ICYMI: Former FTC Policy Director Sets Record Straight On DC Tech Critics’ Antitrust Movement – All Action, No Plan
On Friday, former FTC Policy Director David Balto and CCIA Outside Counsel Matthew Lane addressed calls to break up America’s leading tech services in The Hill, writing, “This is no time to throw out the consumer welfare standard and introduce chaos into our antitrust enforcement regime. That would have the immediate effect of weakening enforcement through confusion.” Balto and Lane make three points:
The DC antitrust push is “surprisingly shallow in its details: all action, no plan. There is no consensus on how a new standard would work in courts. What we are left with are calls for change for change’s sake. This is not the way to build policy that needs to be as stable and forward looking as antitrust law.”
“We need less revolutions, and steadier hard work in building out the framework we already have. This requires things like better funding for our antitrust agencies and more work by economists in understanding new markets.”
Critics have mistakenly “fixated on antitrust law as panacea for all the world’s ills.” Balto and Lane argue, “Modern antitrust law has thrived on the consumer welfare standard. Other policy goals are better suited to other forms of policy.”
Read the full piece here and Matt Lane’s DisCo blog post here for more details. These pieces echo arguments from other scholars that are detailed below.
Matt Lane Argues Non-Price Related Harms Are Being Addressed In Antitrust Law, Citing Microsoft And Intel Cases, Undermining A Key Critique Of Current Approach By Tech Critics. “The key criticism of the neo-Brandeis movement is that the consumer welfare standard is incapable of handling non-price related harms and therefore we need to move on to a more expansive standard. While some criticism of the consumer welfare standard may be helpful, this is like saying that a car’s turning radius is too wide so we should replace it with a boat. The best answer is to just modify the car to handle the few situations where turning radius matters. Antitrust law is already doing just that – non-price theories of harm, like harm to innovation, have been used in cases and are continuing to develop. In United States v. Microsoft, the judge relied on a harm to innovation theory that Microsoft’s anticompetitive activities held up emerging technologies that might eventually threaten Microsoft’s dominance. And in In re Intel Corp., the FTC charged that Intel bullied its customers into surrendering the rights to their innovations, deterring these customers from innovating in the first place. These harm to innovation theories fit under the consumer welfare standard because consumers are worse off when they do not get to enjoy the benefits of missed innovation.” (Matt Lane, “The Neo-Brandeis Movement’s Pocket Book Problem,” CCIA Project DisCo, 3/16/18)
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)
American Antitrust Institute President Diana Moss Says It Was The Lack Of Enforcement Rather Than Poorly Written Antitrust Law That Led To Rise In Concentration. “‘Lack of vigorous enforcement,’ not a poorly written law, has caused industries to become concentrated. ‘It is not a basis for concluding that the existing law or standard is inadequate,’ she said. Moss’s group advocates rigorous antitrust enforcement, but she has pushed back on the notion that the law needs to be rewritten. ‘Throwing out the existing framework would throw the courts, the agencies, and private plaintiffs into disarray, and it would hamstring enforcement at a time when we need it the most,’ she said.” (Alexei Alexis, “‘Hipster Antitrust’ Comes Under Senate Spotlight,” Bloomberg, 12/13/17)
Georgetown University Center For Business And Public Policy’s Larry Downes Argues The Best Regulator Of Technology Is “Simply More Technology.” “The best regulator of technology, it seems, is simply more technology. And despite fears that channels are blocked, markets are locked up, and gatekeepers have closed networks that the next generation of entrepreneurs need to reach their audience, somehow they do it anyway—often embarrassingly fast, whether the presumed tyrant being deposed is a long-time incumbent or last year’s startup darling.” (Larry Downes, “How More Regulation for U.S. Tech Could Backfire,” Harvard Business Review, 2/9/18)
Carl Shapiro, Former Deputy Assistant Attorney General For Economics At The Department Of Justice’s Antitrust Division, Says We Should Avoid A “Big Is Bad” Mentality And Truly Have The Interests Of Consumers In Mind. “I believe this approach is sound and has widespread support among industrial organization economists. So I say: let these inquiries proceed when suspicious conduct can be identified. But in doing so, let us avoid a ‘big is bad’ mentality and let us truly have the interests of consumers in mind. We learned long ago that proper antitrust enforcement is about protecting consumers, and protecting the competitive process, not about protecting competitors. We must not forget that guiding principle. Indeed, that principle is especially important in markets subject to large economies of scale, whether those scale economies are based on traditional production economies or based on network effects, which are often important in the tech sector.” (Carl Shapiro, “Antitrust In A Time Of Populism,” Haas School Of Business, 10/24/17)