Thread by @ProfWrightGMU

LONG THREAD.

Here's a really unpopular opinion about the FTC skaters, organist, & piano teacher cases. They are heavily criticized as a symbol of the agency being out of touch or misallocating resources.

But these are good cases. The FTC was right to bring them. (1/x)

DISCLOSURE: I voted in favor of bringing these cases.

To be clear --- my claim is that they are socially valuable cases and belong in the AT agency portfolio; it is not that they should be the only cases. We will get to the agency resource arguments shortly. (2/x)

The various criticisms of the skater/ organ / piano teacher cartel cases are wrong and reveals some real structural problems in the current Neo-Brandeisian (NB) / Hipster Antitrust critique of modern antitrust. Let's discuss. But first, let's lay out the cases (3/x)

You can see complaints and consents here:

ftc.gov/enforcement/ca…

ftc.gov/news-events/pr… (4/x)

Critics raise two basic objections to these cases: (1) the underlying conduct should be lawful; (2) the cases involve unlawful conduct but the FTC should not bring them because it should prioritizes other unlawful conduct (e.g., from large tech companies). (5/x)

.@openmarkets folks like Barry Lynn and @sandeepvaheesan make the 1st argument: people who are "workers" ought to be able to coordinate w/o antitrust concern regardless of whether they are classified as employees or independent. See, e.g.: bit.ly/2yKE1Vj (6/x)

Here is my friend @halsinger making the second argument about priorities and misuse of resources, sometimes blending in some capture allegations, in his recent column slate.com/technology/201… (7/x)

P.S. I don’t want to mischaracterize Hal. So if he believes the first argument as well – that this conduct should be legal – I'd welcome clarification. And for extra credit, maybe he can tell us which cartels are to be immune from the antitrust laws and which are not? (8/x)

Criticism of these cases has been bipartisan. I recall being asked hostile questions about these cases by House Republicans in an oversight hearing after they were featured on a critical Fox News segment. Here is Kim Strassel in the WSJ: on.wsj.com/2RrAIh1 (9/x)

OK. Let's get to the merits. The first argument against these cases is that the cartels in these cases are good and ought to be lawful because they help the worker against large corporations. What conduct are we talking about precisely? Let's look. (10/x)

At the FTC Hearings, Derek Moore (FTC) described the conduct and asked panelists whether it should, in their view, be unlawful. So let’s look at the conduct: An express non-solicitation agreement between rivals backed by sanctions for violations. (11/x)

I found Barry Lynn's response at the FTC Hearings to be informative. Here is an exchange between Carl Shapiro and Lynn where he makes absolutely clear that he thinks this conduct should be legal. (12/x)

This of course, begs the question of how we would know in the New Brandeisian/ Hipster Antitrust world which cartels are favored by the government and which are not? The argument seems to be that whatever helps the worker against large corporations is good. OK. (13/x)

But here's the important point: that logic that worker cartels are good simply doesn’t apply here, does it? And this is a separate point from whether “help the little guy” is or should be part of antitrust in the first place. (14/x)

The ethics codes do harm their trading partners, e.g. consumers of ice skating/organist services. I have no idea whether the average supplier is wealthier than the average consumer in these markets, but we can stipulate for ease of analysis that the suppliers are poorer. (15/x)

But the restraints also harm new supplier entrants - the real little guy! Indeed, the restraints are specifically aimed at them - “thou shalt not solicit the student who already has another teacher.” I’m confident the avg incumbent is wealthier than the avg new entrant. (16/x)

These cases have NOTHING to do with monopsony buyers. The challenged restraints do not relate at all to the arrangements organists have with church employers or the skating teachers with ice rinks. They are about the suppliers’ relationships with INDIVIDUAL consumers. (17/x)

Unless we think all ice skaters who want a teacher or wedding parties that want an organ have monopsony power, then the monopoly-sellers-bargaining-with-monopsony-buyers-increases-output argument cannot fly. (18/x)

So much for the objections to these cases. But what positive value do they provide? Deterrence. The settlements help deter anticompetitive trade association conduct -- which harms real consumers in real markets. Including individual families buying piano lessons. (19/x)

I'm genuinely puzzled as to where NB is on discretion and rule of law (of course: there may be variation in views here). E.g., @linamkhan recently criticized the Baxter DOJ for failing to enforce fully precedents like Brown Shoe and Von’s Grocery:

https://twitter.com/linamkhan/status/1075168798288896000

(20/x)

The ice skating cases certainly enforce the law as it is stands. But some on the left and right appear to want forbearance here. The position appears dangerously close to discretion for me and those who think like me but not for thee. (21/x)

Is discretion only appropriate when exercised in a manner that fits one's idiosyncratic priors about which cartels are good and bad? If so, which are those? Do NB/ Hipsters think courts and agencies should follow the letter of the law on AMEX? Trinko? Brooke Group? (22/x)

My view is that scarcity of resources requires agency heads to exercise discretion on priorities. Surely they can be judged for those decisions. But maximizing the rate of return for consumers -- including benefits of deterrence -- can and should be part of the calculus. (23/x)

To repeat: I voted to bring these cases. They were good cases then. They still are.

Naked restrictions on competition between rivals are bad. Antitrust agencies should use the tools at their disposal to stop them. Deterrence is an important part of that. (24/x)

An antitrust enterprise that requires at its core the identification of good and bad cartels is a recipe for antitrust as an instrument of crony capitalism and rent seeking. The FTC got some deterrence value for consumers with minimal resources. That is good! END.