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Big Data and Competition Policy by Stucke, Maurice; Grunes, Allen (1st June 2016)

Part IV What are the Risks if Competition Authorities Ignore or Downplay Big Data?, 16 The Price of Weak Antitrust Enforcement

Maurice E. Stucke, Allen P. Grunes

From: Big Data and Competition Policy

Maurice Stucke, Allen Grunes

From: Oxford Competition Law (http://oxcat.ouplaw.com). (c) Oxford University Press, 2015. All Rights Reserved. Subscriber: null; date: 23 October 2019

Agency agreements — Market power — Rights — Internet — Technology — National merger control

(p. 232) 16  The Price of Weak Antitrust Enforcement

16.01  Chapter 15 explores the risks of the competition agencies’ clearing anticompetitive data-driven mergers, especially ones involving multi-sided platforms. This chapter explains why the societal harm is too great to ignore data-driven mergers and abuses by dominant firms. The costs from the agencies’ and courts’ getting it wrong can be very high, going to the heart of many democratic systems. Anticompetitive data-driven mergers and monopolistic abuses can affect not only consumers’ economic interests but also their privacy interests and the values that underlie these privacy interests, such as individual autonomy and freedom of expression and association.1 The chapter also explains why the privacy and consumer protection agencies and laws—through behavioural remedies and fines—will not necessarily prevent these harms.

A.  The Chicago School’s Fear of False Positives

16.02  Cartels are generally condemned. We do not care if the particular cartel was successful or unsuccessful in imposing harm. But for everything else—mergers and exploitive, predatory, and exclusionary conduct—the concern is whether under the current legal framework, the competition authority finds procompetitive or benign business activity to be anticompetitive (false positives/type I errors) or finds anticompetitive behaviour to be benign or procompetitive (false negatives/type II errors).

(p. 233) 16.03  The Chicago School made much ado about false positives—namely the risk of aggressive antitrust enforcement chilling procompetitive business activity. Much less has been said about false negatives—namely the risks of weak antitrust enforcement. As one Department of Justice (DOJ) official said in 2002, ‘[i]‌n designing decision rules, it is important therefore that we take into account the relative costs of type I (false positive) and type II (false negative) errors. Because markets tend to be self correcting, we in the United States tend to put more emphasis on reducing false positives in order not to chill competition.’2 Likewise, the US Supreme Court, since 1980, has been more concerned over false positives, noting for example that the ‘cost of false positives counsels against an undue expansion of § 2 liability’, which involves monopolization and attempt to monopolize claims.3

16.04  The Chicago School’s underlying belief is that when the agencies get it wrong, by not intervening, market forces often will correct the mistake. Market forces often cannot correct the harm when the government erroneously intervenes.

16.05  This is far from empirically true. A former DOJ colleague observed how the US merger review process is so concerned with preventing erroneous challenges that it is systematically skewed to under-enforcement:

If the agency determines that a merger is anticompetitive, that decision is subject to review by a federal court, since to ‘enforce’ its determination that the merger is anticompetitive the agency must typically seek an injunction in federal court. On the other hand, if the agency determines that the merger is not anticompetitive (or even that it is anticompetitive, but other factors, such as opportunity costs or litigation risks are sufficiently high as to make a challenge unwise), that is typically the end of the matter: there is no judicial review. Thus, the prospect of correction of an error made by the reviewing agency depends upon the type of error. If the reviewing agency’s determination is a false positive, error correction via judicial review is available. If the agency’s determination is a false negative, it is not; the error will almost certainly go uncorrected. Assuming the reviewing agency is not significantly more prone to false positives or false negatives, the inevitable result of the entire process (including any available judicial review), would be significantly more false negatives than false positives.

Indeed, the effect of this asymmetry is not simply limited to the fact that agency false positives may be corrected whereas false negatives are not. A rational entity, knowing that a decision in one direction is subject to review (which entails significant costs and perhaps an embarrassing reversal that might undermine future enforcement efforts) and a decision in the opposite direction is final (and thus, essentially costless) would have some incentive to choose the latter. Although it is impossible to (p. 234) estimate the magnitude or importance of this incentive on agency decision making, logically, the asymmetrical nature of judicial review would tend to encourage the reviewing agency, particularly in close cases, to err in favor of closing investigations rather than undertaking enforcement actions.4

16.06  It gets worse. As Larry Frankel notes, the agencies, under ‘a nondeferential standard’, must persuade a generalist court ‘with less expertise, information, and resources’.5 Although this reduces false positives, it ‘will also inevitably lead to true positives being converted into false negatives’.6 A string of agency defeats may further skew the error mix towards more false negatives than false positives.7 The net result, Frankel notes, ‘is systematic underenforcement’.8

16.07  Likewise, economist Jonathan Baker has argued that contemporary antitrust commentators employing an ‘error cost’ framework have made a series of erroneous assumptions: ‘These assumptions systematically overstate the incidence and significance of false positives, understate the incidence and significance of false negatives, and understate the net benefits of various rules by overstating their costs.’9

16.08  As an example, the claim that markets self-correct rests in part on an economic premise: if entry is easy, the exercise of market power will prompt new competitors to emerge. The proponents move from that premise to the conclusion that errors of under-enforcement will ‘self-correct’ as well. Baker notes that this requires reliance on a second, unstated premise, namely ‘that entry will generally prove capable of policing market power in the oligopoly settings of greatest concern in antitrust—or at least prove capable of policing market power with a sufficient frequency, to a sufficient extent, and with sufficient speed to make false positives systematically less costly than false negatives’.10 However, there is little reason to believe that is true. Dominant firms often persist for decades, and cartels often last more than a decade even when antitrust enforcement cuts short their duration. As Baker concludes,

The many examples of long-lasting dominant firms and cartels, along with the theoretical reasons why the exercise of monopoly power need not be transitory or corrected by new rivals attracted by supracompetitive prices, make clear that the exercise of durable market power should be treated as a serious concern. One cannot simply presume that entry by new competitors will correct the instances of market power that antitrust courts identify.11

(p. 235)

16.09  Moreover, as Chapter 7 discusses, neither the EU nor US competition agencies need to predict perfectly. The US Clayton Act, for example, tilts the balance towards enjoining mergers. Congress intended the agencies to arrest trends towards concentration and anticompetitive harms therefrom in their incipiency. Built into the law is some tolerance of false positives, namely that some mergers may ultimately not lessen competition but are enjoined to prevent further concentration.

B.  The United States as a Test Case of Weak Antitrust Enforcement

16.10  Historian Richard Hofstadter asked in the mid-1960s what happened to the antitrust movement in the US. ‘[O]‌nce the United States had an antitrust movement without antitrust prosecutions’, observed Hofstadter.12 By the 1960s, however, there were ‘antitrust prosecutions without an antitrust movement’.13 By 2015, the US has far fewer antitrust prosecutions without an antitrust movement.

16.11  Figure 16.1 shows the overall decline, since the mid-1970s, in the number of private federal antitrust lawsuits brought in the US.

Figure 16.1  Number of private federal antitrust lawsuits brought in the United States

Source: Sourcebook of Criminal Justice Statistics Online, Antitrust Cases Filed in US District Courts Antitrust Cases 1975–2012 (2012), Table 5.41, http://www.albany.edu/sourcebook/pdf/t5412012.pdf.

(p. 236) Figure 16.2 shows the steady decline in the number of DOJ investigations (civil and criminal) under section 1 of the Sherman Act.

Figure 16.2  DOJ investigations (civil and criminal) under section 1 of the Sherman Act

Source: DOJ, Antitrust Division Workload Statistics FY 1970–2014, http://www.justice.gov/atr/division-operations.

The DOJ has investigated even fewer monopolization and attempted monopoly violations under section 2 of the Sherman Act, as shown in Figure 16.3.

Figure 16.3  DOJ investigations of monopolization and attempted monopoly violations under section 2 of the Sherman Act

Source: DOJ, Antitrust Division Workload Statistics FY 1970–2014, http://www.justice.gov/atr/division-operations.

(p. 237)

Figure 16.4  Total DOJ civil non-merger cases and criminal cases filed, 1970–2014

Source: DOJ, Antitrust Division Workload Statistics FY 1970–2014, http://www.justice.gov/atr/division-operations.

16.12  One possible explanation is that while the DOJ opened fewer investigations, it brought more cases. As Figure 16.4 shows, aside from criminal price-fixing cases, that has not happened. Civil non-merger enforcement has dramatically declined. To put this in perspective, the Nixon administration brought more civil non-merger antitrust cases in one year (53 in 1972), than the DOJ brought collectively under the George W. Bush and Obama administrations.

16.13  Thus private antitrust actions, DOJ investigations, and DOJ civil non-merger enforcement are down. And as we saw in Chapter 15, the US agencies have challenged relatively few mergers, mainly in highly concentrated industries. So have markets effectively regulated themselves? Have the markets’ self-policing powers prevented companies from inflicting significant harm and safeguarded our welfare?

16.14  Not surprisingly, with weak antitrust enforcement, markets have become more concentrated. ‘In nearly a third of industries’, the Wall Street Journal found in 2015, ‘most US companies compete in markets that would be considered highly concentrated under current federal antitrust standards, up from about a quarter in 1996.’14 Among the industries experiencing greater concentration is commercial radio, where we saw in Chapter 15 the harm from deficient merger review. Now we will look at the agricultural and financial industries.

(p. 238) C.  Costs of Weak Antitrust Enforcement in the Agricultural Industry

16.15  In 2010 the DOJ and US Department of Agriculture (USDA) examined buyer power in the seed, hog, livestock, poultry, and dairy industries.15 The DOJ and USDA deserve credit for arranging the workshops. Professor Peter Carstensen noted:

For years many of us who follow agricultural competition issues have lamented the failure of both antitrust enforcement and market facilitating regulation to deal with continuing problems that farmers and ranchers confront in both the acquisition of inputs and the marketing of their production.16

Over 4,000 people attended the public workshops in Iowa, Alabama, Wisconsin, Colorado, and Washington DC. The DOJ received over 18,000 public comments.

16.16  The DOJ heard many complaints about market concentration, monopsony, bid rigging, potential market manipulation, high input prices, and weak antitrust enforcement:

  • •  how the ‘lack of antitrust enforcement in recent decades’ has resulted in ‘a severely concentrated marketplace in which power and profit are limited to a few at the expense of countless, hard working family farmers’;

  • •  how one recent merger challenge was an ‘anomaly’, given ‘a lot of mega-mergers’ that ‘have allowed a lot of concentration of market power’ and finding it ‘appalling that our antitrust enforcement has not been more vigorous than it has been in the past’; and

  • •  how ‘merger policy has been broken for 10 years, if not 20 or 30’.17

16.17  Participants complained that ‘high input prices, low commodity prices, or other hardships, hav[e]‌ invested particular suppliers or buyers with greater market power’.18 Many participants at the workshops, the DOJ observed, ‘specifically raised the issue of monopsony power’.19 Some expressed concern that the enforcers, courts, and competition laws were ‘inattentive to the monopsony problem’.20 (p. 239) Participants complained how processors ‘depress[ed] the prices of crops or animals below competitive levels’.21 Participants ‘pointed to retail concentration as an area of concern, charging that retailers are extracting a greater and greater share of the consumer food dollar, leaving producers with an ever decreasing share, and at the same time imposing price increases on consumers’.22 Others raised social and moral concerns, such as the environmental toll from monopsonies.23 The US livestock industry, observed several states, was more concentrated in 2010 than in 1921, when Congress enacted the Packers and Stockyards Act to respond to a market the ‘Big Five’ packers controlled ‘and to ensure fair competition and fair trade practices in the marketing of livestock, meat and poultry’.24

16.18  One account of the hearings aptly summarized, ‘[w]‌hat applies across the board—in cattle ranching and dairy and hog farming—is the stark and growing imbalance of power between the farmers who grow our food and the companies who process it for us, and how this imbalance enables practices unimaginable in any competitive market.’25

16.19  The DOJ had heard these complaints before. US Senator Kohl at a 2008 congressional hearing on concentration in the agriculture industry observed:

Disparity in market power between family farmers and large agribusiness firms all too often leaves the individual farmer and rancher with little choice regarding who will buy their products and under what terms. …

Unfortunately, it appears that the Justice Department’s antitrust enforcement efforts, both in the ag sector and generally, have been much too weak and passive in recent years. In the opinion of many experts, the Justice Department has often failed to take effective action as merger after merger in the pork, milk, and seed markets have sharply increased concentration as well as reducing competition. Antitrust investigations in the dairy industry have languished, with no resolution. While the Justice Department sits largely on the sidelines, agriculture concentration rises, and food prices rise.26

(p. 240) 16.20  Thus 2010 appeared to be a watershed. Recognizing ‘that, historically, farmers and others have voiced concern about the level of merger enforcement in the agricultural sector’, the DOJ under the Obama administration promised to redouble its efforts to prevent anticompetitive agricultural mergers and conduct.27

16.21  Other than one 2008 case,28 the DOJ did not bring any significant enforcement actions in the agricultural sector.29 Nor have the competition agencies, as Diana Moss and C Robert Taylor observed, systematically examined the ‘increasingly concentrated agricultural supply chains and their implications for the two most vulnerable stakeholders: growers and consumers’.30 One concern of the lax antitrust enforcement is that as a result farmers are being paid less, consumers are being charged more, and the middlemen are collecting a bigger profit.31

D.  Costs of Weak Antitrust Enforcement in the Financial Sector

16.22  Given the importance of the financial services industries to the US economy, one priority of antitrust policy should be promoting the efficiency and competitiveness of the US financial markets. Before the financial crisis, the DOJ annually reviewed hundreds, if not thousands, of bank mergers.32 The 1990s, one DOJ official said at the time, witnessed ‘an explosion both in the number of mergers in banking and, in the past few years [late 1990s], in large deals that have caught the public imagination and concern’.33

(p. 241) 16.23  But what was the DOJ reviewing in these bank mega-mergers? Competition agencies, as Chapter 7 explores, typically examine a merger’s anticompetitive risks with respect to the exercise of market power (ability to raise price) in narrowly defined markets. So, absent the resurrection of the perceived potential entrant theory, the DOJ would unlikely challenge a merger between a dominant bank in the western US and a dominant bank in the eastern US.34

16.24  Here too, the post-merger reviews reflect a bleak picture, as six of seven studies found evidence that bank mergers in the US (and abroad) resulted in price increases.35 But in focusing on the short-term static effects (such as whether the banks post-merger may raise rates for specific categories of borrowers), the competition (and banking) authorities failed to see or assess the long-term impact of the merger wave, such as the mergers’ impact on the efficiency, competitiveness, and stability of the overall financial system.36

16.25  One lesson from the financial crisis is the role of systemic risk. The financial system, when viewed as a complex adaptive system, can become more vulnerable when one bank increases in size and becomes too big and too integral to fail.

16.26  The irony is that the DOJ and Federal Reserve heard these concerns during the 1990s merger wave in the financial services industry. One mega-merger was between Travelers Group Inc and Citicorp. In 1998, Travelers was a diversified financial services firm. With total assets of approximately USD 420 billion, it engaged in various securities, insurance, lending, advisory, and other financial activities in the United States and overseas.37 Citicorp, with total assets of approximately USD (p. 242) 331 billion, was the third-largest commercial bank in the US. The USD 70 billion merger created in 1998 the world’s largest commercial banking organization, with total consolidated assets of approximately USD 751 billion.38 During its merger review, a DOJ official said, the Antitrust Division ‘heard numerous complaints that Citigroup would have an undue aggregation of resources— that the deal would create a firm too big to be allowed to fail’.39 But the DOJ ‘essentially viewed this as primarily a regulatory issue to be considered by the [Federal Reserve Board]’.40

16.27  The Federal Reserve Board, however, dismissed this and several other concerns, which presaged the financial crisis a decade later. Some commentators forewarned the Federal Reserve Board of Citicorp’s anticompetitive abuses with subprime mortgagers.41 A ‘significant number of other commenters’ said the merger violated the Glass–Steagall Act and ‘urged the Board not to consider the proposal unless and until Congress amends the law to allow unlimited combinations of insurance, banking and securities businesses’.42 Travelers CEO Sanford Weill had hoped his mega-merger would push Congress to remove the barriers under the Glass–Steagall Act of 1933.43 Congress did so a year later. The Gramm–Leach–Bliley Act repealed the Glass–Steagall Act’s restrictions on affiliations between bank and securities firms and amended the Bank Holding Company Act to permit affiliations (p. 243) among financial services companies, including banks, securities firms, and insurance companies.44

16.28  Commentators also warned that the Citicorp/Travelers Group merger ‘would result in an undue concentration of resources and in an organization that is both “too big to fail” and “too big to supervise” ’.45 In permitting the merger, the Federal Reserve responded that the markets in which the merging parties competed were ‘unconcentrated’ and, in any market where one party had a significant presence, the other party has a relatively small market share.46

16.29  The nation’s largest corporate merger, predicted the Federal Reserve, ‘would have a de minimis effect on competition’.47 The Federal Reserve rejected the argument that the absolute or relative size of Citicorp would adversely affect the market structure.48 It saw no evidence that ‘the size or breadth of Citicorp’s activities would allow it to distort or dominate any relevant market’.49 Finally, the Federal Reserve claimed it had ‘extensive experience supervising Citicorp and, building on that experience’, it ‘developed a comprehensive, risk-based supervision plan’ to effectively monitor Citibank; also other agencies, like the Securities and Exchange Commission, would ‘assist the Board in understanding Citigroup’s business and the risk profiles of those businesses’.50

16.30  Thus, during the 1990s, the DOJ and Federal Reserve heard concerns about mega-mergers in the financial industry, including the concern that the Citibank–Travelers merger would create an institution too big to fail. Over the next decade, Citigroup senior management (and the Federal Reserve) demonstrated a lack of understanding of the collateralized debt obligation (CDO) business and the risk profiles of that business. After Citigroup senior executives testified before the Financial Crisis Inquiry Commission investigators on the cause of Citigroup’s 2008 bailout, the Commission’s Chairman said, ‘[o]‌ne thing that is striking is the extent to which senior management either didn’t know or didn’t care to know about risks that ultimately helped bring the institution to its knees.’51 As the Federal Reserve Chair Janet Yellen said,

The crisis also revealed that risk management at large, complex financial institutions was insufficient to handle the risks that some firms had taken. Compensation (p. 244) systems all too frequently failed to appropriately account for longer-term risks undertaken by employees. And lax controls in some cases contributed to unethical and illegal behavior by banking organizations and their employees.52

16.31  A decade after its merger, Citibank, and other financial institutions considered too big to fail, were (or were perceived to be) failing, and received an implicit government guarantee. Citigroup, an early recipient of the government bailout, received a USD 45 billion emergency infusion and USD 301 billion of government asset insurance, which was the largest taxpayer bailout for any US bank.53 In March 2010, Citigroup’s CEO testified before Congress that no financial institution should be too big to fail, and that ‘Citi owes a large debt of gratitude to American taxpayers’ for bailing out his bank.54

16.32  So what are we left with after ineffectual antitrust and banking oversight during the 1980s–1990s merger wave? For one thing, a highly concentrated financial services industries in the US. Six bank holding companies—Citigroup, JPMorgan Chase, Bank of America, Wells Fargo Bank, Goldman Sachs, and Morgan Stanley—dominate the industry. By the third quarter of 2010, the assets of these six bank holding companies were worth 64 per cent of gross domestic product (GDP), which was higher than in 2006 (about 55 per cent of GDP) and 1995 (17 per cent of GDP).55 As one point of comparison, the combined assets of all US commercial banks in 1978 were worth 53 per cent of GDP.56

16.33  As another measure of concentration, in 1990, the five largest banks accounted for 9.68 per cent of the US banking industry’s total assets. By 2014, they controlled 44.19 per cent of the industry assets.57 In 2011, the four largest US commercial banking firms (Bank of America, Wells Fargo, JPMorgan Chase, and Citigroup) accounted for 34 per cent of national deposits and 56.6 per cent of the market in general purpose credit card purchase volume; they originated 58.2 per cent of mortgage loans by volume in 2009 and serviced 56.3 per cent of such loans.58 (p. 245) As a point of reference, the 25 largest banks accounted for 29.1 per cent of deposits in 1980.59

16.34  So what has been the primary response to the bank merger wave that yielded a handful of dominant financial institutions deemed too big to fail? The 2010 Dodd–Frank Wall Street Reform and Consumer Protection Act. It seeks to ‘promote the financial stability of the United States by improving accountability and transparency in the financial system, to end “too big to fail” to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes’.60 Toward that end, the Act created a Financial Stability Oversight Council (Council), which, among other things, (1) monitors the financial services marketplace to identify potential threats to the financial stability of the United States; and (2) advises Congress and makes recommendations in such areas that will enhance the integrity, efficiency, competitiveness, and stability of the US financial markets.61 (Conspicuously missing from the Council are any officials from the DOJ’s Antitrust Division or the FTC.62 Despite the DOJ’s role in reviewing bank mergers and the DOJ’s and FTC’s role in preserving the competitiveness of the US financial markets, the antitrust agencies are on the sidelines with respect to this Council’s fact-gathering and advising function.)

16.35  Interestingly, the Council studied a statutory measure to effectively curb the larger financial institutions from getting any bigger by acquiring rivals. A financial company could not merge with, or acquire, another company if the resulting company’s liabilities would exceed 10 per cent of the aggregate liabilities of all financial companies.63 The Council studied how the statutory cap would affect financial stability, moral hazard in the financial system, the efficiency and competitiveness of US financial firms and financial markets, and the cost and availability of credit and other financial services to US households and businesses.

16.36  By barring very large bank mergers, a statutory cap, under the old Chicago School beliefs, would raise significant concerns of false positives. Not true, the Council (p. 246) found. Overall, the statutory cap would have a ‘positive impact on US financial stability’:

Specifically, the Council believes that the concentration limit will reduce the risks to US financial stability created by increased concentration arising from mergers, consolidations or acquisitions involving the largest US financial companies. Restrictions on future growth by acquisition of the largest financial companies ultimately will prevent acquisitions that could make these firms harder for their officers and directors to manage, for the financial markets to understand and discipline, and for regulators to supervise. The concentration limit, as structured, could also have the beneficial effect of causing the largest financial companies to either shed risk or raise capital to reduce their liabilities so as to permit additional acquisitions under the concentration limit. Such actions, other things equal, would tend to reduce the chance that the firm would fail. …

Although the Council expects the impact of the concentration limit on moral hazard, competition, and the availability of credit in the US financial system to be generally neutral over the short- to medium-term, over the long run the Council expects the concentration limit to enhance the competitiveness of US financial markets by preventing the increased dominance of those markets by a very small number of firms.64

16.37  In 2014, the Federal Reserve implemented the financial sector concentration limit.65 The rule, however, does not eliminate systemic risk.66 But the statutory cap should limit domestic acquisitions by Bank of America, JPMorgan Chase, Citigroup, and Wells Fargo.67

16.38  Why should competition policy take bigness into account in one sector but not another? Or disregard lack of competitive overlaps sometimes but not always? We are not arguing for a statutory merger cap for every industry. There is a significant difference between financial mergers and many other mergers, such as when two large chains of fast-food restaurants merge. The key issue is the separation of risk (p. 247) and reward for these institutions deemed too big and too integral to fail. In creating a financial institution too big to fail, a merger can adversely affect consumers and other market participants by reducing the requisite degree of diversity for the financial network to remain stable. Moreover, in being deemed too big to fail, financial institutions can engage in risky behaviour with the confidence of a government bailout, and thus enjoy a competitive advantage over smaller rivals that are permitted to fail.68

16.39  The financial crisis exposed the significant harm that many large financial institutions inflicted on society. As the Fed Chairwoman observed, ‘[i]‌nstead of promoting financial security through prudent mortgage underwriting, the financial sector prior to the crisis facilitated a bubble in the housing market and too often encouraged households to take on mortgages they neither understood nor could afford.’69 She noted how recent research has ‘raised important questions about the benefits and costs of the rapid growth of the financial services industry in the United States over the past 40 years’, including how trends in compensation in the financial sector contributes to the increase in income inequality in the United States in recent decades.70

16.40  One complaint is that the senior executives at these financial services firms were never prosecuted for any of the fraudulent activity leading up to the economic crisis.71 Nor were any of the too-big-to-fail financial institutions criminally prosecuted. Then US Attorney General Eric Holder told Congress that the financial institutions were too big to criminally prosecute: ‘It does become difficult for us to prosecute them when we are hit with indications that if you do prosecute—if you do bring a criminal charge—it will have a negative impact on the national economy, perhaps even the world economy’.72

16.41  And the concentrated financial sector continues to be fertile ground for illegal collusive behaviour. In May 2015, five banks—Citicorp, JPMorgan Chase, Barclays, the Royal Bank of Scotland, and UBS AG—pled guilty to felony charges of conspiring to manipulate the price of US dollars and euros exchanged in the foreign (p. 248) currency exchange spot market. The banks agreed to pay criminal fines totalling over USD 2.5 billion.73 Moreover, two banks—UBS and Barclays—had to pay an additional USD 203 million and USD 60 million, respectively, for breaching their 2012 non-prosecution agreements resolving the DOJ’s investigation involving the London Interbank Offered Rate (LIBOR). The DOJ fined Citicorp (USD 925 million), Barclays (USD 650 million), JPMorgan (USD 550 million), and RBS (USD 395 million). The new US Attorney General noted how the financial penalties ‘should deter competitors in the future from chasing profits without regard to fairness, to the law, or to the public welfare’.74 That is optimistic. Since 2009, the large financial institutions have paid over USD 204 billion in 175 settlements (counting only settlements where the fine exceeded USD 100 million).75

16.42  Moreover, the concentrated financial sector now faces a new systemic threat, namely cyber-attacks. When Congress repealed the Glass–Steagall Act to allow different types of financial institutions—commercial banks, brokerage houses, and insurers—to merge, it also enabled the merging parties to amass a variety of personal data. The Gramm–Leach–Bliley Act required, among other things, the financial institutions to design, implement, and maintain reasonable safeguards to protect the security, confidentiality, and integrity of their customers’ sensitive information.76

16.43  No doubt many companies and government agencies are subject to data breaches. But the large financial institutions are a treasure trove for hackers. Apparently hackers used off-the-shelf technology to steal in 2014 the personal data of 83 million JPMorgan Chase customers.77 So the Council is grappling with preventing cyber-attacks from destabilizing the financial sector’s stability (and undermining our privacy). It warns that ‘[m]‌alicious cyber activity is likely to continue, and financial sector organizations should be prepared to mitigate the threat posed (p. 249) by cyber attacks that have the potential to destroy critical data and systems and impair operations.’78

16.44  And the Federal Reserve Chairwoman in 2015 is still dissatisfied with changes made by the largest US financial firms since the 2008 crisis. The Fed still sees ‘substantial compliance and risk management issues’ at the largest financial firms.79

E.  Consumers’ Overall Welfare

16.45  No one has calculated the costs of false negatives—namely the US government’s passivity in enforcing the competition laws. For too long, the focus has been on false positives. On a macro level, it is hard to see how competition policy has promoted consumer welfare over the past 35 years–given the bleak picture of America’s stark income and wealth inequality, the stagnant living standards, the growing economic insecurity and poverty, and the decline in social mobility.

16.46  One recurring theme in 1890 (when the Sherman Act was enacted), in 1950 (when the Clayton Act was amended), and today is the destabilizing effect from extreme wealth inequality. In 1890, inequality was high. Senator Sherman identified this inequality of condition, wealth, and opportunity as the greatest threat to disturbing social order: this inequality had ‘grown within a single generation out of the concentration of capital into vast combinations to control production and trade and to break down competition’.80 As the majority and dissent in the 1911 Standard Oil decision discussed, people were concerned about wealth concentrated in the hands of a few individuals and corporations.81

16.47  Economists have documented the distinctive ‘U’ shape of income disparity between 1917 and 2014 in the US.82 Peaking in 1928, income disparity sharply declined during the Great Depression. Thereafter, ‘[b]‌etween 1947 and 1973, economic growth was both rapid and distributed equally across income classes’, reported the Economic Policy Institute. ‘The poorest 20% of families saw growth at least as fast as the richest 20% of families, and everybody in between experienced similar rates of income growth.’83 But in the late 1970s, income inequality in the US began (p. 250) growing, reaching a record high in 2014.84 In 2014, the official poverty rate in the US was 14.8 per cent, with 46.7 million people in poverty.85

16.48  The widening income inequality is not limited to the US. It is a worldwide issue. In a 2014 Pew Research Center survey, ‘majorities in all 44 nations polled described the gap between rich and poor as a big problem for their country, and majorities in 28 nations said it was a very big problem’.86

16.49  The rise in income inequality beginning in the late 1970s corresponds with the period when antitrust enforcement began tapering off. Scholars are studying the implications of weak antitrust on wealth and income inequality.87 For example, economist Joseph E Stiglitz discusses why the growing wealth and income inequality is not the natural by-product of a market economy, but the result of policy decisions.88 Stiglitz’s central thesis is that this bleak picture did not appear naturally. Rather economic policies entail choices. All economic policies have distributive consequences. Much of the inequality resulted from deliberate legal and enforcement decisions, whereby the government over the past 30 years failed to protect most Americans. Instead, the economically powerful used the government to enrich themselves at society’s expense. Stiglitz provides a panorama of how various government policies increased wealth and income inequality, including the deregulation of the financial sector, various corporate welfare (p. 251) programmes, the regulatory race to the bottom, the attack on unions, the biased tax and bankruptcy policies, the permissiveness towards predatory lending, and macro-economic policies that prized inflation over unemployment. What is interesting is how lax antitrust enforcement went hand-in-hand with these other policy choices. The wealthy devised better ways to attain, maintain, and exploit their market power. Stiglitz criticizes how judges and policymakers were ‘educated’ in the Chicago School ideologies of self-correcting, presumptively efficient and competitive markets, even when the economic literature was refuting these claims. Other factors that Stiglitz attributes to monopolies’ durability are network effects and new business tactics to resist entry (such as Microsoft’s notorious ‘FUD’ strategy of Fear, Uncertainty, and Doubt). But the rent-seeking problem ultimately for Stiglitz was weak enforcement of the competition laws.

16.50  Finally, Stiglitz articulates why the growing inequality matters. Society overall pays a stiff price. We end up with a less stable, less efficient economy that generates less growth, less public investment, and less opportunity. Our democracy is weakened with greater voter disillusionment, greater distrust in our government, and greater disillusionment as many citizens are disempowered. Society ends up with more rent seeking, more lobbyists, and a greater misallocation of economic resources (as talented people flock to the financial sector to devise better ways to fleece consumers). Ultimately, there is an under-investment in human capital. The greatest cost imposed on society is ‘the erosion of our sense of identity in which fair play, equality of opportunity, and a sense of community are so important’. Not surprisingly, among the various economic reforms Stiglitz advances are stronger and more effectively enforced competition laws.89

F.  Why Ignoring Big Data Will Compound the Harm

16.51  With the rise of too-big-to-fail financial institutions, the complaints of excessive concentration in other industries, like radio and agriculture, and Kwoka’s meta-analysis of post-merger studies, one would think that the competition agencies are finally taking note. One would expect them to inquire whether their analytical tools for assessing mergers are up to par. One would also expect the agencies to revisit their merger guidelines assumptions and explore when actual marketplace behaviour deviates from their theories’ predicted behaviour. The cost of weak antitrust enforcement is too great.

(p. 252) 16.52  The cost of false negatives in data-driven industries will likely be even greater. Data-driven mergers, McKinsey and Company predicted, will only increase: ‘the need for scale of data and IT infrastructure may become a critical driver toward consolidation, which can be both an opportunity and threat, in sectors where subscale players are abundant’.90 Many of these industries, given the data-driven network effects, are ripe for consolidation. Thus the incentives for mergers and exclusionary behaviour increase to tip the market towards dominance. We are already hearing the warnings: ‘Where companies acquiring massive proprietary data sets’, the OECD observed, ‘there is thus a higher risk that we’re kind of heading toward data as a source of monopoly power.’91 The OECD also noted how the ‘economics of data favours market concentration and dominance’ and how ‘data-driven markets can lead to a “winner takes all” result where concentration is a likely outcome of market success’.92

16.53  So data-driven mergers coupled with network effects and sleepy (or intellectually captured) antitrust enforcers will likely yield highly concentrated markets. One long-standing premise of competition policy is that, absent strong economic evidence to the contrary for a specific industry, less concentrated markets are generally preferable over moderately and highly concentrated markets. In discussing the need for a statutory cap to prevent further mergers by large firms, the Financial Stability Oversight Council noted how a ‘large body of theoretical and empirical work has found that less concentrated markets produce socially beneficial results compared to more concentrated markets’.93 That is especially true in data-driven industries, where a few dominant firms can undermine many democratic systems. Of the many harms, the OECD noted, is the loss of autonomy and freedom:

Advances in data analytics make it possible e.g. to infer sensitive information including from trivial data. The misuse of these insights can affect core values and principles, such as individual autonomy, equality and free speech, and may have a broader impact on society as a whole. Discrimination enabled by data analytics, for example, may result in greater efficiencies, but also limit an individual’s ability to escape the impact of pre-existing socio-economic indicators. …94

16.54  Second, the shift in power to a handful of dominant tech firms will exacerbate existing inequalities:

Better data-driven insights come with a better understanding of the data objects and of how best to influence or control them. Where the agglomeration of data leads to (p. 253) concentration and greater information asymmetry, significant shifts in power can occur away from: i) individuals to organisations (incl. consumers to businesses, and citizens to governments); ii) traditional businesses to data-driven businesses given increasing returns to scale and potential risks of market concentration and dominance; iii) governments to data-driven businesses where businesses can gain much more knowledge about citizens than governments can; and iv) lagging economies to data-driven economies.95

16.55  For example, Professors Lianos and Motchenkova discuss how search engines, unlike other two-sided platforms, ‘act as “information gatekeepers” ’: they not only provide information on what can be found on the web; they are ‘an essential first-point-of-call for anyone venturing onto the Internet’.96 Moreover, search engines ‘detain an important amount of information about their customers and advertisers (the “map of commerce”)’.97

16.56  As a gateway, a dominant search engine, one study found, could impact democratic elections.98 Many users trust and choose the search engine’s higher-ranked results more than its lower-ranked results. The study inquired whether manipulating the search rankings could alter the preferences of undecided voters in democratic elections. Using 4,556 undecided voters representing diverse demographic characteristics of India’s and the US’s voting populations, the experiments found that ‘(i) biased search rankings can shift the voting preferences of undecided voters by 20% or more, (ii) the shift can be much higher in some demographic groups, and (iii) search ranking bias can be masked so that people show no awareness of the manipulation’.99 As the authors concluded, ‘Given that many elections are won by small margins, our results suggest that a search engine company has the power to influence the results of a substantial number of elections with impunity. The impact of such manipulations would be especially large in countries dominated by a single search engine company’.100

16.57  Moreover, as privacy erodes, so can trust. Consumers may be reluctant to share personal data, including data for innovations that improve overall welfare. After hearing the ‘widespread concerns about the effectiveness of the means by which consumers engage with the process of collecting data, including the use of privacy (p. 254) policies, terms and conditions and cookie notices’, the UK competition authority expressed unease about how the deterioration in privacy competition could erode trust:

Consumer trust could be fragile and at risk if negative perceptions about new technologies or the way firms manage data take hold. We are concerned that future changes in the way that data is collected and used (such as more passive collection via the [Internet of Things] could test how far consumers would be willing to continue to provide data.101

The OECD was likewise concerned. Many competition officials still are not fully acknowledging these privacy harms, and instead tend ‘to direct the specific privacy issues to the privacy protection authorities; the latter however having no authority on competition issues’.102 As the OECD concluded, ‘[t]‌he effective protection of privacy is therefore a key condition for preserving trust in data-driven innovation’.103

G.  The Competition Agencies Cannot Assume that Other Agencies will Repair Their Mistakes

16.58  The DOJ in the radio merger wave might have assumed that the FCC would prevent any harm to listeners. Likewise, the DOJ assumed that the Federal Reserve would protect against increases in systemic risk during the bank merger wave. The problem was that the other agencies allowed these mergers to sail through. Even after consumers are harmed, the competition agency may point the finger at another agency. This is reminiscent of one quail hunt. The plaintiff was shot, but did not know which defendant had shot him. Under those circumstances, the court held, the burden shifted to the defendants to show who was responsible.104

16.59  We can safely say that many of the harms we identify for data-driven mergers and abuses are fairly traceable to weak antitrust. The privacy agencies typically are not notified of data-driven mergers. Nor can they enjoin the mergers. Privacy and consumer protection laws typically provide behavioural remedies and fines, which have been generally lower than antitrust penalties.105 Fines will increase significantly (p. 255) in Europe for privacy violations.106 But the privacy authorities still lack structural remedies. If a company uses anticompetitive tactics to tip the market in its favour, fines will unlikely reverse the network effects (or adequately deter given the likely monopoly profits).

16.60  Thus for anticompetitive data-driven mergers and restraints, the antitrust remedies will often be critical and superior to attempts to regulate monopolies after the fact. US Senator Mike Lee (R-UT), for example, noted that ‘antitrust enforcement may unlock beneficial competition for the protection of user privacy and avert the need for additional privacy regulation’.

16.61  Competition law accordingly can play an integral role in ensuring that we capture the potential benefits of a data-driven economy while mitigating its associated risks. So what is to be done? Our next, and final, part identifies several steps the competition agencies can take.(p. 256)


1  See, eg, Public Citizen, Mission Creep-y: Google Is Quietly Becoming One of the Nation’s Most Powerful Political Forces While Expanding Its Information-Collection Empire, November 2014, p 7, https://www.citizen.org/documents/Google-Political-Spending-Mission-Creepy.pdf (warning that ‘the amount of information and influence that Google has amassed is now threatening to gain such a stranglehold on experts, regulators and lawmakers that it could leave the public powerless to act if it should decide that the company has become too pervasive, too omniscient and too powerful’).

2  William J Kolasky, Deputy Assistant Attorney General, US Department of Justice (DOJ), Antitrust Division, ‘What Is Competition?’, Address Before the Seminar on Convergence, Sponsored by the Dutch Ministry of Economic Affairs, The Hague, Netherlands, 28 October 2002, http://www.justice.gov/atr/speech/what-competition.

3  Verizon Communications Inc v Law Offices of Curtis V Trinko, LLP, 540 US 398, 414, 124 S Ct 872, 882 (2004).

4  Lawrence M Frankel, ‘The Flawed Institutional Design of US Merger Review: Stacking the Deck Against Enforcement’, Utah L Rev [2008]: pp 159, 171–2 (internal footnotes omitted).

5  Ibid, p 180.

6  Ibid.

7  Ibid.

8  Ibid.

9  Jonathan B Baker, ‘Taking the Error Out of “Error Cost” Analysis’, 80 Antitrust LJ (2015): pp 1, 37.

10  Ibid, p 9.

11  Ibid, pp 11–12.

12  Richard Hofstadter, ‘What Happened to the Antitrust Movement?’, in Richard Hofstadter, The Paranoid Style in American Politics and Other Essays (New York: Vintage Books, 2008), pp 188, 189.

13  Ibid.

14  Theo Francis and Ryan Knutson, ‘Wave of Megadeals Tests Antitrust Limits in US: Analysis shows that in many industries, most firms are competing in highly concentrated markets’, Wall Street Journal, 18 October 2015, http://www.wsj.com/articles/wave-of-megadeals-tests-antitrust-limits-in-u-s-1445213306.

15  DOJ, ‘From Farm to Fork: Antitrust Division and USDA Agriculture Workshops. Division Update Spring 2011’, updated 15 July 2015, http://www.justice.gov/atr/public/division-update/2011/ag-workshops.html.

16  Peter C Carstensen, ‘Comments for the United States Departments of Agriculture and Justice Workshops on Competition Issues in Agriculture’, University of Wisconsin Law School, Legal Studies Research Paper No 1103, 15 January 2010, pp 1–2, http://ssrn.com/abstract=1537191.

17  DOJ, ‘Competition and Agriculture: Voices from the Workshops on Agriculture and Antitrust Enforcement in our 21st Century Economy and Thoughts on the Way Forward’ (2012), pp 4–5, (‘DOJ Agriculture Workshops’), http://www.justice.gov/sites/default/files/atr/legacy/2012/05/16/283291.pdf.

18  Ibid, p 5.

19  Ibid, pp 8, 16.

20  Ibid.

21  Ibid.

22  Ibid, p 7.

23  See ibid, p 8 (‘[I]‌t’s the monopsony power of these concentrated purchases of farm goods that are stressing the people and the natural systems that are producing food …’ (internal quotation marks omitted)).

24  Attorneys General of the States of Montana, Iowa, Maine, et al, Comments Regarding Competition in the Agriculture Industry, United States Department of Agriculture and United States Department of Justice Competition in the Agriculture Industry Workshops, 11 March 2010, p 6, http://www.justice.gov/atr/public/workshops/ag2010/016/AGW-15683.html (providing comments from the attorneys general of various states).

25  Lina Khan, ‘Obama’s Game of Chicken’, Washington Monthly, November–December 2012, pp 32, 35–6, http://www.washingtonmonthly.com/magazine/november_december_2012/features/obamas_game_of_chicken041108.php; see also David A Domina and C Robert Taylor, Organization for Competitive Markets, The Debilitating Effects of Concentration in Markets Affecting Agriculture, October 2009, p ii, http://farmfutures.com/mdfm/Faress1/author/2/OCM%20competition%20report.pdf.

26  Concentration in Agriculture and an Examination of the JBS/Swift Acquisitions: Hearing Before the Senate Committee on Antitrust, Competition Policy, and Consumer Rights, 110th Cong 1, 8 May 2008), Statement of Sen Herb Kohl, Chairman, Senate Committee on Antitrust, Competition Policy, and Consumer Rights, http://www.gpo.gov/fdsys/pkg/CHRG-110shrg45064/html/CHRG-110shrg45064.htm.

27  DOJ Agriculture Workshops, above note 17, p 16.

28  US and Plaintiff States v JBS SA and National Beef Packing Company, LLC, Case No 08CV5992 (US Dist Ct (ND Ill), filed 20 October 2008), Complaint, http://www.justice.gov/atr/case-document/complaint-137.

29  David Dayen, ‘Bring Back Antitrust’, American Prospect, Fall 2015, http://read.nxtbook.com/tap/theamericanprospect/theamericanprospectfall2015/bringbackantitrust.html.

30  Diana L Moss and C Robert Taylor, ‘Short Ends of the Stick: The Plight of Growers and Consumers in Concentrated Agricultural Supply Chains’, Wis L Rev [2014]: pp 337, 338–9.

31  Christopher R Leslie, ‘Antitrust Law as Public Interest Law’, 2 UC Irvine L Rev (2012): pp 885, 905.

32  Between its fiscal years 2000 and 2009, the DOJ participated annually in 463 (2009) to 1,373 (2000) bank merger proceedings, with screenings requiring competitive analysis ranging between 342 and 945 mergers. DOJ, Antitrust Division Workload Statistics FY 2000–2009, http://www.justice.gov/sites/default/files/atr/legacy/2012/04/04/281484.pdf.

33  Robert Kramer, Chief, DOJ, Antitrust Division, Litigation II Section, ‘ “Mega-Mergers” in the Banking Industry’, Speech given at the American Bar Association Antitrust Section, Washington DC, 14 April 1999, http://www.justice.gov/atr/speech/mega-mergers-banking-industry. See also Robert E Litan, Deputy Ass’t Attorney General, DOJ, Antitrust Division, ‘Antitrust Assessment of Bank Mergers’, Speech given at the American Bar Association Antitrust Section, 6 April 1994, http://www.justice.gov/atr/public/speeches/litan.htm (noting that in the early 1990s the DOJ was reviewing approximately 2,000 bank merger or acquisition applications annually).

34  See Kramer, above note 33, p 7 (noting how the NationsBank and Bank of America mega-merger ‘was a classic market extension merger since NationsBank’s operations focused generally on the east coast and south and Bank of America was largely on the west coast’ so the merger’s competitive issues for the DOJ involved only two states—New Mexico and Texas).

35  Orley Ashenfelter et al, ‘Did Robert Bork Understate the Competitive Impact of Mergers? Evidence from Consummated Mergers’, 57 J L & Econ (2014): pp S67, S78.

36  Janet L Yellen, Chair of the Federal Reserve Board, Speech at ‘Finance and Society: A Conference Sponsored by Institute for New Economic Thinking’, Washington DC, 6 May 2015, 2015 WL 2152904, p *4 (‘Yellen Speech’), http://www.federalreserve.gov/newsevents/speech/yellen20150506a.htm (noting how the ‘financial crisis revealed weaknesses in our nation’s system for supervising and regulating the financial industry. Prior to the crisis, regulatory agencies, including the Federal Reserve, focused on the safety and soundness of individual firms—as required by their legislative mandate at the time—rather than the stability of the financial system as a whole. Our regulatory system did not provide any supervisory watchdog with responsibility for identifying and addressing risks associated with activities and institutions that were outside the regulatory perimeter. The rapid growth of the “shadow” nonbank financial sector left significant gaps in regulation.’).

37  Federal Reserve Board, Travelers Group, Inc, and Citicorp, Order Approving Formation of a Bank Holding Company and Notice to Engage in Nonbanking Activities, 84 Federal Reserve Bulletin (23 September 1998): p 985 (‘Federal Reserve Citicorp Order’), http://www.federalreserve.gov/boarddocs/press/BHC/1998/19980923/19980923.pdf.

38  Ibid, p 4.

39  Kramer, above note 33 (emphasis added).

40  Ibid.

41  Federal Reserve Citicorp Order, above note 37, p 6 (‘Travelers’s marketing and sales practices for its subprime mortgage loans, personal loans and insurance products adversely affect consumers’ and the merger ‘would provide incentives for Citigroup to “steer” [low to moderate income] and minority consumers to its subprime lenders.’). In 2002, in the largest consumer protection settlement in the FTC’s history, Citigroup Inc paid USD 215 million to resolve the FTC’s charges of systematic and widespread deceptive and abusive lending practices by a company it acquired in 2000 and merged in its consumer finance operations. The FTC sued Citigroup Inc and CitiFinancial Credit Company as successor corporations to Associates First Capital Corporation and Associates Corporation of North America, which Citigroup acquired in 2000. Federal Trade Commission, ‘Citigroup Settles FTC Charges Against the Associates Record-Setting $215 Million for Subprime Lending Victims’, Press Release, 19 September 2002, https://www.ftc.gov/news-events/press-releases/2002/09/citigroup-settles-ftc-charges-against-associates-record-setting. Citigroup said that the alleged predatory lending practices happened before its 2000 acquisition and that it had taken corrective steps to prevent such abusive tactics. See Paul Beckett, ‘Citigroup to Pay $215 Million to Settle Charges with FTC’, Wall Street Journal, 20 September 2002, http://www.wsj.com/articles/SB103244794635808195. Despite these assurances, Citicorp and CitiFinancial Credit Company were fined USD 70 million in 2004 for their subprime lending practices in 2000 and 2001. Board of Governors of the Federal Reserve System, In the Matter of Citigroup, Inc, Order to Cease and Desist and Order of Assessment of a Civil Money Penalty Issued Upon Consent, 27 May 2004, http://www.federalreserve.gov/boarddocs/press/enforcement/2004/20040527/attachment.pdf. And in 2005, Citigroup acknowledged that it made hundreds of high-cost home loans to customers with poor credit histories in 2004. Eric Dash, ‘Citigroup Units Kept Making Loans that Violated Policy’, New York Times, 4 May 2005, http://www.nytimes.com/2005/05/04/business/citigroup-units-kept-making-loans-that-violated-policy.html.

42  Federal Reserve Citicorp Order, above note 37, p 6.

43  The NewsHour with Jim Lehrer: Financial Powerhouse, PBS television broadcast, 7 April 1998.

44  Glass–Steagall Act (1933), New York Times, http://www.nytimes.com/topic/subject/glasssteagall-act-1933.

45  Federal Reserve Citicorp Order, above note 37, p 74.

46  Ibid, p 75.

47  Ibid.

48  Ibid, p 85.

49  Ibid, p 86.

50  Ibid.

51  Bradley Keoun, Jesse Westbrook, and Ian Katz, ‘Citigroup “Liquidity Puts” Draw Scrutiny from Crisis Inquiry’, Bloomberg Business, 13 April 2010, http://www.bloomberg.com/news/2010-04-13/citigroup-s-14-billion-liquidity-put-loss-is-focus-of-u-s-crisis-panel.html.

52  Yellen Speech, above note 36, p *3.

53  See Keoun et al, above note 51; Pro Publica Inc, ‘Where Is the Money?: Eye on the Bailout’, http://projects.propublica.org/bailout/entities/96-citigroup.

54  Eric Dash, ‘Panelists Question Citigroup’s “Government Guarantee” ’, New York Times, 4 March 2010, http://www.nytimes.com/2010/03/05/business/05tarp.html.

55  Simon Johnson, ‘The Bill Daley Problem’, Huffington Post, 9 January 2011, http://www.huffingtonpost.com/simon-johnson/bill-daley-obama-chief-of-staff_b_806341.html.

56  Simon Johnson and James Kwak, 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown (New York: Vintage Books, 2010), p 59.

58  Financial Stability Oversight Council, ‘Study & Recommendations Regarding Concentration Limits on Large Financial Companies’, January 2011, pp 13, 24, http://www.treasury.gov/initiatives/Documents/Study%20on%20Concentration%20Limits%20on%20Large%20Firms%2001-17-11.pdf.

59  Stephen A Rhoades, Board of Governors of the Federal Reserve System, Bank Mergers and Banking Structure in the United States, 1980–98, Staff Study 174, August 2000, p 26, http://www.federalreserve.gov/pubs/staffstudies/2000-present/ss174.pdf.

60  Pub L 111-203, 124 Stat 1376 (2010) (‘Dodd–Frank’).

61  12 USC s 5322(a)(2).

62  12 USC s 5321.

63  Dodd–Frank, above note 60, s 622; 12 USC s 1852; see also Financial Stability Oversight Council (FSOC), Study & Recommendations Regarding Concentration Limits on Large Financial Companies, January 2011, p 4 (‘FSOC Study’), http://www.treasury.gov/initiatives/fsoc/studies- reports/Documents/Study%20on%20Concentration%20Limits%20on%20Large%20Firms%2001-17-11.pdf (noting how s 622 would limit growth by acquisition more comprehensively than the pre-existing 10% nationwide deposit cap imposed by the Riegle–Neal Act because ‘it also takes into account non-deposit liabilities and off-balance sheet exposures, limiting incentives to shift liabilities from deposits to potentially more volatile on- and off-balance-sheet liabilities’).

64  FSOC Study, above note 63, p 4.

65  ‘Concentration Limits on Large Financial Companies’, 79 Fed Reg 68095 (14 November 2014) (codified at Concentration Limit: Regulation XX, 12 CFR Part 251) (‘Regulation XX’).

66  FSOC Study, above note 63, p 10 (finding ‘firms with less than 10 percent of US financial liabilities can be sufficiently large or otherwise critical to the functioning of financial markets to raise systemic issues in the event of failure, the concentration limit alone is unlikely to sufficiently reduce the risks posed to financial stability by systemically important firms’).

67  Ibid, p 8. One loophole involves acquisitions by foreign banks. Section 622 provides that the liabilities of a ‘ “foreign financial company” equal the risk-weighted assets and regulatory capital attributable to the company’s “US operations” ’. Regulation XX, above note 65, p 68098. As a result, one law firm noted, the regulation would have the ‘effect of favoring business combinations between US financial companies and foreign companies that are structured, as a legal matter, such that the foreign financial entity is the technical survivor of the merger, for example even where the US financial company is the larger counterparty or where the merger is a merger of equals’. Sullivan & Cromwell LLP, ‘Dodd–Frank Act: Additional Concentration Limits on Large Financial Companies’, 28 May 2014, p 7, https://www.sullcrom.com/siteFiles/Publications/SC_Publication_Dodd_Frank_Act_Additional_Concentration_Limits_on_Large_Financial_Companies.pdf.

68  Johnson and Kwak, above note 56, p 205; FSOC, 2011 Annual Report, p 109, https://www.treasury.gov/initiatives/fsoc/Documents/FSOCAR2011.pdf (noting that credit rating agencies ‘factor an explicit “uplift” ’ into the ratings of financial institutions perceived as too big to fail, how this support ‘increased dramatically in 2008 and persists’; while the markets may not factor the ratings uplift into their evaluation of these companies’ long-term debt, the uplift provides ‘a direct benefit for the short-term funding rating for these firms’ in accessing short-term wholesale funding markets that they would be unable to access with a lower rating).

69  Yellen Speech, above note 36, p *2.

70  Ibid.

71  Jed S Rakoff, ‘The Financial Crisis: Why Have No High-Level Executives Been Prosecuted?’, New York Review of Books, 9 January 2014, http://www.nybooks.com/articles/archives/2014/jan/09/financial-crisis-why-no-executive-prosecutions/.

72  Ibid.

73  DOJ, ‘Five Major Banks Agree To Parent-Level Guilty Pleas: Citicorp, JPMorgan Chase & Co., Barclays PLC, The Royal Bank of Scotland plc Agree to Plead Guilty In Connection With The Foreign Exchange Market and Agree to Pay More Than $2.5 Billion In Criminal Fines’, Press Release, 20 May 2015, http://www.justice.gov/opa/pr/five-major-banks-agree-parent-level-guilty-pleas.

74  Ibid.

75  Jeff Cox, ‘Misbehaving Banks Have Now Paid $204B in Fines’, CNBC, 30 October 2015, http://www.cnbc.com/2015/10/30/misbehaving-banks-have-now-paid-204b-in-fines.html (Bank of America USD 77.09 billion, JPMorgan Chase USD 40.12 billion, Citigroup USD 18.39 billion, Wells Fargo USD 10.24 billion, BNP Paribas USD 8.90 billion, UBS USD 6.54 billion, Deutsche Bank USD 5.53 billion, Morgan Stanley USD 4.78 billion, Barclays USD 4.23 billion, and Credit Suisse USD 3.74 billion).

76  15 USC ss 6801(b) and 6805(b)(2); 16 CFR Part 314; FTC, Financial Institutions and Customer Information: Complying with the Safeguards Rule, April 2006, https://www.ftc.gov/tips-advice/business-center/guidance/financial-institutions-customer-information-complying.

77  ‘What Lies Behind the JPMorgan Chase Cyber-attack: The Criminal Economy is Developing Faster Than the Lawful One Can Defend Itself’, The Economist, 12 November 2015, http://www.economist.com/news/business-and-finance/21678214-criminal-economy-developing-faster-lawful-one-can-defend-itself-what-lies-behind.

79  Ryan Tracy et al, ‘Yellen: Not Satisfied With Banks’ Changes’, Wall Street Journal, 5 November 2015, p C3.

80  21 Congressional Record 2455, 2460 (1890).

81  Standard Oil Co v United States, 221 US 1, 50, 31 S Ct 502, 512 (1911); ibid, 83–4 (1911) per Harlan, J, concurring in part and dissenting in part.

82  Thomas Piketty and Emmanuel Saez, ‘Inequality in the Long Run’, 344(6186) Science (23 May 2014): pp 838–43; Thomas Piketty, Capital in the Twenty-First Century (Cambridge, MA: Harvard University Press, 2014), p 24.

83  State of Working America, Income Inequality, http://stateofworkingamerica.org/inequality/income-inequality/.

84  Carmen DeNavas-Walt and Bernadette D Proctor, US Census Bureau, Income and Poverty in the United States: 2014, Current Population Reports, P60-252, September 2015, p 8, https://www.census.gov/content/dam/Census/library/publications/2015/demo/p60-252.pdf (between 1999—the year that US household income peaked before the 2001 recession—and 2014, ‘incomes at the 50th and 10th percentiles declined 7.2 percent and 16.5 percent, respectively, while income at the 90th percentile increased 2.8 percent’). Since 1999, the 90th to 10th percentile income ratio increased 23.1%. Ibid, pp 8–9.

85  Ibid, p 12.

86  Richard Wike, ‘Inequality is at Top of the Agenda as Global Elites Gather in Davos’, Pew Research Center, 21 January 2015, http://www.pewresearch.org/fact-tank/2015/01/21/inequality-is-at-top-of-the-agenda-as-global-elites-gather-in-davos/.

87  See, eg, Anna Kingsbury, ‘Competition Law and Economic Inequality: Distributional Objectives in New Zealand Competition Law’, 33(5) ECLR (2012): pp 248, 248 (discussing the distributional goals in New Zealand competition law, in the context of rising economic inequality, and considering the relationship between competition law and inequality in New Zealand); Jonathan B Baker and Steven C Salop, ‘Antitrust, Competition Policy, and Inequality’, 104 Geo LJ Online (2015), http://georgetownlawjournal.org/glj-online/antitrust-competition-policy-and-inequality/; see also Greg Ip, ‘Behind Rising Inequality: More Unequal Companies: More Competition Would Help Narrow the Gap Between the Highest- and Lowest-paid Employees’, Wall Street Journal, 4 November 2015, http://www.wsj.com/articles/behind-rising-inequality-more-unequal-companies-1446665769 (‘Mounting evidence suggests the prime driver of wage inequality is the growing gap between the most- and least-profitable companies, not the gap between the highest- and lowest-paid workers within each company. That suggests policies that have focused on individuals, from minimum wages to education, may not be enough to close the pay gap; promoting competition between companies such as through antitrust oversight may also be important.’).

88  Joseph E Stiglitz, The Price of Inequality: How Today’s Divided Society Endangers Our Future (New York: WW Norton & Co, 2012).

89  Stiglitz’s book complements other recent scholarship, such as Daron Acemoglu and James A Robinson’s discussion of extractive and inclusive economies in Why Nations Fail: The Origins of Power, Prosperity, And Poverty (New York: Crown Business, 2012), and Adair Turner’s critique in Economics After the Crisis: Objectives and Means (Lionel Robbins Lectures) (Boston, MA: MIT Press, 2012), of the simplistic beliefs about the objectives and means of economic activity that dominated the past few decades.

90  James Manyika et al, McKinsey Global Institute, Big Data: The Next Frontier for Innovation, Competition, and Productivity, June 2011, p 113, http://www.mckinsey.com/insights/business_technology/big_data_the_next_frontier_for_innovation.

91  OECD, Data-Driven Innovation for Growth and Well-Being: Interim Synthesis Report, October 2014, p 58, http://www.oecd.org/sti/inno/data-driven-innovation-interim-synthesis.pdf.

92  Ibid, p 7.

93  FSOC Study, above note 63, p 12 n 26.

94  OECD, Data-Driven Innovation, above note 91, p 7.

95  Ibid, p 7.

96  Ioannis Lianos and Evgenia Motchenkova, ‘Market Dominance and Search Quality in the Search Engine Market’, 9(2) J Competition L & Econ (2013): pp 419, 422, doi: 10.1093/joclec/nhs037.

97  Ibid.

98  Robert Epstein and Ronald E Robertson, ‘The Search Engine Manipulation Effect (SEME) and its Possible Impact on the Outcomes of Elections’, 112(33) PNAS (2015): E4512–21; published ahead of print 4 August 2015, doi:10.1073/pnas.1419828112, http://www.pnas.org/content/112/33/E4512.full.pdf.

99  Ibid.

100  Ibid.

101  UK Competition and Markets Authority, The Commercial Use of Consumer Data: Report on the CMA’s Call for Information, June 2015, paras 21, 26, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/435817/The_commercial_use_of_consumer_data.pdf.

102  OECD, Data-Driven Innovation, above note 91, pp 59, 62.

103  Ibid.

104  Remijas v Neiman Marcus Grp, LLC, 794 F3d 688, 696 (US Ct of Apps (7th Cir), 2015), discussing Summers v Tice, 33 Cal 2d 80, 199 P2d 1, 5 (1948).

105  European Data Protection Supervisor (EDPS), Privacy and Competitiveness in the Age of Big Data: The Interplay Between Data Protection, Competition Law, and Consumer Protection in the Digital Economy, Preliminary Opinion, 26 March 2014, p 16 (‘EDPS Preliminary Opinion’), https://secure.edps.europa.eu/EDPSWEB/webdav/shared/Documents/Consultation/Opinions/2014/14-03-26_competitition_law_big_data_EN.pdf (noting that the sizes of potential sanctions for privacy law breaches ‘vary widely between Member States’ with ‘the lower limit in Croatia is HRK 10 000 (EUR 1 131), while the UK authority may require penalties of up to GBP 500 000 (EUR 597 000)’ and that in ‘practice victims of unlawful processing are prevented from obtaining redress through the length and expense of proceedings and lack of unawareness of data protection rules and rights, although there have been some encouraging developments’). In contrast, fines for violating EU competition law are a percentage of the infringing company’s relevant sales, which, depending on several factors, can be up to 30%; for cartels, ‘the relevant percentage tends to be in the range of 15–20%.’ European Commission, ‘Fines for breaking EU Competition Law’, November 2011, http://ec.europa.eu/competition/cartels/overview/factsheet_fines_en.pdf. In the US, the DOJ has obtained, as of 16 December 2014, criminal antitrust fines of USD 10 million or more 121 times, with fines reaching as high as USD 500 million. DOJ, ‘Sherman Act Violations Yielding a Corporate Fine of $10 Million or More, updated 29 January 2016’, http://www.justice.gov/atr/public/criminal/sherman10.html.

106  Lisa Kimmel and Janis Kestenbaum, ‘What’s Up with WhatsApp?: A Transatlantic View on Privacy and Merger Enforcement in Digital Markets’, 29(1) Antitrust (Fall 2014): pp 48, 50 (noting under proposed privacy regulation, violators ‘could be subject to fines of up to 5 percent of its annual turnover or 100 million euros, whichever is greater—a dramatic increase from the maximum fines most individual data protection authorities may currently impose’).