Hipsters are known to ruin everything. But did they ruin antitrust too? One buzz term you might be hearing lately among antitrust practitioners is “hipster antitrust.” But what does that term even mean? Does it involve bearded competition lawyers? Are all the cool people doing it? Is it vegan? This piece will briefly look at “hipster antitrust”—what it is, why it came about, criticisms against it, and whether it has anything to offer the prevailing modes of antitrust analysis.
Let’s start with some context. For the last several decades, American antitrust law has been largely shaped by the so-called “Chicago school” of economic thought, which holds that consumer welfare should be the standard by which competition policy is measured. This standard largely prizes lower prices, increased production, higher quality, and greater efficiency as the metrics for judging competition.
It took over from the then-prevailing jurisprudence in the mid-20th century, more concerned with firm size, industry concentration, and protection of (often smaller) competitors without close scrutiny of actual effects. The proponents of the Chicago school persuaded courts, regulators, and practitioners that firm size is often the product of greater efficiency and economies of scale—much, if not all, of which accrues to the benefit of consumers—and that other constituencies, such as less efficient competitors, should not be shielded from marketplace forces. (NCAA v. Bd. of Regents of Univ. of Okla., 468 U.S. 85, 107 (1984)).
Over the last several years, however, there has been something of a backlash. Discrete parts of the antitrust bar, consumer advocates, politicians, and other interested entities have called for antitrust to focus more on the absolute size of firms, market structure over effects, protection of smaller businesses, distribution of wealth and political power, and employment. This change has been driven in large part by complaints about the increased concentration of firms in a number of industries, stagnant wages, and the seeming inability of current antitrust law to contain the growth of technology companies that are undoubtedly dominant and increasingly powerful, such as Google, Facebook, and Amazon.
While calls for reforming antitrust laws are nothing new, the recent level of interest in change—characterized by increased congressional hearings and statements, extensive commentary from the bar, and academic conferences on the topic—has led this movement to be colorfully (and perhaps derisively) labeled “hipster antitrust.”
Hipster antitrust calls for changes to the law that would give regulators more leeway to combat transactions or behaviors that traditionally escape scrutiny. For example, whereas vertical mergers, such as Amazon’s recent acquisition of Whole Foods, are generally viewed as unproblematic because they do not result in two competitors combining, hipster antitrust believes that transactions involving dominant firms can entrench market power even if they are not direct competitors. (See Lina M. Khan, "Amazon’s Antitrust Paradox," 126 Yale L.J. 710, 716–17 (2017)). Similarly, proponents are more skeptical of acquisitions of companies that would typically be considered too small to be of concern because of the potential for future or nascent competition. And some appear to argue that reductions in headcount after a merger should not count as a creditable efficiency because of the need to protect jobs, reduce labor market concentration, and maintain wages. Hipster antitrust proposals include implementing a presumption of illegality for mergers of a certain size, putting on the would-be merging entities the burden of proving that their transaction would not be anticompetitive, viewing more skeptically vertical mergers (especially those involving at least one dominant firm or in high-tech industries), and scrutinizing alleged monopolistic behavior by two-sided platforms on one side of the platform. (See Ohio v. Am. Express Co., No. 16-1454, 2018 WL 3096305, at *3 (U.S. June 25, 2018)).
Critics of hipster antitrust decry its vague goals and argue that abandoning the consumer-welfare standard would be ruinous for competition policy. First, they point out that the consumer-welfare standard brought order to antitrust, which was previously internally inconsistent and incoherent. Hipster antitrust, they contend, would return competition policy to the dark ages of unproven presumptions of anticompetitiveness and dispensing of actual-effects evidence.
Second, critics note that a focus on any goals other than consumer welfare will almost certainly come at the expense of consumer welfare, as courts and enforcers weigh competing interests. For example, protecting small businesses—including those which may not be as efficient as larger companies—could result in higher prices, lower quality, or reduced output to consumers. Finally, critics point out that broadening competition policy to encompass the disparate aims of hipster antitrust increases agency discretion and, correspondingly, augments the risk of regulatory capture and undermines the rule of law. In response to hipster antitrust’s attack on the prevailing mode of analysis, proponents of the consumer-welfare standard argue that it is fully equipped and agile enough to account for new business models, new industries, and developments in economic thought, noting, of course, that consumers remain the ultimate beneficiaries of the standard however it may develop (or not).
So what does hipster antitrust have to offer, if anything? Even without abandoning the consumer-welfare standard, several things come to mind. First, the calls for an alternative regime indicate that, at the very least, more vigorous enforcement is needed under the current regime. For example, Carl Shapiro, the former chief economist for the Antitrust Division, rejects departing from the consumer-welfare standard but agrees that enforcers should more aggressively scrutinize mergers, even when the target is relatively small. Similarly, even after a merger has been approved, enforcers should continue to scrutinize any anticompetitive effects that may have resulted from the transaction but were not anticipated during the review.
Second, hipster antitrust has drawn attention to the as-yet unquantifiable significance of data and network effects in deals. For instance, what is the value of Facebook’s huge network of members, as well as the data it has on those members? A number of competition authorities—notably, the European Commission—have already been focusing significant efforts on how to account for big data in competition. Being able to quantify the importance of data will be critical to the effective enforcement of the antitrust laws as applied to technology companies—the frequent target of hipster antitrust advocates. Hipster antitrust has undoubtedly drawn attention to the need to better understand new or nascent technologies and industries in order to better predict likely anticompetitive effects in those markets under the consumer-welfare standard.
Finally, if nothing else, hipster antitrust has prompted a vigorous debate about competition policy. Even if it is ultimately debunked and relegated to the antitrust’s intellectual wastebasket, it has prompted vigorous defenses of the current analytical framework—and even the consumer-welfare standard’s most ardent defenders cannot doubt that periodic questioning and reevaluation of deeply held principles can only serve to make our laws and thinking about competition better and stronger.
The full version of this article was originally published in the July 2018 issue of Perspectives in Antitrust newsletter, by the American Bar Association. Perspectives in Antitrust newsletter is a member benefit of the ABA Section of Antitrust Law Civil Practice and Procedure Committee. Learn more about the Section of Antitrust Law.
