Shopper welfare normal underneath siege after 40-year dominance of antitrust
Bipartisan momentum to limit the power of Silicon Valley has threatened the 40-year reign of the consumer welfare standard in US antitrust law.
The shift — most notable among Republicans terrified that they will be de-platformed by Big Tech companies such as Facebook, Twitter, and Google — has far-reaching implications for the relationship between the government and business.
Under the consumer welfare standard, deals or practices are deemed anti-competitive only if they harm consumers by raising prices or hurting quality. Its dominance is generally traced to the 1978 publication of The Antitrust Paradox by the conservative legal scholar Robert Bork. Bork’s book criticized existing antitrust law and became highly influential among the courts during the Reagan Era.
Since then, it has guided merger and acquisition approvals and competitiveness policy during both Republican and Democratic administrations. Because the consumer welfare standard does not presume that “big is bad,” it has been credited with a drop in antitrust enforcement.
But developments in both parties have now threatened to dislodge the consumer welfare standard.
The first is the rise of liberals known as the “hipster antitrust” movement, which first gained prominence within the Democratic Party and has risen to key positions within the Biden administration. Members of the group, also known as Neo-Brandeisians, seek to go beyond the consumer welfare standard to consider other economic factors in antitrust cases, such as corporate concentration and income inequality. Their members include, prominently, Federal Trade Commission Chairwoman Lina Khan and White House tech czar Tim Wu.
Meanwhile, many conservative Republicans, once the most stalwart defenders of the idea that corporate size was not inherently wrong, have undergone a conversion and now fear the concentrated power of big business. Republican Rep. Ken Buck of Colorado, Sen. Josh Hawley of Missouri, and Louisiana Attorney General Jeff Landry, notably, favor antitrust measures to force Big Tech companies to stop censoring conservatives online.
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These conservatives now say that courts are to blame for antitrust cases being narrowly focused on prices and for allowing unfair pro-corporate power structures to harm small businesses and consumers.
“Over time, the consumer welfare standard has narrowed from what Bork intended, to just being about price. But Bork intended to be greater and bigger than that,” said James Braid, chief of staff for Buck, who is the top Republican on the powerful house antitrust panel with oversight of the technology sector.
“We’re not moving away from the standard at all, but we’ve lost some confidence in the courts’ ability to interpret and execute Congress’s will. The courts need a course correction in regards to antitrust law, with new tools and guardrails, ” Braid told the Washington Examiner.
Buck and his Democratic counterpart on the House antitrust panel, Rep. David Cicilline of Rhode Island, last year introduced and passed six sweeping anti-monopoly bills aimed at reining in tech giants such as Apple, Amazon, Google, and Facebook by expanding the capabilities of antitrust law.
The bills passed the House Judiciary Committee last week by narrow bipartisan margins after over 24 hours of debate, and they are expected to be brought to the House floor later this year by House Speaker Nancy Pelosi.
Furthermore, liberals like FTC Chairwoman Khan are keen to expand the agency’s antitrust rule-making authority to include economic factors beyond the consumer welfare standard in the hopes of spurring more aggressive and expansive antitrust enforcement.
Still, the shift in thinking among Republicans has not yet reached the officials currently in antitrust positions.
“No one should forget about how important price is, despite the attempt to shift away from it by many in the House Judiciary Committee,” Republican FTC Commissioner Noah Phillips told the Washington Examiner.
“The government trying to stop companies from charging higher prices would actually encourage higher prices, and with generational high inflation, I don’t think that’s what people actually want,” Phillips said.
Phillips added that the consumer welfare standard is not just focused on price, and any further attempt to expand it would not adequately protect consumers from price hikes.
“The consumer welfare standard is flexible enough to adapt to changing market conditions and keep doing its intended job with respect to tech and other industries,” Maureen Ohlhausen, a former Republican commissioner and acting chairwoman of the FTC, told the Washington Examiner.
“I’m worried about it becoming the competitor welfare standard, thanks to the current political push. This would create an inefficient and inflexible economy with much greater government control of the market,” said Ohlhausen.
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Liberals in favor of reforming the standard say that antitrust law is unjustly hyper-focused on prices when determining monopolistic behavior, as evidenced by the lack of antitrust lawsuits that have been successful when the only harm identified is ‘non-price’ harm, such as a reduction in product quality or innovation or labor.
“You simply can’t go into court with non-price harms exclusively because the judge will say, ‘How do I quantify that?'” said Hal Singer, an antitrust economist and professor at Georgetown University who regularly works with Democrats on tech- related legislation.
“That’s why we have the House antitrust bills, so we can revisit the antitrust standards that are currently not addressing worker harms, harms to other input providers, and to product quality and innovation,” said Singer.
Conservatives are particularly interested in expanding the consumer welfare standard and using antitrust law to address consumer harm in the form of censorship by social media giants such as Facebook and Google.
“Conservatives are motivated to change the law by their desire to address what people perceive as concentrated market power of a few companies,” said Makan Delrahim, former President Donald Trump’s assistant attorney general for the Department of Justice’s antitrust division.
“They also have the belief that antitrust could help stop the unfair censorship and attacks on them by Big Tech platforms through increased competition,” Delrahim told the Washington Examiner.
Frustration with Big Tech is widely viewed as the reason for the erosion in support for the consumer welfare standard.
“We’re all unhappy with Big Tech, which is a clear result of the consumer welfare standard, so clearly we have to get rid of it in its current form,” said Matt Stoller, an antitrust expert and author of Goliath: The Hundred Year War Between Monopoly Power and Democracy.
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“There’s an increasing anger about the concentration of power, even Trump’s DOJ chief, Bill Barr, said this explicitly. People don’t feel in control of their economic lives and communities, and changing the antitrust laws could give them significantly greater control and benefits,” said Stoller, who works for the American Economic Liberties Project, a liberal think tank.