Wright in The Deal: The Return of Big is Bad

In an op-ed appearing in The Deal, Professor Joshua Wright and his coauthors maintain that consensus in the antitrust academy still holds that "while big can be bad, the harm that dominant firms can do needs to be demonstrated, not simply assumed in consequence of their sheer size."

The op-ed is critical of recent signals from the Department of Justice (DOJ) that it will provide greater scrutiny and challenge to business practices. In particular, the authors believe DOJ's summary withdrawal of the Section 2 Report represents a dismissal of the report's intellectual bases in order to more easily pursue a preferred agenda.

Wright and his coauthors point out that most recent antitrust activity in the U.S. has had at its core a concern for the cost to consumers of making errors in antitrust enforcement, or "error cost analysis," something they believe DOJ seems to be willing to ignore. "The repudiated report envisioned predictable, principled and coherent enforcement," they say. "That's a noble, if tough, vision to achieve in any enforcement regime. But it is one that has no chance of materializing if antitrust shuns the limitations of economic analysis and adopts economic engineering based on simplistic industrial policy goals as its touchstone," they conclude.

The return of "big is bad", The Deal Magazine, May 26, 2009. By Keith Hylton, Geoffrey Manne, and Josh Wright.

"The report was an imperfect document, to be sure, but the work that went into it was substantial, varied and engaged. The report itself assessed a range of policy positions, evaluating and interpreting the existing economic theory and evidence in support of competing positions, and it endorsed some of those positions. At its core the report adopted an approach to antitrust enforcement that was cautious and well informed by economics and the law, even while debate continues.

"But wholesale rejection of the document -- the most complete statement to date on the law and economics of Section 2 -- because of disagreement with some of its positions is irresponsible and premature. And the rejection of specific conclusions from among the range of possibilities discussed in the report without any discussion of which other policy positions the DOJ would support, and why, severely undermines the intellectual efforts that the DOJ and FTC staffs put into the original report by summarily dismissing them. Instead, Varney asserts that the report 'loses sight of an ultimate goal of antitrust laws -- the protection of consumer welfare' -- but cites no evidence. (And the report, for its part, mentions 'consumer welfare' 31 times.) Meanwhile, the mere reference in Varney's speech to the idea of returning to 'tried and true' principles of Section 2 enforcement is meaningless, since no one knows what those are, and the whole point of the report was to define them. It is difficult to avoid the conclusion that the announcement dismisses the report and its intellectual bases simply because it was inconvenient to the agenda upon which the DOJ's antitrust division is about to embark."

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