Thread by @doctorow

In his latest newsletter, the campaigning journalist @nickshaxson talks with former EU Commission Chief Competition Economist @TomValletti: it's an eye-opening view into how European competition policy has failed so dismally and massively.

thecounterbalance.substack.com/p/the-european…

1/

Importantly, it's about the European course of the disease of corporatism, which was rooted in 1920s Austria and then made the leap to the University of Chicago where it mutated into a virulent, global plague.

2/

The Austria-Chicago plague destroyed the "democratic theory" of fighting monopoly ("monopolies are bad because they concentrate power into too few hands") with the "consumer welfare theory" ("monopolies are ONLY bad if they make prices go up).

3/

This neutered competition rules in two ways: first, it ended all enforcement predicated on harms to society (as opposed to consumers). Even if a merger or other anticompetitive act was unambiguously about forcing lower wages, say, competition law no longer got a look in.

4/

Second, though, was that it forced opponents of mergers to prove that they would result in higher prices, and it defined the standard of proof: "proof" came in the form of complex mathematical models that only pro-monopoly partisans knew how to build or interpret.

5/

Thus Valletti describes how any objection to a monopolistic act had to clear a series of gatekeepers: high-powered law firms that briefed economists ("useful fools") on how to present the most obviously anticompetitive mergers so they'd pass muster.

6/

These lawyers would interpose themselves between Valletti and the economist-experts - he (in his capacity as a senior economist at a regulator) would ask another economist expert for clarification and the lawyer would jump in and say, "Don't answer that."

7/

The enablers are drawn primarily from three firms: @News_CRA, @compasslexecon and RBB Economics, and, until recently, there was precious little pushback from NGOs who might be able to serve as a countervaling force.

8/

But, as Valletti notes, there's some progress, for example, an intervention by @amnesty in opposition to the (idiotic) Google-Fitbit merger. We're going to need a lot more of that, though, thanks to the timidity of EU competition regulators.

9/

Describing this timidity, Valletti says that his former colleagues face a "stigma attached to losing cases in court, of having decisions reversed" and that this makes the reluctant to take bold measures, particularly in tech.

10/

Echoing James Comey (who called the coterie of prosecutors who never lost a case "The Chickenshit Club" for their lack of ambition), Valletti say, "If you are not losing cases in court, you are not being ambitious enough."

11/

Which is not to say that there aren't NGOs in the mix - there are, on the side of monopolists, in the form of Koch Network think-tankies who handwave away rigorous academic work opposing mergers ("Professor So-And-So is wrong").

12/

What these paid shills lack in rigor they make up for in brevity and approachability - they know a judge won't read a 50-page, peer-reviewed economic paper, so they rebut it with "a glossy pamphlet with three nice pages."

13/

When the arguments do get technical, they enter the realm of absurdity. Key to antimonopoly enforcement is "relevant market defintiion" - before you call a company a monopolist, you have to say what they MONOPOLIZE.

14/

The regulators give big companies the most amazing passes when it comes to this - for example, when Facebook was buying Instagram, it did not characterize the merger as affecting the social media market - rather, it said the "camera app" market was the one to look at.

15/

All this market definition wrangling burns resources. To reverse this, Valletti proposes a new standard - not merely a shifting of the burden of proof that would force merging firms to prove that the merger WON'T be anticompetitive.

16/

But also a requirement that firms prove that they can't get the same benefits WITHOUT MERGING: "can you prove that this merger is the only way to bring these benefits?"

17/

Valletti: "You, Google, the most almighty firm in the world, why do you need to purchase Fitbit to achieve these benefits? Can’t you do it yourself, with all the smart guys you have?"

18/

"And leave Fitbit on its own, or available for purchase by someone without your market power, as this will increase competition? Prove that you really cannot do it without buying Fitbit. It is beyond my comprehension. Show me."

eof/

ETA - If you'd like an unrolled version of this thread to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:

pluralistic.net/2021/04/21/re-…