Financial Regulation in the (Receding) Shadow of Antitrust
61 Pages Posted: 26 Mar 2019 Last revised: 26 Mar 2021
Date Written: March 20, 2019
Mounting evidence that a number of key industries in the U.S. economy have become less competitive in recent years is prompting a renewed national conversation about an enhanced role for antitrust enforcement. But there are limits on the anticompetitive conduct antitrust enforcers and private plaintiffs can reach, especially in regulated markets. This is due in part to the doctrine of implied antitrust immunity: when a court perceives a conflict between the antitrust laws (e.g., the Sherman Act) and a regulatory regime (e.g., the securities laws), it may find immunity for conduct that otherwise would violate the antitrust laws. Two Supreme Court cases from the 2000s, Verizon Communications Inc. v. Law Offices of Curtis V. Trinko and Credit Suisse v. Billing, appeared to enhance these restrictions, seemingly increasing the likelihood that regulation will displace antitrust entirely. This Article argues that these cases have had a surprisingly limited impact in most regulated markets, but have affected the scope of implied immunity in the financial markets. As a result, the job of confronting heightened concentration and reduced competition in financial services may fall to sector regulators, especially the Securities & Exchange Commission and Commodity Futures Trading Commission. But these agencies are unprepared for the task and often are unwilling to undertake it. They have neither the resources nor personnel to enforce competition rules and such enforcement ranks low on their priority list. Competition in financial markets therefore may suffer. The stakes are high: increased concentration in financial markets harms consumers and may threaten systemic financial safety. In light of the sector regulators’ limitations, this Article proposes a regulatory-design solution to the problem of competition enforcement in financial markets and focuses on Dodd-Frank’s regulatory regime for the derivatives markets as a case study. It argues that sector regulators should craft structural rules to protect competition in these markets ex ante rather than solely relying on conduct rules and corrective measures taken ex post. The Article contends that increased reliance on structural regulatory responses to competition problems in regulated markets may be beneficial from a competition standpoint when compared to antitrust enforcement and that these salutary effects may be enhanced when the products involved are potentially toxic, as is the case for some derivatives products. This approach is particularly crucial for the derivatives markets, which are enormous, continue to grow, and pose serious competition and systemic risks that may spill over into the wider economy.
Keywords: antitrust, antitrust immunity, regulation, financial services, financial regulation, derivatives
JEL Classification: L4, L41, L43, L5, L52, L88
Suggested Citation: Suggested Citation