AI, Mergers & More!: Competition Corner by Alden Abbott

Issue #25

Good evening.

Big things are underway this month in the world of competition law, and at the Mercatus Center.

Artificial Intelligence & Antitrust

I’m proud to announce the release of my Mercatus Center colleague Satya Marar’s primer on Artificial Intelligence and Antitrust. It provides a comprehensive outline of AI concepts, their antitrust implications, and how the law approaches and ought to approach this burgeoning, rapidly-evolving technology from a pro-innovation and pro-consumer standpoint. Issues canvassed include the intersection of AI-related industries and markets and vertical and horizontal mergers, monopolization, algorithmic collusion, consumer protection and more. I highly recommend this primer for anyone with an interest in technology law and antitrust policy in innovation-based markets.

Will the FTC Scupper the Kroger-Albertsons Merger?

The press is full of news about the FTC’s challenge to the Kroger-Albertsons mega-supermarket merger, which had been in the works since the fall of 2022. If the FTC succeeds in obtaining a temporary restraining order and preliminary injunction in Oregon federal district court (a big if), it plans to review the transaction in an administrative hearing beginning in late July. The FTC’s administrative process could drag on for an extended period of time, assuming an administrative judge’s decision, an appeal to the FTC, and a possible appeal of the FTC’s determination to a federal court of appeals. This deal could scupper the deal or, in the alternative, impose substantial delay-related costs on the companies (and perhaps consumers).

The FTC claims likely harm to consumers in a “supermarket market” that excludes mega-retailers (such as Walmart and Costco), specialty grocery stores, and online retailers (Amazon and others). The merging parties argue to the contrary that the transaction will enhance their offerings and make them more effective competitors against mega-retailers. Based on a non-traditional FTC Act Section 5 theory, the Commission also claims harm to unionized Kroger and Albertsons workers in the form of reduced bargaining power. The FTC neglects to mention that this posited bargaining power shift could benefit consumers in the form of lower prices. A reviewing court would likely find this labor story hard to square with the sort of monopsony theory that is cognizable under federal antitrust law.

In short, mark me rather skeptical about this latest FTC foray into mergerland. The non-labor theory conceivably might be plausible, but we need hard facts, and I am skeptical. (In particular, note that a California federal court judge “twice agreed to dismiss . . . [a private] [consumers] lawsuit [challenging the merger], ruling in December [2023] that the consumers did not show how they would be harmed by the merger.”) I am not skeptical, however, about the reality that FTC administrative litigation and its attendant delays, if they occur as proposed, will impose major costs, including likely harm to business efficiency, and, quite possibly, consumer welfare.

Research & Analysis: from mergers to new FTC rulemaking proposals

Our other scholars have also been busy at work. Tracy Miller’s new policy brief examines the FTC’s approach to deceptive earnings claims. Companies, including gig economy firms and for-profit colleges, sometimes lure consumers by promising a certain lifestyle or expected income. These promises often turn out to be baseless or false. The FTC wants to target this problem through an Advanced Notice of Proposed Rulemaking (ANPRM) that considers claims with regard to multi-level marketing, for-profit colleges, franchises, gig economy opportunities, investments and mentoring services. Even if such rules could make it easier to secure monetary relief from wrongdoers, they could also harm innovation and entrepreneurship in how firms communicate earnings opportunities. Tracy instead advises that the FTC address such claims by combining continued adjudication with their penalty offense authority. I’ve written about this issue and Tracy’s brief in Truth on the Market.

Ted Bolema’s new brief examines the new DOJ-FTC merger guidelines and their implications for shifting antitrust enforcement.

Intellectual Property under threat

In the world of IP, my colleague Satya Marar wrote for The Hill this month, criticizing a proposed extension of the World Trade Organization (WTO)’s pandemic-era TRIPS waiver on IP for Covid-19 vaccines to include Covid-19 diagnostics and therapeutics- even though the original waiver has not helped a single additional patient in the developing world. The move is currently being considered by the Biden administration, which supported the original TRIPS waiver, and imperils healthcare innovation and America’s global leadership in this space.

I’ve also written for Truth on the Market about the Biden administration’s plans to “march-in” and fix prices for innovations fostered by the Bayh-Dole Act. This is nothing short of a grievous attack on American IP that threatens successful public-private partnerships that have brought life-saving innovations to millions of people while generating billions in economic output.

That’s all for now. See you next month.