In her new book Antitrust, Senator Amy Klobuchar explains the origins of US antitrust law, diagnoses how the nation got derailed from the legislative intent, and spells out her prescriptions on how to fix it.

Antitrust: Taking on Monopoly Power from the Gilded Age to the Digital Age. By Amy Klobuchar; Alfred A. Knopf; 355 pages. 

There are two dueling templates for fixing what many consider to be a dysfunctional antitrust system, seemingly incapable of slowing the massive concentration of economic power. Led by thinkers such as Lina Khan, Zephyr Teachout, and Tim Wu, the New Brandeisian movement represents the progressive wing, and advocates for a wholesale redesign of competition policy. They embrace structural separation by legislative fiat, rather than via divestiture remedies at the end of lengthy antitrust proceedings. Their vision was spelled out in the House Majority Staff Report of October 2020, led by Representative David Cicilline (D-RI), which calls for, among other things, breaking up Big Tech, overturning hostile Supreme Court precedent, and imposing a non-discrimination regime to police acts of “self-preferencing” by platforms—using its platform power to give preference to a content affiliate—that would exist outside of antitrust.

The second template represents the views of more centrist thinkers, many of whom worked in the Obama administration, and is principally organized by the Washington Center for Equitable Growth. Just one month after the House Majority Report was released, this faction released its own, alternative template on how to fix antitrust in November 2020. Led by thinkers such as Michael Kades, Fiona Scott Morton, and Carl Shapiro, the Incrementalists (they need a name) call for, among other things, modifying antitrust’s evidentiary standards and devoting more resources to antitrust enforcement.

With the publication of her new book Antitrust, Senator Amy Klobuchar (D-MN) is trying to position herself in the Incrementalists’ camp. To wit: One of her chief policy proposals is to change the applicable evidentiary standard of the Clayton Act, so as to stop mergers that “materially” lessen competition; the current standard requires the government to show that the merger would “substantially” lessen competition. (A truly incremental reform.) But unlike some of other Incrementalists, who have openly mocked Lina Khan, Klobuchar is sympathetic to the pleas of the progressives. She cites the New Brandeisians favorably, and even allows for the possibility of non-antitrust remedies to rein in Big Tech, “from regulation to forced asset divestiture.” And this is what makes her such an intriguing figure for antitrust observers.

“Klobuchar asserts that she was inspired to write a book about fixing antitrust after the Federal Trade Commission, at her urging, pursued and ultimately lost what should have been a slam-dunk case against the drugmaker Ovation.”

The Pharma Case That Inspired Klobuchar

Klobuchar’s Antitrust is really two books: the first is a history lesson on the origins of antitrust law; the second, a set of policy proposals aimed at beefing up US antitrust enforcement. Her book has received positive reviews in the Washington Post (by Matt Stoller) and New York Times (by Shira Ovide). And this reviewer strongly recommends the book as well.

Klobuchar deftly weaves in her own personal experience in antitrust, from her time as outside counsel to long-distance provider MCI, seeking reasonable access fees to incumbent local exchange carriers, to her time as the reigning chair of the Senate’s Subcommittee on Competition Policy, Antitrust, and Consumer Rights. That background qualifies her to speak with authority on the subject matter.

In the introduction, Klobuchar asserts that she was inspired to write a book about fixing antitrust after the Federal Trade Commission (FTC), at her urging, pursued and ultimately lost what should have been a slam-dunk case against the drugmaker Ovation. By way of background, Ovation secured control of the only two patent ductus arteriosus (PDA) drugs used for treating newborns with heart conditions—one from Merck (Indocin) in August 2005, then the other from Abbott (NeoProfen) in January 2006. Two days after it acquired the rights to NeoProfen, Ovation jacked up the price of Indocin IV by 1,300 percent to $500 per vial. 

To an economist, the smoking gun here is not so much the price hike, but the fact that Ovation did not raise the price of Indocin until after it secured the closest substitute. Put differently, had the $500 per vial price been profit-maximizing for Ovation before it acquired the rights to NeoProfen, we would have seen that price hike six months earlier, as firms are assumed not to leave money on the table. That we didn’t see such a massive price hike until after the acquisition strongly suggests that merger was the cause of the hike, and that NeoProfen, in the hands of a separate firm, was at least partially restraining the price of Indocin.

Despite this powerful evidence of anticompetitive effects, the case was lost over some silly market-definition formalism. Applied here, market definition asks whether a hypothetical monopolist of all PDA drugs could profitably raise prices; if not, then the market would have to be expanded to include additional substitutes. The defendant-friendly inclination to avoid the direct evidence of market power and anticompetitive effects, and focus instead on market definition would be akin to a forensic pathologist saying, “Ignore the blunt instrument protruding from the victim’s head, and instead ponder, as a metaphysical exercise, what a hypothetical murderer could have done with the same weapon.” In non-merger antitrust cases where the harm has manifested itself, and where plaintiffs establish a causal nexus between the challenged conduct and a price effect, it’s not clear what further utility, if any, a market-definition exercise provides to the fact-finder; in these cases, market definition is an example of the kind of court-imposed obstacle to antitrust enforcement that Klobuchar seeks to unwind.

An Origin Story That Conflicts with the Chicago School’s Teachings

The Chicago School of Thought, which was propagated chiefly by Judge (and Yale Law School professor) Robert Bork and other University of Chicago professors, stresses low prices in the final goods market as the sole criterion for assessing potentially anticompetitive conduct. When undertaken by a single firm, conduct that had been deemed exclusionary as recently as the 1960s (think predatory pricing, tying, exclusive dealing) was suddenly considered innocuous in the absence of higher prices or lower output. Under this “consumer welfare” framework, which Klobuchar rightly labels “Bork’s incredibly misleading misnomer,” the welfare of workers and other input providers was made subservient to the needs of end users. 

A student of modern antitrust law, steeped in the Chicago School orthodoxy, might be confused to hear Klobuchar’s origins story and to reconcile it with the consumer-welfare lens: A key animating thrust of antitrust law, per Klobuchar’s history, was the protection of workers and farmers in their dealings with monopsonists. If workers weren’t supreme, they were at least equal to consumers in the eyes of the law. Klobuchar’s origins story puts the lie to Bork’s history of antitrust. And if the Chicago School is built on a deliberate misreading of history, then it should be easier to unwind.

Klobuchar explains that the end of the trusts came about not just from overcharging customers, but also from their exploitation of workers and other input providers such as farmers. The book documents that one of the motives of the trusts was to “get more control over employees because with trusts there is less competition to negotiate over wages and working conditions,” and to “dominate the labor markets.” In her telling, the movement to unwind the trusts was spurred, at least in part, by a desire to improve conditions in labor markets. 

Klobuchar spells out how the antimonopoly movement was interwoven with the labor movement: “[C]ompetition doesn’t just mean competition for prices. It also means competition for workers and better wages and working conditions.” That the two movements peaked at the same time was not accidental: The 1894 labor strike against the Pullman Company, which followed on the heels of the Sherman Act, was a response to the company’s decision to reduce workers’ wages and lay off workers. She concludes that the “monopolists’ penchant for cheap labor, racially discriminatory practices, limiting wages, and basically making way too much money on the backs of others is what eventually led to the downfall of the trusts.” In blatant disregard to this history, a hostile and pro-monopoly federal court, shortly after the Sherman Act became law, aimed the antitrust machinery at workers to attack unionization.

The precursor to federal antitrust legislation in 1890 was state antitrust laws aimed at protecting vulnerable farmers in their dealings with the trusts. Klobuchar writes that while the Anti-Monopoly Independent Party failed to gain traction on the national level, the “Grange movement caught on state by state in a big way … with farmers battling falling crop prices.” Once again, monopsony concerns—namely, excessive buying power leading to input prices below competitive levels—were at the fore of the antimonopoly movement. The natural political constituency for an antimonopoly movement were not overcharged consumers, where the pain from overcharges was diffuse, but rather farmers and workers, where the pain from underpayments was concentrated. Eventually, this populist energy was channeled by Republican Senator John Sherman of Ohio, who noted in 1890 that monopolists dictate “the price of labor without fear of strikes” and “decrease the cost of raw material, the farm products of the country.” 

Klobuchar explains how this antimonopoly fever, grounded in an effort to connect with labor and not consumers, eventually reached the White House. William Jennings Bryan in 1896 and Teddy Roosevelt in 1904 would seek to channel these same forces in their presidential campaigns. Roosevelt recognized that voters in the Midwest—“from farmers to small-business owners—despised the trusts;” he “saw how great disparities in wealth and the industrialists’ arrogance towards workers were resulting in strikes” and other forms of social instability, because the trusts “had acquired too much power over their workers” (emphasis added). Woodrow Wilson also railed against the trusts, again because input prices were too low: “The little man is crushed by the trusts,” where the “big concerns come in and undersell him” (emphasis added). Klobuchar notes how the Robinson-Patman Act of 1936, “another pillar of competition law,” was an “effort to save mom-and-pop retailers” from the larger chains, efficiencies be damned.


A Few Inconsistencies 

At times, Klobuchar’s book reveals a deaf ear, almost reflecting a different voice. After carefully explaining the origins of the law relating to monopsony concerns, Klobuchar slips back into Borkian revisionism by writing: “While the framers of the Sherman and Clayton Acts intended to proscribe only conduct that threatens consumer welfare, the framers of the Robinson-Patman Amendments intended to punish the perceived economic evils not necessarily threatening to consumer welfare per se.” In her defense, Klobuchar quickly corrects this error—hopefully that line will be excised in the next edition—by noting how “Bork grossly perverted the whole history of the Sherman Act, which was to protect American farmers and workers and consumers from the power of monopolies” (emphasis added).

Similarly, after complaining about the elevated status of market definition, Klobuchar argues that Reagan’s FTC gutted the Line of Business program, which contained industry aggregates and financial ratios compiled from line of business financial data submitted by large US manufacturing companies; had the program been preserved, the FTC could have “defined relevant markets with much greater precision.” Is market definition important or not? Klobuchar also treads too gently on the Obama administration, which under-enforced antitrust law as well. To her credit, she criticizes Obama’s DOJ for permitting the 2013 merger of Penguin and Random House, two of the largest publishers, presumably out of concern for newfound buying power vis-à-vis writers. She finds fault with Obama’s antitrust enforcers for allowing “multiple tech mergers” and Big Tech to “get even bigger.” Yet she wrongly credits Trump’s Antitrust Division head, Makan Delrahim, for having the courage to “launch long-overdue investigations of tech companies.” In fact, Delrahim had to recuse himself from the DOJ’s investigation of Google due to his prior lobbying for the company.

Why Klobuchar wants to play both sides of the antitrust field is a bit of a puzzle. Presumably, she wants to pick up the support of the New Brandeisian wing and the Obama holdovers. In doing so, however, some passages in Antitrust create cognitive dissonance. 

In his review of Antitrust, Matt Stoller rightly points out that Klobuchar “doesn’t explain how her proposals would address the deep-rooted problem of today’s largely pro-monopoly judiciary.” Klobuchar laments “a dominant conservative ideology in the courts, particularly in the nation’s highest court.” If a judge is predisposed to ruling against an antitrust plaintiff, he or she will identify some way to kill the case; tweaking the evidentiary standards will not result in different outcomes. 

Klobuchar also complains that “during that lengthy time” before the FTC’s litigation against Ovation played out in the courts, Ovation continued to inflict anticompetitive injury on consumers. She later laments that “antitrust cases can go on for years, sometimes more than a decade …” Yet none of her remedies would address the delays inherent in antitrust proceedings. Although not mentioned in the book, her proposed antitrust legislation would jettison the senseless market-definition requirement for most cases, which torpedoed the FTC’s case against Ovation.

“Why Klobuchar wants to play both sides of the antitrust field is a bit of a puzzle.”

Antitrust Isn’t The Only Tool in the Competition Toolkit

The book concludes with a Top-25 list of things Congress and the White House can do to solve America’s monopoly problem. The first 18 prescriptions track her latest legislative proposal, and fall under the domain of antitrust. There are many good ideas here, as well as some important omissions, as noted by Eric Posner, including the failure to overturn Supreme Court cases that established limitations on antitrust liability and enforcement. To her credit, Klobuchar also calls for policies outside of antitrust, such as protecting workers by restricting the use of non-competes agreements and forced arbitration clauses. 

Klobuchar’s 24th suggestion, my personal favorite, is to “stop using the word antitrust and start calling it competition policy.” Alas, she only spends one paragraph on this proposal. It would have been an ideal place to note that sector-specific regulation can complement antitrust in hard-to-reach areas, where antitrust can’t easily recognize the (non-price) harm, or where antitrust can’t provide relief in time to spare innovation at the edges of the platforms. The book repeatedly calls for the restoration of net neutrality rules, an admission that antitrust isn’t the only tool in the competition toolkit. 

Alas, Klobuchar seems more inclined to steer a case involving self-preferencing by a tech giant through the (admittedly dysfunctional) antitrust funnel, where it likely would go to die, even if her new evidentiary standards relating to exclusionary conduct were to become law. Much better for such cases of favoring one’s content affiliate to be dealt with in a specialized tribunal, subject to a nondiscrimination standard outside of antitrust. Hearings could also be subject to strict limits on duration, to prevent a dominant platform from strategically drawing down the (smaller) complainant’s litigation resources.

Despite some minor inconsistencies, Antitrust is well worth your read. Klobuchar is a skilled writer and thinker, knows this space inside and out, and has seized on an issue—attacking power imbalances via competition policy—that should be front and center of our political debates for years to come.