Antitrust Brainstorming Board with Daniel Crane

Below, we have provided the full transcript of the interview with Prof. Daniel Crane, the Frederick Paul Furth Sr. Professor of Law at the University of Michigan Law School, recorded on September 8, 2021.

This interview was done as part of the Antitrust Brainstorming Board created by CPI with the support of the CCIA.

Thank you, Prof. Crane, for sharing your time for this interview with CPI.

A video of the complete interview is available HERE.

Do you think the current antitrust framework works for consumers?

Daniel CRANE:

Framework of course could mean a number of different things. If we mean the consumer welfare standard in particular, which is what lots of people mean by framework. To the extent that what antitrust policy is focused on is preventing acts that harm the competitive functioning of the market, then I think that’s actually the right framework. If the question is how has that standard been applied in fact, I think we could do a better job in some areas, particularly in horizontal mergers, which I know we’ll talk about. Then if by framework we’re including institutional arrangements, which is something I’ve long been interested in, then I think we could also do better in a number of ways. I think for example the federal agencies need more funding to do more work. I would prefer to see more public enforcement funded by Congress and less reliance on private enforcement, which I think often does not particularly serve the consumer or the public interest.

Again, I think there are certainly things we can do to tweak what we’re doing, and in some cases to shift it pretty importantly, but I’m quite comfortable with working within the framework of the consumer welfare standard.

Do you believe the vertical merger guidelines need to be changed?

CRANE:

Well, I’ve seen that the FTC has calendared a vote on repealing the 2020 vertical guidelines for September 15th. As far as I understand and can predict they’re going to be gone in about a week, whether I like it or not. I’m skeptical that they should be repealed. First of all, we’re talking about ones promulgated in December of 2020, so very recently, barely a year and a half ago. The revisions to the guidelines were intended to actually broaden the scope of vertical challenges, something we hadn’t done a lot for the better part of 30 years. I think why not give these a try? I understand that there could be ways that could be improved. If the commission wants to revise them or add some additional ways in which vertical challenges could be brought or vertical theories might be seen to harm competition.

I’m fine with that, but just wholesale repealing them, I mean frankly what that’s going to do is re-up the 1984 guidelines, the last vertical ones we had. I don’t think anyone thinks that those are the right way to think about things today. I’m also really skeptical about litigating on another vertical case like AT&T Time Warner without having guidelines in place. I think one of the problems in that case was precisely that there wasn’t any agency guidance on how to think about vertical challenges for a long time. Anyway, I’m very open to the possibility of rethinking some of the things in those guidelines and coming up with new ways of looking at it, but I think just repealing it, getting rid of it is a mistake.

Do you approve of the shift from competition towards regulation?

CRANE:

If we’re going to go that route, we better bone up on our 19th century case law because that’s where the last time we really thought in those terms. It’s one thing to say that a railroad is a common carrier, has an obligation to serve all comers on a reasonable non-discriminatory basis.

It’s a quite different matter though to think about regulating Google’s complex search engine, from the perspective of ex ante design regulation. The Ohio attorney general has brought a case in the last few months to declare Google a common carrier. Suppose they win well, who’s going to actually be the one to regulate Google? There isn’t a public utility commission set up to do that in Ohio. There’s no agency that’s going to do that, it’s basically going to be a court. We’re going to have a court regulating Google as a common carrier. It’s not that we don’t have models for that, we have the ASCAP and BMI consent decrees in place for 70 or 80 years, which have the flavor of a court sitting as a regulator over kind of a public utility in a way. Even there I think there are questions about whether that’s the right model for regulating music licensing. I think it’s a lot more complicated though to regulate big tech as a common carrier.

If we’re going to go that route, I don’t think the judicial supervision is the right approach, and the question is well, what agency is going to do that? What agency is going to have the competence to do that and stay up on the change in the technology? I’m pretty skeptical that that’s the right approach.

How would you ensure antitrust is enforced vigorously if no changes are made to the current antitrust system?

CRANE:

Well, I think there are particular areas like horizontal mergers for example, that I think we should do merger retrospectives to really get better predictive tools. I think we probably have been too permissive in some horizontal merger contexts and we need to do better there. A lot for me depends upon agency funding again. I think if we were to fund the FTC and the DOJ more vigorously, and particularly now that the current political environment, President Biden has made clear with his executive order that he expects the agencies to do more. Congress is looking at legislation. They made clear that they expect the agencies to do more. I think if we give the agencies the resources to do more within the framework of the current law, I think there’s a lot more that they can do.

Now, the one piece of course we haven’t talked about yet is the courts, and there’s been lots of focus on what the agencies will do and what Congress will do. Ultimately, the courts is where the buck stops on lots of this stuff. We’ve already seen in the Facebook case for example, that judge Boasberg thought that the initial complaint wasn’t good enough. He dismissed it. We now have an amended complaint. I think though that when you look at what he said in his opinion, he made it very clear that he was dismissing a complaint not dismissing a case, and that case is going to go forward. I don’t ultimately think that the law as created by the courts is the real obstacle here. I think that when you have good facts that show behavior that’s really harming the competitive process, I think that the law is going to not get in the way of successful challenges. I don’t think we need a revolutionary rethinking of doctrines so much as we need more resources and capacity in the agencies to bring these cases.

What are your thoughts regarding start-up acquisitions?

CRANE:

I think the answer is generally speaking yes, and here’s a place where I think we need to improve merger policy. Of course the problem is making accurate predictions about the path of innovation with nascent startups. To quote Frank Easterbrook we have an error cost problem. The question is, is it more costly to prohibit acquisitions that might be anti-competitive when we’re not sure, or to allow them when we’re not sure? I think in recent years we put our thumb on the scale of saying well, if we’re not really sure that an acquisition will be harmful to competition because we’re not sure the path of innovation, what this company would do with or without the acquisition, that’s been a reason to say we’re not going to block the merger. I think we’ve maybe erred in the direction of the false negative. We haven’t been willing enough to say yeah we’re not sure, but not being sure means we say no rather than yes. Really what that means is looking at a Facebook or a Google or an Amazon or an Apple, and saying if you want to move in this direction technologically, then it’s fine for you to do it but you have to develop it internally.

You can’t just buy up those technologies in the market. To be clear, that could entail a loss of efficiency. There are good reasons why big tech companies acquire startups, and sometimes those are very legitimate and pro-consumer reasons. But again, the question is where we put our thumb on the scale. I think there’s enough evidence of big tech buying up small nascent competitors who were not yet direct competitors, but in many ways could have flourished into a more dynamic ecosystem. I think we need to start saying no more.

Is break-up the best solution for the digital economy and for consumers?

CRANE:

People use the term break-up to mean what I think of as two quite different things. One is the divestiture of acquired business assets. The other is splitting up companies that have grown primarily through internal growth. As the DC Circuit said of Microsoft those are actually two really different things. If Facebook shouldn’t have acquired Instagram, then it seems to be okay to say they should spin it off, they should sell it off. Even though of course the more time that passes, the harder that gets to do, and the more potentially we have losses of efficiency.

But that seems to me very different from saying to Microsoft we’re going to split you into an operating system and a browser company. Or to Google, we’re going to split you into a universal search company and vertical search companies. Those business lines were not put together through merger primarily, they were put together through organic growth of the product. It strikes me that there are very serious losses of efficiency from breaking up companies as opposed or to divest assets they’ve just acquired. I really don’t like the idea of telling companies that they’re limited in what they can do in terms of business lines. For one, there is no platonic catalog of business lines that’s kind of there’s this thing and there’s that thing and you can’t do both of them. Although of course in the 19th century we thought that, and corporate charters initially restricted companies to a single business line. Eventually we figured out that’s not good for competition.

You think about a company like Apple. They were a hardware company, before they were a software company, before they were a retailer. They keep growing into new spaces. I think actually in many ways exactly the thing that will bring an end to the dominance of a Facebook or a Google is when other companies grow into their space, Other strong companies grow into their space. The idea of artificially segmenting companies into business lines they can and can’t be in, I think is actually really bad for competition policy as a whole.

How do you see the role of the FTC and the DOJ in ensuring competition works for consumers?

CRANE:

If I had my druthers, all antitrust enforcement would be moved into DOJ with considerably increased funding, and FTC will be freed up to focus exclusively on its consumer protection role. I also know that’s just not going to happen, so that’s a hypothetical preference but it’s not grounded in reality. If we stick with the institutional arrangements that we have, my one hope is that FTC and DOJ keep their eye, keep their focus on the consumer interest. I’ll include in that really both sides of the market, both the input and the output side.

If you want to focus on labor markets as well, and focus on anti-competitive mergers or other practices that harm competition and labor markets to the detriment of American workers, I’m very happy to include that in a broadly defined understanding of consumer welfare. For me though, again, the key is to ask whether the practice in question harms the competitive functioning of a market. If it does, that’s a reason to challenge it. If it doesn’t, it’s not at all clear to me that antitrust law is the right tool to be thinking about it.

How would you reconcile competition and competitiveness? Should antitrust reforms take into account the potential impact on proposed changes vis-à-vis China?

CRANE:

We can talk about China, we can talk about India, or Russia, Brazil, or any other country in the world that are growing powers of their own. Every country ultimately has national champions and it protects as national champions whether or not it’s willing to admit it. Just as a positive observation, we have to remember that that national champions are a thing in the world. We also need to remember that competition policy is just one of the many drivers that makes for a strong and free society.

I tweeted the other day that I hadn’t thought at all about the Taliban’s antitrust policy, for the obvious reason that competition policy is a luxury that we can afford to start talking about once other basic social and political conditions are satisfied. Until we have functioning government, the rule of law, protection for basic human rights, those are all things that are antecedent really to talking about competition policy. Now don’t get me wrong, I strongly believe that there’s a relationship between the health of a democracy and questions of concentrated economic power. I’ve written extensively for example, about the relationship between overly concentrated economic power and the rise of Nazi-ism. I don’t want to suggest that there isn’t a relationship there, but I also think it’s important for us in the antitrust community not to forget that there are many other things in the national interest that sometimes will override competition policy. There’s security issues, there are human rights issues.

There are many other issues that sometimes mean that we’re not going to allow this company to come into our market, even though that might stimulate competition because there are other national interests at stake. Ultimately, I think those are political judgments that need to be made by the politically accountable branches of government. I would not be comfortable with the FTC making those decisions, because it’s not part of the elected branch of government, the executive branch. But if President Biden decides that a particular company shouldn’t do business here or an American company shouldn’t do business abroad for a certain reason in the national interest, again competition policy needs to take a back seat to that political determination, again so long as it’s democratically legitimate and accountable, that’s in some sense above our pay grade.

Any final comments you would like to make?

CRANE:

It’s a super interesting time for antitrust policy of course, it’s particularly interesting to me that the pressures for antitrust reform are coming from both the right and the left sides of the political spectrum, albeit for quite different reasons.

Antitrust establishment folks like me tend to feel resentment when we get outside interference, like people who don’t know what we’re up to telling us that we’re doing a bad job and suggesting ways of thinking about it that we think are not good. We can’t afford as the antitrust community to have an attitude of protecting our turf. Whatever the merits or the demerits of particular proposals for antitrust reform, it’s important for this field of law like any other to have periodic democratic moments, when people outside the small cadre of experts who regularly work in the field come in and review what we’re doing and give us our marching orders, and talk about what are the principles that we as a society want this area of law to accomplish? Even though I’m not terribly fond of many of the particular reform proposals on the table, I think that having these conversations is really healthy and indispensable to the field that we’re in.