Michael Katz on Challenges to Antitrust Policy

Episode Summary

Executive Summary: Economist Michael Katz argues U.S. antitrust doctrine has drifted too far toward pro-defendant presumptions, especially in vertical practices, market definition, predation, and two-sided markets. He favors economy-wide legislative reform, more agency resources, and better expert use, but is skeptical courts can consistently apply nuanced, fact-specific standards without Congress resetting the rules.

Main Topics: Why antitrust is changing (Priority: 5/5): Katz says the recent antitrust shift reflects both public backlash against big tech and a broader realization that courts have moved away from mainstream economic thinking. Courts vs. economics (Priority: 5/5): He argues major court doctrines—especially in vertical restraints, market definition, and predatory pricing—rest on overly strong presumptions or weak economic logic. Two-sided markets and platform cases (Priority: 5/5): Katz says two-sided markets are useful analytically, but the Supreme Court has overextended the concept in ways that create inconsistent and sometimes absurd results. Merger review and nascent competition (Priority: 4/5): He favors tougher scrutiny of acquisitions that may eliminate emerging rivals, while warning against rigid concentration thresholds and simplistic bright-line merger rules. Legislation and institutional reform (Priority: 4/5): Katz believes meaningful change likely requires Congress, not just new FTC leadership, and he prefers broad antitrust reform over big-tech-specific bills. Role of experts and agencies (Priority: 3/5): He suggests courts should rely more on court-appointed economic experts and that agencies can conduct more sophisticated analysis than courts can manage on their own.

Key Arguments: Antitrust law has drifted through common-law evolution, and the courts have moved too far toward Chicago-school presumptions that are no longer aligned with mainstream economics. Vertical integration and other vertical practices should not be presumed either good or bad; their effects are case-specific and often depend on detailed facts and market structure. The Amex two-sided-market framework is overused and inconsistently applied; the Court’s treatment of platforms in Amex and Apple v. Pepper is internally inconsistent. The Brook Group predatory-pricing test is economically flawed because below-cost pricing can be rational investment in scale or network effects, not necessarily predation. Market definition remains useful as a way to identify competitors, but formal market delineation has become an obstacle in differentiated and platform markets. Mergers involving potential or nascent competitors deserve more aggressive scrutiny, especially where growth trajectories suggest a firm could become a rival. Bright-line thresholds can be helpful for giving agencies more review authority, but Katz doubts anyone knows the right thresholds well enough to make them reliable across markets. He favors economy-wide reform rather than big-tech-only legislation because focused rules risk being both economically distorted and politically fragile. Courts are not well equipped to do highly technical balancing on their own; court-appointed economic experts could improve decision-making. The antitrust debate is not simply consumer welfare versus total surplus; the deeper unresolved issue is what counts as ‘competition on the merits.’

Data Points: Transcript date: Friday, June 25th, 2021 - Opening of the podcast episode DOJ service: September 2001 through January 2003 - Michael Katz’s role as Deputy Assistant Attorney General for Economic Analysis FCC service: January 1994 through January 1996 - Michael Katz’s role as Chief Economist at the FCC Estimated duration of historical shift in court doctrine: 40-50 years - Katz says courts moved rightward over roughly four to five decades Supreme Court cases referenced: At least 4 - Ohio v. American Express, Brook Group, PeopleSoft v. Oracle, Apple v. Pepper/Sabre v. Farelogix Antitrust statutes described as: Very short and very basic - Katz says this enabled flexibility but required courts to fill in many details Merger guideline timing referenced: 2010 - Katz notes the move toward upward pricing pressure around the 2010 merger guidelines Podcast length: Almost an hour - Host wraps up by noting the conversation length

Pivotal Quotes: "don’t believe what I’m saying because I say it, believe it, because when you think about it, you see the arguments are correct" — Michael Katz: Katz’s disclosure and framing of how he wants his arguments judged "the courts have just gone off in the wrong direction" — Michael Katz: His central critique of modern antitrust doctrine and why legislative reform is needed "what’s illegal is certain forms of conduct that are viewed as not being competition on the merits" — Michael Katz: His explanation of what antitrust is actually trying to protect

Implications: Listeners should expect continued antitrust reform fights, but Katz thinks durable change will require Congress and economy-wide rules, not just aggressive enforcement. For firms, the biggest uncertainty remains how courts will treat platforms, mergers, and exclusionary conduct.