The following is an adapted excerpt from “Monopoly Politics: Competition and Learning in the Evolution of Policy Regimes” by Erik Peinert, now out at Oxford University Press.
In 2021, President Biden selected Lina Khan, a prominent critic of technology giant Amazon, and more generally an advocate of reinvigorating American antitrust law and enforcement, as chair of the Federal Trade Commission (FTC), one of the United States’ main antitrust enforcers. Khan was confirmed by a surprisingly bipartisan 69 to 28 Senate vote. Khan quickly signaled her intent to significantly change the status quo at the FTC, pulling back policies designed to constrain the FTC’s legal powers, altering decision-making procedures, and committing to reform the corporate-friendly principles that had guided American antitrust for decades. This prompted a number of longstanding FTC attorneys to seek employment elsewhere, with one commentator noting that “the new chair is telling staff attorneys that she’s going to change antitrust enforcement and the way the agency does things to be more vigorous and vigilant . . . and for many, it feels like they’re being told that the mission they’ve pursued and the policies they’ve implemented—they’ve been doing it all wrong.” So rather than go with the new direction and reverse previous positions and commitments, many staff are looking to leave. Of those that remain, many continue to voice their dissatisfaction with the new leadership.
This blend of bureaucratic politics, staffing, and previous policy commitments can make this appear as a dispute between personalities, but such a view disguises a broader policy shift underway. In December 2020, a number of American states filed a major antitrust action against technology giant Google, alleging that Google attained its monopoly over digital advertising markets through, among other things, anticompetitive tying arrangements and acquisitions, following a similar action by the Department of Justice (DOJ). The same month, forty-eight states and the FTC filed against Facebook, alleging that Facebook eliminated potential competitors via an illegal “buy-or-bury” strategy. Khan’s appointment was not an isolated staffing choice of the Biden administration. Jonathan Kanter, a longtime critic of Silicon Valley tech giants and an experienced litigator, was chosen as assistant attorney general for antitrust, the country’s other main antitrust enforcer. Then in July 2021, Biden signed a broad executive order to expand competition in the American economy, signaling a “whole of government” approach to restoring competition in American markets. Recent years have also seen a slew of bills introduced in Congress to update antitrust law. Compared to a decade ago, when such actions against the United States’ most successful firms would have been unthinkable, all of these together amount to a dramatic reversal in policy regarding antitrust and competition.
What Monopoly Problem?
This policy shift is arguably in response to a series of economic problems. Bolstered by policy for decades, monopoly power in the United States has grown to extreme levels in recent years. Following significant deregulation of merger control and antitrust policies in the 1980s, 75% of American industries became more concentrated from the 1990s through the 2010s (Grullon, Larkin, and Michaely 2019). Guided by a “consumer welfare standard,” antitrust policy in the United States for forty years now has systematically assumed that large, vertically integrated companies are more efficient, that the risks from increased corporate concentration are minimal, and that a number of anticompetitive restraints by large firms are efficient. Intellectual property (IP) rights—which bestow temporary monopolies—have been greatly bolstered from the 1980s to today. This lack of competition characterizes markets across the technological spectrum, where the agricultural, airline, and food-service industries are consolidated with limited competition. Recent research and popular discussion have identified this anticompetitive trend as a key driver of many of today’s broader economic and political maladies. For the past decade, profits have been hitting all-time highs in the United States, in a time of somewhat stagnant growth, where most consumers find prices for medication, insurance, transit, and many other essential goods and services rising year after year.
First, and perhaps most expected, monopolies are not good for consumers. The defining feature of market power—the technical, economic term for monopoly—is the ability for a producer to increase prices without substantially losing sales, and as such firms that face little competition tend to charge consumers more than is justified by the costs of production. De Loecker, Eeckhout, and Unger (2020) have shown that the average markups (the difference between sales price and the costs of goods sold) have increased dramatically in the United States since 1980. Philippon (2019) estimates that the average American household is paying $5,000 more per year for standard goods and services than they would be if American markets were as competitive as they were forty years ago.
Beyond these obvious harms, the new era of monopoly power comes in a particular form. New “platform” business models operate as intermediaries connecting a range of buyers and sellers (Rahman and Thelen 2019), giving them access to large amounts of data to enter and dominate adjacent markets. At the same time, whether in software, hardware, pharmaceuticals, retail, or manufacturing, the consolidation of industry and profits has been closely associated with the consolidation of IP like patents, trademarks, and copyright (Autor et al. 2020; Kurz 2023; Schwartz 2016, 2021). For example, Amazon, an online retail platform and cloud computing firm with a vast IP portfolio, uses its control over its platform and intangible data to maintain its position (Rikap 2022).
Accordingly, this form of monopoly power has contributed to the rise in income inequality over the past several decades. With their core profits protected by enhanced IP rights and limited competition, lead firms have increasingly chosen to unbundle production and outsource a large fraction of their labor to subcontractors—a “workplace fissuring” made possible through anticompetitive reforms to antitrust, trade, and IP law (Callaci 2018; Paul 2020; Schwartz 2020; Weil 2014). And as profitable firms tend to pay much better wages, as firms have outsourced the less-profitable portions of production, profit differentials between these highly profitable firms and others are among the core drivers of income inequality (Barth et al. 2016; Furman and Orszag 2018; Song et al. 2019). In addition to these effects on labor income inequality, the skyrocketing equity values of the most profitable firms have boosted the wealth of existing asset owners and have created a plethora of new multi-billion-dollar fortunes along the way. The founders or early investors of technology companies have ended up with wealth on the scale of the first gilded age in the early 20th century.
These monopoly protections, and the associated unbundling of production, have a series of negative macroeconomic effects, including depressed investment and lower growth rates. Firms with market power tend to invest less than firms facing competition, for a monopoly investing in R&D or productive capacity will possibly reduce profits (Arrow 1962). Moreover, the unbundling of production by IP-heavy monopolies has also meant that profits have been allocated away from investment-heavy sectors (integrated manufacturing, telecommunications, and chemicals), to IP-intensive sectors that invest less (finance, pharmaceuticals, and software) (Schwartz 2020). Accordingly, the largest firms in the United States today have a lower marginal propensity to invest than firms in more competitive markets (Philippon 2019; Schwartz 2021). Gutiérrez and Philippon (2019) show a lagging rate of new business creation in recent decades in the United States, largely driven by anticompetitive regulations and policy, while the contribution of large firms to productivity growth in recent decades has actually been falling (Gutiérrez and Philippon 2020). Gutiérrez and Philippon (2018) link this “investment gap” in the United States to declining competition since 2000.
The policy conflict over antitrust, competition, and monopoly is happening in the shadow of this economic context. While there is dispute over exactly which outcomes are attributable to this rise in market power, there is little dispute that corporate concentration has increased in recent years, profits for the largest firms have grown in comparison to others, and income and wealth inequality have increased over the same time period.
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Borrowing insights from microeconomics, bureaucratic politics, sociology, psychology, and law, this book contends that policy change is an interaction between (a) the self-undermining effects of economic policies over time and (b) the organizational patterns of staff turnover, policy commitment, and learning within policymaking circles. The core of the argument is that policy regimes that consistently favor competition or market power over time intrinsically generate large diminishing returns—economic costs that come in the form of economic stagnation, lower employment, and low investment, among others. However, because the policy regime had already endured for so long, policymakers who had spent their political or bureaucratic careers in favor of the policy regime are effectively committed to it, unwilling to recognize the costs of the policy regime and change their mind about the appropriate goals of policy. Yet through mundane processes of staff and political turnover, uncommitted policymakers are introduced into policy circles, and these uncommitted actors are willing to learn, change their mind about policy, and push others to do so, eventually shifting to a different policy regime in the opposite direction.
This theory will be developed and tested in the national contexts of the United States and France during the 20th century, drawing on extensive archival evidence from key moments of policy change over time. Within each national case, I focus analysis on two cases of policy change. The American cases cover a change in policy regime in the 1930s and 1940s from market power, under the aegis of “industrial self-government,” to competition, under the structure-conduct-performance paradigm, and then a shift back to market power under the consumer welfare standard in the 1970s and 1980s. The French cases examine shifts in policy regime from competition to the market power of “national champions” in the 1960s, and then back to competition during the 1980s.
Excerpted from “Monopoly Politics: Competition and Learning in the Evolution of Policy Regimes” by Erik Peinert. Copyright © 2025. Reprinted by permission of Oxford University Press.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
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