Setting The Record Straight: Consumer Impacts, Not Stock Market Movements, Should Drive Competition Policy
On Liz Claman’s “Countdown To The Closing Bell,” (1/30/18) marketing professor Scott Galloway, reacting to stock price movements, argued, “The reason why I think they [leading American technology services] need to be curbed, or specifically broken up, is that, as evidenced today, we don’t have fair competition, the markets are no longer that competitive. When one company can perform a Jedi mind trick and just threaten to go into a sector and you see tens of billions of dollars shed from the industry, it means effectively the markets are failing.”
Reacting to stock prices and moving away from the consumer welfare standard that has governed federal antitrust policy by bipartisan consensus for over 40 years is a clear policy mistake. As GMU Economist Tyler Cowen recently put it, “Keep in mind the standard of American antitrust law: Are consumers harmed? It’s clearer and more definite than how European antitrust law is run. There’s really not been significant evidence that American consumers have been harmed.” Stock price shifts from new entrants are more likely to represent a much-needed competition shake-up.
Galloway ignores investments in new sectors and services by leading technology companies spurs innovation and competition, benefiting consumers. As the Chamber of Commerce’s Tom Donahue recently put it, “The issue here is that every industry, every company, every organization and every government agency is all connected now by technology, driven by technology, [and] becomes more productive because of it. Whatever we do, we have to be very careful we don’t restrict, limit, we fall behind overnight.”
Following Europe’s path risks the U.S.’s current digital leadership. Galloway believes action against tech services is “probably going to come out of Brussels,” which he argues does not benefit from the economic activity in the same way as the U.S.
As AEI’s Mark Jamison has pointed out, “EU antitrust is driven by many factors, including a desire on the part of EU officials to replace U.S. tech companies with European ones.” Moreover, discounting the economic impact of leading companies is a curious analytical decision. As Tyler Cowen highlighted, “Keep in mind, this is perhaps the best operating sector in the whole American economy—the most dynamic, the most innovative.”
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Consumer Welfare Standard Ensures Antitrust Policy Does Not Protect Incumbents, But Consumers And The Competition Process
Acting Director Of Bureau Of Competition At The Federal Trade Commission Bruce Hoffman: Recent Criticisms Of Antitrust Policy Are An Attack On “A Bipartisan 40-Year Consensus.” “I found it a little surprising that, this year, when I came to the FTC one of the things I was greeted with was an attack on a 40-year consensus, a bipartisan 40-year consensus, about the focus and direction of enforcement. Any vigorous repudiation from a number of different directions of the Obama Administration’s antitrust enforcement program of being weak and timid, which I think are words that Bill used. What I wanted to say is, in our view, antitrust is neither timid nor weak. First of all, I think the point, and Alden mentioned this earlier, the U.S. economy is pretty vibrant, extremely innovative, and growing. That’s a point that I think doesn’t get emphasized enough in this discussion because it sets out the empirical facts that are relevant to this point.” (Bruce Hoffman, “Trump Antitrust Policy After One Year,” Heritage Foundation, 1/23/18)
Law Professor Herbert Hovenkamp Argues Breaking Up Successful Technology Companies Would Injure Rather Than Benefit Consumers. “We might take the same approach with the Amazons of the twenty-first century world – condemn their actions precisely because their lower prices attract so many consumers that smaller competitors might be unable to survive. There are a couple of things worth noting about this approach. First, it clearly injures rather than benefits consumers. They are being robbed of the larger firms’ lower prices. Second, there is no obvious way of limiting its application. Should antitrust condemn every practice that reduces the defendant’s prices or costs, or improves the quality of its product when rivals are injured or suppliers are worse off? That policy would rather quickly drive the economy back into the Stone Age, imposing hysterical costs on everyone.” (Herbert Hovenkamp, “Antitrust Policy And The Inequality Of Wealth,” Competition Policy International, 10/2017)
Chair Of Federal Trade Commission, Maureen Ohlhausen, Says Adopting A New Antitrust Approach That Disregards Consumer Benefits In Pursuit Of Other “Perhaps Even Conflicting Goals” Is Concerning. “Given the clear consumer benefits of technology-driven innovation, I am concerned about the push to adopt an approach that will disregard consumer benefits in the pursuit of other perhaps even conflicting goals. But believing that consumer welfare is the appropriate goal of antitrust does not mean being passive or embracing the view that antitrust in the pursuit of consumer welfare cannot be improved. Antitrust law has changed as our understanding of market dynamics has gotten more sophisticated, and it should continue to evolve as we refine our predictive tools. If those tools suggest that competition will be harmed and consumers made worse off from the behavior of any firm, even a platform, antitrust enforcers should act.” (Maureen Ohlhausen, “Antitrust Enforcement In The Digital Age,” Federal Trade Commission, 9/12/17)
Former FTC Commissioner Joshua Wright Notes That Deviating From The Consumer Welfare Standard Would Come In Spite Of Economic Evidence That Makes Quite Clear That Such Moves Would Make Consumers Worse Off. “The current debate arises from proposals that antitrust law adopt a standard that would reduce consumer welfare—that is, to diminish the well-being of consumers and their ability to consume everyday goods and services—in exchange for advancing some combination of other, vague goals ranging from increasing fairness, to reducing income inequality, to protecting specific national interests or markets, or to protecting particular jobs. Specifically, critics of the consumer welfare standard have proposed steps including that we ban all vertical mergers, make per se unlawful horizontal mergers based solely upon the a firm’s size—i.e., return to the ‘big-is-bad’ enforcement style of early antitrust…”(Joshua Wright, Testimony, Senate Judiciary Subcommittee On Antitrust, Competition, And Consumer Benefit, 12/13/17)
Leading Technology Services are Driving Innovation And Economic Growth Across Sectors
Acting FTC Bureau Of Competition Director Tad Lipsky: Innovation And Technical Progress Are “The Single Most Important Determinant Of Improvements In The Economic Well-Being Of Citizens In Our Society.” “Controversies within the antitrust community regarding law and policy aside, there is essentially zero disagreement among serious analysts that innovation and technical progress are the single most important determinants of improvements in the economic well-being of citizens in our society. Marking the changes in any field of endeavor over the last few decades or centuries – medicine, agriculture, transportation, construction, communication – makes it clear that the most profound improvements in the economic well-being of individuals are attributable to innovation.” (Abbott B. Lipsky, Jr., “Prepared Statement Before The United States Senate Subcommittee On Antitrust, Competition And Consumer Rights,” United States Senate Committee On The Judiciary, 12/13/17)
U.S. Chamber Of Commerce CEO Tom Donohue Says The U.S. Should Be Careful Not To Impede Tech Companies’ Ability To Drive Productivity In The Economy. “The issue here is that every industry, every company, every organization and every government agency is all connected now by technology, driven by technology, [and] becomes more productive because of it. Whatever we do, we have to be very careful we don’t restrict, limit, we fall behind overnight.” (U.S. Chamber of Commerce CEO Tom Donohue, CNBC Squawk Alley, 1/10/18).
Former FTC Commissioner Joshua Wright And Law Professor Geoffrey Manne Say Erroneous Antitrust Interventions Will Hinder Economic Growth. “In the United States, two of the most significant characteristics of the ‘new’ antitrust approach have been a more intense focus on innovative companies in high-tech industries and a weakening of long standing concerns that erroneous antitrust interventions will hinder economic growth. But this focus is dangerous, and these concerns should not be dismissed so lightly.” (Geoffrey A. Manne And Joshua D. Wright, “Google And The Limits of Antitrust: The Case Against The Antitrust Case Against Google,” Harvard Journal Of Law And Public Policy, 3/10/10)
Citing A 2015 Speech By Then-EU Digital Commissioner, University Of Florida Economist Mark Jamison Warns Against Following EU Antitrust Trends, Which Are Driven By “A Desire In Part Of EU Officials To Replace U.S. Tech Companies With European Ones.” “American antitrust practices are driven by customer welfare. EU antitrust is driven by many factors, including a desire on the part of EU officials to replace U.S. tech companies with European ones. Here is text from a 2015 speech by Günther Oettinger, EU’s digital commissioner at the time, at an industrial fair in Hannover, Germany: ‘A great challenge is also Europe’s position in the development of the next digital platforms that will gradually replace the current Internet and mobile platforms. We have so far missed many opportunities in this field and our online businesses are today dependent on a few non-EU players world-wide: this must not be the case again in the future.”’ (Mark Jamison, “Five Myths That Cloud People’s Thinking About Tech Markets,” American Enterprise Institute, 12/19/17)