In new research, Manuel Wörsdörfer compares the philosophies of two formative antitrust thinkers writing in the late 19th and early 20th centuries in the United States and Europe: Louis D. Brandeis and Walter Eucken. A discussion of their body of thought highlights the antitrust concerns of the time and how their positions can be adapted to today’s regulatory environment, particularly regarding Big Tech.
Much of the current antitrust debate in the United States and the European Union concerning Big Tech conglomerates refers to the writings of Supreme Court Justice Louis D. Brandeis and German economist Walter Eucken, two pioneers of modern-day competition policy who wrote in the late 19th and early 20th centuries. A comparison of their bodies of work explicates the concerns of early antitrust thinkers and how contemporary antitrust authorities on both sides of the Atlantic can pursue regulatory reform to tackle structural market failures in the digital economy.
The State of Progressive Antitrust
In the U.S., the Neo-Brandeisian antitrust movement—most prominently represented by Federal Trade Commission Chair Lina Khan and former special assistant to President Joe Biden for technology and competition policy Tim Wu—premises much of its arguments for reform, particularly structural remedies, on Brandeis’ “curse of bigness” guiding principle. The “curse of bigness” posits a deleterious effect on workers, innovation, and democracy due to high market concentration. An analogous suspicion toward Big Tech power and its ramifications for regulatory capture and U.S. democracy has trickled into the policy platforms of several former and prospective Democratic presidential candidates. A 2022 House Committee investigation into digital market competition similarly cited Brandeis while comparing Big Tech to the oil barons and railroad tycoons of the first Gilded Age: “We must make our choice. We may have democracy, or we may have wealth concentrated in the hands of a few, but we cannot have both.”
The E.U. discourse on Big Tech and antitrust, on the other hand, harkens back to Eucken’s founding of the German body of thought on political economy known as ordoliberalism, which prescribes government intervention to maintain competitive markets. Many scholars see Eucken’s influence in recent E.U. competition policy, particularly the Digital Markets Act and other laws, such as the Digital Services Act and the proposed Artificial Intelligence Act.
A Deeper Look Into the Affinities of Brandeis and Eucken
Although Brandeis and Eucken operated on opposite sides of the Atlantic, their scholarship shares many similarities. Before his ascent to the Supreme Court, Justice Brandeis was known as the “people’s lawyer” for his pro bono work in the public interest. He was the architect of President Woodrow Wilson’s New Freedom platform, which included the creation of the Federal Trade Commission and the introduction of the Clayton Act. He was also a close advisor to President Franklin Delano Roosevelt, whose latter terms as president witnessed aggressive antitrust enforcement.
Eucken was one of the founders of the Freiburg School of Law and Economics, which seeded ordoliberalism. Ordoliberalism, or “German neoliberalism,” attempts to bridge the gap between moral (social justice, human rights) and economic imperatives (competition, market freedom). Its primary goal is to establish an economically efficient and humane socio-economic order—one that protects the Kantian values of autonomy and human dignity.
Both Brandeis and Eucken’s work sought to safeguard a free, open, and competitive economy. Freedom was the end for both, and competition was essential to achieving this goal. Notably, Eucken and Brandeis argued that competitive markets were crucial to preserving non-economic values, such as freedom, justice, the rule of law, and democracy.
Brandeis and Eucken’s concerns about free and open economies were primarily reflected in their warnings about the effects of monopolies and big business on the economy and politics. Brandeis feared the erosion of democracy and the rule of law, whereas Eucken worried about political lobbyism and rent-seeking. They claimed that cartels and trusts such as New Haven, Standard Oil, U.S. Steel, the conglomerate built by J.P. Morgan, and I.G. Farben threatened not only economic but also political liberty.
Consequently, Brandeis and Eucken concluded that monopolies—under very specific circumstances—need to be broken up. That is, government agencies need to enforce divestitures and other structural remedies.
However, Brandeis and Eucken’s concerns with power also meant a concern with government power and overreach. In other words, they were worried about big business and big government, and both wanted to keep the government out of business and the business out of government.
To achieve this, Eucken formulated several principles of economic policy that demanded, among others, to focus on regulatory or framework policy instead of an overly interventionist “process policy.” One of the government’s primary tasks is to set up a regulatory framework to define and enforce the rules of the game instead of intervening directly in market processes and the game itself. Brandeis spoke within this context of the importance of regulated competition that aims to prevent the emergence of monopolies, oligopolies, cartels, and trusts—or, if need be, break them up.
Similarly, both scholars believed in the importance of federalism, decentralization, and the principle of subsidiarity. Brandeis, for instance, spoke of states as laboratories of democratic governance and advocated for the democratic distribution of power and equal opportunity in society. At the same time, he feared all forms of centralized power and control. Eucken, on the other hand, derived the principle of subsidiarity from Catholic Social Teaching or Christian Social Ethics and emphasized the importance of individual responsibility, self-initiative or self-help, and communal help and solidarity. Only if those failed should states or the federal government step in and take over responsibility.
Noteworthy is that Eucken and Brandeis searched for a “third way” between laissez-faire capitalism (i.e., excessive capitalism) and the central planning of socialism (i.e., excessive government intervention). Eucken’s ordoliberalism became one of the main pillars of the (West) German social market economy, initiated in 1949, which attempts to bridge the gap between economic and moral imperatives and establish a functioning and humane socio-economic order.
Both thinkers also focused on financial institutions: They were highly critical of all forms of financial speculation—denounced as “gambling”—and stock market manipulation. They blamed banks as the primary drivers of the “Great Merger Movement” (1895-1904) and subsequent market consolidation, including during the Weimar Republic, which some scholars partially credit for the rise of Adolf Hitler and Nazism. Brandeis, in particular, criticized “interlocking directorates,” i.e., the mutual stockholdings and co-directorships that lead to conflicting interests.
Most importantly, both scholars discussed the risk of how market power could create financial institutions that become “system-relevant” and “too big to fail.” One way to avoid this was to separate commercial and investment banking, as the Brandeis-inspired 1933 Glass-Steagall Act did. Euken similarly penned a post-WWII report advising the Allies to break up overly powerful and dominant investment banks.
The two theorists also held similar views toward the role of trade unions—which should ideally form a counterweight to powerful companies and employers—and the relationship between self-interest and the public good. The economy, in general, and competition, in particular, is seen primarily as a means to a higher end, i.e., a free and open society. According to Brandeis and Eucken, companies are “servants,’ not “masters of the public,” and private interests must yield to the public good.
Brandeis and Eucken in the Digital Age
Brandeis and Eucken’s work emphasizes the “curse of bigness.” They feared that big businesses’ domination of the economy could reverberate into politics with detrimental consequences for the rule of law and democracy. That is, monopolies and the like not only pose a severe risk to economic freedom but also to socio-political freedom.
At a time when many contemporary antitrust scholars and regulators are concerned about the market power of Big Tech companies, one question to ask is how Brandeis and Eucken would have approached regulating large tech companies today. Brandeis and Eucken believed it was necessary to regulate competition— e.g., with the help of an ordoliberal-inspired regulatory or ordering policy—rather than regulate the companies themselves. That is, they sought to prevent the emergence of monopolies rather than manage but prolong their market power (remember, both argued for the break-up of large financial and other institutions).
As such, a Brandeisian-Euckenian approach to antitrust would move contemporary regulatory paradigms from an ex-post to an ex-ante perspective. Instead of retroactively sanctioning and fining (tech) companies for antitrust violations, Brandeisian-Euckenian regulation would prescribe pro-competitive business conduct and prohibit anticompetitive business practices, such as ‘“killer acquisitions.”
Such an ex-ante antitrust paradigm would shift the burden of proof to prove that a merger or acquisition is not anticompetitive from antitrust agencies to the defendant companies in a lawsuit. This would imply, among other scenarios, that parties seeking to merge must prove that a merger is in the public interest.
An effective antitrust regime also requires adequate regulatory mechanisms: monitoring, enforcement, and sanctioning. From a Brandeisian-Euckenian perspective, sanctions should ideally include both behavioral and structural remedies to reduce risks to political freedom and democracy. More importantly, sanctions should prioritize divestitures and corporate breakups, given the imbalance of power that favors big businesses.
Lastly, a Brandeisian-Euckenian antitrust platform would require considerably strengthening the E.U.’s Digital Markets Act and reforming, perhaps even abrogating, Bork’s Consumer Welfare Standard, which places considerable emphasis on ex-post regulation and fails to consider the broader political risks that big businesses pose to healthy democracies.
Author Disclosure: The author has declared no conflict of interest/the author has no relevant financial or non-financial interests to disclose.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
