In the midst of record-setting inflation, skyrocketing gas prices, and supply chain issues, Senator Amy Klobuchar (D-MN) and others are attempting to force a vote on S. 2992, the American Innovation and Choice Online Act (AICO), which would radically overhaul competition policy. A new paper just released by the Committee to Unleash Prosperity and authored by Dr. Arthur Laffer shows how AICO and other proposed antitrust legislation would undermine the consumer welfare standard and could make inflation worse. This should be concerning for lawmakers, taxpayers, and consumers.
For over four decades, the consumer welfare standard has guided competition policy and reined in overzealous antitrust enforcement. The consumer welfare standard is a commonsense approach to antitrust enforcement that appropriately focuses competition policy on harms to consumers and competition, not bolstering competitors. However, some progressives in both Congress and the Biden administration are pushing for a return to the “big is bad'' standard. Some Republicans have unfortunately signed onto this misguided approach as well, in hopes it will address content moderation concerns. Senator Rand Paul (R-KY) recently penned an op-ed for Fox News warning his colleagues about abandoning free market principles for big government policies.
As Dr. Laffer’s paper notes, AICO is a solution in search of a problem. The language in this legislation is ambiguous and ill-defined, meaning it would allow antitrust enforcers to have significant discretion in enforcement. It is also a stark departure from the consumer welfare standard. Rather than apply antitrust laws holistically to target barriers to competition, AICO would take aim at common business practices like vertical integration and selling private labels alongside name brands. If this standard were applied across all industries, Costco would be barred from selling Kirkland brand products. This ban on pro-consumer business practices simply makes no sense.
As Dr. Laffer states in his paper, “antitrust is not anti-inflation—quite the opposite, according to economic theory. Proposed antitrust regulatory legislation from Sens. Klobuchar and Grassley that targets companies based on size–threatening utility-style regulation and huge financial penalties–will not reduce inflation. In fact, the inefficiencies this legislation would create could make inflation worse, and further raise the prices of basic needs for consumers.”
This paper notes that overzealous antitrust proposals won’t ease the economic hardships Americans face, and it could even make inflation worse. A new poll shows that inflation and the economy are top of mind with voters. Americans looking to buy or rent a house, fill up their car with gas, stock their fridge with food, or provide the basic necessities for their families are being squeezed by inflationary pressures. Voters urgently want lawmakers to focus on these issues. Making it harder to purchase cheaper goods online or risking consumer data with interoperability mandates is wholly out of touch with what Americans are asking Congress to do.
Above all, lawmakers should first do no harm. Dr. Laffer’s paper provides a compelling case that, rather than increase competition and create a level playing field as proponents claim, aggressively overhauling antitrust laws would worsen the fragile economic situation and harm consumers. A vote on this legislation, let alone passing it, would be a serious mistake. Hopefully, lawmakers abandon this heavy-handed approach and look for targeted reforms to address real problems that Americans care about.