The antitrust books you should’ve read in 2021 [part 2]

In a CoRe Blog post last month, I introduced the first three ‘antitrust books you should’ve read in 2021’. In this second instalment, I take a look at the next and final three books. Antitrust takes a political–historical look at the evolution of U.S. antitrust law, while How Antitrust Failed Workers zooms in on issues of labour market power. One Up, finally, explores competition in the gaming industry—an area of increasing interest to antitrust enforcers.

‘Antitrust: Taking on Monopoly Power from the Gilded Age to the Digital Age’ by Amy Klobuchar

In short: Amy Klobuchar, Senator from Minnesota and candidate in the 2020 Democratic presidential primary, has written a book on antitrust. There’s always a risk when politicians write books on topics like these (exhibit A: Senator Josh Hawley’s The Tyranny of Big Tech, which I reviewed earlier). However, Klobuchar has a relevant background, having studied at Chicago Law School and having worked as a lawyer in telecommunications (her antitrust work for MCI against AT&T surfaces at various points in the book). She (and her team) also did the research: the book comes in at just over 600 pages, but more than 200 of those are occupied by endnotes (Klobuchar credits her husband John Bessler, a law professor, for writing nearly every one of them). Inevitably, Klobuchar narrates herself into parts of the story, but luckily, this never takes precedence over content. Moreover, she has been focussing on antitrust for years, so this book is not an exercise in posturing.

The result is an eminently readable political–historical guide to the evolution—or more specifically, decline—of U.S. antitrust policy. While antitrust history is well-trodden by now, Klobuchar keeps the story fresh by focusing on the politics involved. In that regard, her analysis of antitrust in the Trump era (pp. 158–174) is particularly interesting. In line with contemporary antitrust progressives (many of which are referenced and acknowledged), Klobuchar pays particular attention to the intersection of antitrust with inequality, racial and gender discrimination, and labour issues. She does not go as far as saying that antitrust should be used directly to tackle these challenges but highlights the positive indirect effects of antitrust enforcement in these areas, while also suggesting reforms outside of antitrust to help solve these issues.

Favourite chapter: Klobuchar addresses ‘Modern–Day Antitrust Challenges’ in chapter 6. Some of those challenges, such as the lack of resources of U.S. antitrust agencies, are easier to tackle; others, such as conservative courts and their conservative (business–friendly) antitrust rulings, less so. Nevertheless, Klobuchar puts forward a series of solutions, not only in her book, but also in Congress: her most recent bill—the Competition and Antitrust Law Enforcement Reform Act—would significantly increase enforcement resources and strengthen the law on monopolization and merger control.

Quotable: Klobuchar ends her book with a call to build a new pro–competition movement, like the one that existed around the turn of the 20^th century: ‘To make progress, elected officials must find a way to elevate antirust issues in the political discourse. … [I]t is particularly important for Americans to understand the antitrust laws and how competition policy does—and should—work. And the American people must, themselves, get more involved to solve the problem of BIG.’ (p. 348)

Further reading: The book covers a breadth of topics, so there is plenty of further reading. For more on history, Tim Wu’s The Curse of Bigness (reviewed previously) is a great guide (Klobuchar also references Wu regularly, e.g. on pp. 87–88). Klobuchar also spills a fair amount of ink on consolidation in media industries; Martha Minow’s Saving the News dives deeper into this topic. Finally, antitrust labor issues are explored in the review of Eric Posner’s How Antitrust Failed Workers, right below.

‘How Antitrust Failed Workers’ by Eric Posner

In short: The focus of antitrust enforcers and academics has long been on product market power. In How Antitrust Failed Workers, Eric Posner takes on the topic of labour market power (or monopsony), which has received comparatively little attention. Labor market power derives from job search frictions, job differentiation and labor market concentration. Based on a wealth of evidence, Posner concludes that monopsonistic labor markets are the norm rather than the exception. Among others, this monopsony power has the effect of redistributing wealth from workers to employers by lowering wages. This is also why minimum wage laws do not reduce employment, as commonly thought: employers are underpaying workers and a minimum wage law simply shifts wages to the competitive level.

Posner argues that ‘the case for antitrust law enforcement in labor markets is stronger than in product markets’ (p. 7), but (U.S.) antitrust enforcers have yet to wake up to this. This is slowly starting to change, but even then, only the most egregious cases are taken up. The Silicon Valley no-poaching agreements, for example, essentially constituted a horizontal cartel well-known to enforcers. There is a much wider ‘litigation gap’ in labor markets (compared to product markets) and Posner proposes a set of reforms on collusion, monopsony and mergers to rectify that situation. Even without reform, however, he argues that ‘antitrust law offers opportunities that private litigants and government officials have failed to exploit.’ (p. 117)

Favourite chapter: In chapter 6, Posner takes a close look at non-compete agreements, which many workers (including low-wage workers) are subject to. Even though non-competes are on average anticompetitive, the burden to challenge them under U.S. (antitrust) law is high. That is why Posner proposes adopting a presumption against non-competes. Employers can only rebut that presumption by showing that (i) the non-compete is necessary to protect an investment in training or to preserve goodwill, trade secrets, or customers lists; and (ii) the non-compete generates higher rather than lower wages.

Quotable: After going over the data, Posner is not afraid to state his case clearly: ‘[T]here is little doubt that the traditional model of competitive labor markets is wrong, that monopsony or monopsonistic competition is pervasive, that many labor markets are highly concentrated, and that labor monopsony, as theory would predict, pushes wages down below the competitive rate.’ (p. 28)

Further reading: Jan Eeckhout’s The Profit Paradox (reviewed in the first instalment of this list), also examines the relation between market power and workers’ wages. However, the two books take a different perspective, as explained by Eeckhout: ‘It is important to distinguish the downward pressure on wages due to monopsony power from the falling tide that results from a lot of firms’ market power in the goods market. Monopsony power of a given firm directly affects the wages of its own workers. Good market power by one firm has no effect on wages when the labor market is competitive. There is an indirect effect from the falling tide when there are many firms with goods market power: wages of all workers in the economy fall. Even if the existence of monopsony is a robust finding—large firms underpay their workers substantially—there is no conclusive evidence that monopsony power has increased sharply in the past four decades.’ (p. 87) Finally, note that the book is derived from several papers Posner wrote, some with co-authors including Iona Marinescu, Suresh Naidu and Glen Weyl (with whom he co-wrote Radical Markets, which I included in this list two years ago).

‘One Up: Creativity, Competition, and the Global Business of Video Games’ by Joost van Dreunen

In short: Insightful books have been written about competition in the music, book and film industries. Another entertainment industry—gaming—has not received such a treatment, even though it is at least as economically relevant (in 2021, gaming generated $180B in revenue, which is more than twice the revenue of the Box Office and recorded music combined). In One Up, Joost van Dreunen makes up for this undeserved lack of attention. After introducing gaming industry basics, he takes an insightful, data-driven look at each of gaming’s major segments: mobile, console and PC. While myths persist about ‘mobile millionaires’ now that the big guys have gotten in on the act, mobile remains the largest gaming segment, although the ‘death of the console’ has been exaggerated and PC gaming is making a comeback.

If there’s one conclusion to be drawn, it’s that the famous adage ‘content is king’ is simply wrong. True, gaming companies have long used exclusive content as a key competitive advantage. (p. 31) However, real power in the gaming industry does not derive from content, but rather its distribution. Mobile game distribution relies almost fully on two platforms (iOS and Android, and their app stores), console gaming largely on two (Xbox and PlayStation, with a smaller role for Nintendo), while PC gaming distribution is more competitive (with only two operating systems, Windows and Mac, but various storefronts, which has led to lower fees). By contrast, game publishing is relatively competitive across all segments, although van Dreunen observes an increase in concentration since 2014. (pp. 178–81)

Favourite chapter: Various competition cases, such as Epic v Apple or Microsoft/Activision Blizzard, hinge on market definition. An outstanding question, which the European Commission declined to answer previously, is whether there is one encompassing gaming market, or whether each segment constitutes its own market. In Epic v Apple, the U.S. judge did hold that the three segments are still distinct, but there is evidence of convergence because of innovations like cloud gaming and cross-platform play. Van Dreunen analyzes such innovations in chapter 10 on ‘Next-Gen Revenue Models’ (cross-platform play is already discussed earlier, on pp. 88-89).

Quotable: With the Microsoft/Activision Blizzard merger assessment in mind, the following passage is interesting: ‘In aggregate, the games business has become less concentrated over the pasty twenty years. Large organizations have a persistent appetite for acquisition, however, and giants continue to drive consolidation. In the current lead-up to … the advent of cloud gaming, incumbent platform holders have started to make more aggressive acquisitions to ensure themselves of premium content as complementary. In 2018, Microsoft went through a string of purchase, including Ninja theory, Playground Games, Undead Labs, Compulsion Games, obsidian, and Double Fine Productions.’ (p. 180)

Further reading: In the preface, Van Dreunen references Rockonomics by Alan Kreuger as a good example of a book that demystifies the workings of an entertainment industry (music) and how its economics shape the content it produces (I included that book in this list two years ago). With One Up, van Dreunen meets the exacting standard set by Kreuger.

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Picture via Pixabay