Presenting remarks today at the George Mason University Law Review's Winter Antitrust Symposium in Washington, D.C. on "Moving From Theory to Enforcement," Federal Trade Commission Chairman Timothy J. Muris spoke on improving the economic foundations of competition policy in the antitrust arena. Specifically, dedicating the remarks to his teacher, mentor, and colleague Jim Liebeler, in whose honor the symposium was held, Muris stated that "finding good answers [to how the economic foundations of competition policy can be improved] is vital to the success of antitrust enforcement."
Opening his remarks, Muris identified several propositions about integrating economics into antitrust and then discussed the application to antitrust analysis of the New Institutional Economics, or NIE. One of his primary messages, he said, "is that antitrust analysis, if done correctly, uses the NIE framework - that is, conducting a careful, fact-based economic analysis grounded in a thorough understanding of the relevant institutions." Before continuing, he noted the "intellectual debt" he owed to not only Liebeler, but other "luminaries in UCLA's remarkable constellation of industrial organization economists," where he attended law school.
Muris then described his early career at the FTC, using his experience with the FTC's 1970s investigation of the auto industry as a framework for how his ideas about the relationship between economic and antitrust theory developed. He stated that one of the most important lessons from this experience was that "both economic theory and industry circumstances are ever changing. The prevailing consensus must be tested in the face of new theory and evidence. Good antitrust policy requires getting the model right and doing the hard slogging necessary to apply economics to what I have called the 'stubborn' facts."
Muris said that "economics is neither monolithic nor static," and that "one of the most promising developments for antitrust policy in modern economic analysis is the New Institutional Economics." Much of the FTC's work follows the tenets of the NIE, he stressed, and reflects careful, thorough fact-based analyses "that properly account for institutions and all the relevant theories, not just market structure or market power ones."
Muris further stated that "the typical I.O. theory contains little description or analysis of institutions and factual details . . . too much of modern I.O. theory still makes structure the only important market feature in the model," although empirical work has overturned the structure/conduct/performance paradigm. "My point," he stressed, "is that having a theoretical paradigm that can largely explain business conduct only by market structure and assumed market power is flawed." Proper analysis also considers the specifics of the nature of competition in a market - that is, it pays proper attention to market institutions.
He then described his emphasis as Chairman over the past 19 months on competition policy "research and development," including the organization of an Empirical Industrial Organization Roundtable that brought together leading I.O. scholars to discuss a wide array of topics and leading to a call for more research in evaluating merger outcomes - both in terms of competitive effects and efficiencies.
Finally, Muris touched on issues for future research that can be used to benefit antitrust policy, highlighting what the FTC is doing to advance existing empirical knowledge. Specific examples included the Commission's work in the area of consummated hospital mergers by the newly formed Merger Litigation Task Force and an FTC Bureau of Economics Working Paper on the use of scanner data estimation in antitrust. "In short," he said, "the FTC is making a strong commitment to the kind of detailed, fact-intensive empirical research that improves the economic foundations of antitrust."
Concluding his remarks, the Chairman said, "This list is only a beginning of the numerous topics on which antitrust would benefit from a better empirical foundation. I hope I.O. returns to be much more of an empirical discipline, guided, of course, by sound theoretical insights. We all have much to do to assure that antitrust avoids the mistakes of its past. Jim Liebeler would have been happy with progress to date, but impatient to continue with the job ahead."
Copies of the Chairman's remarks will be available shortly from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC's Bureau of Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Evaluation, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, D.C. 20580, Electronic Mail: firstname.lastname@example.org; Telephone (202) 326-3300.
For more information on the laws that the Bureau enforces, the Commission has published "Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws," which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.