By Edward Longe, American Consumer Institute
By Edward Longe, American Consumer Institute
Shortly after entering office in January 2021, President Joe Biden announced the nomination of Lina Kahn to the Federal Trade Commission (FTC). Responding to the announcement, the FTC’s Chairwoman Rebecca Kelly Slaughter stated, “her creative energy, groundbreaking antitrust work, and passion for the FTC’s mission make her an excellent nominee.”
Should the U.S. Senate confirm her, Kahn will join the FTC’s Board of Commissioners at a time when both Republicans and Democrats are engaged in a battle over who can propose the most punitive and harmful antitrust measures.
In February 2020, Senator Amy Klobuchar (D-MN) introduced the Competition and Antitrust Law Enforcement Reform Act (CALERA) that would re-write the Clayton Act to prohibit mergers and acquisitions if they “create an appreciable risk of materially lessening competition.” Currently, the Clayton Act only prohibits mergers and acquisitions if they significantly “lessen competition, or to tend to create a monopoly.” Klobuchar’s bill would also shift the burden of proof, requiring companies to prove to regulators the merger or acquisition would not lessen competition instead of requiring the government to establish whether the proposed merger or acquisition would harm consumer welfare.
Not to be outdone, Senator Josh Hawley (R-MO) introduced the far more punitive Trust-Busting for the Twenty-First Century Act. Hawley’s bill, if passed, would see companies forced to surrender profits, prohibit mergers of companies worth over $100 billion, and prohibition of dominant platforms from acquiring companies worth over $1,000,000.
If passed into law, both of these bills would inflict significant harm onto big tech companies and the broader tech ecosystem. The millions of Americans who depend on big tech for social media, cell phones, computer software, and shopping would also be harmed as lawmakers consider only the size of a company, not the enhanced welfare they provide for consumers.
Kahn’s previous publications suggest she holds similar views to trustbusters on Capitol Hill, meaning should she be confirmed, the FTC will become increasingly active in enforcing antitrust statutes, underpinned by a misguided “big is a bad” mentality. It is also likely that with Kahn at the FTC, the agency will depart from the consumer welfare standard that placed the priority of antitrust enforcement on cases where consumers are negatively impacted.
Recently, those who have challenged the move away from the consumer welfare standard have dubbed her approach as hipster antitrust because it seeks to use antitrust laws to resolve disconnected social issues such as income inequality, unemployment, and unequal political power. These critics have suggested that using antitrust statutes to solve social problems threatens “to send antitrust enforcement careening backwards in time toward a regime that harmed consumers and propped up inefficient corporations.”
More strikingly, hipster antitrust advocates, such as Kahn, would unequivocally reject “the progress made through developments in modern economics in order to advance a litany of grievances against the perceived consolidation of economic and political power to the detriment of competition.”
Unlike advocates of hipster antitrust, the consumer welfare standard utilizes economic analyses to ascertain whether a proposed merger or acquisition harms or benefits consumers by placing them at the center of decision making. The consumer welfare standard became the basis for U.S. antitrust law in 1974, when the Supreme Court ruled “statistics concerning market share and concentration…are not conclusive indicators of anticompetitive effects.”
The consumer welfare standard is far superior to other approaches because it relies on economic realities, not outdated ideologies. Under the consumer welfare standard, large airlines were allowed to merge because the Department of Justice’s Antitrust Division found they could “produce substantial and credible efficiencies that will benefit U.S. consumers.” Sophisticated economic studies conducted by the Antitrust Division found that airline mergers would “result in efficiencies such as cost savings in airport operations, information technology, supply chain economics, and fleet optimization,” leading to significant savings to consumers.
The result of these mergers was lower prices and increased passenger numbers. Airline mergers would not have been permissible had regulators followed Kahn’s militant big is bad approach.
With Kahn’s nomination to the FTC seeming assured given the bipartisan support expressed by both Democrats and Republicans, it seems readily apparent from her previously expressed views that Washington is getting a new general in its war on big tech. Unfortunately, for consumers, an FTC dominated by advocates of hipster antitrust means a probable departure from the consumer welfare standard that has been the bedrock of antitrust law since the 1970s and allowed large firms to generate substantial value for consumers.
In Washington’s war on big tech, consumers will be the collateral damage.
Edward Longe is a research associate at the American Consumer Institute, a nonprofit educational and research organization. For more information about the Institute, visit www.TheAmericanConsumer.org.