Antitrust laws are complicated. Most Americans have a simple view of the underlying issue: If we pay higher prices because a big company blocks out all the competition, that’s unfair, and the government must act.
But the Biden administration is ushering in a new era of antitrust, based not on higher prices hurting consumers but on big companies having what the government believes is too much power. Even if consumers are getting services free, the administration argues, companies still need to face antitrust regulation.
That emerging view of antitrust can be found in lawsuits launched in recent weeks. The Justice Department is in court with Google over its phenomenally successful search engine, and the Federal Trade Commission is suing the popular online retailer Amazon over some of its Prime practices.
Those moves came months after both agencies proposed new guidelines for corporate mergers that would drastically expand government oversight by raising new potential regulatory problems. For example, the agencies would be able to rule on whether a merger would involve too many workers in one industry, theoretically hurting competition and leading to lower wages.
Other guidelines ask that mergers “not further a trend towards concentration” or “entrench or extend a dominant position.” What does that mean? Critics say the imprecise language is precisely the problem.
“These guidelines are so vague and expansive that they allow the government to haul up any company or executive on serious charges,” said Robert H. Bork Jr., president of the Antitrust Education Project. His father, the late Judge Robert H. Bork, created the consumer welfare standard that new FTC chief Lina Khan wants to set aside.
“You can get in trouble by raising prices, lowering prices, or leaving them the same. Anything can be defined as ‘predatory,’” Bork said.
The concerns are bipartisan. Two former Obama administration officials, Jason Furman and Carl Shapiro, wrote in The Wall Street Journal that the proposed guidelines “lack an adequate economic foundation. They contain a structural presumption against many vertical mergers unsupported by theory or evidence.”
Bilal Sayyed, who served in the FTC during the Trump administration, had a similar take. “The guidelines appear to reject antitrust economics as it has developed over the last 30 to 40 years. That is bad,” he said. “I think they are doing it in a way that does not rely on new theories and empirical results of advances in antitrust economics but moving back to a very structured analysis of the numbers of firms and maintaining firms and maintaining structures.”
Not so, said Jonathan Kanter, assistant attorney general for the Department of Justice’s Antitrust Division.
“Competition varies widely across industries and over time, and the nature of competition may be different from one merger to another,” Kanter said at Georgetown University’s annual Antitrust Law Symposium in September. “For example, so-called zero-price markets are increasingly important, with consumers exchanging their personal data and their time. Competition for platforms, on platforms, and to displace platforms is critical. Labor markets ensure competition for workers’ wages. And new forms of competition are frequently emerging, from generative AI to algorithmic pricing.”
Comparing it to the importance of protecting community hospitals from mergers, Kantor rhetorically asked if antitrust is “really working for the public when we reduce human life to a grayed-out triangle?” He said competition benefits the product and people because they are “so much more” than the aforementioned grayed-out triangle.
“It is the beauty of a rival waking up each morning not knowing what its competitor will do next.”
“Nice emotional appeal, but it’s kind of a straw man argument,” countered Josh Withrow, a resident fellow of Technology and Innovation at R Street Institute. “Even under the consumer welfare standard, price is not the only point of analysis for competitive harm; harms to product quality and innovation are valid considerations as well.”
One explanation for the aggressive new merger guidelines could be Khan’s embarrassing losses in high-profile cases targeting Meta and Microsoft.
Withrow is not surprised by Khan’s record of failure. “Convincing courts to let go of (the consumer welfare) standard, which has been quite successful for the government for the last several decades, is going to be really, really hard without changes to the law.”
Why does the administration constantly go to court on antitrust cases?
“They believe they only have to win once to shift the paradigm, which is why they keep trying, despite defeat after defeat,” Bork said. “Ultimately, it will take a new president with a better vision and the next DOJ, FTC appointees to return FTC back to being a neutral authority.”
Calls for congressional action, always unlikely, appear particularly futile given the current state of D.C. politics and battles over basic actions like passing budgets. That doesn’t mean antitrust is dead, particularly with these merger guidelines.
“The private sector would live in permanent thrall to regulators and the politicians who control them,” said Bork of the administration’s merger guidance. “At its root, this is not about antitrust. It is about the exercise of power by the people in power over all private business.”
