Richard A. Epstein reviews “The Curse of Bigness” by Tim Wu

See ‘The Curse of Bigness’ Review: Revisiting the Gilded Age. Exerpts:

"Whereas Bork recognized that large firms often have little or no monopoly power, Mr. Wu insists, wrongly, that the two are highly correlated."

"The deeper source of philosophical disagreement, however, lies in Mr. Wu’s self-proclaimed “neo-Brandeisian” attack on Bork’s underlying worldview. First, Mr. Wu claims that Bork’s consumer-welfare theory shows too little solicitude toward the small businessman, who can be steamrolled by larger businesses with greater economic power. Second, Mr. Wu claims that Bork’s thesis ignores the perverse influence that dominant firms exercise on the overall political system.

Against both challenges, Bork’s position holds up reasonably well. As to the first, the protection of the small businessman comes at a high price. It forces consumers to do business with small firms that may well have a local geographical monopoly, which would be undercut by a larger firm offering better goods at lower prices. Today the entry of such a competitor often comes from online merchants, like Amazon, that sell to everyone anywhere, and it is hard to think of any sensible restriction on Amazon’s business practices that would produce a net social benefit, given the many underserved areas in the United States. In addition, Amazon is always vulnerable to other online sellers that can take advantage of their skills in niche markets. Finally, a big entrant doesn’t always destroy local businesses. The dominant firm could be the anchor tenant at a shopping mall, for instance, whose presence makes way for smaller businesses offering complementary goods and services. What is more, the high administrative and compliance costs involved in Mr. Wu’s aggressive antitrust regime could easily exceed whatever gains in market efficiency he is aiming for.

Similarly, both Brandeis and Mr. Wu have an oversimplified vision of political markets, for economic dominance need not translate into political dominance. Companies like Google and Facebook today enjoy dominant positions with their search engines or social-media platforms, but they face massive political opposition, not only from regulatory authorities but also from skilled political operatives—activist groups, litigation centers, unions, trade associations—who can make their lives a public-relations nightmare. Fighting off bad publicity, consumer protests, hostile investigations and well-financed litigation is no small task. If these companies do indeed need more regulation, as Mr. Wu claims, it would be better to bring it about in spheres other than antitrust—say, added privacy protections or measures to combat consumer fraud.

Finally, Mr. Wu’s Brandeis fixation blinds him to the distinctive features of modern antitrust litigation, which must contend with often complicated economic arrangements and effects. When American Express tried to prevent its merchants from steering their customers to credit-card companies that charge lower fees to retailers, it was hit with an antitrust lawsuit. But the Supreme Court this year upheld the policy, claiming that it didn’t result in an abuse of market power but was pro-competitive because of indirect effects that improved the benefits to Amex card holders. With his over-concern with bigness per se, Brandeis had nothing to say about these novel issues, and neither, alas, does Mr. Wu."