For nearly five decades there has been a basic, relatively stable consensus among United States antitrust practitioners, scholars and courts that the goals of competition policy, and thus of governmental antitrust enforcement, should be the neutral economic principles of market competition, consumer welfare and efficiency. That consensus is under threat today, a potential victim of the extraordinarily divisive politics we are witnessing in contemporary America.
Two examples are illuminating. First, President Trump remarked during the campaign, and tweeted after his inauguration, that the pending AT&T/Time Warner merger should be blocked, leading to much speculation that he would use the Justice Department to punish CNN, an outspoken Trump critic and a Time Warner property. Second, Democratic Party leaders recently unveiled a new, populist theme which highlights as one of its three pillars more aggressive merger enforcement, in part as a job-preservation vehicle, namely to “protect consumers, workers and competition.” (That itself is a revision to settled doctrine that antitrust protects competition and consumers, not competitors.)
— Cato Press (@CatoPress) July 12, 2017
In the 1970s, the infamous “Dita Beard memo” — revealing the Nixon Administration’s secret application of political leverage favoring a controversial ITT acquisition spree — led to a push for more open and independent antitrust merger enforcement. This resulted in bi-partisan passage of the Tunney Act and the Hart-Scott-Rodino Act to mandate merger reporting, enforcement transparency and judicial review of governmental antitrust consent decrees. The related Horizontal Merger Guidelines embody that transparency, provide predictable guidance on antitrust merger policy for corporate acquisitions, and have been accepted by both conservative and liberal administrations since 1982. No one seriously questions the wisdom of those policies.
But, current developments reveal growing discontent with the fact that for “the last half-century,” the federal antitrust agencies have applied “only competition and consumer welfare standards” in making enforcement decisions. Some critics are scholarly and present academic arguments for why, in their view, consumer welfare needs to be re-examined in the context of increased market concentration. Others are polemic, taking superficial pot-shots at what they mischaracterize as an antitrust framework inherited from the late, controversial Judge Robert Bork that supposedly makes price the sole objective of competition policy and attacking Facebook, Google and the like for what even liberal Democrats agree is a “cartoonish portrayal of the tech industry as monolithically bad for society.” And some, like New Jersey Sen. Cory Booker and the United Food & Commercial Workers union (UFCW), are overtly political, condemning the proposed acquisition of Whole Foods by Amazon — which if consummated would control only an immaterial “sliver,” some 1.4%, of grocery sales nationwide.
— Ars Technica (@arstechnica) July 24, 2017
As the Washington Post commented, the UFCW “sees Amazon the way some Rust Belt workers see global trade — as a threat to American jobs.” The union’s FTC complaint against Amazon’s proposed deal urges that antitrust be used to remedy “a lack of affordable healthy food choices from grocers” in minority urban neighborhoods. That is but one part of a broader, and apparently growing, populist rebellion against the historic antitrust consensus by those who protest what they see as the Democratic Party establishment’s “about-face on monopolies” that they claim threatens to “eliminate jobs [and] drive down wages.” And it is reflected in that new Democratic theme, which would require that in mergers the parties show “not just that the deal won’t harm competition, but also that it will also be a positive force in Americans’ lives.”
Using the antitrust laws as a job-preservation, wage-elevating, or social policy vehicle is a particularly bad idea from which nearly all competition lawyers and advocates recoil. There of course has been debate at the margins of the prevailing antitrust consensus about more esoteric issues, like whether producer efficiencies should be an absolute merger defense and the proper antitrust treatment of “consumer surplus.” But using antitrust as a substitute for progressive social change legislation promotes selective enforcement and yields poor public policy subject to a serious risk of ad hoc political interference.
This is not a new conclusion. It was highlighted, for instance, in the bi-partisan 2007 Antitrust Modernization Commission report. In 2015, the Obama Administration itself told the OECD that the FTC and the Justice Department’s Antitrust Division
do not consider employment or other non-competition factors in their antitrust analysis. The antitrust agencies have learned that, while such considerations “may be appropriate policy objectives and worthy goals overall…integrating their consideration into a competition analysis…can lead to poor outcomes to the detriment of both businesses and consumers.” Instead, the antitrust agencies focus on ensuring robust competition that benefits consumers and leave other policies such as employment to other parts of government that may be specifically charged with or better placed to consider such objectives.
And as free-market oriented commentators like the American Enterprise Institute have observed, “[t]ech is destroying jobs: and it’s a good thing, too.” Automobiles destroyed jobs in the horse stabling industry, airplanes destroyed jobs in the train industry, etc. Even if true in technology — which well-respected studies dispute — that’s an economic process which has occurred before (as in farming) and that benefits consumers and the economy overall, even though workers in disrupted and legacy industries may lose their jobs.
Today’s politicization of antitrust is unfortunate, because it brings to bear the same political pressures, and potential for scandals, that led to the post-ITT antitrust process reforms of the 1970s. It is also unfortunate because it disregards a lot of data-driven, sophisticated competition analysis from liberal economists, like those at the esteemed Brookings Institution, whose scholars concluded in 2003 — under the last, pre-Trump Republican president (George W. Bush) — that “until there is some hard evidence that identifies where the antitrust authorities are significantly improving consumer welfare…those authorities would be well-advised to prosecute only the most egregious anticompetitive violations.”
This is good advice to those who today propose throwing the antitrust consensus overboard and using competition enforcement to achieve goals, such as job preservation and wealth redistribution, that are better served through other laws, policies and government agencies. It took a long time and some sordid episodes to get the politics out of antitrust. It would be a shame to go backwards and politicize antitrust enforcement again.
Originally prepared for and reposted with permission of the Disruptive Competition Project.