ICYMI: Former FTC Chair & General Counsel — How Unsound Criticisms Of A Grocery Store Chain 80 Years Ago Predicted Arguments Made By Modern-Day Tech Critics
In a recent paper, former FTC chair Timothy J. Muris and former FTC general counsel Jonathan Nuechterlein analyzed tech critics’ arguments against leading tech services within the context of backlash against the leading grocery chain A&P eighty years ago. After vertically integrating, the grocery store chain was once called the “Wal-Mart before Wal-Mart.”
Muris and Nuechterlein write, “These attacks on A&P bear an eerie resemblance to attacks today on leading online innovators.” When critics claim antitrust law should punish pro-competitive behavior, it makes “no more sense today than it did when the government attacked A&P for cutting consumers too good a deal on groceries.”
Muris and Nuechterlein’s outline of A&P’s similarities to modern-day services below:
A&P was innovative with a long-term investment strategy, like many leading tech services today. “Although A&P is no longer a going concern and is rapidly passing from public memory, it was once a disruptive juggernaut of American retailing. From humble beginnings in the mid-nineteenth century, it emerged by the 1920s as the largest American retail chain by far, vertically integrating into multiple stages of food production, distribution, and retail sales.”
“Low costs were the linchpin” of A&P’s business strategy, which critics tried to twist into consumer harm. “In this and other respects, Adelman suggests, ‘the government lawyers, although competent in their profession, were so sadly illiterate in economic facts and economic analysis that they simply did not realize what they were saying.'”
Government calls to break up leading tech services mirror past calls to break up A&P. “If ‘[t]hose who cannot remember the past are condemned to repeat it,’ the story of A&P should be remembered, now more than ever, as a cautionary tale of what can happen when antitrust is divorced from an economically rigorous focus on consumer welfare. The stakes are high; without that focus, antitrust can easily be misused to destroy the very competition it was meant to promote.”
The antitrust doctrine “does not need an overhaul” — critics need to understand facets of consumer welfare (like lower prices). The doctrine is “well-calibrated to serve its central function: promoting consumer welfare. It does so not only by prohibiting conduct that harms consumers in the long run, but also by avoiding interference with conduct that might appear problematic to non-economists but that demonstrably benefits consumers over time. The advocates of doctrinal overhaul cannot show that consumers would benefit if we ripped up the current antitrust rulebook and replaced it with a more impressionistic ‘big is bad’ doctrine.”
Modern criticisms of tech services grossly overstate market concentration. “There is no antitrust market for ‘commerce’ or even ‘e-commerce.’ There are instead numerous separate markets for particular goods and services.” (Timothy Muris and Jonathan Nuechterlein, “Antitrust In The Internet Era: The Legacy Of United States V. A&P,” George Mason Law & Economics Research Paper, 6/11/18)
We’ve seen strange examples of narrow market definitions before: In one of the most inconceivable decisions, the European Commission didn’t consider Apple iOS and Android to be competitors. “To define a market as narrow as ‘licensable mobile OS’ essentially means that there must be a separate market for ‘non-licensable mobile OS’ and that companies active in these two markets do not compete. In light of the ‘Apple factor,’ that is more than just counterintuitive.” (Jakob Kucharczyk, “Android, iOS, And Market Power — What Does Mobile Platform Competition Really Look Like?” Project DisCo, 9/21/16)