Respectfully Dissent is a debate series by Vanderbilt Law School that brings together experts in various fields of law to debate relevant issues in today’s legal climate. The first installation of the series, held in October, pitted Rebecca Allensworth, Associate Dean for Research and David Daniels Allen Distinguished Professor of Law, against Professor Thom Lambert of the University of Missouri Law School in a debate on antitrust litigation’s limits.
Allensworth and Lambert both have extensive experience with antitrust and regulatory law. Lambert has published numerous books on the matter while Allensworth’s lawsuits against large tech companies are a mainstay in the news cycle.
Moderated by Morgan Ricks, Herman O. Loewenstein Professor in Law, in front of a packed Flynn Auditorium, the debate addressed three distinct areas of antitrust law.
Question 1: should antitrust be limited by an error cost analysis?
Lambert’s answer:
Lambert explained that the common school of antitrust is when it comes to enforcement, false positives are more harmful than false negatives. While false negatives may correct themselves, over-enforcements are more costly.
“My descriptive claim is antitrust is an inherently limited body of law,” Lambert said. “My normative proposition is that antitrust’s inherent limits should lead courts to resolve antitrust disputes in a particular way.”
He described the Sherman and Clayton Antitrust Acts, two of the most impactful antitrust laws, as are too vague.
“These statutory provisions are remarkably sparse,” Lambert said. “They don’t look anything like the tax code or the securities laws or the environmental laws—and that means that the federal courts have had to flesh them out in deciding discrete cases.”
While resulting regulations target competition-reducing agreements and monopolization, Lambert believes the statues are still not appropriate.
“The problem for courts is that most antitrust behaviors are what I call, ‘Mixed facts,’” Lambert said. “Many agreements that reduce competition between firms also benefit consumers by reducing costs or enabling the creation of new products and services or creating other efficiencies.”
Costly errors that present themselves as both false positives and negatives can be reduced by making rules more nuanced. More nuanced rules present a third cost of antitrust regulation that fall on firms and enforcers: decision costs.
“[Courts] should decide cases creating liability rules with an eye toward minimizing the sum of error and decision costs,” Lambert said.
Allensworth’s answer:
Allensworth agreed that antitrust regulation is a mixed bag and caution is necessary, but also pointed out what effect the approach outlined by Lambert has had in the past.
“The idea that we need to proceed cautiously was taken to heart by the enforcers who essentially stopped enforcing the antitrust laws,” Allensworth said. “Merger enforcement went way down. It went down to almost zero.”
The last 40 years have been dominated by what she described as the “Chicago” school of thought, which in Allensworth’s estimation, has had longstanding effects on the economy.
“Economists tell us that entry is way down, competitive entry has declined over the last 40 years,” Allensworth said. “We know that concentration has essentially gone through the roof, and this is across industries.”
Some companies hold immense market power in products that the public doesn’t consume, but rather relies on, according to Allensworth.
“What would you do if you got locked out of your Apple ID—how much would you pay to be let back in?” Allensworth said. “If Amazon raised its prices 25% across the board, would you stop using the platform?”
Allensworth went on to blame the rationale that false positives are worse than false negatives for the lack of regulation in the past.
“The idea behind error-cost analysis was that the false positives were really costly because they were precedential, but I would argue that the false negatives were also precedential,” Allensworth said. “Other companies were watching as enforcers didn’t go after their peers for anti-competitive conduct. This emboldened a whole generation of businesspeople to suppress competition freely.”
Lambert’s rebuttal:
Lambert doubled down on his argument that false convictions are worse than false negatives by again emphasizing that markets are self-correcting and false convictions can take lots of time and resources to overturn. Cases of collusion are examples of the worst instances of false convictions, according to Lambert.
Lambert also chalked higher price markups to changes in business models and the nature of the tech industry, which has higher fixed and lower marginal costs, citing economists like Carl Shapiro.
Allensworth’s rebuttal:
Economists can give two different answers to the same question, depending on who’s funding them.
“The idea that economists have some monopoly on not just antitrust policy, but antitrust litigation, I think is part of the problem with where we are now,” Allensworth said.
Question 2: Should antitrust be limited by the consumer welfare standard?
Lambert’s answer:
The quick answer for Lambert was yes, but the professor also saw lots of nuances. In some instances, mergers may harm competitors but also benefit consumers, such as the 1962 Brown Shoe Case. The merger in question was ultimately blocked because Congress wanted to protect small businesses, but Lambert saw an issue with that.
“When enforcers can pick and choose like that and courts just defer, we have a real problem,” Lambert said.
Lambert reasoned that in order to assign liability, reliable harm to consumers must be present.
Allensworth’s answer:
The quick answer for Allensworth was no, but she believed that she and Lambert were more aligned on this question than the previous one.
“I do think the point of antitrust law was, is and should be the protection of consumers,” Allensworth said. “The problem is the idea that this is some sort of rule or even standard that we can apply to each individual case.”
But Allensworth reasoned that, regardless of intention, antitrust laws are framed towards promoting competition on the grounds that competition benefits consumers.
“I am a capitalist. I believe in markets,” Allensworth said. “I believe markets do give consumers what they want when they’re properly run, and that’s why I think the real problem for the consumer welfare standard is it’s not a standard.”
Question 3: Should antitrust remedies be limited to avoid breakups and court-imposed duties?
Responses to this question were limited to sixty seconds.
Lambert’s answer:
“I am not categorically opposed to breakups, but I think that they should be rarely used,” Lambert said. “The reason for that is that the record of breakup revenues is really poor. When you breakup companies, you often destroy productive efficiencies.”
A 2001 study by the Brookings Institution on seven breakups found that only one increased industry output and lowered prices. A major issue in Lambert’s mind is the cross-subsidization in firms such as Google, where its ad business likely couldn’t stand on its own due to its reliance on Chrome and Android data funds.
Allensworth’s answer:
“I think we have to think bigger. We have to think about the incentives,” Allensworth said. “When it comes to remedies, we’re thinking about that one little competitor, and if their sales team will have to get divided. That’s protection of competitors, not competition. That’s the opposite of what antitrust should be worried about.”
