On July 9, 2021, President Biden issued an executive order on “Promoting Competition in the American Economy.” The move represented a long overdue response to the alarming levels of concentration that now characterize wide range of sectors of the American economy. It also reflected the influence within the government of a new generation of reformers committed to reviving the country’s anti-monopoly traditions and developing a “new framework for holding private power to account” in an era dominated by tech giants such as Amazon, Apple, Meta, and Google.
Many of these reformers—including, most prominently, Lina Khan and Tim Wu—are self-described “neo-Brandeisians.” As the name suggests, the movement draws inspiration from ideas promoted by the 20th century legal scholar and Supreme Court Justice Louis Brandeis, arguing as Brandeis did over a century ago that competition law should “protect market structures that [distribute] individual opportunity and prosperity” and ensure that “excessive concentrations of private power” do not undermine economic freedom and democracy. These animating ideals have gained increasing acceptance in both academic and popular circles in recent years, but as both fellow travelers and skeptical interlocutors have observed, there is still work to be done to translate them into guiding principles and concrete policy programs.
Here we suggest that comparison to Europe can serve as a powerful tool toward these ends. With justification, neo-Brandeisian and other legal scholars generally associate Brandeis with America’s own anti-monopoly traditions. Yet, as we argue in a new working paper, what is less appreciated is that Brandeis himself drew key insights and inspiration from developments unfolding in the early 20th century across the Atlantic. In particular, Brandeis observed that many European countries had mitigated industrial consolidation and limited what Brandeis called “the competition that kills” through the involvement of cooperatives and trade associations, which helped prevent the cycles of over-production and cutthroat price competition that were driving economic centralization in the United States. Directing his gaze especially at the Danish (and to a lesser extent) German models of “regulated competition,” Brandeis observed that coordination on price or output could upgrade competition in ways that allowed smaller firms (often catering to niche markets) to survive, without sacrificing productivity. Indeed, such coordination could be productivity-enhancing because it channeled competition away from price and toward innovation and quality.
Brandeis was well aware of the potential abuses that could occur within private regulatory structures, particularly when dominant companies were permitted to coerce smaller firms. But rather than bright-line judicial rules, Brandeis argued for a flexible regulatory system that empowered experts within the government to direct competition and coordination toward beneficial ends – exercising forbearance in cases where inter-firm cooperation improved technical efficiency or innovation or upgraded production into higher value-added products, but intervening decisively to prosecute dominant actors whose behavior suppressed competition or exploited private economic power.
Some of these ideas found institutional expression in the early FTC, an institution whose creation Brandeis heavily promoted, and one which in its early years did in fact facilitate the formation of trade conferences to share information and encourage the adoption of stronger cost accounting measures among small firms. Yet these initiatives failed to take durable root in the American context and were abandoned in the post WWII period. Postwar Europe, however, built on the regulatory governance practices that Brandeis admired while abandoning the strong cartelization that characterized most European industry during the interwar period. The result, we argue, is that the European competition regime has gradually if inadvertently gravitated toward an increasingly Brandeisian approach. Three features of the current European regime in particular instantiate core elements of the vision that Brandeis articulated at the beginning of the 20th century.
Flexible Administrative Enforcement
Central to Brandeis’ model of “regulated competition” was a proactive but flexible system of economic governance. Such a system would involve a cooperative regulatory approach that sought to encourage firms to upgrade competition, combined with “coercive” powers that could be used to enforce positive agreements and to police abuses, particularly by dominant players.
The European Union’s administrative system of competition enforcement embodies key features of this vision. The European competition authority retains administrative rulemaking power that is used in part to develop block exemptions that allow firms to cooperate in areas such as research & development, specialization, or standard-setting. At the same time, the EU retains extensive “coercive” authority that can be directly applied to companies that violate competition rules. Unlike the court-based enforcement system in the United States, the EU’s enforcement authority is administrative in nature. While subject to judicial review, the competition directorate can conduct preliminary investigations, launch case proceedings, issue statements of objections to companies, hold oral hearings, enter into settlement agreements, make judgments, and assess fines, all without initial recourse to courts.
Recognizing the Benefits of Horizontal Coordination among Weaker Parties
Brandeis strongly supported arrangements that endowed weaker parties—smaller competitors, workers, farmers—with what Sanjukta Paul terms “coordination rights” as a way of countervailing the power of large corporations. Far from demanding the suppression of all forms of coordination, therefore, the Brandeisian vision called for nurturing precisely those forms of coordination that safeguard competition by channeling competition away from price (and labor sweating) into quality and innovation.
In the European Union, policymakers have also adopted policies that facilitate horizontal coordination. The Commission has used its block exemption authority to permit and encourage coordination and technology transfer between small and medium sized undertakings by exempting companies below certain market shares from many competition rules. Non-dominant companies are also permitted to cooperate in a range of different areas – including research and development, specialization, joint production and distribution, information sharing, standard setting, and sustainability – which reduces the economic pressure to consolidate. Finally, European competition law both permits and encourages business cooperation aimed at improving labor conditions. Collective bargaining agreements between one firm and its employees as well as inter-firm collective labor agreements that apply to an entire sector are fully permitted under European competition law. Courts and regulators have expanded these exemptions in recent years to include gig economy workers. In 2022, the Commission adopted guidelines that explicitly protect independent contractors who seek to organize as long as they are “in a situation comparable to workers” and are in a “weak negotiating position.”
Prosecuting Abuse of Dominance
If there is one through line in Brandeis’ work, it is a concern about economic concentration and the many abuses that can stem from it. Brandeis was therefore highly attuned to questions of economic power – and the ways such power could undermine both the freedom of producer groups and the legitimacy of democracy itself. Consequently, he believed that larger companies should be subjected to more stringent rules than smaller companies and that certain predatory, exclusionary, and abusive practices should be forbidden in most cases.
In a reflection of its “ordoliberal” roots, the European Union also places concerns about the exploitation of economic power at the center of its competition law. The Treaty of Rome dedicates an entire article to the “abuse of dominance,” which regulates the restrictive practices and agreements of undertakings with substantial market shares. There are now extensive rules, adopted into both hard and soft law, that prohibit dominant companies from engaging in a range of “abusive” practices, including the creation of barriers to entry, predatory pricing and price discrimination, the refusal to sell or buy products from competitors, and “squeezing” the profits of suppliers or distributors below a certain margin. Dominant companies also have extensive obligations to facilitate access to core infrastructures (i.e., essential facilities), to license intellectual property, and to provide interoperability information if such access is deemed necessary for a company to effectively compete. Since the year 2000, the European Commission has finalized more than 70 infringement and commitment decisions under this article across a wide range of industries. These decisions have generated more than €13B in fines and mandated sweeping behavioral changes to some of the world’s most powerful companies, including Microsoft, Google, Gazprom, Deutsche Telekoms, and Teléfonica.
These previous interventions and ongoing investigations were and are of course post hoc. They stem from investigations that are initiated long after violations have occurred and which usually take years to investigate and finalize. Brandeis, as discussed earlier, preferred “prophylactic” approaches to economic dominance. As he explained the U.S. House of Representatives in 1914, an effective competition regulator would “create conditions which will render less likely the existence of restraints of trade and monopolies,” not merely “correct them when they are discovered.” The new European Digital Markets Act (DMA) is clearly designed to confront abuse of power more preemptively—preventing abuses before they occur. This legislation designates a number of large online platforms as “gatekeeper firms” and then subjects these firms to a range of stringent requirements designed to ensure market fairness and market contestability. For instance, the DMA will obligate companies to apply fair and non-discriminatory conditions to the ranking of services and products, a principle that was first developed in the Google cases. The broader requirement for business users to receive the data that they generate on the platform parallels in many ways Brandeis’ concern for preserving the freedom of all market players and preventing predation by the powerful over the weak.
Lesson Drawing from the European Union
While the European system is by no means perfect, it offers a concrete example of how an alternative regime can operate in real life. As such, it can serve to unsettle taken-for-granted understandings about how states and markets must work, a task that is urgently needed in the area of antitrust, since so many features of the American antitrust system have become deeply ingrained—from the illegitimacy and inefficiency of business cooperation to the superiority of enforcement and rule development through the courts.
While we leave it to others to develop specific policy recommendations, we conclude by discussing a few ways in which U.S. reformers might draw inspiration from the European competition system. First and foremost, the EU experience with competition law shows the benefits of having a strong, flexible state agency that is empowered both to develop and enforce rules directly through administrative processes, and to update these rules in line with new economic and technological developments and ongoing consultation with industry. The EU arguably has avoided some of the political pushback against a strong administrative state because its administrative model incentivizes cooperation from industry while also making it easier for regulators to accommodate legitimate business concerns. By making expert regulators rather than entrepreneurial private lawyers the predominant enforcers, an administrative system also generates fewer opportunistic and frivolous private lawsuits that in the long-term may undermine the effectiveness of public enforcement. Finally, the EU’s administrative model makes it easier to update competition rules to address new societal challenges – as the Commission recently did by creating a new “safe harbour” from antitrust prosecutions for groups of companies cooperating to improve environmental sustainability.
Second, the European experience shows that forbearance as well as enforcement is needed to address the problem of corporate power. While the EU has shown in recent years that it will impose steep sanctions in response to violations, an equally important part of its mission is offering industry exemptions and approving agreements that are deemed to be economically or socially beneficial. Importantly, the EU does not consider all instances of cooperation between competitors to be harmful. Clearly, horizontal coordination can be abused, but the European case also shows that some forms can strengthen the ability of smaller companies to hold their own against larger ones, thus reducing pressure to consolidate or be absorbed by gigantic firms. They can also provide an institutional basis for countervailing power in capitalist political economies. Without substantially rethinking US horizontal rules, we fear that the intensification of anti-monopoly enforcement will not be sufficient to significantly alter the oligopolistic structure of the American economy.
Finally, we see the EU experience as a potentially helpful political tool that can be used to show that reform is both administratively feasible and economically beneficial, as many of the doctrinal and procedural aims promoted by the New Brandeisian movement are already in place in the EU. Compared to US antitrust, European competition law places more limits on predatory pricing and predatory bidding, more restrictions on monopoly leveraging, more extensive application of the essential facilities doctrine to both regulated and unregulated sectors, more limitations on “price squeezing” by dominant companies, and more extensive “coordination rights” for independent contractors and employees. Among other things, European regulators have been delegated a more extensive role in rulemaking and given more leeway with market definitions. European courts have also developed a better balance between false negatives and false positives in case evaluations while avoiding establishing a narrow “consumer welfare” standard in jurisprudence that would hamstring enforcement.
Each of these policies or institutions is already in place in the EU, yet no economic disaster has ensued. Indeed, a number of comparative studies suggest that the European competition paradigm has generated economic benefits, including lower consumer markups, higher labor market shares, and lower levels of market concentration than in the United States. By pointing to the European experience, New Brandeisians will be in a better position to advocate for substantive reforms.
Just as Brandeis looked across the Atlantic a century ago for usable lessons to inform American antitrust theory and policy, so too can today’s neo-Brandeisians – and US regulators generally – benefit from considering some of the advantages of the EU example, especially its flexible, administrative enforcement, greater tolerance for some forms of interfirm coordination, and more proactive approach to regulating the exploitation of private economic power.
