Free to Prosper: Antitrust

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Efforts to expand the scope and enforcement of antitrust law are playing out on a global scale and, so far, have mostly targeted large technology companies. In the United States, the fight is being waged in the states, at federal agencies, and in Congress.

Expanding antitrust regulation is unnecessary and would harm consumers and the U.S. economy. Instead, policy makers should seek to narrow the scope and applicability of antitrust regulation to allow for greater private-sector innovation, economic growth, and technological progress. At the very least, policy makers should preserve the consumer welfare standard, which prioritizes the interest of consumers rather than those of companies.

Sole Antitrust Authority at the Department of Justice

Placing antitrust authority solely at the Department of Justice will help reduce opportunities for politically motivated investigations and ensure fairness for defendants. DOJ lawyers must convince a federal court of the merits of a case. This is in stark contrast to the Federal Trade Commission, which acts as both prosecutor and judge through internal “trial-type” proceedings that can lead to biased decisions and cause uncertainty in markets. The One Agency Act, draft legislation introduced by Sens. Mike Lee (R-Utah) and Thom Tillis (R–N.C.) in the 117th Congress, would accomplish this.

Antitrust regulation is subject to politicization and often comes at the cost of economic liberty and progress. Consider the views expressed by some of the current appointees to the FTC. Chair Lina Kahn made a name for herself in academia by advocating for a vastly expanded role for antitrust regulation and a rejection of the consumer welfare standard. As FTC chair, she has undertaken these reforms in an atmosphere largely devoid of transparency and input from the public.

Taking antitrust authority away from the FTC would guard against much of the regulatory capture, excessive deference to agencies by Congress, and distortion of antitrust law away from consumer benefit.

Regulatory capture occurs when a regulated industry influences its regulators’ actions for its own benefit. It is rampant in antitrust. Most antitrust cases are brought by companies seeking to hobble competitors. In cases brought by the government, competitors of the targeted firm often help antitrust enforcers behind the scenes, as Oracle did during the Justice Department’s case against Microsoft in the 1990s, to the point of paying a pro-Microsoft group’s janitors to hand over that group’s office trash.

If the FTC’s current case against Facebook parent company Meta reaches a settlement, Meta might welcome the onerous new rules on privacy and content moderation it might impose because smaller competitors might find it much more difficult to comply with those rules. In that way, antitrust could lock in Meta’s dominance and make the market in which it operates less competitive.

Congress has given the DOJ and the FTC too long of a leash, and both agencies have abused that lack of oversight. Existing antitrust statutes are vague, especially in that they do not define key terms such as “monopoly” or “unfair or deceptive acts and practices.” Much of antitrust law is based on case law rather than statutes, so agencies are free to change legal definitions and enforcement thresholds and expand their missions without congressional input. The FTC has been particularly bold in this regard and is now seeking to move antitrust enforcement away from the consumer welfare standard.

Under the consumer welfare standard, big is not automatically bad. Bigness is bad only if it results in harm to consumers, usually by some combination of restricting supply and raising prices. The FTC’s current leadership instead wants to move to a “Big is bad” standard, such as prevailed during the Progressive Era, and to expand antitrust to address unrelated issues, such as democracy, inequality, environmental, and social justice concerns.

An agency can usually pursue one mission reasonably well or many missions poorly. Congress should remove the FTC’s antitrust authority or, at the very least, set clear boundaries limiting it.

Scope of Antitrust Regulation

The creative destruction, competitive pressure, and price signals of the free market are much more responsive and efficient at promoting prosperity and consumer welfare than antitrust regulation. The rule of law, property rights, and voluntary exchange have produced more societal good, raised more people out of poverty, and empowered more individuals than any other economic arrangement in history. Antitrust regulation consistently lags behind market conditions, mistakes competitor harm for consumer harm, and invites political corruption and rent seeking.

One antitrust case against IBM filed by the Department of Justice in 1969 lasted for 13 years and still never reached a verdict. The product at issue, mainframe computers, were going extinct due to the rise of personal computers, so the DOJ dropped the case in 1982. The current case against Meta may follow a similar path because the company has been losing users and market share to competitors such as TikTok—before a court date has even been set. Meta is also responding to competitive threats by changing its products to keep up with the times.

Antitrust enforcement is supposed to protect the competitive process, not individual competitors. It doesn’t work that way in practice. Companies can become big simply by being good at what they do. And greater size allows for economies of scale that make it easier for companies to offer better products to consumers at lower prices.

Antitrust is also becoming increasingly politicized. The Republican Trump administration put pressure on companies that the former president personally disliked. That included Amazon, which found itself in “a very antitrust situation” mostly because its founder, Jeff Bezos, owns The Washington Post, which featured coverage that was often critical of Trump. Some Republican politicians have targeted social media companies over perceived anti-conservative bias.

The Democratic Biden administration has also politicized antitrust policy, with potentially favorable media coverage influencing its decisions to bring cases, as with its recent threats to oil companies over rising gas prices. It has also sought to expand the government’s antitrust authority to go after not just tech companies, but other industries ranging from health care to live events. Incumbent businesses and their lobbyists might welcome these cases, provided the settlements put up barriers to entry to potential competitors.

Read the full chapter on antitrust here.