Today, antitrust is in a moment of churn. Many philosophical schools are questioning the first principles associated with the orthodox Chicago and Post-Chicago schools. In the United States, the Neo-Brandeisian school, which has come to be associated with former FTC Chairwoman Lina Khan, has emerged as a prominent rival. It seeks to revive the antitrust philosophy of Justice Louis D. Brandeis, a former great judge of the United States Supreme Court, for the modern era. Meanwhile, in the European Union, the European Commission (EC) has taken the unprecedented step of enforcing ex-ante regulation in the digital economy through the Digital Markets Act (DMA). The DMA aims to bolster fairness, contestability, and transparency in the EU’s digital economy, which is currently dominated by a handful of Big Tech companies. It is often argued that the regulatory philosophy undergirding Neo-Brandeisianism is impracticable or, at least, has few real-world applications. This post challenges that notion by mapping the similarities between the DMA and Neo-Brandeisianism. While existing scholarship has mapped the similarities between, for example, Ordoliberal competition policy and the DMA, little to no scholarship has mapped the similarities between Neo-Brandeisianism and the DMA. One paper that argues that the DMA adopts Neo-Brandeisianism does so primarily on the basis that both converge on the proposition that ‘potential—not necessarily the actual—existence of a market failure justifies antitrust regulatory intervention’. It doesn’t explore the issue of convergence in any further detail. There is a clear gap in the literature and this post addresses it.
Five broad similarities are discussed: (a) Both eschew the consumer welfare standard (CWS); (b) Both adopt an ‘anti-bigness’ stance but not a ‘pro-smallness’ stance; (c) Both regard the Essential Facilities Doctrine as a cornerstone regulatory principle; (d) Both favour centralisation of rule-making authority and legal enforcement; and (e) Both prefer structural remedies in a limited number of cases.
- The Eschewing of the Consumer Welfare Standard
Both Neo-Brandeisianism and the DMA have moved away from the consumer welfare standard.
The basic premise of the CWS is that antitrust policy should seek to maximise output and lower prices. To achieve these aims, the CWS prescribes grounding legal decision-making (firmly) in economic analysis, specifically, neoclassical empirical methods. In the CWS scheme, overenforcement is generally understood to be more problematic than underenforcement. That’s because markets are considered self-correcting and therefore as minimising the welfare costs of the latter but not the former. Judge Frank H. Easterbrook, a leading proponent of the Chicago School of antitrust, argued that
‘For a number of reasons, errors on the side of excusing questionable practices are preferable. First, because most forms of cooperation are beneficial, excusing a particular practice about which we are ill-informed is unlikely to be harmful...Second, the economic system corrects monopoly more readily than it corrects judicial errors..Third, in many cases the costs of monopoly wrongly permitted are small, while the costs of competition wrongly condemned are large.’
The Neo-Brandeisians, on the other hand, fundamentally reject the notion that markets self-correct by themselves. According to them, markets are not ‘independent and primary’. Their very existence is owed to ‘government and other social organisation’. Naturally, they also reject that notion’s corollary, ie, underenforcement inflicts less damage than overenforcement. And in fact, they argue that modern economics supports their view of antitrust, not the Chicagoans’ or the Post-Chicagoans’.
By prescribing a per-se rules approach, the DMA marks a radical departure from the standards-based rule of reason approach under the ‘more economic approach’ rubric in EU competition law.
- Anti-Bigness but not Pro-Smallness
Both Neo-Brandeisianism and DMA adopt a regulatory stance that can be described as anti-bigness but not pro-smallness.
While Neo-Brandeisianism believes that large size of industrial enterprises can limit competition and economic freedom, it also readily accepts that economies of scale associated with large enterprises can benefit consumers. Equating this view with pro-smallness—in the sense of reducing it to economic structuralism—would be wrong.
The DMA applies, through its Article 3, to undertakings with a large size and scale of operations. But the legislation’s regulatory philosophy doesn’t seek to punish the legitimate commercial success of designated gatekeepers. It only seeks to level the playing field, tilted in favour of gatekeepers at the expense of business users and end users.
- Support for the Essential Facilities Doctrine
Both Neo-Brandeisianism and DMA operationalise the Essential Facilities Doctrine (EFD). (The U.S. Supreme Court gave birth to the doctrine in United States v. Terminal Railroad Association (1912).)
The EFD originated to counteract ‘exclusionary conduct by which an undertaking controls the conditions of access to an asset forming a “bottleneck” for rivals to compete’.
By seeking to bolster contestability, fairness, and transparency through gatekeeper restrictions and obligations in Articles 5, 6 and 7, the DMA reflects the idea behind the EFD. In this way, similar to the EFD, the DMA understands ‘competition’ as a process rather than maximisation of consumer welfare.
As for the Neo-Brandeisians, former FTC Chairwoman Lina Khan has proposed applying the doctrine, as shaped in MCI Communications Corp. v American Telephone & Telegraph Co., to Amazon Marketplace, Amazon Web Services, and Amazon fulfilment services.
- Support for Centralisation of Rule-Making Authority and Legal Enforcement
Both Neo-Brandeisianism and DMA favour centralising rule-making authority and legal enforcement.
Neo-Brandeisians believe that the rule-making authority and enforcement powers need to be centralised at the level of the federal government. Unlike Justice Brandeis, the Neo-Brandeisians tend to favour top-down laws and regulations. For example, Lina Khan believes that by neglecting its ‘administrative, norm-creating role’, the US Federal Trade Commission failed to deliver on its legislative mandate.
The DMA centralises a high degree of enforcement powers in the EC. Article 1(5) bars national competition authorities (NCAs) from imposing further gatekeeper obligations aimed at contestable and fair markets. They can merely assist the EC in the DMA’s enforcement. While the DMA implicitly vests private enforcement powers with NCAs, their roles may be only marginal.
- Preference for Structural Remedies in a Limited Number of Cases
Structural remedies usually involve asset divestiture. They are considered more effective in restoring competition and sustaining long term competition.
Both Neo-Brandeisianism and DMA support structural remedies like breakups where other remedies are likely to fail in protecting competition, including in the case of vertically integrated industries—where conflict of interest issues may be prominent. At the same time, neither Neo-Brandeisianism nor the DMA advocate such remedies for natural monopolies.
Gokul Plaha is an independent legal researcher and an International Competition Law & Policy LLM student at the University of Glasgow.
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