The Senate Subcommittee on Competition Policy, Antitrust, and Consumer Rights held a hearing on March 11 to discuss antitrust reform. While much of the hearing homed in on large technology companies, many of the ideas being advocated would have serious consequences across the entire economy. In fact, Chairwoman Amy Klobuchar (D-MN) has recently announced a series of upcoming antitrust hearings that will address, among others, the pharmaceutical and agriculture industries. This should be a warning for conservatives who are focused on using antitrust enforcement as a mechanism to punish Big Tech in particular. The momentum for aggressive rewriting of antitrust laws and the move away from the consumer welfare standard will enable massive government intervention in any industry that the majority party can deem as subjectively harmful.
The consumer welfare standard simply provides a more objective measurement for determining whether antitrust enforcement is necessary. While some might be frustrated that the federal government isn’t aggressive enough, it is notable that the federal government has won 85 percent of their merger cases. The consumer welfare standard doesn’t put the government in a losing position, but it does reasonably restrain federal agencies from intervention into the free market on behalf of competitors. Upending decades of antitrust precedent would open the door for more partisan picking and choosing of winners and losers in the marketplace.
Similarly, the nomination of vocal tech company critic Lina Khan to the Federal Trade Commission by President Biden could see a move away from the consumer welfare standard and could be a shot across the bow for free market advocates. Moving away from this standard which grounds antitrust enforcement in the outcome for consumers instead of boosting the competitors, would open the door for the controlling party to break up any companies deemed ‘too large.’
For the pro-antitrust camp, mergers and acquisitions represent a danger to innovation. Senator Josh Hawley (R-MO) even broached the idea of a flat out ban of any mergers and acquisitions from firms over a given size. This overly simplistic proposal would seriously disrupt the marketplace and harm small businesses too. First, it could disincentivize some businesses from growing large enough to be considered dominant in their market. Additionally, smaller companies also benefit from being acquired by larger companies, and in many cases venture capitalists count on a startup firm being acquired as an exit strategy for recouping their investments. Just because a company is large, it does not mean it can focus on every niche area. Small businesses help fill this gap and are an integral player in the rapid innovation we see online.
A similarly bad argument made by Senator Hawley is banning online companies from competing with sellers through private labels. The argument rests on the presumption that online companies use competitor’s data for anti-competitive reasons. Senator`Hawley fails to recognize the benefits to consumers, both online and in traditional retail. Companies like Costco, Walmart, and Target all have private labels that compete directly with other sellers. Similarly, grocery stores are able to collect shoppers’ data through discount cards to track purchasing patterns. This is not a unique practice and even companies like Netflix produce their own content that is exclusive to their platform. Vertical integration provides consumers with more, and in many cases, cheaper options. Banning or restricting technology companies from participating in this common market practice limits consumer choice.
Sen. Klobuchar and many others have called for increased funding for antitrust enforcers. There is an argument to be made for ensuring antitrust enforcement keeps pace with inflation and can retain a high-caliber staff. However, there are serious issues with having two separate federal agencies -- the Federal Trade Commission (FTC) and the Department of Justice (DOJ) -- enforce antitrust laws. Senator Mike Lee (R-UT) aptly made this point in the hearing, saying that if someone were to set up antitrust enforcement mechanisms from scratch, there would be no reason why they put the power in two separate federal agencies. Senator Lee’s One Agency Act (S. 633) would help better utilize taxpayer dollars by removing the jurisdictional dogfighting and even contradictory opinions that result from this nonsensical structure. Until measures are taken to delineate the roles of the FTC and DOJ, increasing federal funding would not be a good use of taxpayer dollars.
With the rhetoric around large technology companies, it is easy to assume Congress has a binary choice: break up “Big Tech” or do nothing. In truth, lawmakers have a large tool kit to address privacy, content moderation, and other issues without using the sledgehammer of antitrust enforcement. As large technology companies have attracted the ire of some lawmakers on both sides of the aisle, an all-of-the-above approach to punishing these companies would ultimately hurt consumers. Ironically, with the backdrop of a global pandemic that has led to lockdowns, school and work closures, and social distancing, technology has made this all possible. Increasingly, businesses are entering the digital space and are utilizing the expertise and reach of large companies to stay afloat.
The common thread of proposed antitrust reforms is an abandonment of the consumer welfare standard. Once objective measurements are removed, the government, judges, and politicians have much more freedom to seek ideologically driven enforcement measures. These measures could disincentivize innovation by threatening radical government intervention whenever an abstract level of “bigness” is achieved. Consumers should remain front and center in antitrust enforcement. As Ashley Baker, Director of Public Policy at the Committee for Justice, a witness in the Senate hearing, pointed out, antitrust is designed to protect the competitive process, not competitors. This should remain the standard to avoid rogue antitrust intervention.