Braving the Melbourne winter recently were the University of Toronto’s Avi Goldfarb, the University of California’s John Asker, Julian Wright from the National University of Singapore, Lorin M. Hitt from the University of Pennsylvania and Johns Hopkins’ Aviel Rubin, to name just a few. They were in town for Australia’s show-stopping antitrust trial — Epic Games versus Apple and Google — a pitched battle over how the two internet giants treat app developers. Their presence was a reminder of the role experts with university affiliations are playing in defending the digital giants.
In the United States, Big Tech’s willingness to splash cash on researchers and the universities that employ them is starting to have an impact on government policy — and those funds are flowing at the very time US antitrust regulators have ratcheted up their scrutiny of the digital giants. If you’re reading an article in a refereed journal about, say, what cut Apple and Google take from every app sale or why Google’s search engine is pre-installed on iPhones, you need to ask yourself this: who’s paying for the research?
Growing concerns about covert influence within American academia were boosted earlier this month by the justice department’s competition chief Jonathan Kanter. Speaking in New York, Kanter suggested that the “expertise-buying game” unleashed by tech companies was akin to how tobacco companies used their influence to suppress medical evidence. The issue, he said, could no longer be ignored.
The speech has prompted some Australian academics and economists, sixteen thousand kilometres away, to engage in serious soul-searching. Is the direct relationship some of them have with business interests — or the nature of the funding sources tapped by their universities — leading them to downplay the need for a more robust government crackdown on anti-competitive practices?
“The disease has reached Australia, but on a lesser scale,” says Allan Fels, founding chair of the Australian Competition and Consumer Commission and éminence grise of our local antitrust scene. “With all the money pouring into the field through consulting and research, there is more research and publishing,” he says. “This is welcome. But it has a bit of a bias in favour of business interests.”
Rod Sims, who stepped down as ACCC chair in March 2022, is on the same page. He says the money that sloshes around, targeting academic experts and economic consultants, is distorting the conversation. “The problem in Australia is that the vast bulk of antitrust economists spend nearly all their time working [to defend] companies,” Sims says.
That’s not to say that everyone on our side of the world is receptive to Kanter’s claim that there’s been a “pervasive breakdown” in the distinction between expertise and advocacy in competition policy. Graeme Samuel, the prominent Melbourne businessman who chaired the ACCC between 2003 and 2011, describes as “rubbish” the suggestion that captains of industry and US-based tech disruptors have co-opted academics and economists into an anti-regulatory cabal. “There are plenty of economists out there,” Samuel says. “Just because big corporates retain them… That’s not an issue. It’s a big world.”
Indeed, antipodean anti-Kanterites argue that the differences between Australia and the US are too numerous to support any suggestion that experts have been captured by business interests, let alone by Big Tech. For a start, the market here is small, with a dwindling pool of academic economics experts — a reality that limits their influence. And Kanter’s suggestion that money set aside by corporations to discourage antitrust enforcement is “flowing by the millions into academia” may well describe the situation on the other side of the Pacific but doesn’t quite ring true in Australia.
Add to these the fact that, unlike the US justice department, the ACCC periodically outsources its own analysis to economic consultants. Most local economists, in other words, aren’t exclusively doing the bidding of businesses with an interest in undermining calls for greater regulation.
But none of this answers a basic question: has corporate money compromised Australian academics’ independence in the same way that, as Kanter suggested, Big Tobacco once did? Many bristle at the comparison. Academics “guard their independence very carefully,” according to one prominent former competition official-turned-academic, who added that universities had already reached informal agreements to ensure that journal articles are accompanied by the disclosure of any funding from business interests (disclosures now required by all reputable journals).
This may be so. But Kanter’s speech still carries a message for Australian universities and regulators.
Prominent competition experts including Cristina Caffarra, a Brussels-based economist, and Tommaso Valletti, a professor of economics at Imperial College Business School in London, have been warning about corporate capture for years. Valletti uses the term “agnotology” — the study of how doubt or ignorance is created, in this case with the support of corporate funding. To illustrate the point, he makes the same comparison as Kanter: the policy interference once run by Big Tobacco against evidence of smoking’s impact on health.
Influence campaigns of this sort are “pernicious precisely because they are subtle,” Kanter told his audience in New York. Many antitrust academics might consider themselves distant enough from their funding sources for the money to be irrelevant, he said. But even so, research reveals that corporate influence could “impact a researcher in a wide range of different ways — whether consciously or unconsciously.”
Brussels-based antitrust lawyer Damien Gerardin told us that the relationship between business interests and academia in Australia and the European Union is more nuanced than it is in the US. Among those working on these issues are “pure” full-time academics whose sole focus is on research and teaching. They tend to guard their independence from big business more assertively — unless, that is, they’re invited to “write a paper… or because they receive money for their research centre.”
Then there’s a category more typical of economists: those with a tenured university position who also work for an economic consultancy. “I think these guys are often willing to flex their academic independence to suit corporate interests,” Gerardin says. “In the US, clearly, if you look at all the economists from Berkeley, Stanford and MIT, most of them are actually expert witnesses for the government or for private parties. So, that’s where the problem lies.”
But some academics don’t believe these concerns apply to Australia in the same way. Flavio Menezes, an economics professor at the University of Queensland recently appointed as a part-time member of the Australian Competition Tribunal, says there’s no evidence of a lack of debate within academia on competition issues. “There has been a lot of research on what has happened to competition in the US, for example,” he says. “There has also been research on fundamental competition issues, like network economics. There’s no lack of independent thinking.”
Rob Nicholls, a senior research associate at the University of Sydney, agrees that Kanter’s concerns can’t be readily transposed to an Australian context. “There are far fewer academics who are retained or even funded by any business at all, let alone major multinational platform operators. And that does, of itself, mean that there’s a degree of academic freedom,” says Nicholls, who also holds a position with the Association for Data-driven Marketing and Advertising. A byproduct of this freedom is that some researchers will take issue with a regulator’s call for greater antitrust regulation — but that, he says, shouldn’t be taken as evidence of bias.
The ACCC’s current chair, Gina Cass-Gottlieb, says that access to quality independent economic advice is generally not a problem in Australia. But she concedes that her agency has been challenged by the shortage of digital-platform specialists. “One aspect that can be challenging is technical experts, particularly in digital areas, because there are a small number of them globally,” she says. “Many of them, of course, will be working for one or other of the platforms, because that’s where their main client base is.”
As to whether Australian academics have been captured by big money, Cass-Gottlieb says she doesn’t think so — although that could be because the phenomenon here “is opaque and we’re unaware of it.” That said, it’s important to have “informed, robust and frank debate” on competition issues, the ACCC chief adds. “Provided there’s a clear disclosure, we welcome it.”
Perhaps the clearest difference between Australia and the US lies in the structure of the market for economic advice itself. In Australia, the vast majority of detailed economic work on antitrust issues is done by a handful of specialist consultancies, led by global players Charles River Associates and RBB Economics, as well as locally headquartered HoustonKemp and Frontier Economics. The markets here are generally smaller and consultancies tend to employ full-time specialists rather than moonlighting academics.
“In Australia, we don’t have a strong history of academic economists specialising in competition economics doing hands-on work in the context of merger review or litigation,” says Jennifer Fish, a Sydney-based economist at Charles River. “There’s just not a big academic presence here,” she adds, arguing that the distinction between academic and consulting economists in Australia is much more stark than it is in the US. “In the US, a lot of the economists that testify are academics.”
But if most of the Australian work is being contracted out to consulting economists, does that lead — as Fels and Sims suggest — to a body of research that’s generally supportive of large business interests? While many Australian economists think this is too simplistic a view, that’s not least because a lot of them have done, and continue to do, work for the ACCC itself.
This dynamic doesn’t exist in the US, where the justice department, for example, relies on in-house economists to do the heavy lifting. And that ability to move from a regulator to a market participant, and then from one player to a rival player, also helps economists to assert their independence, according to a consultant who preferred not to be named.
Greg Houston, a founding partner at HoustonKemp, says criticism of industry funding of Australian antitrust research also ignores the significant advancements in economic knowledge generated by public–private research projects. “Some of the best recent innovations of economic thought in antitrust have come in situations where the academic and practitioner community has worked alongside large interested parties who have helped to finance that research,” says Houston. “That process has produced ideas that have transformed mainstream accepted literature and led to a body of research that is rich and deep.”
Houston points to the theory of two-sided markets, which emerged in part through research sponsored by large companies including Visa and Mastercard, and which now informs competition analysis of areas such as electronic payments and digital platforms.
A few Australian economists made it onto the witness stand during that recent wintry trial in Melbourne. But the majority were academics from the US, ready to put themselves through the often hostile cross-examination of local lawyers. As one local academic noted, the international witnesses’ presence at a local trial suggested Australia was “transferring the problem” — that is, importing possible conflicts of interest into the Australian regulatory system. Meanwhile, some local competition academics say they’ve actively opted to avoid taking on corporate work, not because it would affect their objectivity but because of the perception that it might.
Brussels-based Gerardin says that no one labours under the impression that those appearing time and time again for tech giants — the experts he calls “repeat players” — are impartial observers. “There’s a problem of consistency,” he says. “I mean, once you’ve said something, it’s difficult to say the opposite the next day. So, some of them have a fairly balanced practice and maybe the problem [for them] is less significant. But I’m afraid that some leading economists have been captured.”
More broadly, all sides of the argument agree that the problems that do exist in Australia may be linked to the small number of professionals working in this increasingly important area of the law and economics. If the top end of town hires Australia’s ten leading economic consultants, that takes a lot of fish out of a very shallow pool.
“In Australia, a key issue is essentially that there are not enough people working in competition,” Menezes says. “Eventually, it’s a rule of supply and demand. The problem isn’t that they are engaged by Google — it’s more systemic.” •
