Debate: ‘Doubt is their product’—The difference between research and academic lobbying

By: Tommaso Valletti (Imperial College London/Taylor & Francis Online)

Policy-relevant research on market power

In recent years, research on market power—its origins and consequences—has experienced a significant resurgence. A number of leading scholars have advanced our understanding of critical topics in competition policy. Moreover, this work has been published in journals that are considered among the most prestigious in the field.

I have identified three studies that have had a particularly notable impact. De Loecker et al. (2020) provide compelling evidence of a historical rise in markups, defined as firms’ ability to set prices above their variable costs. This trend has been especially pronounced since the 1980s, accompanied by an increase in firms’ profit rates. Azar et al. (2018) explore the influence of large asset management firms, such as BlackRock and Vanguard. Their study reveals that in the airline industry, competing airlines are often jointly owned by a small group of common investors. They further demonstrate that when common ownership on specific airline routes increases, ticket prices tend to rise, suggesting that airline passengers bear the cost of this ownership structure. Lastly, Cunningham et al. (2021) examine mergers within the pharmaceutical industry, focusing on so-called “killer acquisitions,” where an acquiring firm buys a target solely to discontinue its products and prevent future competition. This practice is especially prevalent when the target’s drug overlaps with the acquirer’s portfolio, and when the acquiring firm holds significant market power. These acquisitions frequently occur just below the thresholds that would trigger antitrust review, allowing them to evade scrutiny by competition authorities.

The response from lobbyists and ‘think tanks’

These papers offer thought-provoking insights and are grounded in extensive data. Each study has undergone rigorous peer review by the journals that published them. Yet, what stands out is the strong reaction they provoked in certain quarters. During my time at the European Commission, I witnessed firsthand the alarm these findings caused (and I was pleased to contribute to their dissemination in various public forums where I was invited to speak).

The reaction came not only from industries such as Big Pharma and large asset managers but also from their consultants, who shape much of the policy debate in Brussels and Washington, D.C. Particularly influential are the lawyers, who act as gatekeepers. These groups made significant efforts to downplay the importance of the academic findings—sometimes resorting to aggressive tactics in response…

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