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Why Regulators Went Soft on Monopolies

Federal officials become economists and lawyers who help kill competition for their corporate clients. Welcome to the new Gilded Age.

Antitrust authorities once fought against monopolies, but for the past four decades they have given a green light to merger after merger. The guardians who were meant to protect competition have become the principal cheerleaders of monopolies.

The Department of Justice (DOJ) and the Federal Trade Commission (FTC) have become revolving doors for highly paid economists and lawyers whose only goal is to look after their corporate clients rather than voters, consumers, workers, suppliers, and competition.

Americans have the illusion of choice, but in industry after industry, a handful of companies control entire markets. Two companies control 90 percent of the beer industry. Over 75 percent of households face local monopolies in high speed internet. Four airlines dominate airline traffic, often enjoying local monopolies in their regional hubs. Non-existent antitrust enforcement has made them all possible.

The boom in corporate mergers over the past 40 years surpasses the original merger mania under robber barons like John D. Rockefeller and J.P. Morgan. We are now living in a new Gilded Age.

The results have been disastrous for competition. In the last two decades, over 75 percent of U.S. industries have experienced an increase in concentration levels. Even as GDP has grown, half of all publicly traded companies have disappeared since 1997. IPOs are also disappearing. In the 1990s, there were an average of 436 IPOs per year, but in 2016 there were only 74, and in 2017 only 108.

A growing mountain of evidence demonstrates that rising industrial concentration is leading to lower wages for workers, fewer startups, lower productivity, rising inequality, and weaker towns and cities. Most damningly, mergers have led to higher prices in almost all industries.


If there is one man who is responsible for the revolution in antitrust thinking, it is Robert Bork. Perhaps best known as an unsuccessful Supreme Court nominee, Bork was a leading thinker in the so-called Chicago school of economics. In his view, antitrust enforcement only served to protect small firms from competition, keeping industries fragmented at the expense of cost efficiencies. Bork argued that the only factor that matters in antitrust is “consumer welfare,” which could only be measured by consumer prices—the lower the price, the better the consumer’s welfare. Everything else was populist demagoguery.

President Ronald Reagan’s DOJ put Bork’s views into practice with the relaxed Merger Guidelines in 1982. Since then, the DOJ and FTC adopted the “consumer welfare standard” and almost never reject mergers so long as companies promise to keep prices low. Gone was any concern regarding concentrations of economic and political power, harms to innovation, economic vitality, suppliers, and workers.

The change in antitrust regulation was nothing short of revolutionary. Consumer welfare was never part of the Sherman Antitrust Act of 1890 or the Clayton Antitrust Act of 1914. With no new act of Congress, the DOJ overrode the express will of Congress and changed the nature of antitrust without a new law, public debate, or vote. Today, an unelected group of lawyers and economists go through the revolving door at the FTC and DOJ and promote mergers. They dictate the economic rules of the game with almost no oversight.

When companies merge, they announce the “synergies” they’ll be able to share with customers. To give you a sense of how outlandish the estimates are, the accounting firm Deloitte calculated that the announced cost savings of the current mergers boom amounted to $1.9 trillion, which is roughly the size of Canada’s GDP. Such dubious claims are indicative of where antitrust policy finds itself today.

No matter what period you study, the evidence is abundant: increasingly concentrated industries with less competition result in higher prices.

Dozens of economic studies have shown that businesses don’t become more efficient after a merger. A 2016 study by economists Bruce Blonigen and Justin Pierce of the Federal Reserve shows that mergers cause higher prices, with little evidence of greater productivity and efficiency.

In 2007, economist Matthew Weinberg undertook a comprehensive study of mergers between competitors over the previous 22 years. He found that the majority of deals “resulted in increased prices for both the merging parties and rival firms.” Many firms were so impatient that they increased prices before a merger was approved. Weinberg followed up his study seven years later and the results were the same: “The empirical evidence that mergers can cause economically significant increases in price is overwhelming.”

Mergers raise prices and harm consumers, even in industries that are only moderately concentrated. That is the definitive finding of John Kwoka, who created the most comprehensive database available of mergers, including dozens of studies covering more than 3,000 mergers. Kwoka’s damning conclusion was that in mergers that led to six or fewer significant competitors, prices rose in nearly 95 percent of cases.

According to the American Antitrust Institute, “merger control in moderately concentrated sectors appears to have virtually ceased.” Enforcement of Section 2 of the Sherman Antitrust Act fell from an average of 15.7 cases per year from 1970 to 1999 to less than three per year over the period of 2000 to 2014. Incredibly, no cases were filed in 2014. In 2015, the government challenged a record seven mergers out of a total of 10,250. The FTC itself says that over 95 percent of mergers don’t present any competitiveness issues. The proportion of merger deals that are completed is close to 90 percent. The only reason deals do not go through is because companies get cold feet, not because of antitrust enforcement.

Since Reagan, no president has enforced the spirit or the letter of the Sherman and Clayton Acts. It doesn’t matter what party has controlled the presidency, there has been no difference in policy toward industrial concentration. The budget for antitrust enforcement has shrunk with each president and has never been lower in real inflation-adjusted dollars.

Presidents George W. Bush and Barack Obama may have disagreed on many issues, but there was no difference in policy when it came to monopolies and oligopolies. For example, the Bush administration allowed Whirlpool to acquire Maytag even though they controlled up to 75 percent of the market for many home appliances. Obama’s administration actively killed all FTC probes of Google. Cell phone providers consolidated from six to four companies. The two biggest now control almost 70 percent of the entire U.S. market.

Each president has become more lax than his predecessor, and the DOJ and FTC now primarily serve the interests of companies. Enforcement is rare and selective. A 2017 study found that firms connected to politicians that oversee antitrust regulators are more likely to receive favorable merger reviews. Today, except in extreme circumstances, such as outright monopoly, regulators and the courts are unlikely to block mergers because of an increase in market concentration.

The revolving door works in subtle ways, including in the FTC’s case selection. The Wall Street Journal published internal memos of FTC staff deliberating whether Google was abusing its monopolistic position in the search engine industry and discriminating against its rivals. The staff’s opinions were overruled by the commissioners, who apparently were more concerned with their future job prospects than enforcing the law.

Or consider the recent FTC enforcement action against 1-800 CONTACTS. The FTC’s opinion isn’t bashful about who benefits from this enforcement—the very first part in the agency’s “proof” of anticompetitive effects was that the challenged conduct results in fewer Google ad sales, as if Google’s welfare were a proxy for consumer welfare. The two cases demonstrate that the FTC is reluctant to take on the corporate giants—presumably a future spot of employment—yet is willing to assume great legal risks to bring enforcement actions against small competitors at the behest of monopolists.

Antitrust law is not so much dormant as it is actively sabotaged by the very people who should enforce it. The DOJ and FTC’s policies today are best described as aggressive do-nothingism.

In the mid-1990s Peter Beinart quipped about Rhodes Scholars, “Like Clinton, my peers believe earnestly in government. Above all, they believe in themselves in government.” Antitrust lawyers and economists do not believe in government, but they certainly believe in themselves in government.

The process of getting mergers approved appalls the mind. Firms hire Washington, D.C. K Street law firms and engage highly paid economists to argue that mergers will promote efficiencies and lower prices. The top economists in the field move back and forth from consulting firms such as Compass Lexecon or Charles River Associates to run the DOJ and the FTC. The economists create models arguing that mergers will lower prices. But once mergers are approved, prices mysteriously go up.

This naturally influences the work of well compensated pro-merger economists. Financial models rely on questionable assumptions of demand, costs, and the way firms will behave in the future. Numerous studies show that these assumptions turn out to be incorrect, and merger simulations do not accurately predict actual post-merger prices. In layman’s terms, “garbage in = garbage out.” Merging firms pay well, and economists are happy to perform on demand.

Since the early 1980s, economists have become wealthy moving in and out of government promoting mergers. Each time, they land at a cushy law firm or research firm that trades on their inside connections in government, and they return to government.

The problem is not restricted to the DOJ and FTC. According to The Washington Post, 10 years after the financial crisis brought the U.S. economy to the abyss, about 30 percent of the lawmakers and 40 percent of the senior staff who wrote the Dodd-Frank Act have gone to work for or on behalf of the financial industry.

The conflicts of interest within the antitrust world are receiving increased scrutiny, with even The Economist writing that “competition regulators have been captured.” It is a damning indictment of the status quo that the pro-market publication could write:

Competition regulators have a dated view of the economy and, in official forums about how to reform competition policy, lawyers acting for private firms are given undue weight. Academics are paid as witnesses or are sponsored by firms without disclosing it. Officials rotate between the agencies and law firms which defend big companies. Consumers rarely have a voice. In America things have slipped so badly that a material conflict of interest is not considered a disqualifying condition, or even a relevant consideration, for someone to pronounce on antitrust policy and be taken seriously.

The free-market-friendly publication even likened them to the financial regulators before the financial crash.

The money in the revolving door is vast. In the world of antitrust, many economists charge over $1,000 an hour, and some economists, such as Dennis Carlton of Compass Lexecon, have made over $100 million. And behind them stands Wall Street. This year alone, mergers and acquisitions departments at investment banks have received $21 billion in fees from deals.

Compass Lexecon and Charles River Associates completely dominate the market for economists for hire. Compass Lexecon has worked on many big deals that have materially weakened competition, including the merger of US Airways and American Airlines. Seven professors on Compass Lexecon’s payroll have served as the top antitrust economist at the DOJ, while Charles River Associates has three.

Sometimes the firms work on both sides of a merger deal. Their conclusions match the views of whichever party is paying.

Compass Lexecon is the granddaddy of merger and antitrust consulting firms. It was founded by law professor Richard Posner at the University of Chicago in 1977. At the time, the government was trying to break up AT&T. The firm called Posner to ask if he could consult in defense of the monopoly. Since then, the company has argued in favor of mergers in thousands of cases and deals. Even though Posner had to sell his share of Lexecon when he was appointed to a federal appeals court in 1981, he returned 36 years later as a senior adviser after his retirement from the bench in late 2017.

This is not Nigerian corruption where suitcases of cash are handed over or money is transferred to Swiss Banks. Such an amateur comparison would be inappropriate. This capture is not only legal, but much more effective. The revolving door creates a culture of ideological capture and what Nassim Nicholas Taleb calls the “retrospective bribe.” It encourages poachers turned gamekeepers turned poachers to look after their clients’ interests in the long term. As Michael Kinsley wrote of Washington, D.C. in the 1980s, “The scandal isn’t what’s illegal, the scandal is what’s legal.”

Lawyers are trained from a young age to learn the ins and outs of the revolving door. If you do some searching on the Internet, you’ll come across message boards, such as one, titled, “FTC -> Big Law Partner,” where a young lawyer asks for advice on how best to manage the ins and outs of government: “I’m about to become an antitrust associate at a firm with a good antitrust practice (Cleary/Jones Day/Gibson) and I would really like to lateral to the FTC eventually. If I am at my firm for 5 years and at the FTC for 5 years (for example), how easy would it be for me to come back as an antitrust partner in big law?”

The responses from fellow lawyers in private practice and the FTC show it is a well understood and traveled path.


The examples of a revolving door between the FTC, DOJ, the courts, K Street law firms, and Compass Lexecon and Charles River Associates are too numerous to count. Rather than bore you with an endless list, here’s a sample of the most notable revolvers to give you an idea of the rich rewards from going in and out of government.

Dennis Carlton: Carlton is an economist at the University of Chicago and has been president of Compass Lexecon. According to a report by ProPublica, he has made about $100 million in salary, equity stakes, and non-competes. He has written reports and testified in favor of dozens of mergers, including AT&T-SBC Communications, Comcast-Time Warner, United-Continental, and American-US Airways. In 2006, he joined the Bush DOJ for a year and a half as the top antitrust economist. He then, naturally, returned to Compass Lexecon.

Over the years, Carlton has worked advising the government on merger guidelines, making them looser with each passing revision, even as he stood as a direct beneficiary of non-existent antitrust enforcement.

Timothy Muris: Muris has gone in and out of government over the past 40 years, serving in half a dozen law firms as well as being the chairman of the FTC from 2001 to 2004. Given his conflicts of interest, he often had to recuse himself when reviewing mergers. When he joined Kirkland & Ellis, the law firm boasted that “Muris is the only former FTC chairman with an active private practice.”

Muris is no longer at the FTC, but he now writes reports defending Amazon against antitrust attacks. Along with Jonathan Nuechterlein, a former FTC general counsel, he has been paid to advise on antitrust issues and wrote that Amazon “is a brilliant innovator” whose “breakthroughs have in turn helped launch new waves of innovation across retail and technology sectors, to the great benefit of consumers.”

Muris is a George Mason University Foundation Professor of Law. Other notable revolvers who teach at George Mason include Douglas Ginsburg, who Reagan nominated to the Supreme Court in 1987 after Robert Bork’s confirmation was blocked. Ginsburg had to withdraw his nomination due to frequent marijuana use. He’s best remembered for gutting antitrust on the bench and earlier in his career opposing car safety standards, as they “stifled innovation.”

Christine Wilson: When Muris went to Kirkland & Ellis, he took his FTC Chief of Staff Christine Wilson. In private practice, Muris and Wilson represented Northwest Airlines in its merger with Delta Air Lines, and Verizon in its acquisition of MCI. Delta liked Wilson so much that it hired her as in-house corporate counsel on a $390,000 a year salary. She had already received over $500,000 from Kirkland & Ellis.

A former colleague described Wilson as “ideological,” and said she “can back a corporate line, even a palpably outrageous one, without a blush.” This is presumably meant as praise in the world of revolving doors. She was appointed as FTC commissioner again on September 26, 2018 and her term expires in 2025. She is young, and will likely find time for a few more ins and outs through law firms and the FTC.

Carl Shapiro: Overall, Shapiro has frequently favored greater enforcement, and is to be commended. However, his one blind spot has been Google.

He served as deputy assistant attorney general for economics in the Antitrust Division of the DOJ from 1995 to 1996. He then served as a senior consultant to Charles River Associates from 1998 to 2009 before joining the Obama administration, and has been a consultant for CRA again from 2012 to present. Google is one of the bigger clients of CRA. He re-joined CRA before FTC opened settlement negotiations with Google.

To say that Shapiro is close with Google would be an understatement. He co-authored several white papers and studies with other academics and scholars who have received Google funding in the past. Shapiro co-authored a 1998 book with Google’s chief economist, Hal Varian, entitled Information Rules: A Strategic Guide to the Network Economy.

Jon Leibowitz: Leibowitz served four years as head of the FTC during the Obama administration and then went on to join Davis Polk & Wardwell. Many other Obama antitrust experts went through the revolving door with him. Christine A. Varney, the former head of the Justice Department’s Antitrust Division, joined Cravath, Swaine & Moore in 2011. And Joseph F. Wayland, another DOJ antitrust official, returned to his former firm, Simpson Thacher & Bartlett.

Leibowitz got a big pay raise over his government salary (the average Davis Polk partner earned about $2.5 million when he joined). He has spent much of the last few years lobbying for Comcast, which has a local monopoly in cable, while at Davis Polk.

Deborah Feinstein: From 1989 to 1991, Feinstein worked at the FTC as assistant to the director in the Bureau of Competition. When she left the FTC, she returned to high-powered corporate law firm Arnold & Porter, later becoming a partner and the head of the firm’s antitrust practice. Feinstein specialized in representing clients before the FTC and DOJ.

Arnold & Porter’s antitrust group is a revolving door unto itself. According to reporting by journalist David Dayen, lawyers from the group have become “chair of the FTC, general counsel of the FTC, director of the FTC’s Bureau of Competition, and head of the Justice Department’s Antitrust Division.” Dayen also notes that former Antitrust Division chief William Baer “had two stints at the FTC in between his tenure at Arnold & Porter. Robert Pitofsky, former chair of the FTC, also went back and forth between the agency and Arnold & Porter.”

At the FTC she abandoned any attempts to block mergers, instead favoring consent agreements that are largely ineffective. She allowed countless mergers that reduced competition. Under her watch, mergers reached an all-time record and surpassed $2 trillion for the first time ever. Healthcare and technology mergers reached record heights in 2015.

Under Feinstein, the U.S. merger wave reached its most recent peak, and mega-mergers like AB InBev’s acquisition of SABMiller were approved. That deal helped take the U.S. market into a beer duopoly. In other deals, drug makers were allowed to eliminate any generic competition. Horizon, for example, was allowed to buy the main competitor of one if its medications called Deuxis, and subsequently raise prices by 600 percent. So much for consumer welfare.

She returned to Arnold & Porter when her stint at the FTC was over.

Joshua Wright: A former FTC commissioner during the Obama administration, Wright today is a law professor at George Mason University, the executive director of the Global Antitrust Institute, and Senior of Counsel at one of Google’s outside law firms, Wilson Sonsini Goodrich & Rosati (WSGR).

Wright recused himself from voting on any Google cases for two years while serving on the commission. After two and a half years on the commission, he left to teach at George Mason University. Wright had also acted as a consultant for Charles River Associates. In 2013, the government granted him a waiver that permitted him to serve as an FTC commissioner and review deals his former consulting firm advised on. After he left the FTC, Trump picked Wright to head the transition of the FTC.

During Wright’s first tenure at GMU before joining the FTC, the University’s Law & Economics Center received at least $762,000 in funding from Google.

Wright has written numerous papers supporting Google’s position, and he did not disclose the support on many papers, although there is little need on some. He wrote a paper with key Google paid ally Geoffrey Manne titled “Google and the Limits of Antitrust: The Case Against the Antitrust Case Against Google.” Manne has received funding from Google and is a go-to person anytime the internet giant needs defending.

Wright never met a merger he didn’t like. He even supported the merger of Sysco and US Foods, which would have given the company control of 75 percent of full-service food distribution nationally. Fortunately, he was in the minority.

His writings drip with condescension for the “hipster antitrust” movement and its “inevitable fall.” In an op-ed in The New York Times, he claimed that today’s “antimerger fervor” is based on the false belief that concentrated market power is bad for consumers. “Sometimes mergers harm consumers, but those instances are relatively rare.” This statement ignores an overwhelming body of evidence to the contrary.

Renata Hesse: Hesse is another noted Google revolver. Hesse joined the Antitrust Division of the DOJ in 2002. She worked there until 2006 when the revolving door took her to Google’s law firm WSGR.

At WSGR Hesse joined another revolver, Susan Creighton, the former director of the FTC’s Bureau of Competition from 2003 to 2005. Creighton appeared before the 2011 Senate Antitrust Subcommittee investigation into Google’s business practices alongside then-Google CEO Eric Schmidt. Hesse did a lot of antitrust work for Google. Hesse worked with Creighton, lobbying state attorneys general investigating Google for violations of state antitrust law.

In 2012, Hesse returned to government as special advisor to the Civil Enforcement Division of the DOJ, and was soon after appointed to oversee the entire Antitrust Division. She is now at the private law firm of Sullivan and Cromwell, which is elbowing its way into the lucrative business of antitrust advice.


The roles of Wright and Hesse are only the tip of the iceberg. The level of contacts between the White House and Google has been unprecedented. During the Obama administration, Google representatives attended White House meetings more than once a week. Nearly 250 people shuttled from government service to Google employment or vice versa over the course of his administration. The revolvers included former Google vice president Megan Smith, who served as chief technology officer of the Office of Science and Technology Policy, and former Google deputy general counsel Michelle Lee, who served as director of the Patent Office.

Google is also known for paying academics for studies that are pro-Google. Often, the source of the funding is not even mentioned. The company pays authors from $20,000 to $150,000 per paper, and these are presented as impartial evidence to the FTC. It has also funded conferences where the sponsorship is not disclosed.

George Mason University worked closely with Google on conferences to bring its allies as speakers during the FTC investigation into the company. More than half the researchers at a 2016 GMU conference received financial support from Google, including the FTC’s own chief technologist, Lorrie Cranor, who received a $350,000 “unrestricted gift” from the tech firm.

The antitrust establishment will not give up its lucrative lifestyle without a fight. Herbert Hovenkamp, an antitrust professor, recently wrote that if we abandon the consumer welfare standard we might “quickly drive the economy back into the Stone Age, imposing hysterical costs on everyone.” Hovenkamp is enamored with mergers and has said, “The fact is that sometimes it takes a pretty big business to benefit consumers.” Joshua Wright—parroting the establishment’s talking points—co-wrote a paper also arguing that any moves to change the status quo will “send antitrust jurisprudence careening back to its Stone Age.”

To fend off growing criticism, the FTC and defenders of the status quo have been hosting hearings that offer the air of impartiality while attacking critics and defending the status quo.

In a December 2017 Senate hearing on whether the consumer welfare standard should be amended, four out of five panelists supported the status quo. Only Barry Lynn, executive director of the Open Markets Institute, disagreed.

Lynn’s fellow panelists attacked him. “I don’t know any serious antitrust scholars who want to move away” from the consumer welfare standard, Carl Shapiro said. Not only did Shapiro disagree that there was a problem, he berated journalists who “tend to be herd animals.”

The FTC began a series of hearings in September 2018 on “Competition and Consumer Protection in the 21st Century.” Chairman Joseph Simons expressed concern over the growing problem of monopoly, which is now found in nearly every sector of the economy.

The current chairman of the FTC himself has been a repeated revolver. He served as chief of the FTC’s Competition Bureau, investigating mergers from 2001 to 2003. After his time at the FTC, Simons accepted a $1.9 million partnership share at the law firm Paul, Weiss, Rifkind, Wharton & Garrison, to work on corporate mergers.

Until we end the revolving door and draw from a wider group of candidates, nothing will change.  

Jonathan Tepper is a senior fellow at The American Conservative. He is co-author of The Myth of Capitalism: Monopolies and the Death of Competition. This article was supported by the Ewing Marion Kauffman Foundation. The contents of this publication are solely the responsibility of the authors.