America's independent, non-partisan advocate for overburdened taxpayers.

Letter


NTU supports the recent oversight hearing of antitrust agencies:
A Letter to the Subcommittee on Intellectual Property, Competition, and the Internet

December 8, 2011

The Honorable Robert W. Goodlatte, Chairman
The Honorable Melvin L. Watt, Ranking Member
Subcommittee on Intellectual Property, Competition, and the Internet
Committee on the Judiciary
United States House of Representatives
Washington, DC 20515

Dear Chairman Goodlatte, Ranking Member Watt, and Members of the Committee:

On behalf of the 362,000 members of the National Taxpayers Union (NTU), I write to express our gratitude for the Subcommittee’s recent oversight hearing of antitrust agencies. These proceedings, along with today’s full Committee hearing on Department of Justice (DoJ) oversight, have both offered a timely opportunity to continue and advance discussions on the vital fiscal and economic issue of federal antitrust policy. We remain greatly concerned that recent actions on the part of DoJ and the Federal Trade Commission (FTC) against firms such as Google could endanger the prospects of an economic recovery, all while draining taxpayer resources that could be better utilized for deficit reduction or core program priorities.

As you may know, NTU has a long history of advocating for a sensible federal approach toward economic competition that carefully limits interventions in the marketplace to clear and imminent cases of direct harm to consumers. During the late 1990s and early 2000s, NTU was a leading grassroots participant in the antitrust debate from the conservative community. Our projects included a major conference, “Antitrust in the Information Age,” a widely distributed video interview on the topic with the late Milton Friedman, involvement of state-level citizen groups against the regulatory excesses of state Attorneys General, and engagement with numerous economists and think tanks across the globe to speak out on the issue. As an NTU Policy Paper, written more than 10 years ago by our then-Director of Programs Mark Schmidt, warned:

The greatest threat to free competition comes not from aggressive businesses, but from government intrusions into the marketplace. By undermining competition through antitrust enforcement or subsidies for failing industries, government uses tax dollars to make consumers pay higher prices. … If any party is guilty of engaging in ‘conspiracies in restraint of trade’ that keep costs high for consumers, it is government.

Unfortunately, since the publication of that paper, America’s antitrust enforcement history has been continually marred by episodes of controversial activities, causing particular difficulties for the development of high-technology products and services such as telecommunications and software. Rigid federal policy can fail to recognize that competition in these emerging innovations may occur among a wide range of markets serving fast-shifting consumer preferences, not merely among similarly-situated companies in the same industrial sector. Furthermore, government regulators have become increasingly overzealous in crafting supposed “solutions” to perceived competition “problems” that involve manipulation of companies’ business decisions at their most basic levels.

The most blatant manifestation of this flawed philosophy is the FTC’s bizarre and counterproductive investigation of Google and its Internet search engine. Apparently claiming some vast sanction from Section 5 of the FTC Act, regulators involved in the Google case are seeking far-fetched remedies (such as reconfiguring search results to fit federal tastes) for contrived “anti-competitive” offenses surrounding a service that has innumerable competitors in a market with very low barriers to entry. This is emblematic of a process too often driven by the interests of expansion-minded bureaucracies and politically savvy competitors. In the Google case, as in so many others, such interests will be rewarded at the expense of taxpayers who are forced to fund these misadventures, innovators who are discouraged from risk-taking, and workers and investors who are denied financial opportunities from foregone economic growth.

At this stage of America’s fragile economic recovery, we hope that Members of the Subcommittee and the full Committee would agree that another wave of heavy-handed antitrust policy would be particularly destructive. As many lawmakers on both sides of the aisle have noted, a resurgence in the health of our private sector will occur when businesses and consumers have sufficient confidence to make bolder investments of time, energy, and capital that will pay off in the future. While many fiscal and regulatory reforms can help to bolster such confidence, one highly positive signal that Washington could send to innovators would be a reform effort to establish affirmative boundaries on federal policy toward competition. As a September 6, 2011 U.S. Chamber of Commerce letter to FTC Chairman Leibowitz observed:

[Uncertainty] can act as a significant deterrent to creativity and experimentation in all its manifestations, including investments in research and development, and therefore represents a threat to innovation, the most basic and essential driver of long-run productivity growth and economic progress. Given the need to eliminate uncertainty in this challenging economic climate arguably nothing within the FTC’s purview is in greater need of review and guidance than what is the standard by which the FTC plans to pursue ‘unfair methods of competition’ that exist beyond traditional theories of consumer harm supported by established antitrust law precedents.

Accordingly, we would urge you and your colleagues to conduct a thorough, ongoing exploration of the following matters after this week’s hearings:

1) Do DoJ’s and FTC’s interpretations of their authority and powers exceed or misconstrue Congress’s intent? If so, how can Congress clarify this intent?

2) Are the latest actions against Google and other high-tech firms likelier to benefit consumers or competitors?

3) How will new and expansive approaches to antitrust policy impact large and small businesses, as well as the chances of a robust economic recovery?

4) Would taxpayers be better served by redirecting future budgetary allocations away from programs encouraging excessive antitrust enforcement schemes, and toward more practical pursuits such as deficit reduction and greater program oversight?

 

NTU and its members are hopeful that the recent Committee- and Subcommittee-level deliberations will mark the beginning of a concerted effort to reexamine the fundamental purpose of DoJ’s and FTC’s antitrust operations, and provide a new policy foundation going forward that facilitates, rather than undermines, the well-being of our economy. We stand ready to assist you in this critical task.

Sincerely,

Pete Sepp
Executive Vice President

cc: Chairman, Ranking Member, and Members of the Committee on the Judiciary