This past Sunday, Lina Khan, the Biden-appointed chair of the Federal Trade Commission (FTC), was featured on “60 Minutes.” On the show, she discussed her approach to leading the FTC, which enforces antitrust law and consumer protection. Her approach, along with that of Jonathan Kanter, Biden’s United States Assistant Attorney General for the Antitrust Division, has made waves to observers of corporate regulation for marking a shift in policy toward stricter enforcement of corporate merger law and consumer protection efforts.
To explore these changes, The Phoenix spoke with antitrust expert and Associate Professor of Economics Marc Remer.
Aside from research on the calls basketball referees make and racial bias in the hiring of NBA head coaches, Remer has spent most of his career studying antitrust economics. After writing his dissertation on the pricing strategies of gas stations and whether they were colluding with each other, Remer took a job with the Antitrust Division of the Department of Justice (the division now led by Mr. Kanter) to study the impact of corporate mergers determining which should be blocked because of negative impacts on consumers. After a family relocation, Remer then became associate professor of economics at Swarthmore, where he now teaches microeconomics and antitrust, which he continues to research.
Khan and Kanter have overseen and directed a much stronger level of federal government regulation of corporate mergers and potentially anti-competitive practices. At the FTC, Khan has brought forward and led high-profile legal battles against major big tech companies, including Amazon, Facebook (Meta), Nvidia, and others, in addition to taking on mergers of grocery store companies that the agency thinks will raise prices, corporate non-compete clauses identified as exploitative, and pharmaceutical middle-men that Khan argues are responsible for raising prices. Over at the Department of Justice’s Antitrust Division (where Remer worked), Kanter has similarly sued Google, Apple, TicketMaster, and others, in addition to challenging mergers thought to have negative impacts on consumers in the airline and other industries. Both associated with the “New Brandeis” movement that argues consolidated private power is dangerous for society, Khan and Kanter have worked together to change the federal government’s merger guidelines and more.
Remer is glad to see this new approach from the Biden administration: “Under the Bush administration, there was very little or very loose antitrust enforcement. They tried to block a small handful of mergers, but the most prominent one was Oracle PeopleSoft, and they lost that one.” Remer thinks this created a hesitancy to bring antitrust cases for the rest of Bush’s tenure as president. Even in the Obama administration, while “they became more active and started bringing some more cases, which I think was good, we still didn’t see any prominent conduct cases or abusive monopoly power cases,” he said.
Remer thinks it’s possible that this could have been because “Amazon and Google were growing, but they weren’t quite the behemoths that they are today.” On the Trump administration, Remer said “I don’t know exactly what was going on during the Trump administration, but certainly not strict antitrust enforcement.”
On the Biden administration’s antitrust enforcement, Remer observes that it’s “probably more active than it was even during the Obama administration, and we’re seeing all these big anti-monopolization cases, and that’s what I really think is interesting to see.” He continued, “I think there’s a lot of conduct by these big tech companies, but also in other industries, that is bad for consumers. So, at least from my view, it’s nice to see a lot more activity there.”
Even though some critics of Khan and Kanter question their efficacy because of some losses in high-profile court cases, Remer sees this as misplaced. “That’s kind of what you want,” he said. “If you think that there’s been under-enforcement of antitrust laws, the only way to find out how much enforcement we should have is by taking risks. For example, the FTC [under Khan] lost its case blocking Microsoft/Activision merger. Well, if that’s a case that’s sort of on the margin, the only way to sort of push the case law and see how far you can take it is by bringing a case like that to court. If you win 100% of your cases, you’re probably not bringing enough of them.”
Remer thinks the shift in antitrust enforcement from the federal government will be long lasting. “The antitrust laws, for the most part, have not been changed since the Sherman Act, other than some minor tweaks. So what we now believe about what types of behaviors and what types of mergers are deemed illegal has really evolved through case law just by virtue of bringing more cases. Just by bringing these anti-monopolization cases or abusive monopoly power cases, they’re going to have a big, lasting impact. One monumental case can have an effect for decades.”
Additionally, Remer sees importance in another area of the federal government’s antitrust and consumer protection work: the guidelines they publish for mergers. These guidelines, Remer explained, serve to articulate and tell businesses what the antitrust division and FTC will look for when evaluating mergers or monopolies. “The previous version of the DOJ’s merger guidelines was released in 2010, and before that, it was 1992, so it’s pretty infrequently they get updated. And during the Biden administration, one of the top priorities was to update the merger guidelines.” He continued, “The new guidelines were released in December 2023 and there’s a lot of stuff in there that wasn’t really mentioned or had got very little weight in the previous merger guidelines.” Among these new considerations that Remer discussed were the number of mergers in an industry, whether venture capital was buying up a bunch of smaller companies in the sector, effects of mergers on innovation, and the impacts mergers have on the labor market.
“So by virtue of just putting out these new guidelines, I think we’re going to see a big shift in the types and the number of cases that are brought by the antitrust agencies, and that’s definitely going to have a lasting impact.”
Additionally, when thinking about which parts of the Biden Antitrust legacy will be most impactful, Remer reflected on the importance of Khan and Kanter starting to challenge vertical mergers rather than just horizontal mergers. Vertical mergers are when companies buy their suppliers, and these used to be widely accepted because of the potential for lowering the final cost to consumers. While he’s unsure how the cases have ended up in court, Remer talked about how the Biden Administration has taken a harder stance on vertical mergers after putting more consideration into the effects of mergers on labor markets, among other things.
“Up until the Biden administration, what was usually analyzed in antitrust cases was the impact on the final consumer price,” Remer said, and explained how that would allow businesses to cite potential lower markups and lower final prices to justify their mergers. Part of this, he thinks, is because changes in final price is an easier thing to measure, relative to other factors.
“But the problem is, there’s all these other effects of competition. For example, innovation, labor, quality, all that stuff gets ignored when you only focus on final price effect. But what the Biden administration has done is, say ‘hey, just because we can’t measure this thing precisely doesn’t mean there’s not going to be harm from a merger or from monopoly conduct, and we’re going to find other ways to tell our story of harm here.’ And there’s been a much more willingness to sort of not go in there with hard numbers.”
Remer clarified that there’s nothing inherently illegal about being a monopoly.
“Our antitrust laws do not prevent you from becoming a monopolist if you compete on the merits. So that’s not why Amazon, Google, Apple, etc, are getting these lawsuits. What is true, though, is that if a company has substantial market power, there’s lots of things that now it’s not allowed to do that are considered an abuse of monopoly power, and a lot of these things you cannot do have kind of been determined by the case law that’s evolved over the past 100 years.”
“Once we’ve proven that they have a lot of market power, [the enforcers] ask, ‘are the things that they are doing harmful to the competition and harmful to consumers or competition?’”
Referencing the DOJ’s antitrust case against Google for abusing their market power to crowd out potential search bar competition, Remer said, “a lot of it revolved around the payments that Google was making to Apple, which resulted in billions of dollars sent to Apple annually in return for making Google the default search browser on the iPhone. And Google argues that they have all this market power because they’re better than everyone else, and that’s why people like them. But, the simple counterargument to that is, well, ‘if that’s true, why do you need to pay Apple millions of dollars to be the default search engine?’”
While exploring the example to shed light on how these cases work, Remer discussed how the DOJ called a behavioral economist to testify about the economic advantage of being the default search engine. The DOJ found lots of internal Google documents that showed they knew the economic advantage of being the default search engine. “So, again, it’s not the status itself of being a monopolist that’s anti-competitive. But when you combine that market power with actions to stop competition, it’s like, well, who has a chance?”
Khan and Kanter were both appointed by Biden, who will no longer be in office in four months. On the question of antitrust changes of a new administration, Remer said “What’s not going to change is the staff that works there, and they’re the ones that make those places run. But what the staff can’t do is to make decisions about what cases to bring and not bring — they can only make recommendations.”
“My hope is that the current cases that are already filed will continue to proceed. If they’re already in court they’ll continue to proceed. What could happen is that the new administration decides to settle the cases out of court. And, I don’t think it takes a genius to suspect that Harris’s administration would be more in line with Biden’s antitrust approach than Trump’s would be,” Remer said.
Remer is continuing to research market power and antitrust. With Swarthmore students as research assistants, Remer is currently working on a paper that goes back to the basics of antitrust philosophy. “One of the original reasons for antitrust was just having too much political power, and that these companies are just too powerful. And since the 1960s-1970s, this concern was completely lost as a concern of antitrust policy. I’m not entirely sure why, but it’s partly that it’s hard to measure how powerful a company is.”
“Something we’re looking at is the public information of how much all these companies lobby. We’re collecting data on corporate concentration, so what we’re looking at is when we see the amount of concentration, basically the size of these companies, does that impact how much they lobby, which government entities they lobby, and how much the industry itself lobbies.”
This work, and an additional paper on airline merger pricing will take up Professor Remer’s time for the foreseeable future.
