Power to Truth: Market Power, Consumer Protection, and Fair Competition

Do today’s markets support consumers and entrepreneurs, or do they primarily cater to the interests of a powerful few? This question set the stage for the latest episode of the Power to Truth web series, featuring Anat Admati, Stanford professor and faculty director of the Corporations and Society Initiative (CASI), and Rohit Chopra, former director of the Consumer Financial Protection Bureau. Together, they explored the complex relationship between market power, regulation, and innovation.

Chopra’s visit to Stanford included a series of discussions with students, which revealed ways the next generation of business leaders were thinking about these critical issues. Chopra expressed admiration for their thoughtful questions and genuine curiosity. He noted that their concerns centered on fundamental economic questions: What should markets look like? Should society accept the dominance of a few large corporations, or should it encourage an environment where smaller businesses can thrive?

His conversations with students naturally led to discussions about regulatory policy. Chopra emphasized that crafting effective regulations always involves striking a delicate balance, since regulations should protect democratic values and ensure fairness but at the same time should be designed to foster commercial growth and innovation that benefit society as a whole. Both he and Admati agreed that a deeper understanding of the forces that determine market dynamics is essential for ensuring the economy truly serves the broader public.

To focus more on how undesirable markets dynamics can emerge, Admati asked Chopra to discuss some of the business practices that give big companies a competitive edge.

Chopra offered as an example "dark patterns," which are deceptive online practices designed to mislead consumers into making choices they might otherwise avoid. He highlighted common frustrations, like endless pop-ups or convoluted cancellation processes, as clear examples.

"I'm not really sure we should be training people on how to design manipulative devices to lock in consumers. We should be training people to make the customer experience better."

Chopra made a strong case for clear regulations against manipulative practices, emphasizing that these rules aren’t roadblocks—they’re essential for driving real innovation and creating sustainable market opportunities.

Admati asked Chopra to discuss some of the problems created by market power, observing that dominant corporations can potentially shape entire industries, often at the expense of competition. She noted that innovation should not be about exploiting regulatory loopholes or deceptive tactics but about creating genuine value for society.

Chopra highlighted concerns voiced by a number of Stanford students that tech startups often end up being pressured to sell to industry giants. He agreed this stifles innovation, emphasizing that true progress depends on newcomers challenging incumbents. Citing the 1990s antitrust case against Microsoft, he pointed to it as a pivotal moment that cleared the way for companies like Google and Amazon to emerge.

Beyond government regulation, Chopra emphasized that dominant companies impose their own private regulations on consumers and competitors. He pointed to Apple’s control over digital payments through its App Store and Apple Pay, arguing that these restrictions stifle competition and innovation by creating artificial tolls on transactions. During his tenure at the CFPB, Chopra oversaw a report analyzing how Apple and Google’s policies shaped the digital payment landscape, often favoring their own ecosystems at the expense of lower-cost, faster alternatives.

Chopra challenged business schools to rethink their approach to training the business leaders of the future. "We’ve got to ask ourselves, how are we training business school students? Are we training them to create moats where they are protecting the incumbency power of the biggest market players? Or are we creating mechanisms to make sure that those big players are sweating about the new startup behind them?"

Admati and Chopra agreed that many financial regulations protect dominant players rather than level the playing field, and this reinforces the need to rethink both public and private regulatory structures to ensure innovation benefits society.

Admati challenged the common myth that all regulations are inherently burdensome, arguing that this view overlooks who they impact and how they shape, and potentially strengthen, the broader system. She asked Chopra to discuss whether the public and policymakers can fully grasp these complexities.

Chopra argued that while educating consumers and entrepreneurs about their rights is important, individuals shouldn’t have to personally verify the safety of every product or service they use. Just as people trust that planes and elevators meet safety standards, markets should function in a way that ensures fairness and reliability without excessive effort from consumers.

He emphasized that clear, enforceable rules, sometimes even outright bans on harmful practices, can create a more trustworthy marketplace. Rather than relying on case-by-case assessments, well-defined regulations simplify enforcement and reduce uncertainty, an idea that resonated with students in their discussions on market design.

Admati noted that complex regulations often favor large corporations, as the cost of compliance can push smaller players out. Chopra agreed, emphasizing that legal and business education should not be about helping powerful entities manipulate the system but about using the law to support democracy and economic fairness.

Admati also pointed to the tension business professionals face when financial incentives push them toward narrow objectives rather than the broader public good. Chopra stressed the need for business leaders to challenge the status quo and create new opportunities rather than just reinforcing existing power structures.

Reflecting on his discussions with students, Chopra noted that strong regulations didn’t hold back America’s economic progress, they helped drive it. He pointed to securities laws, banking laws, and food safety laws as key examples, explaining how they created markets and built the trust that attracts investment.