I am very pleased that Fiona Scott Morton has accepted to be interviewed by the Platform Law Blog. Fiona is the Theodore Nierenberg at the Yale School of Management and one of the best IO economists in the world. She recently spent several months in Brussels as a research fellow at Bruegel, a leading think-tank. I had the privilege of meeting Fiona a few times during that period to exchange on a variety of competition and regulatory topics.
Economics is a rich discipline comprising multiple areas. What drove you to competition economics?
I had not studied Industrial Organization in university for some reason and so my first exposure to the subfield was at MIT where we were permitted to take one elective in the first year of the PhD program. The instructor that year was Jean Tirole. I remember thinking after the first day, “This is it. I love this subject.” My second transition in the field came while I worked at the US DOJ. I realized then that I enjoy ‘fitting’ the economics into the law, by which I mean using the right model, redefining the features of the case to fit the model, and using words to describe the model so that it matches the law. This is a slightly different skill, and one that is underappreciated by economists I think.
For a long time, antitrust enforcement was generally seen as weak in the United States, even under the democrats. Why was it so? And why has it recently changed with the DoJ and the FTC suing large tech companies?
The “Chicago School” of thought took hold in the late 1970s and really became entrenched as the perspective from which for US judges viewed cases. The main point of that school of thought is that government should rarely intervene, most settings are competitive, and markets will fix themselves. A few moments of introspection concerning market imperfections and the difference between competitive profit and monopoly profit produces an understanding that that position is incorrect. But for almost 40 years – from 1980 to the late teens of this century – we dialed back on antitrust enforcement and did less.
Within the economics profession the pendulum began to swing back after 2010. The evidence on anticompetitive conduct of firms and resulting harm to consumers began to accumulate, from studies of particular industries to cross market studies of all kinds, some carried out by macroeconomists! European enforcement had not slowed down and this provided a useful model and counterpoint. Enthusiasm for enforcement began to tick up, and this may have been most visible initially in the Facebook FTC and Google Search DOJ cases under Trump. More recently under Biden that enthusiasm has appeared in ordinary industries like hospitals, locks, defense, airlines, etc.
Some members of the antitrust old guard have criticized these lawsuits as a form of antitrust populism. Do you agree?
I would say these lawsuits are about protecting and increasing consumer welfare by trying to increase competition in digital markets. I think the ‘old guard’ likes consumer welfare and doesn’t like populism, which makes the proposition above problematic.
Do you think the US approach to antitrust will change in a meaningful way if there is a change in the Administration following the next elections, or do you think some of the values carried by the current leadership of the DOJ and FTC are shared more broadly across the political spectrum?
Yes, it will change. There is still a strong element in the Republican Party that is fond of corporate profits. Competition tends to reduce corporate profit and therefore this wing of the establishment is against enforcement and that is likely to show up in any Republican administration. In addition, tech companies are “liberal” according to conservatives, and that makes them targets of enforcement designed to make content moderation more favorable for conservatives or other outcomes that are not about consumer welfare – just as the Trump DOJ investigated auto makers for agreeing on emissions standards with the State of California.
While EU competition law has been more vibrant than US antitrust law in recent years, it seems that the three decisions against Google (Shopping, Android and adSense) have not made a major difference? Why is it so?
These cases are difficult because designing remedies to restore competition to those markets is a challenging task. In addition, European antitrust is very uncomfortable with divestiture as a remedy, and continues to think of it as a punishment, which is a cultural divide that is challenging for me personally. Part of the response to the remedy challenge is the DMA, which is another type of tool, namely regulation. This law puts in place remedies that the antitrust tool cannot achieve, and does so more broadly, and more quickly (at least eventually).
What are the strengths and weaknesses of the DMA in your view?
The strength of the DMA is its ex ante nature and the fact that enforcers do not have to prove market definition, market power, and harm every time there is a problem. That should create certainty for business as well as speed up benefits for consumers. In addition, the rules open up more chances for business users to innovate and head in directions that the incumbent platforms have been unwilling to go. That could be exciting. The rules, further, only apply to fairly old technology like search and operating systems and social networks, that have been around for 15 years or more so we understand them reasonably well. We will find out its weaknesses in the year ahead!
Big tech companies have almost unlimited resources and some of them have appealed their designation decision. Are you worried about DMA implementation?
Yes, of course, in the sense that I want it to happen now, and am worried there will be years of delay. But am I generally worried? Not really. I think the law is quite clear and the enforcement will eventually get there. My one serious worry is that enforcers may not have as much backbone as is needed to achieve good outcomes.
As the EC will no longer have to define markets, dominance and show effects to establish a DMA infringement, do you still foresee a role for economists?
Yes, absolutely. There are many areas of discretion and many choices that platforms must make concerning how they comply. Economics will be very useful in those places to help regulators pick options that create the most benefit for consumers and the best paths for contestability going forward. See my paper with friends on this topic here.
You have now spent several months in Brussels. What will you remember from your interaction with the Brussels competition community?
I will remember how friendly everyone was, and continues to be! And I will long remember how many expressions of support I received from a wide range of people of every nationality. The visit also gave me a chance to get to know quite a few national competition authorities and that was a great pleasure. There are so many talented and dedicated enforcers in Europe.
What are your projects when you return to the U.S. mid-December?
I continue on as a Senior Fellow at Bruegel, which means I will stay connected to the European enforcement community and debate for a while longer. My research will stay focused on the DMA as it comes into force. Analyzing the outcomes of the DMA is intellectually interesting, critical for Europe, and highly relevant for what the US does by way of regulation, so it will keep me busy.
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