A Modern Antitrust Paradox
By: Laurel Duggan
Maureen Olhausen, Joshua D. Wright, and Geoffrey Manne discussed antitrust law and the problems with reform efforts recently at a panel hosted by the Committee for Justice. The panelists made the case that the American economy is still very competitive, large mergers will not end competition, and progressive antitrust reforms would empower the federal government rather than consumers.
The consumer welfare standard developed by Robert Bork in 1978 brought American antitrust law out of the dark ages. It created a more robust competitive marketplace while empowering businesses to innovate and expand relative to consumer demand, rather than at the whims of bureaucrats.
Bright-line laws and other efforts to reform current antitrust law would bring us back to the ill-advised policies of the 1960s, which prevented competition, harmed consumers, and gave the federal government sweeping control over the decisions of private businesses.
The consumer welfare standard posits that antitrust law should have a singular focus on consumer welfare. It rejects the notion that antitrust law can be used to protect certain businesses or to advance unrelated policy goals outside of the legislative process. Wright commented that “There’s currently a firehose of proposals to abuse antitrust laws in order to make broad social policy and control the internal structures of private businesses.” Efforts to use antitrust law to prevent lawful mergers in a competitive market reflect a dogmatic commitment to the idea that big is always bad; such assumptions are untethered from economic reality.
Critics’ focus on preventing the acquisition of nascent competitors is harmful to small businesses; experienced companies are better equipped to bring products to market, and such opportunities drive investment for startups.
Reformists worry that our economy is not competitive enough and that major American companies are too large. Manne explains that competition at the local level is so robust that even a concentration of corporations at the national level would not hurt consumers; national chains still compete with local retailers. Additionally, concerns that major tech companies do not compete with one another are unfounded. Wright provides the example of Google, which some view as having a monopoly on online searches. In reality, Google faces immense competition for monetizable searches, which are often directed towards Amazon and other online retailers.
Antitrust reformers complain that there are too few antitrust cases litigated. Wright explains that antitrust laws work primarily through their deterrent effect: businesses are not interested in pursuing mergers which will result in an antitrust lawsuit. The frequency of antitrust litigation is not an appropriate measure of the effectiveness of antitrust law.
Manne discussed the importance of the consumer welfare standard as a limit on government power. Economics serves as a constraint. It is difficult for elected officials to push for dogmatic “big-is-bad” antitrust policy when confronted with the reality that sweeping antitrust power actually reduces competition and harms consumers.
Photo Credit: John Brighenti