, at 165.

Id.

Robert Bork, The Antitrust Paradox 382 (1978) (“Bork”).

15 U.S.C. § 13(a).

See, e.g., FTC v. Standard Motor Prods., Inc., 371 F.2d 613, 622 (2d Cir. 1967); see generally 1 Alfred Kahn, The Economics of Regulation: Principles and Institutions 150–153 (1988); MCI Commc’ns Corp. v. AT&T Co., 708 F.2d 1081, 1116 (7th Cir. 1983).

Walton Hamilton, Cost as a Standard for Price, 4 L. and Contemp. Problems 321, 323, 328 (1937).

Id. at 333.

Frederick Rowe, The Evolution of the Robinson–Patman Act: A Twenty-Year Perspective, 57 Colum. L. Rev. 1059 (1957).

See, e.g., Sunshine Biscuits, Inc., 59 F.T.C. 674 (1961) (Elman, Comm’r, dissenting from finding of Robinson–Patman violation), rev’d, 306 F.2d 48 (7th Cir. 1962) (adopting Elman’s position).

Adelman, supra note 17.

ABA, Report of the ABA Commission to Study the Federal Trade Commission (1969).

Richard Posner, The Robinson–Patman Act: Federal Regulation of Price Differences (1976).

See infra notes 79–80, 111–119 and accompanying text.

How the Chicago School Overshot the Mark: The Effect of Conservative Economic Analysis on U.S. Antitrust (Pitofsky ed., 2008). Rowe was also critical of some aspects of the Chicago School. See Frederick Rowe, The Decline of Antitrust and Delusions of Models: The Faustian Pact of Law and Economics, 72 Geo. L.J. 1511 (1984).

Dep’t of Justice, Report on the Robinson–Patman Act 250 (1977).

See Daniel Sokol, Analyzing Robinson–Patman, 83 Geo. W. L. Rev. 2064, 2075–2076 (2015).

Great Atl. and Pac. Tea Co. v. FTC, 440 U.S. 69, 80 (1979). The losing party in that case was the FTC, which was represented by Frank Easterbrook, then an attorney in the Office of the Solicitor General. Easterbrook would paradoxically become a leading light of the Chicago School.

Volvo Trucks N. Am., Inc. v. Reeder-Simco GMC, Inc., 546 U.S. 164, 180–181 (2006).

The 1944 indictment followed an earlier indictment in 1942, which was dismissed by a federal district court in Dallas. Although the court of appeals reinstated most of the indictment, the Justice Department was disinclined to proceed before a presumptively hostile judge. It thus dismissed the original indictment and filed new charges against A&P in the Eastern District of Illinois, where the case was ultimately tried in 1945. Levinson, supra note 15, at 226–227.

United States v. N.Y. Great Atl. and Pac. Tea Co., 67 F. Supp. 626 (E.D. Ill. 1946), aff’d, 173 F.2d 79 (7th Cir. 1949).

See, e.g., id. at 630–631.

Adelman, supra note 17, at 15; see also Section 1.4, infra (discussing Donald Turner’s similar analysis).

Adelman, supra note 17, at 14; cf. Brooke Grp. Ltd. v. Brown and Williamson Tobacco Corp., 509 U.S. 209, 222–223 (1993). A&P had made the same point at trial, calling Harvard Business School professor Malcolm McNair to explain: “The business of food distribution is just about the last business I can think of in which it would be feasible for anybody to develop a monopoly.” Levinson, supra note 15, at 232.

Id. at 231.

Id. In a variation on this theme, the court of appeals affirmed the convictions in part on the ground that “[w]hen the gross profit rate is reduced in Area X [to meet competition], it is an almost irresistible conclusion that A&P had the power to compensate for any possible decline in net profits by raising the gross profit rate and retail prices in Area Y, where it was in a competitive position to do so.” 173 F.2d at 87. This makes no sense: A&P presumably strove to maximize long-term profits when setting its prices everywhere, and it would have been irrational to deviate from a profit-maximizing strategy in Area Y simply because the company decided to lower prices to meet competition in Area X.

Adelman, supra note 17, at 16.

67 F. Supp. at 657.

Id. at 658.

Levinson, supra note 15, at 230–231.

See, e.g., 67 F. Supp. at 636 (conduct “that leads directly to lower prices to the consumer may … be restraint of trade” because the Sherman Act “has no concern with prices, but looks solely to competition”).

Levinson, supra note 15, at 229.

Id. at 161–162.

Adelman, supra note 17, at 17. The district court lent its own support to this view, expressing “doubt whether we ever needed the Robinson–Patman law,” given that “the Sherman Act, properly interpreted and administered, would have remedied all the ills meant to be cured.” 67 F. Supp. at 676.

See id. (“[i]ntegration … is not, of itself, a violation of the law”; “the chain store system … is not in issue in this case”; “nor is A&P’s size, alone, of importance”).

Id. at 642.

Id. (emphasis added).

Id. at 639 (emphases added).

Id. at 655.

Id. at 658.

Id. at 678.

173 F.2d 79.

Levinson, supra note 15, at 244.

Id. at 245.

Id. at 249.

Morris Adelman, The A&P Case, 63 Q.J. Econ. 283 (1949).

Adelman, supra note 17.

Note, Trouble Begins in the “New” Sherman Act: The Perplexing Story of the A&P Case, 58 Yale L.J. 969 (1949) (“Turner”); see also Adelman, supra note 17, at 18 and n.9 (identifying Turner as author of Yale note).

Turner, supra note 73, at 977.

Id. at 978.

Id. at 970.

Id.

Id. at 969–971 (footnotes omitted) (paragraph break omitted).

Bork, supra note 28.

See, e.g., William Kovacic, The Intellectual DNA of Modern U.S. Competition Law for Dominant Firm Conduct: The Chicago/Harvard Double Helix, 2007 Colum. Bus. L. Rev. 1, 6–7 (“[T]wo Harvard School scholars, Phillip Areeda and Donald Turner, spurred the rethinking of modern predatory pricing doctrine with their proposal in 1975 that a dominant firm can ordinarily be presumed to be acting legally under the U.S. antitrust laws when it sets its prices at or above its average variable costs.… Areeda and Turner, more than any other commentators, catalyzed the retrenchment of liability standards and motivated a more general and fundamental reassessment of U.S. doctrine governing dominant firms.”) (footnote omitted).

1 George Santayana, The Life of Reason 284 (1905).

William Baumol and Alan Blinder, Economics: Principles and Policy 425–426 (8th ed. 2000) (paragraph break omitted); see also Spectrum Sports, Inc. v. McQuillan, 506 U.S. 447, 458–459 (1993).

Khan, supra note 2.

Khan, supra note 2, at 743.

Foer, supra note 7; see also Khan, supra note 2, at 716 (“[T]he story of Amazon’s sustained and growing dominance is also the story of changes in our antitrust laws.… It is as if [Amazon CEO Jeff] Bezos charted the company’s growth by first drawing a map of antitrust laws, and then devising routes to smoothly bypass them.”); Lina Khan, Amazon Bites Off Even More Monopoly Power, N.Y. Times, June 21, 2017 (“The company has established its level of dominance because of the failings of our current antitrust laws.”); Pearlstein, supra note 7 (“Amazon.com … has made itself as essential to commerce in the 21st century as the railroads, telephone systems and computer hardware makers were in the 20th.”). The authors have advised Amazon on a variety of antitrust issues.

Levinson, supra note 15, at 229.

Id. at 161–162.

Khan, supra note 2, at 713; see also Foer, supra note 7 (“Rather than pocketing the profits from this creation, Amazon has plowed revenue into bettering itself ….”).

Brooke Grp., 509 U.S. at 222–223.

See, e.g., Herbert Hovenkamp, Antitrust Policy and Inequality of Wealth, CPI Antitrust Chron. 1, 6 (Oct. 2017) (“almost nothing about [Amazon’s] market positions suggests that it would be able to sustain monopoly pricing without producing so much consumer defection or competitor entry that the price increase would be unprofitable”), http://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=2771&context=faculty_scholarship (“Hovenkamp”).

Adelman, supra note 17, at 14; cf. Brooke Grp., 509 U.S. at 222–223.

Khan, supra note 2, at 791.

Id. at 730.

Turner, supra note 73, at 970, 977.

Barry Wright Corp. v. ITT Grinnell Corp., 724 F.2d 227, 234 (1st Cir. 1983) (Breyer, J.).

The arrangement described here is known as “Fulfillment by Amazon” (“FBA”). Merchants can also obtain, at a lower fee, a “Fulfillment by Merchant” (“FBM”) arrangement, in which they handle warehousing and shipping but still appear on Amazon’s website.

Khan, supra note 2, at 777.

Id. at 755; see also Foer, supra note 7.

Turner, supra note 73, at 970.

100

Khan, supra note 2, at 776–777.

101

Id. at 779 (emphasis added).

102

Id. Khan claims that the discounts Amazon obtained from delivery companies have harmed third-party merchants because the “[d]elivery companies sought to make up for the discounts … by raising the prices they charged to independent sellers.” Id. at 775. This claim parallels the A&P prosecution’s charge that “[t]he consumers who [bought] food in stores competing with A&P pa[id] part of the low cost of A&P’s operation” on the theory that the food suppliers who gave A&P discounts made up for them by raising prices to other grocery stores. Levinson, supra note 15, at 231. In both cases, the claims contradict the basic economics of individualized bargaining: Suppliers can normally be expected to charge each buyer the highest price it can negotiate from that buyer, irrespective of whatever concessions they make to other buyers. See id.

103

Khan, supra note 2, at 780 (emphasis added).

104

See Phillip Areeda, Essential Facilities: An Epithet in Need of Limiting Principles, 58 Antitrust L.J. 841 (1990).

105

67 F. Supp. at 658.

106

Turner, supra note 73, at 978.

107

A&P sold Eight O’Clock Coffee from the company’s earliest days to its ultimate demise. Levinson, supra note 15, at 55–56. That brand, now owned by international conglomerate Tata, is one of A&P’s last remaining vestiges.

108

See generally Sarah Halzack, Retail’s Secret Weapon Is the Private Label, Bloomberg (Oct. 24, 2017), https://www.bloomberg.com/gadfly/articles/2017-10-24/private-label-brands-retail-s-new-secret-weapon.

109

Khan, supra note 2, at 780.

110

Foer, supra note 7; see also Khan, supra note 2, at 716.

111

Francine LaFontaine and Margaret Slade, Vertical Integration and Firm Boundaries: The Evidence, 45 J. Econ. Lit. 629, 680 (2007). Professor LaFontaine served as Director of the FTC’s Bureau of Economics from 2014 to 2015. Similarly, Oliver Williamson—no Chicago economist—won a Nobel Prize in significant part for his work on the role of efficient vertical integration within the modern firm. See, e.g., Oliver Williamson, The Economics of Organization: The Transaction Cost Approach, 87 Am. J. Soc. 548 (1981).

112

See, e.g., Aaron Director and Edward Levi, Law and the Future: Trade Regulation, 51 Nw. U.L. Rev. 281, 293 (1956) (noting raising-rivals’-costs considerations); Thomas Krattenmaker and Steven Salop, Anticompetitive Exclusion: Raising Rivals’ Costs to Achieve Power over Price, 96 Yale L.J. 209 (1986) (developing analysis).

113

Steven Salop and Daniel Cully, Potential Competitive Effects of Vertical Mergers: A How-To Guide for Practitioners 5 (Georgetown U. Law Ctr. Dec. 8, 2014), https://scholarship.law.georgetown.edu/cgi/viewcontent.cgi?article=2404&context=facpub.

114

Bruce Kobayashi and Timothy Muris, Chicago, Post-Chicago, and Beyond: Time to Let Go of the 20th Century, 78 Antitrust L.J. 147, 172 (2012) (noting that the Chicago School’s shared purpose was criticism of 1960 s and 1970 s antitrust policy and that the School had no shared positive antitrust agenda).

115

Khan, supra note 2, at 717.

116

See Microsoft Corp., 253 F.3d at 55 (“That barrier … stems from two characteristics of the software market: (1) most consumers prefer operating systems for which a large number of applications have already been written; and (2) most developers prefer to write for operating systems that already have a substantial consumer base. This ‘chicken-and-egg’ situation ensures that applications will continue to be written for the already dominant Windows, which in turn ensures that consumers will continue to prefer it over other operating systems.” (citation omitted)).

117

See United States v. AT&T Co., 552 F. Supp. 131 (D.D.C. 1982), aff’d sub nom Maryland v. United States, 460 U.S. 1001 (1983).

118

See, e.g., Complaint, FTC v. Qualcomm Inc., No. 5:17-cv-00220 (N.D. Cal. filed Jan. 17, 2017); Press Release, FTC, FTC Settles Charges of Anticompetitive Conduct Against Intel (Aug. 4, 2010); FTC v. Actavis, Inc., 133 S. Ct. 2223 (2013); Press Release, Dep’t of Justice, Justice Department Requires Six High Tech Companies to Stop Entering into Anticompetitive Employee Solicitation Agreements (Sept. 24, 2010). The authors have played roles in some of these matters while in the government or private sector.

119

Richard Posner, Antitrust in the New Economy, 68 Antitrust L.J. 925, 925 (2001) (“Posner”); see also Jonathan Jacobson, Do We Need a “New Economy” Exception for Antitrust? Antitrust 89 (Fall 2001).

120

Kahn, supra note 2, at 716, 737.

121

Joshua Wright and Douglas Ginsburg, The Goals of Antitrust: Welfare Trumps Choice, 81 Fordham L. Rev. 2405, 2410 (2013) (“Wright and Ginsburg”) (footnote omitted).

122

U.S. Dep’t of Justice and Fed. Trade Comm’n, Horizontal Merger Guidelines § 6.4 (Aug. 19, 2010) (“2010 Horizontal Merger Guidelines”).

123

See, e.g., Jonathan Baker, Beyond Schumpeter versus Arrow: How Antitrust Fosters Innovation, 74 Antitrust L.J. 575 (2007); Michael Katz and Howard Shelanski, Mergers and Innovation, 74 Antitrust L.J. 1 (2007); Richard Gilbert, Looking for Mr. Schumpeter: Where Are We in the Competition-Innovation Debate?, in 6 Innovation Pol’y and the Econ. 159 (Adam Jaffe et al. eds., 2006). One of us discussed these issues as FTC Chairman in analyzing the proposed Genzyme-Novazyme merger in 2004. See Statement of Chairman Timothy Muris in the Matter of Genzyme Corporation/Novazyme Pharmaceuticals, Inc. 3 (Jan. 13, 2004) (citing “lack of any clear theoretical or empirical link between increased concentration and reduced innovation”), https://www.ftc.gov/news-events/press-releases/2004/01/ftc-closes-its-investigation-genzyme-corporations-2001.

124

See, e.g., Posner, supra note 119, at 930 (“The gale of creative destruction that [Joseph] Schumpeter described, in which a sequence of temporary monopolies operates to maximize innovation that confers social benefits far in excess of the social costs of the short-lived monopoly prices that the process also gives rise to, may be the reality of the new economy.”).

125

2010 Horizontal Merger Guidelines, supra note 122, § 6.4.

126

Id.

127

Wright and Ginsburg, supra note 121, at 2411.

128

Senator Elizabeth Warren, Keynote Remarks at the New America’s Open Markets Program: Reigniting Competition in the American Economy (June 29, 2016), https://www.warren.senate.gov/files/documents/2016-6-29_Warren_Antitrust_Speech.pdf (“Warren”).

129

Council of Econ. Advisers Issue Brief, Benefits of Competition and Indicators of Market Power 1 (Apr. 2016) (“CEA Report”).

130

Too Much of a Good Thing, The Economist, Mar. 26, 2016 (“Too Much of a Good Thing”) (emphasis omitted).

131

CEA Report, supra note 129, at 4.

132

Carl Shapiro, Antitrust in a Time of Populism 8 (Oct. 24, 2017), https://faculty.haas.berkeley.edu/shapiro/antitrustpopulism.pdf (emphasis omitted). Professor Shapiro was Deputy Assistant Attorney General for Economics in the Antitrust Division from 1995 to 1996 and again from 2009 to 2011 and served on the President’s Council of Economic Advisers in 2011–2012. For another, equally incisive critique of the CEA analysis, see Gregory Werden and Luke Froeb, Don’t Panic: A Guide to Claims of Increasing Concentration, 33 Antitrust Mag. 74 (Fall 2018).

133

Shapiro, supra note 132, at 11. “HHI” refers to the Herfindahl–Hirschman Index, a widely used approach to measuring market concentration.

134

CEA Report at 4 (emphasis added).

135

Shapiro, supra note 132, at 9. Shapiro observes that the same shortcomings undermine the conclusions the Economist purported to draw from its own concentration analysis of “900-odd sectors,” Too Much of a Good Thing, supra note 130, within the national economy. Shapiro, supra note 132, at 9–12.

136

Alex Shepard, How Amazon Is Changing the Whole Concept of Monopoly, The New Republic (June 19, 2017), https://newrepublic.com/article/143376/amazon-changing-whole-concept-monopoly.

137

Shapiro, supra note 132, at 8 (emphasis omitted).

138

Too Much of a Good Thing, supra note 130.

139

Shapiro, supra note 132, at 14.

140

These studies and the concentration debate are summarized in Industrial Concentration: The New Learning (Harvey Goldschmid et al. eds., 1974); see also Wesley Liebeler, Bureau of Competition: Antitrust Enforcement Activities, in The Federal Trade Commission Since 1970: Economic Regulation And Bureaucratic Behavior 65 (Kenneth Clarkson and Timothy Muris eds. 1981).

141

384 U.S. 270 (1966). Just as the unlikely advocate for the government in A&P v. FTC (the 1979 Robinson–Patman case) was Frank Easterbrook, see note 42, supra, the unlikely advocate for the government in Von’s Grocery was Richard Posner. In a 1992 interview, Posner remarked that he was “perfectly convinced of the soundness of the government’s position” when he argued the case in 1966 but subsequently concluded that the merger “was completely harmless.” Interview with Judge Richard Posner, Seven Circuit Court of Appeal, 6 Antitrust 4, 5 (Spring 1992).

142

384 U.S. at 272, 277. As Justice Stewart remarked in dissent, this outcome was perplexing because “[t]here is simply no evidence in the record … that the increment in market share obtained by the combined stores can be equated with an increase in the market power of the combined firm.” Id. at 297.

143

Harold Demsetz, Two Systems of Belief about Monopoly, in Industrial Concentration, supra note 140, at 164.

144

See id.; see also Jeffrey Perloff et al., Estimating Market Power and Strategies 33 (2007) (“Many researchers, after finding a link between high profits (or excessive rates of return, or large price–cost margins …) and high concentration ratios, infer improperly that high concentration rates are bad because they ‘cause’ high profits. However, profit and concentration influence each other. An alternative interpretation of a link between profits and concentration is that the largest firms are the most efficient and innovative. Only when a firm is efficient or innovative is it profitable to expand in a market and make the market concentrated. In this interpretation, a successful firm attracts consumers, either through lower prices or better products. A firm’s success, as measured by both its profits and its market share, is an indicator of consumer satisfaction, not of poor industry performance.”) (citation omitted).

145

See generally Transcript of FTC Workshop, Horizontal Merger Guidelines Review Project, No. P092900 (Jan. 26, 2010), https://www.ftc.gov/sites/default/files/documents/public_events/horizontal-merger-guidelines-review-project/100126transcript.pdf. A “4-to-3” merger is one that combines two firms in a market occupied by four major participants, leaving three post-merger firms. Unlike the guidelines that followed, the 1968 version lacked uniform benchmarks. In some cases, the 1968 guidelines condemned mergers in markets with more than eight equal-sized competitors.

146

Compare, e.g., John Kwoka, Mergers, Merger Control, and Remedies (2014) with Michael Vita and F. David Osinski, John Kwoka’s Mergers, Merger Control, and Remedies: A Critical Review (2016), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2888485.

147

E.g., Khan, supra note 2, at 737.

148

Lynn, supra note 6; see also Warren, supra note 128 (favorably citing proposals for “adopting a public interest standard for enforcement actions”).

149

Khan, supra note 2, at 795; see also id. at 780 (discussing “discrimination” and “conflicts of interest”).

150

See George Lardner Jr., On Tape, Nixon Outlines 1971 “Deal” To Settle Antitrust Case Against ITT, Wash. Post, Jan. 4, 1997 (describing White House intervention in antitrust proceedings involving political benefactor); Ed Kilgore, Is Trump’s War with Amazon Like Kennedy’s War with U.S. Steel?, New York Mag., Apr. 4, 2018 (noting that Attorney General Robert Kennedy “launched an antitrust investigation, summoned a federal grand jury, and sent FBI agents to the homes and offices of steel executives” after President Kennedy announced a political vendetta against steel companies); see also Callum Borchers, Two Reasons Trump Loves One Media Merger But Hates Another: Fox News and CNN, Wash. Post, Dec. 15, 2017 (speculating about White House influence in merger clearance decisions). These past episodes of abuse are answer enough to Tim Wu’s curious proposal for injecting “non-economic … political values” into antitrust analysis. Tim Wu, After Consumer Welfare, Now What? The “Protection of Competition” Standard in Practice, CPI Antitrust Chron., Apr. 2018, at 9. (The authors have advised AT&T in connection with the AT&T-Time Warner merger.)

151

Shapiro, supra note 132, at 26.

152

Hovenkamp, supra note 90, at 5.

153

Shapiro, supra note 132, at 28.

154

See, e.g., Daphne Howland, Why The Marketplace Revolution Keeps Gaining Momentum, RetailDive, Jan. 31, 2017; Phil Wahba, Here’s the Latest Way Walmart Is Taking on Amazon and eBay, Fortune, July 5, 2016; Fareeha Ali, Crate and Barrel Launches an Online Marketplace, Internet Retailer, Nov. 18, 2016.

155

See generally Raffaella Bianchi et al., More Than Digital Plus Traditional: A Truly Omnichannel Customer Experience, McKinsey&Company (July 2016), https://www.mckinsey.com/business-functions/operations/our-insights/more-than-digital-plus-traditional-a-truly-omnichannel-customer.

Title: Antitrust in the Internet Era: The Legacy of United States v. A&P
Authors: Timothy J. Muris
Jonathan E. Nuechterlein
Publication date: 20-03-2019
Publisher: Springer US
Published in: Review of Industrial Organization / Issue 4/2019
Print ISSN: 0889-938X
Electronic ISSN: 1573-7160
DOI: https://doi.org/10.1007/s11151-019-09685-7

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