Federalist Society Event Focuses on Competition and Antitrust Issues

WASHINGTON — President Joe Biden’s controversial executive order on competition was the topic being discussed at a Federalist Society event held Thursday. 

The July 9 Executive Order 14036 entitled, “Promoting Competition in the American Economy,” seeks to address competition issues and reform the antitrust laws governing them. Any actual change to the antitrust laws will take years, an antitrust attorney told the Well News, and that is if there is any eventual bipartisan support. 

But Neil Averitt, a former Federal Trade Commission lawyer, identified six areas of likely and useful action at the debate on whether the order advances or restricts competition. These ultimate benefits, he added, make the order “sound and fundamentally [deserving of] support.” Nevertheless, critics of the order claimed it sought to favor party objectives and ignore its long-term effects. 

The order focuses on health care and online platforms and urges agencies to adopt progressive policies but doesn’t include any enforcement mechanism. It includes 72 provisions that could result in more than a dozen federal agencies looking into rulemaking to foster competition and consumer protection. For example, it asks the Department of Health and Human Services to look into mapping out how to lower drug prices and make health care affordable. 

Out of the 72 initiatives, the now-columnist at FTC:WATCH pointed to six likely areas where “useful action” was likely: 

• Removing barriers created by the government for new entrants to markets like state and federal occupational and product licensing; 
• Addressing anti competitive provisions like non-compete clauses or no-poach agreements between competitors in the labor market; 
• Fostering government competition in present industries;
• Protecting consumers from fine print provisions like high cell phone termination fees or “drip pricing” – the final prices revealed by industries like airlines and hotels;
• “Difficult and contentious” areas like merger guidelines and technical standards; 
• Shifting the burden of proof to the merging parties in merger cases that have empirical data showing it would result in an anticompetitive merger. 

But Howard Beales III, professor at George Washington University’s School of Business, thinks the order is “schizophrenic about competition, it uses competition as an excuse to replace competitive outcomes and it delivers favors to interest groups.” 

Antitrust laws, Beales said, should be an “economic concept” not a vehicle for “fundamentally political decisions.”

“The executive order seems to be ignoring the important long-term benefits of patents,” he said. 

Robert Bork, Jr., president of the Antitrust Education Project, agreed that the recommendations within the order “are essentially payoffs, picking winners and losers… [an] infusion of social policy regulation that will be part of this effort from labor to climate change to equity.” 

Bork sees antitrust laws beginning and ending with the consumer welfare standard – the economic model employed by antitrust enforcers that finds a merger anti-competitive if it increases prices above competitive market levels or decreases product quality. Critics of the order say it targets that standard. 

Issues of competition in the labor market, however, are missed by the consumer welfare standard, argued Ioana Marinescu, associate professor at the University of Pennsylvania. The majority of labor markets, she claimed, are highly concentrated, thus tending to result in lower wages when there are non-compete clauses that prevent employees from working for a competitor or no-poach agreements between competitors stopping them from hiring each other’s workforce.

Incorporating labor market issues into the merger guidelines for further enforcement, for example, would help the issues plaguing the market, Marienescu suggested. 

As an economist, she said, “it’s more meaningful to focus on protecting competition rather than consumer welfare.” This is particularly important for the labor market, as the adverse effect of a merger on wages “doesn’t necessarily have a direct effect on consumers in the market.” 

The fact that the White House has appointed its own regulatory advisor on competition and the progressive appointment of FTC Chair Lina Khan, the attorney added, points out the increased scrutiny most deals should expect to receive.

Khan’s notoriety in the antitrust realm skyrocketed in 2017 when she authored the paper entitled, “The Amazon Paradox,” which broke down the failure of antitrust doctrine in regulating the big tech giant that now dominates across markets.