Tommaso Valletti argues that economic consultants have made little meaningful contribution to antitrust policy and enforcement over the past 20 years—despite their assertions of bringing academic insights to practice. Valletti calls for more critical scrutiny of consultants’ biased economic analyses by antitrust authorities and courts, as well as greater use of structural presumptions in merger review.
What have the Romans ever done for us? British comedy troupe Monty Python posed this famous question in the movie Life of Brian. It came back to my mind when I stumbled on a LinkedIn post. Written by one of the most successful economic consultants in Europe of the last 20 years, he was gracefully moaning that consultants had not been invited by the European Commission to celebrate 20 years of EU Merger Regulation (while instead former and current enforcers, some academics, and even journalists had been invited to the party). His preferred explanation was that consultants are “a pain in the neck, like Galileo, Kepler, Servetus” and so, despite their foundational scientific contributions, perhaps not the best people to have around at a party.
I had to search for Servetus, and learned that he was a heretical Renaissance polymath that ended up burnt alive. Interesting, but I was not so convinced by this reference. Instead, the post’s author dismissed an alternative hypothesis: that “economic consultants have not contributed anything of value in these last 20 years.” That was the Monty Python moment. What have the consultants ever done for us?
That’s a good question, I thought. Specifically, what is the contribution of the professional economic consultants to antitrust in the past 20 years? I could not come up with much, possibly because I have done little consulting. So I asked three good friends whom I trust and have been practitioners for the past two decades. I received two straight “nothing” responses, and the third one said, “nothing comes off the top of my head, I would have to do some research.” I am still waiting for the results of that research.
Ah, I was on to something! But I reluctantly admit that a biased sample of three is not the gold standard for supporting a thesis. I decided to dig further. I am an academic, and we measure impact and contributions by publications in certain journals and citations. I searched for all the publications done by the top three economic consultancies. In Europe, where I am based, they have consistently been for the past many years Compass Lexecon, Charles River Associates, and RBB Economics. I searched over the past 20 years, following the LinkedIn post’s timeline. I searched for publications in our top five economics journals (I know, that’s a high hurdle, but one never knows, especially if you are in the league of Galileo and Kepler), and in the top three journals in Industrial Organization (IO), a much more realistic target, given that competition economics is a subfield of IO.
This is not a silly exercise. The top economic consultancies employ in excess of a thousand economists. A good portion have PhDs and have been exposed to the best academic environments. I am sure that some of them would be happy to stay academically and intellectually alive. The business of the top three firms is worth well above $1 billion per year. They have resources, talent, and contacts. They talk to the biggest corporations, have access to data no one else can see, and they have been advising the most important antitrust cases in the world. That must have produced a lot of thoughts and excitement to share. Right?
Wrong. The result was as follows. Zero papers in the top five economics journals, and 9 in the top three IO journals that could be related to economic consultancies in Europe. That number increases to 13 if I consider the entire world (including one top 5). This is over 20 years. Citations are also paltry. And I was probably generous in my search: I attributed publications to a consultancy even if the main author was essentially an academic, but they had put the consultancy as an additional affiliation. If I consider publications done by “full-time” consultants only, with no academic co-author, the total – done by the top three firms – drops close to 0, worldwide. You can find the results here (and many thanks to Mirko for the research assistance!).
For comparison, I did a related exercise for the enforcers. I limited my search to the Department of Justice (DOJ) and Federal Trade Commission (FTC) in the U.S., and DG COMP in Europe – apologies for missing several other national competition authorities. The results are rather different: over 70 publications, including “top fives,” with good citations. Half of these publications were done by the FTC (with a staff of about 80 PhD-holding applied microeconomists), and then a quarter each by the DOJ (50 PhD economists) and DG COMP (less than 30 economists in the Chief Economist team; disclaimer: I led that amazing team between 2016 and 2019). That’s much more and more impactful output with much fewer resources. You can find the results here.
I already know what the response will be, as I have heard it many times: “That’s the wrong exercise! Economic frontier progress is not our job. We are translators: we translate academic economic progress into practical usable advice for our clients facing legal and policy questions. We are exactly the interface between academia and practice. We don’t set out to publish in journals, we are the brokers of ideas to the legal and policy community, our main job is to make good economics accessible and useful, etc., etc.”
Okay stop – I got that. Let me take at face value the “translation” argument. What does this actually mean? It means, to me at least, that they should have produced economic tools that are useful in practice. And this is where things get possibly worse.
The mission of the consultancies has become to bend and use what, they claim, are existing academic insights to produce analyses that are supporting the client. But the simple matter is that incentives are incredibly skewed in this setting where resources are asymmetrically distributed. The business model of consultancies is basically to protect corporate rents. Let’s take a look at a few examples.
Mergers? The bread and butter of merger analysis is something called Gross Upward Pricing Pressure (GUPPI). This “method” really just needs two numbers: the firm’s margins and something called the diversion ratio. What do the consultants do in practice? They spend hours torturing data and massaging margins down to get the desired result. They do the same thing with survey data manipulation to get those parameters in the “right” range. When things get more “sophisticated”—we then talk about merger simulations—with calibration exercises that again depend on a couple of parameters that the consultancies know exactly how to put in front of the agencies to get the merger approved. Worst case scenario: the consultant identifies, scientifically of course, a (typically miniscule) “surgical” divestiture that the company promises to spin off. Merger approved. Hurray.
Oh by the way, this stuff you do find it published somewhere, in journals or magazines that are largely unknown to academic economists, they are not seriously refereed (if at all), and often edited by some consultants themselves. And if even that does not work, they are “published” on SSRN, so they can claim to have economics publications and preserve the mysticism of Greek letters and statistics. The consultants are also regularly going to conferences, mingle with “think tanks” that pretend to conduct research, and they even award themselves prizes during the Annual Antitrust Spring meetings of the American Bar Association.
I allow for the possibility that I am unfair in my assessment. So the acid test should be this: have these “methods” actually worked in practice? They should have led to merger approvals benefiting society, since the consultants are also the same ones telling enforcers of the incredible efficiencies that will arise from those transactions. Think about it: prices should never go up, ceteris paribus. Since overlaps are either immaterial, or they have been fixed by remedies. If anything, prices should have gone down after the mergers, thanks to those unspeakable efficiencies. Right? Wrong again. According to a recent meta study of existing retrospectives of approved consummated mergers, prices went up in 52% of the cases (Stöhr, 2024). And those were precisely the transactions that had been notified and vetted and therefore should not have led to any increase, thanks to the scientific methods espoused and translated by the consultants. One in two is as good as tossing a coin. Would you call it a major contribution?
Or what about the “translation” of two-sided platform economics to real cases? We tested this concept in Ohio v. American Express: While claiming to apply modern economics, the United States Supreme Court took an approach that was contrary to the fundamental principles of the field. Here the academics bear some responsibility too. We created a set of “possibility” results, without really thinking about how to use them practice. We left the translation to others, until it produced such damage that, in the U.S., it has become almost impossible to go after any two-sided platform at all. At this point, Congress needs to correct it.
Or what about the contribution to abuse of dominance cases in Europe using what some call the “as efficient competitor test” (AECT)? The actual body of economic literature shows the AECT is often irrelevant when dealing with exclusionary practices. Yet, the “translation” got out of hand, and AECT has become a beast with a life of its own as it is used in case after case in the European courts.
The antitrust enforcement Agencies on both sides of the Atlantic should rethink about their past behavior when they accepted these submissions without enough critical reviews and without making more of an effort to reject the flawed economics included in many such submissions. There must be a system in place to drastically reduce biases. Credit should go to the DOJ and FTC (and the CMA in the UK) for their recent endeavor to break with the past by releasing the new Merger Guidelines, but more is needed and faster. In the courts there should be a greater focus on structural presumptions against certain categories of anticompetitive mergers and a far greater focus on internal documents and industry-specific dynamics as opposed to simplistic (and partial) economic analysis like the one summarized above. The Agencies should also do more retrospective studies to see where their approach needs to change. You can read here the details of a fuller proposal.
As the Monty Python joke goes, what the Romans actually did was create the aqueducts, sanitation, public order, and wine (the roads go without saying). What have the consultants ever done for us? I’ll let the reader decide.
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