Radical Antitrust, Two Ways
Winston Churchill once said “Show me a young conservative and I’ll show you someone with no heart. Show me an old liberal and I’ll show you someone with no brains” (although it is equally likely that he said no such thing, such is the way with Churchill quotes). This phenomenon, of getting more conservative as you get older, appears to have hit Glen Weyl at a rather tender age. Born in 1985, a year after me, he was “a Democratic and socialist activist, before becoming an Ayn Rand follower and founding a national teenage Republican organization”, according to his bio. “Much of his life since has been about reconciling these apparently contradictory ideologies.” Reading this makes sense of Weyl’s work for me. His passion comes, I think, from his earnest quest for truth.
You see it takes one to know one. I am on the same journey as Weyl, but in precisely the opposite direction. I was a teenage conservative — the odd one out amongst my mostly liberal friends. And it was discovering economics at school that gave me the certitude, the conviction that I was right — markets could save the world, if only we could make them a little freer. To anyone familiar with Weyl’s current work this sentiment will sound familiar.
I have since moved away from that thinking because I look at the state of the world — climate change, geopolitical instability, inequality, and the failure of market capitalism to adequately address these problems — and I see a situation which my old friend neoclassical economics cannot on its own solve, because it does not truly accept or understand the problem. This doesn’t mean that I don’t trust economics, but that I think the “renegade economist” Kate Raworth and the Rethinking Economics movement are right to suggest that 21st Century economists can access a wider, more pluralist set of economic tools, which do not always emphasise the sanctity of free markets.
What I find fascinating about Weyl’s approach to antitrust in particular — which he calls “Radical Antitrust”, with a proprietary-sounding claim that makes you wonder if you’re meant to put a “™” after it — is that starting from completely different sides of the debate we nevertheless come to startlingly similar conclusions, at least on some issues.
The core principle of Radical Antitrust, from what I can gather, is that far from shying away from the influence of economics within antitrust law we should rely more on economics and follow the recommendations of the mainstream economic models to their logical conclusions. By Weyl’s estimate, 80–90% of power in the markets is untouched by antitrust, so we have our work cut out for us.
One example Weyl identifies of systematic underenforcement is the practice of cross-shareholdings by institutional investors across individual industries. Weyl believes we should increase the regulation of investments from an antitrust standpoint because basic economics predicts that the common shareholders will use their influence to encourage coordination between rival firms.
Weyl and his co-authors propose that institutional investors, which may include mutual funds, pension funds, insurance companies and university endowments, should have to choose between investing across the market with small stakes or investing deep in one company in a given industry but being banned from investing in any rival companies (see here for more detail). So BlackRock could invest 1–2% in all drinks manufacturers, or 10–20% in Coca-Cola but none in Pepsi.
Common ownership is an exceptional point of crossover between the corporate governance and competition disciplines, and given that my work increasingly straddles this rarely-bridged divide it is a natural area of interest for me. But I am unsure whether it warrants a central place within antitrust policy.
Worrying about common ownership makes sense if markets are competitive — cross-shareholdings may facilitate coordination, raising prices and reducing output. But if we are talking about investments by institutional shareholders then we are talking about the public company market, which is rife with sources of market failure — from product differentiation to information asymmetries — which allow for market concentration. Indeed we might think of market failure, and market power, as a prerequisite for floatation — if there are no rents to distribute then shareholders would not be so keen to pile into the stock.
I am not convinced that a world in which Weyl’s proposals have been adopted would be radically different from our own. For example, if it turns out that investing deep in one company pays more than investing across the whole market, if a fund manager can earn the same fees but with less work monitoring investee companies, then such a restriction on investment strategies would not only expose beneficiaries to a great degree of investment risk but it might just move us from a system of coerced collusion across the market to inescapable monopolisation by individual firms (wouldn’t an institutional investor with a big stake in Coca-Cola have a strong incentive, and the power to act, to push the company to shore up its market power? And what if the other big investors were all to buy into the same stock?).
Weyl calculates the benefits of cracking down on common ownership at a third of a percent of national income annually or $60 billion, presumably coming from a return to competitive prices, which theoretically would benefit everyone. More money is better, I suppose, but a bigger problem for society may be inequality, which is bolstered by the inequality of shareholdings across the income distribution, and by monopolisation, which channels monopoly rents towards already wealthy shareholders. It seems that I have become more circumspect about the pure economic harm that results from coordination versus the economic, social and political harm that can result from monopoly. Antitrust recognises both but has traditionally focused on the former, and gladly this situation seems to be up for review by the competition community.
More theoretical and empirical research needs to be done to work out the common ownership dynamic, and if it turns out that cross-shareholding does facilitate coordination and increase prices paid by consumers then we should enforce against it. But it may turn out that shareholders are equally happy to leave the market to its own devices, designed as it is to coalesce towards market power. Shareholders do well enough out of the unilateral market power of public companies and the requirement for companies to pursue shareholder wealth maximisation for their benefit and to the detriment of workers, consumers, communities and the planet.
There is also an open question as to the impact of institutional investors with common holdings across an industry in maintaining industry standards and supporting, or not blocking, socially beneficial collective action between firms. Since at least some of the ultimate beneficiaries of institutional investments are everyday savers we should consider how we trade off their interests as consumers against their interests as investors, let alone as workers, parents and citizens of the planet. I know that people with a much better grasp of this than I, such as Rick Alexander, Head of Legal Policy at B Lab, are working on this piece of the puzzle.
Where Weyl’s thinking really converges with my own is around Big Tech, although I must constantly remind myself that he is employed by Microsoft. Weyl thinks that going after Big Tech with tying and exclusion cases won’t go far enough, and breaking them up doesn’t solve the problem either. He advocates for supporting “countervailing power”, allowing users to effectively unionise and pool their power in their interactions with companies like Facebook and Google.
Weyl and his co-authors talk about “Data Labour” — shifting the categorisation of data from that of “capital”, produced by the tech companies and owned by them, to that of “labour”, produced and owned by the user (see here and here for more detail). This means that Google is not a data monopolist, it is a monopsonist buyer of data (for which they currently pay in the form of “free” services and apps). This is a completely different proposition to the narrative of users gaining free access to a service and instead casts users in the role of (possibly poorly paid) workers. Weyl proposes that data labourers should form “data unions”, allowing for collective bargaining, the threat of strike, as well as the possibility of moving and removing data en masse.
We know that to train an AI you need data, the more data the better. So technology drives companies to acquire data or data workers, meanwhile companies use that data to cement their market dominance, either by making their products indispensable, raising the switching costs, exacerbating information asymmetries or by tracking and acquiring nascent rivals. So I think that countervailing power is very much needed.
The idea of data unions is very similar to my proposals for giving users voice and influence over company strategy and decision-making, and the trajectory of innovation. I propose integrating this into the enforcement of antitrust. If it is determined that a company has significant market power such that it has a degree of control over the evolution of the market then it should also have greater social responsibilities. This means that competition authorities could, for example, consider whether approval of a merger or dominant practice should be made contingent on the company making binding commitments to protect stakeholder interests. In doing so, antitrust agencies would oversee the adoption of mechanisms that would protect stakeholder interests directly by giving them votes or influence over board decisions on an ongoing basis, through stakeholder councils or board representation, changing the way the company operates for good.
The most appropriate model for embedding “stakeholder value” will vary by company and by industry. The Big Tech companies, for example, already have a symbiotic relationship with their users and suppliers, including app developers and content producers, and would likely use technology as part of their own community solutions. Thus supporting the creation of “data unions” could be part of an antitrust remedy, with the added bonus that pooling the resources of data labourers would also foster competition as data unions could effectively sponsor entry into a new market by granting a potential competitor access to the data pool.
I start from the perspective that powerful companies should have greater responsibility, so when we identify market power we should look at ways of redressing that balance through governance mechanisms. Weyl starts from somewhere else — from the idea that “the entire business community has been speaking with one voice in the common interest of capital as a class” and that the most powerful way to undermine the argument for the status quo is to show that truly free markets require completely different institutional arrangements to those we have now. But we both conclude that the balance of power should be restored by boosting the power of stakeholders. Weyl’s proposal for collective action by users and my suggestion for regulated proactive engagement with users by companies can be seen as two sides of the same coin, but I believe there is a role for both within antitrust and within the regulation of the tech sector.
