THE COURAGE TO LEARN A RETROSPECTIVE ON ANTITRUST AND COMPETITION POLICY DURING THE OBAMA ADMINISTRATION AND FRAMEWORK FOR A NEW, STRUCTURALIST APPROACH Krista Brown Lucas Kunce Reed Showalter Matt Buck Sarah Miller Matt Stoller Pat Garofalo Kalen Pruss Olivia Webb January 2021 economicliberties.us ACKNOWLEDGEMENTS For generously reviewing drafts and providing expert insight, Economic Liberties thanks Jeff Chester, Brandi Collins-Dexter, Eric Cramer, Joshua Davis, Jonathan Kanter, Lina Khan, John Kwoka, Hal Singer, Shaoul Sussman, Zephyr Teachout, and Tommaso Valletti. For invaluable help in drafting and editing the Agriculture section, we thank Claire Kelloway. Any mistakes are our own. 2 THE COURAGE TO LEARN TABLE OF CONTENTS Executive Summary 7 Introduction 8 Why Did Enforcers Fail Under the Obama Administration? 19 “Consumer Welfare” and the Creation of America’s Concentration Crisis 21 PART I: THE ANTITRUST AGENCIES DURING 24 THE OBAMA ADMINISTRATION The 2008 Opportunity 25 DOJ and FTC Enforcement Against Single-Firm Conduct and Monopolization 30 Settlements 31 IDEXX 31 Intel 32 Pool Corp 32 Litigated Victory 33 McWane 33 DOJ and FTC Enforcement Against Anticompetitive Mergers 33 Significant Merger Challenges 40 Anheuser-Busch InBev and Grupo Modelo 41 Anheuser-Busch InBev and MillerCoors 42 Anthem and Cigna 42 Aetna and Humana 43 AT&T and T-Mobile 43 Comcast and Time Warner 44 H&R Block and TaxACT 45 Office Depot and Staples 46 Sysco and US Foods 47 The Failure of Settlement Strategies for Mergers 48 Hertz and Dollar Thrifty 50 Albertsons and Safeway 51 Live Nation and Ticketmaster 53 Wielding Antitrust Against Working People 55 Failure to Stop Anticompetitive Mergers That Harm Labor 56 Using Antitrust to Attack Labor Organizing 56 Undermining State and Local Efforts to Promote Collective Bargaining 58 AMERICAN ECONOMIC LIBERTIES PROJECT 3 Unused Tools: Section 5 Regulatory Authority, Section 6(b), and the Robinson-Patman Act 60 Section 5 60 Section 6(b) 62 Lines of Business Reports 62 The Robinson-Patman Act 63 Cartels 65 Reduction of Regional Focus 69 Flinching From No-Poach Cases 69 PART II: ENFORCEMENT IN KEY SECTORS 71 Agriculture 72 The Rise and Fall of GIPSA Reform 72 Avoiding Bold Cases and Siding With Monsanto Over Farmers 77 Airlines and Online Travel Agencies 79 Airline Consolidation Accelerates 80 Google-ITA Drives Consolidation Among Online Travel Agencies 83 Consumer Protection Rules Prove Insufficient 86 Amazon and E-Commerce 87 Amazon Builds Gatekeeping Power in the Book Market 88 Amazon Consolidates Online Retail 89 Amazon Builds a Logistics Empire 89 Defense and Aerospace 91 Consolidation Inflates Costs 92 Consolidation Promotes Offshoring of Critical Defense Industry Inputs 93 Google, Facebook, and Online Advertising and Communications 94 Google 96 Absence of Merger Challenges 97 Tolerating Monopolization 98 Failure to Regulate the Use of Personal Data in Ad Markets 100 Weak Policing of Unfair Trade Practice Violations 101 Facebook 102 A Failure to Block Mergers and Enforce Anti-Monopolization Laws 103 Weak Privacy Policy 105 Weak Policing of Consumer Protection and Privacy Rules 105 4 THE COURAGE TO LEARN Health Care 108 Hospitals 110 Providers and Clinical Sites 112 Insurers 113 Pharmaceutical Manufacturers 113 Group Purchasing Organizations 116 Retail Pharmacies 118 Pharmacy Benefit Managers 119 Media and Telecommunications 120 Disney’s Mergers 122 Comcast and NBC 124 Netflix, Streaming, and Cutting Worker Pay 125 Consequences 126 News Publishing 127 The Monopolization of Online Advertising 127 Private Equity Steps In 129 PART III: RECOMMENDATIONS FOR ADDRESSING AMERICA’S CONCENTRATION CRISIS 133 Recommendations 137 Enforce Fair Competition Goals at the FTC and DOJ 137 Enforcing the Antitrust Laws to Break Corporate Power 138 Exerting Regulatory Authority at the FTC 141 Shaping Antitrust Law Through Antimonopoly Guidance and Policy Statements 142 Studying Market Power 144 Strengthen Antitrust Enforcement Through Statutory Changes to Antimonopoly Law 146 Strengthening Antitrust Law 146 Removing Barriers to Private Enforcement 147 Addressing Corporate Power in Future Recovery Legislation 149 Exercise Shared Sector-by-Sector Enforcement Authority to Attack Monopoly Power 150 Agriculture 150 Big Tech 152 Defense 155 Health Care 156 Labor 158 AMERICAN ECONOMIC LIBERTIES PROJECT 5 Media, News, and Entertainment 160 Telecommunications 161 Transportation 163 Small Business 165 Provide Committed Leadership From the White House 167 APPENDIX 169 Table 1: FTC and DOJ Merger Enforcement Between 1993-2016 170 Table 2: Top 5 Insurer Acquisitions of Insurance and Health IT Companies Between 2009-2016 171 Table 3: List of FTC Actions Against Pharma Companies Between 2009-2016 172 Table 4: Market Sector Breakdown of HSR Filed Mergers Between 2009-2016 174 Table 5: Table of Second Requests Filed Between 1981-2016 177 Table 6: Value of M&A Deals Challenged by FTC and DOJ Between 2009-2016 178 GLOSSARY 179 6 THE COURAGE TO LEARN EXECUTIVE SUMMARY Concentrated economic power has reached extreme proportions in virtually every sector of the economy, from Big Tech to telecommunications, banking, hospitals, defense contracting, pharmaceuticals, and retail. Monopoly power is a causal factor in our most serious economic challenges, such as inequality, health care costs, farm bankruptcies, reduced entrepreneurship and productivity, the decline of the free press, and systems of racial discrimination. To reverse America’s corporate concentration crisis, we need to understand its cause. This report traces the root of the problem to a deliberate series of policy choices to under-enforce antimonopoly laws. For decades, a narrow guild of antitrust enforcers in both parties allowed waves of corporate mergers and acquisitions, as well as predatory conduct by powerful monopolies to fortify and extend their power. While there has been ample recognition of the perils of conservative Chicago School thinkers who sought lax enforcement and deregulation under Republican administrations, less well understood is why the problem of concentrated wealth and power worsened under Democrats as well. This report tracks the cause to a specific ideological framework of antitrust and competition policy officials—the “consumer welfare” standard—that enforcers under both Republican and Democratic administrations have instrumentalized over multiple decades. To show the power of this ideology among Democrats, this report documents the approach of Obama-era enforcers and competition policymakers, describing how enforcers carrying the consumer welfare banner subverted President Obama’s public pledges to structure markets to be fairer and more stable. It also lays out a host of recommendations to reject the consumer welfare standard and reverse America’s concentration crisis. These recommendations include expanding existing antitrust actions against Google and Facebook as a signal to the business community, endorsing congressional recommendations to strengthen antitrust laws, undoing problematic mergers, reviving dormant regulatory and enforcement tools, and engaging in a sustained legislative and executive branch campaign to break up and regulate dominant corporations across the economy. There is increased recognition on both sides of the aisle that corporate consolidation is a political and economic threat to democracy itself, as well as a growing constellation of efforts at the local, state, and federal level to address it. Now, President-elect Biden and a new Congress have an opportunity to lead the way. This report shows in detail how they can do so. AMERICAN ECONOMIC LIBERTIES PROJECT 7 INTRODUCTION Five years ago, antitrust and competition policy was a niche policy area dominated by a narrow set of technical experts. Today, the problem of corporate concentration is widely acknowledged. Over the last few months, the federal government and state attorneys general have launched a series of antitrusts suits seeking structural remedies against Google and Facebook, two of the largest corporations in the world, and monopolists such as Mark Zuckerberg are routinely brought before Congress to testify in high-profile hearings. Policymakers increasingly understand that the concentration of private economic power has reached extreme proportions in virtually every sector of the economy, from Big Tech to pharmaceuticals to telecommunications to agriculture. A growing body of journalism and research has shown corporate concentration causes or worsens a broad range of social problems.1 Labor economists have used new sources of evidence to show that most labor markets are highly concentrated, and that this concentration has significant impacts on both the availability of jobs and the level of wages.2 One study showed that corporate consolidation costs the average American household $5,000 a year in lost purchasing power; another found that median annual compensation would be $10,000 higher if employers were less concentrated.3 1 “Confronting America’s Concentration Crisis: A Ledger of Harms and Framework for Advancing Economic Liberty for All,” American Economic Liberties Project, July 2020, https://www.economicliberties.us/wp-content/uploads/2020/08/Ledger-of-Harms-R41.pdf; “Benefits of Competition and Indicators of Market Power,” Council of Economic Advisers, Issue Brief, May 2016, https://obamawhitehouse.archives.gov/sites/default/ files/page/files/20160502_competition_issue_ brief_updated_cea.pdf; Jan De Loecker, Jan Eeckhout, Gabriel Unger, “The Rise of Market