Steven C. Salop writes that the Biden administration oversaw a paradigm shift in antitrust, but it was the full adoption of the ideas of the Post-Chicago school, whose intellectual influence has countered Chicago since the 1980s, rather than the empowerment of the Anti-Monopoly or Neo-Brandeisian school of thought. This latter school of thought played an important role by motivating increased enforcement and corralling political support, even if it did not lead to cases that could not have been brought by Post-Chicagoans.
This article is part of a symposium studying the “paradigm shift” in antitrust scholarship and policy. Inspired by philosopher Thomas Kuhn’s work on progress in science, this symposium asks if and how the tenures of Federal Trade Commission Chair Lina Khan, Department of Justice Assistant Attorney General Jonathan Kanter, and scholarship associated with the antimonopoly or Neo-Brandeisian movement has changed how we understand the priorities of antitrust enforcement, evidence of anticompetitive harm, and the study and enforcement of antitrust more broadly. Over the next few days, we will publish contributions from Tim Brennan, Eleanor Fox, Daniel Francis, Andrew Gavil, Richard Markovits, John Mayo, Steven Salop, and Randy Stutz. You can read the previously published articles here. ProMarket encourages our readers to respond to the symposium and the ideas these scholars put forth with their own. Responses can be sent to ProMarket@chicagobooth.edu.
Daniel Francis has referred to the record of the Biden administration’s antitrust enforcers as evolutionary, not revolutionary. In his view, the evolutionary improvements the Biden administration has made to antitrust’s traditional focus on welfarism (namely prices, output, and innovation, but also labor wages) have succeeded, while the wished-for antitrust revolution that shifts away from welfarism toward other goals, such as inequality and political domination, has failed. His article carefully explains why this is so.
I have in mind a somewhat different—but complementary—conceptual framework. In my view, Biden has changed the competition and antitrust paradigm from a Chicago to Post-Chicago paradigm. (Note that I am using paradigm in the sense of policy driver, not in a Kuhnian sense.) I also think Biden has encouraged some movement towards a broader Anti-Monopoly paradigm. But it has not led to a revolutionary moment regarding the latter paradigm and the prospect for accomplishing that moment is not high.
My terminology distinguishes between a change in paradigm itself and a revolutionary moment. While revolutions are sudden and discrete at a moment in time, they are preceded by a slow build-up in pressure. One can analogize this to an earthquake in which pressure on the plates builds up along the fault lines until it creates a sudden and dramatic fracture. The build-up of pressure is evolutionary. The earthquake is the revolutionary moment. And, perhaps to stretch the analogy, the subsequent post-fracture slow movement of the plates is a post-revolution, new round of evolutionary development.
To illustrate, consider the so-called Chicago (or Neoliberal) antitrust revolution. It began with the Mont Pelerin Society in 1947, followed by economics and legal academic literature in the 1950s and 1960s, and then future Justice Lewis Powell’s famous Attack on American Free Enterprise memo to the Chamber of Commerce in 1971. These events were the increasing pressure on the plates of the existing antitrust (and broader competitive policy) paradigm. While Sylvania (1977) and BMI (1979) were important discrete events that rejected existing per se rules, both opinions were evolutionary in the sense that they further increased the pressure on the old economic paradigm rather than destroyed it.
The revolutionary moment was the election of President Ronald Reagan in 1980, leading to the ascension of William Baxter to Department of Justice assistant attorney general and Jim Miller to chair of the Federal Trade Commission. Soon thereafter followed the appointments of Robert Bork, Richard Posner, Frank Easterbrook, Ralph Winter, Michael Boudin, and Alex Kosinski to the appellate courts.
The oxygen running through the bloodstream of this newly empowered movement was the belief that aside from explicit price-fixing cases, antitrust normally just gets in the way. The paradigm included belief in the economic claim that market power that is not socially beneficial soon would lead to market self-correction. According to this paradigm, market power can only survive when it is earned on the merits through better products and lower costs, implying that permitting the free exercise of this market power will benefit consumers and society at large.
In the technical language of decision theory, the new paradigm implied that antitrust enforcement and legal standards should place much higher weight on avoiding false positives (behavior that enforcers identify as anticompetitive but in reality is not) than false negatives (behavior enforcers believe is not harmful but is in fact anticompetitive). That is, this paradigm implies that antitrust should focus on avoiding over-deterrence, not under-deterrence. Antitrust and competition law and policy then developed within this new Neoliberal, Chicagoan paradigm that there would be a singular focus on economic welfare while abandoning the idea that antitrust should attempt to stop consolidation.
In setting out the following overarching theme of his “whole of government” competition policy, President Biden rejected this policy paradigm:
Capitalism without competition isn’t capitalism – it’s exploitation. … [T]rue capitalism depends on fair and open competition. Forty years ago, we chose the wrong path, in my view, following the misguided philosophy of people like Robert Bork, and pulled back on enforcing laws to promote competition. We’re now 40 years into the experiment of letting giant corporations accumulate more and more power. …I believe the experiment failed. We have to get back to an economy that grows from the bottom up and the middle out. … The executive order I’m soon going to be signing commits the federal government to full and aggressive enforcement of our antitrust laws. No more tolerance for abusive actions by monopolies. No more bad mergers that lead to mass layoffs, higher prices, fewer options for workers and consumers alike.
Biden’s competition policy rejects the religious trust in unfettered market behavior and belief in self-correcting markets and socially beneficial market power. This reflects a new competitive paradigm consistent with both Post-Chicago and Anti-Monopoly or Neo-Brandeisian approaches. As a practical matter, this paradigmatic change implies a significant shift in antitrust enforcement away from avoiding false positives and over-deterrence to one focused on avoiding false negatives and underdeterrence. I think this is what Assistant Attorney General Jonathan Kanter meant when he announced: “I am here to declare that the era of lax enforcement is over, and the new era of vigorous and effective antitrust law enforcement has begun.” Thus, the antitrust agencies should be willing to bring cases based on conventional legal theories but where the facts are not necessarily slam-dunk winners. In order to win the war, the agencies must be willing to engage in some battles that they might lose.
The approach of Kanter’s self-described “new era” can be illustrated by examining the agencies’ enforcement in the areas of exclusionary conduct, that is, vertical mergers and monopolization. After this discussion, I will then briefly explore market domination conduct and explain why I think that Biden’s competition policy has failed to create a revolutionary moment.
In doing so, I do not mean to be claiming that Post-Chicago was irrelevant before 2021. To the contrary, the Post-Chicago approach and criticism of the Chicago paradigm began in the 1970s and has led to substantial improvements in competitive effects analysis and antitrust law. For example, the 1992 Horizontal Merger Guidelines (HMGs) added a Post-Chicago analysis of unilateral effects and ease of entry. The 2010 HMGs revised critical loss analysis, added bargaining analysis, and also analyzed the value of diverted sales and upward pricing pressure, in addition to making other changes. The 2001 Microsoft case was premised on Post-Chicago network effects analysis. Most-favored-nation contractual provisions are no longer seen as presumptively procompetitive and loyalty discounts are not treated as simple price cuts. I see the Biden antitrust as completing the transition to the Post-Chicago paradigm.
Vertical Merger Enforcement
A paradigm shift that leads to less enforcement and more permissive law can just bring fewer cases and argue in cases that it faces a higher standard and burden of proof. It is more difficult to implement a paradigm shift that leads to more enforcement and stronger legal prohibitions when the judiciary mainly comprises judges raised on the old paradigm. If an agency is focused on avoiding false positives, it will only bring the easiest cases against the most egregious mergers and conduct and will generally prevail in court. By contrast, antitrust enforcement premised on placing greater weight on avoiding false negatives and under-deterrence will normally lead to a worse won-loss record, which can lead to criticism by politicians and commentators who ignore the basic dynamics of litigation self-selection.
Despite these headwinds, the Biden administration vertical merger enforcement was highly successful. In fact, the evidence suggests that the shift from Bork to the Post-Chicago paradigm has now been completed.
Vertical merger enforcement was on the back burner during the Obama administration. A cautious DOJ failed to fully engage with the vertical foreclosure issues in LiveNation/Ticketmaster (2010). Even when it became apparent that the 2012 Jeldwen/CMC merger was leading to vertical foreclosure concerns, the Obama DOJ did not step up. Instead, it took a private plaintiff, Steves and Sons, to file a complaint in 2016 and achieve a divestiture remedy. Despite a series of Post-Chicago economic deputies, the DOJ did not revise the 1984 Vertical Merger Guidelines. It was only in September 2016 that Acting Assistant Attorney General Jonathan Sallet gave a speech on vertical mergers, which he cautiously titled as “The Interesting Case of Vertical Mergers.”
The Trump DOJ brought and lost the 2019 AT&T/Time Warner vertical merger case. While there were unsubstantiated rumors of a political motive, it was a valid complaint. However, it was cautiously and poorly litigated. The DOJ took on the burden of disproving efficiencies, rather than placing the burden on the parties. The DOJ insufficiently criticized the adequacy of the voluntary fix. The DOJ’s 2020 Sabre/Farelogix case foundered, possibly because it chose to litigate it as a horizontal merger based on a hot document rather than as the inherently vertical merger that it was. The FTC challenged and settled several vertical merger cases, including Northrop Grumman/Orbital ATK (2018) and Broadcom/Brocade (2017), as well as horizontal mergers that were vertical as well.
The 2020 Vertical Merger Guidelines (VMGs) were a step in the right direction. FTC Chair Joe Simons was a conservative post-Chicagoan who engaged in substantial efforts to increase antitrust enforcement in various ways, and the 2020 VMGs clearly adopted the modern approach to foreclosure. But in the end, Chicago influence ran too deeply in the VMGs’ bloodstream. For example, the drafters found it necessary to remind the courts about the efficiency benefits from “elimination of double marginalization” at least once on every page, and without indicating that the “opportunity cost” from losing upstream profits on sales to rivals that results from reducing post-merger downstream prices can mitigate or even eliminate benefits from the elimination of double marginalization. The latter factor was included in the draft VMGs but was not included in the final version.
More interventionist vertical merger analysis was included in the Biden administration’s 2023 Merger Guidelines, and foreclosure concerns also were a focus in the competitive effects analysis of ecosystem and network market mergers. These Guidelines notably also included an anticompetitive structural presumption based on showing a high “foreclosure share” of a “competitively significant” input being sold by the upstream merging firm. Adopting an anticompetitive presumption for vertical mergers is a major change that could lead to additional deterrence, if upheld by the courts.
Vertical merger enforcement substantially ramped up during the Biden administration. The DOJ’s record on vertical mergers was not very intense or successful. The FTC has had greater success. FTC Chair Lina Khan’s Illumina/Grail (2023) opinion was upheld by the Fifth Circuit Court. Moreover, it is notable that the FTC neutralized the parties’ elimination of double marginalization efficiency claim by showing that their expert witness failed to account for the opportunity costs of reducing price.
The FTC also successfully litigated the 2024 IQVIA/Propel merger transaction as a vertical as well as horizontal merger. However, the court focused only on the horizontal aspects in finding for the FTC. The FTC also issued complaints against the Lockheed Martin/Aerojet Rocketdyne (2022) and NVIDIA/ARM (2022) vertical merger transactions, both with bipartisan agreement, which led to both mergers being abandoned. Under threats of complaints by both the FTC and the European Commission, Amazon abandoned its proposed acquisition of iRobot.
The FTC rejected the fix proposed by the parties in the 2023 ICE/Black Knight merger, which led to a post-complaint consent decree with an additional divestiture. The FTC’s complaint against the 2023 Amgen/Horizon transaction alleged that the merger would lead to anticompetitive bundling that would raise entry barriers. This litigation ended with a post-complaint consent decree along the lines of what the parties had initially proposed. While this may have involved unnecessary litigation resources, that should not undermine the fact that the FTC enforcement action succeeded. The FTC is currently litigating the Tempur Sealy/Mattress Firm vertical merger. The FTC failed in its case against the 2024 Microsoft/Activision merger, a case that is now on appeal. But even assuming that the FTC loses on appeal, this is a very successful record overall.
Monopolization Enforcement
Rapid shifts in merger policy are facilitated by the fact that mergers must be notified to the agencies in advance. Enforcement threats also can lead to the parties abandoning the transaction or agreeing to a remedy, and litigation outcomes are obtained rapidly. By contrast, changes in monopolization enforcement naturally take longer since there is a substantial period of investigation and discovery, followed by a trial and appeals.
Microsoft was clearly based on Post-Chicago economics, and the D.C. Circuit applied a consumer welfare balancing test instead of the more defendant-friendly “sole purpose to exclude” or “no economic sense” test. Post-Chicago monopolization analysis of exclusivity advanced during the George W. Bush administration with Dentsply (2005) and the Obama administration.
The FTC’s 2015 McWane exclusive dealing case is the poster child of the shift. Dissenting Commissioner Joshua Wright argued that McWane’s exclusive dealing deserved the Chicago-School procompetitive presumption and he would have required the Commission to provide “clear evidence” of actual harm. I have explained that Wright also misinterpreted my scholarship in citing it for the proposition evidence that foreclosure would prevent a rival from access to a critical input necessary to achieve minimum efficient scale, rather than simply that the foreclosure would raise rivals’ costs, as my article with Thomas Krattenmaker explained. In affirming the FTC’s decision and clearly rejecting Wright’s approach, the Eleventh Circuit applied a “probable effect” standard and rejected McWane’s desired high bar for causation. It rejected the “total foreclosure” standard and went beyond the foreclosure rate in favor of analysis of how the conduct raised rivals’ costs, slowed their expansion, and prevented prices from falling. This analysis is very different from earlier decisions like Gilbarco (1997).
The FTC declined to file a broad antitrust complaint against Google in 2012 that the staff apparently had recommended. But the FTC did bring a conditional pricing complaint against Intel (2010) that was settled. In the Meritor (2012) private litigation involving loyalty discounts, the Third Circuit applied an exclusive dealing focus, not predatory pricing. The record was not entirely one-sided, however. While the Trump FTC prevailed in the District Court in Qualcomm, the Ninth Circuit reversed in 2020.
The Trump FTC filed a number of other monopolization cases including Surescripts (2020), Vyera (2020) and others. The Trump agencies filed their Google Search and Facebook complaints in December 2020, and they are now being litigated by the Biden administration. While the FTC’s original Facebook complaint initially was dismissed in 2021, the amended complaint subsequently has survived a motion to dismiss and summary judgment motion. The DOJ prevailed in the Google Search complaint and the case is now in the remedy phase.
There has been a raft of complaints filed during the Biden administration: Google (AdTech), LiveNation, Visa, and Amazon. These all involve conduct that began long before 2020. Bipartisan groups of states are also plaintiffs in these cases, which is further evidence that the shift to the Post-Chicago paradigm is closer to completion. However, caution is warranted in that the Supreme Courts has not yet spoken on these cases.
Market Domination Concerns
Another strand of Biden’s competition policy statement was a concern with power differentials that lead to economic exploitation. He cited President Franklin Roosevelt’s call for an economic bill of rights: “the right of every businessman, large and small, to trade in an atmosphere of freedom from unfair competition and domination by monopolies.” Vertical merger and monopolization cases are designed to reduce market domination by monopolists. But this is most central to the Anti-Monopoly paradigm suggested by Barry Lynn’s work and Zephyr Teachout & Lina Khan’s 2014 article.
The Biden administration has pursued this strand with the FTC’s proposed prohibition on labor non-competition agreement and several DOJ cases. In contrast the Obama administration’s passive approach to the Silicon Valley no-poach agreements, the Biden DOJ has alleged these as criminal offenses, though it has obtained convictions in individual cases. The FTC has a labor market count in its Kroger/Albertsons complaint. In a notable private case, the First Circuit Court of Appeals reversed the Jinetes (2022) price-fixing claim against a group of non-unionized jockeys in Puerto Rico that held a strike to collectively bargain with a monopoly race track, holding that the Clayton Act exempted such worker conduct from such Sherman Act liability, even though the workers were not unionized. Outside of antitrust, the Biden National Labor Relations Board has engaged in efforts to increase worker power.
The FTC’s consumer protection cases are focused on exploitation, including attacks on conduct intended to exploit imperfect information or conduct intended to raise switching costs, such as the Amazon Prime “dark patterns” case. These latter cases might be criticized by Chicagoans who argue that the lock-in leads to procompetitive pre-contract innovation and lower prices.
My Countervailing Exploitative Pricing article is motivated by Neo-Brandeisian concerns. It addresses exploitation by proposing to permit small firms to form joint negotiation entities to collectively bargain to countervail the monopsony (or market) power of their dominant counterparties. Because such joint action currently could (or would) be treated as per se illegal price fixing, I proposed either a statutory exemption or a Section 1 doctrinal change that would analyze these agreements under the rule of reason and treat likely output increases flowing from these agreements as a legitimate efficiency justification.
There is No Revolutionary Moment for the Anti-Monopoly Paradigm
If the agencies prevail in all of these monopolization cases (and certainly if they all come down in the same month), it will signal a revolutionary moment for Post-Chicago enforcement. However, the prospects for a revolutionary moment for the Anti-Monopoly paradigm are much lower. Senator Amy Klobuchar’s antitrust bill with a merger cap was not passed. While Biden appointed aggressive enforcers, he did not follow through with the courts. His judicial appointments have not been focused on antitrust. Justice Ketanji Jackson’s main antitrust experience apparently was clerking for Justice Stephen Breyer during the 1999 term that saw the Court rule on California Dental Association. There has not been the slew of circuit court appointments like those made by Reagan. While there are certainly populist elements within the Trump coalition, one can imagine that the fact that greater competition tends to reduce corporate profits will lead to substantial pushback from the more traditional contingent friendly toward big business. Thus, the paradigm shift that the Biden administration leaves behind will be remembered as the entrenchment of Post-Chicago and the final nail in the coffin of Chicago. The ideas of the Anti-Monopoly paradigm remain in the pressure build-up stage of providing intellectual energy, so time will tell whether and how they will influence future legislation and the judiciary.
Author Disclosure: Steve Salop is Professor of Economics and Law Emeritus, Georgetown University Law Center and Senior Consultant, Charles River Associates. The author has consulted or written on a number of the cases discussed here, primarily on the enforcement side. You can read our disclosure policy here.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
