Over the last four years, new voices in the Democratic Party have been calling for policies that push back on established power structures. The growing anti-monopoly movement is a major part of this populist uprising—aimed at breaking up the corporate giants that dominate large swaths of the economy.
Even some stalwarts of the old system are now anti-monopolists: In late April, a group of longtime Democratic economists and antitrust practitioners sent a letter urging Congress to pass legislation that would align antitrust law with “modern economic theory and to fix harmful judicial rules.” The letter’s recommendations, if enacted, would create a substantially more active antitrust regime than we’ve seen over the last four decades.
In other words, elite liberals now recognize that something has gone wrong in how America polices market concentration. The problem, though, is they haven’t yet fully figured out what that “something” is. The April missive prescribes new legislation and judicial interpretations of antitrust law, which would be welcome, but it ignores the circumstances that made antitrust enforcement collapse in the first place.
America’s flawed anti-monopoly policies have flourished because a cloistered world of bureaucrats—some well-intentioned, some not—have been charged with implementing it with few checks on their power. This small cache of regulators, lawyers, and judges all know each other, and all know that there’s a lot of money in letting the system fall into the decay it has. Too often, the same antitrust officials who set lax antitrust standards then go and work for firms that benefit from those decisions.
To fix our monopoly problem, the United States needs more than a set of policy prescriptions from well-meaning wonks. It requires a fundamental shift in both who we trust to shape our political economy—and the personal incentives that drive those people’s careers.
As they stand, the principal federal institutions that enforce antitrust law—the Department of Justice and the Federal Trade Commission—present conflicts of interests to the lawyers and economists who carry out the agencies’ missions. That’s because civil servants regularly leave government to cash in on their insider knowledge and connections in the private sector.
Our organization has found that the most popular career path—by far—for former FTC antitrust lawyers was to argue for corporate mergers and acquisitions before the very agencies for which they used to work. Forty-one of 81former FTC Bureau of Competition officials who left the agency between 2014 and April 2020 went to BigLaw firms, such as Kirkland & Ellis, Baker Potts, and Akin Gump. Another 11 became in-house competition counsels at acquisition-fueled companies like Facebook and Amazon. In total, 67 percent of former FTC officials went to work for corporate America arguing against their former government colleagues.
Even among the antitrust experts who signed on to the April letter, at least one is currently advising corporate clients. Bloomberg revealed that Fiona Scott Morton, Yale professor and former deputy assistant attorney general of the Antitrust Division, has been advising Apple and Amazon while co-authoring papers on the government’s cases against Google and Facebook.
This revolving door underlies many frustrating examples of our failure to police big business. In April 2020, Facebook hired a lawyer from the FTC’s Anticompetitive Practices division, just as the company faces an examination of its past acquisitions. Former FTC higher-ups also helped Facebook secure its wrist-slap of a settlement over the Cambridge Analytica scandal.
The coronavirus pandemic demonstrates how the FTC’s revolving door can have deadly consequences. In 2007, for instance, federal officials attempted to stock up on cheap ventilators to be supplied by a firm called Newport Medical Instruments. But this arrangement threatened medtech giant Covidien, whose ventilators were more expensive to produce. So through what executives called a “killer acquisition,” pushed through by a former FTC lawyer, Covidien bought Newport and terminated the government contract, and thus the cheaper ventilators. As we reported, that merger was approved by FTC leaders who all, without exception, left the agency for positions representing corporate clients.
This dynamic has proved toxic. When a partnership at a corporate law firm appears to be the logical next step in a career, officials are incentivized to keep private interests in mind when they’re supposed to be carrying out antitrust enforcement in the public interest.
To truly change the culture within the antitrust enforcement agencies, political appointees— including nominees by a potential Biden administration—must be provably free from corporate interests, due to long and clear records advocating for the public good and against private buckraking. Congress and the agencies also need to limit the influence of former antitrust officials who leave for private gigs, via restrictions on post-employment work and other binding ethics guidelines. At the same time, Congress and a future Biden administration should also heavily prioritize promoting career officials within government, and better compensate them for their expertise. This would be vastly superior to hiring former corporate lawyers inside the agencies they once sought to undermine—and likely will again.
Economists with antitrust authorities also have a clear path to representing corporate clients through a cottage industry of consultancies. C-Suite executives rarely lose any sleep if the FTC or DOJ start asking tough questions about their corporation’s latest acquisition. They simply cut a check to one of these consultancies and, like magic, a tenured academic or well-regarded economist comes back with numbers showing that merger to be a godsend to consumers. If they’re savvy, they can hire an economist with experience at the very agency they’re seeking to persuade. Our organization has found that at least five members of the Bureau of Economics ended up at an economic consulting group after leaving the FTC.
Fittingly, there are only two major firms that regularly argue in favor of monopolies: Charles River Associates and Compass Lexecon. Charles River, for example, consulted on a full third of all merger cases in the early 2010’s.
Lax professional ethics are common inside the consultancies, too. In one case reported by ProPublica, a group of government lawyers hired Compass Lexecon’s Jonathan Baker as a consultant for a case against Apple. In the courtroom, however, Baker found himself arguing against his own boss at Compass Lexecon, Jonathan Orszag, who’d helped to set up Baker’s contract with the Feds. Baker conducted an economic analysis finding Apple artificially inflated e-book prices by 19 percent. Orszag ran a similar analysis and found Apple only had negligibly higher prices of 1.9 percent. Two economists from the same firm, two different answers to the same question. The only difference was who was paying whom.
With case studies like these, is it any wonder why “outdated and bad economic theory has undermined antitrust enforcement,” in the words of the letter from established antitrust actors? This isn’t simply a matter of good-faith economists coming to the wrong conclusions. It’s far simpler: If these economists cannot justify what corporate America wants, they don’t get paid. It’s like the old Upton Sinclair quote: “It is difficult to get a man to understand something when his salary depends on his not understanding it.”
The antitrust regulatory agencies simply cannot compete with the deep pockets of BigLaw and mega-corporations. Mergers in the US economy have quintupled since 1985, while the DOJ Antitrust division’s budget has declined in real dollars. Government officials’ paychecks look pitiful compared to private sector peers. Plus, the FTC and DOJ Antitrust highly value private-sector experience when looking to promote, thus stifling any promising talent from inside the agencies and further incentivizing ambitious lawyers to revolve back and forth. Executive appointments to the top positions similarly pull from the pool of revolving antitrust experts rather than steady promotions from within. That means genuinely career-oriented officials are effectively barred from attaining positions of peak responsibility or prestige unless they go work for the other side.
This does not need to be the case: recently retired Postmaster General Megan Brennan achieved her position within the US Postal Service after starting her career as a mail carrier 30 years ago. The Consumer Financial Protection Bureau, along with the Securities and Exchange Commission and Office of the Comptroller of Currency, operates on an alternative pay scale specifically to attract skilled experts that normally might take higher-paying private sector positions. And of course, Dr. Anthony Fauci has run the National Institute of Allergy and Infectious Diseases since 1984, and is trusted by 70 percent of Americans, including 60 percent of Republicans. Americans have faith in his judgement about when to re-open the economy more than the president’s by more than two-to-one.
In contrast, two of the current FTC Commissioners came to the FTC from private sector jobs: Christine Wilson was a senior vice president at Delta Airlines, while Joseph Simons was the co-chair of the antitrust section of Paul Weiss, a BigLaw firm. The assistant attorney general who oversees DOJ Antitrust, Makan Delrahim, was a longtime partner practicing competition and intellectual property law at BigLaw firm Brownstein Hyatt Farber Schreck before he joined the Trump Administration in 2017.
But there’s yet another way that corporate America rigs antitrust law in its favor—the courts themselves. A recent analysis by Demand Justice, a progressive court-watching group, found that nearly 60 percent of all 175 circuit-court judges (the level just below the Supreme Court) were once BigLaw partners.
Given most judges’ formative experiences, it’s unsurprising that each decade the courts become more permissive of mergers and acquisitions. That’s an example of why BigLaw partners are less, rather than more, suited to the bench than lawyers who represent small businesses, much less unions, consumers, or civil rights plaintiffs. (This, of course, affects more than just antitrust; corporate and labor law would, for example, be unrecognizable if fewer members of the bench were corporate law veterans).
A recognizable liberal impulse undergirds the calls for reform from established antitrust practitioners—a belief that rationality will prevail, that Congress and DOJ and FTC officials just need to have the problems with current antitrust enforcement explained to them properly. Then, they’ll naturally spring into action to correct these innocent errors. It’s a desperate belief that everyone else is acting in good faith, that actors in the system just haven’t noticed the problems that exist.
But not everyone is acting in good faith. Many antitrust regulators have been motivated by their own bottom line. The real challenge, then, is to ensure that people who occupy those positions don’t have a conflict of interest. That way, we can be sure they are acting in the public interest, not their own.