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Tomorrow, the CEOs of Amazon, Apple, Facebook, and Google will appear at a high-profile antitrust hearing where they are likely to face questions about whether our nation’s antitrust laws apply to their innovative high-tech businesses. And soon the House Subcommittee on Antitrust is expected to produce a seminal report that will delve deeper into these issues.
These developments — most notably the report — are fueling legislative proposals that would radically remake a century’s worth of bipartisan policy that has protected competition and championed innovation to the benefit of consumers and America’s global competitiveness. The impacts of this shift will be felt far beyond the tech sector.
Recently, Senator Elizabeth Warren and Representative Alexandria Ocasio-Cortez proposed banning mergers during COVID-19. Other lawmakers have introduced legislation that would challenge so-called “exclusionary” business conduct. All of these proposals have one thing in common: They divorce economic analysis from our nation’s long-standing and tried-and-true antitrust laws.
If this separation of the law from economics were to go into effect, many industries and sectors of our economy would wake up to a new regulatory regime. The current process, which is driven by data and analysis, will be replaced by one focused on achieving political outcomes.
Modern antitrust enforcement is a marriage of law and economics, developed over decades of study. Antitrust investigations rely upon economic analysis to weigh whether business conduct has pro-competitive versus anti-competitive effects in the market. The net impact is a measurement of what happens to consumer welfare. Where consumer welfare is adversely impacted, antitrust intervention is necessary. Where consumers are not negatively impacted the government is prevented from intervening. This focus on data and economic analysis is what prevents the antitrust process from becoming another political tool to advance other agendas.
Opponents of the current system have lots of theories about how large companies hurt competition and consumers, but they often lack evidence. And with no evidence that the harm to consumers outweighs the benefits, they are unable to prevail in their antitrust campaigns. So now they are proposing to change the rules. Their “solution” is bypassing evidence altogether by pushing for policy changes that disconnect antitrust from economics. That way they can try to go after “undesired” dominance or to block “unwanted” mergers. Some have even proposed shifting the burden of proof away from the government altogether, instead making companies justify the business decisions they make.
To be sure, any legislative changes are unlikely to become law this year. But the fact that some are willing to undermine the useful marriage of law and economics that is antitrust in the United States should give us all pause. Upending the role of economics would turn antitrust enforcement into something far more broad: antitrust laws would become another form of political economic regulation.
With the changes being proposed, the government would be free to pick winners and losers in the market, decide the fate of business models, and tell consumers that they do not know best. We should be wary to entertain changes to our antitrust laws and be suspect of those that seek to divorce economics from antitrust enforcement.
