ICYMI: Principal Deputy AAG Andrew Finch Dispels Common Myths Surrounding Concentration And Competition
During a speech at Capitol Forum’s Fifth Annual Tech, Media & Telecom Competition Conference, Principal Deputy AAG Andrew Finch discussed antitrust markets and the vibrant new competition present in traditional industries.
He rebuts tech critics’ misconceptions around concentration and tech, noting:
1. Industry concentration data that looks at industry-level census data does not reflect relevant antitrust markets.
2. Increased concentration does not necessarily imply decreased competition.
3. Antitrust is guided by competition over concentration, enforcement over regulation, behavior over size, and innovation over stagnation.
Industry concentration data that looks at industry-level census data does not reflect relevant antitrust markets.
“Some criticisms, including those published last month by Carl Shapiro, as well as Greg Werden and Luke Froeb, challenge these studies because they rely on industry-level Census data rather than measuring concentration in relevant antitrust markets. The studies relying on US Census data look at broad categories like ‘retail trade,’ ‘utilities,’ ‘finance and insurance,’ and ‘healthcare.’ A relevant antitrust market, however, is invariably much narrower because it includes only products that are close substitutes from the consumer perspective. If the studies do not capture concentration in relevant antitrust markets, they can’t really meaningfully tell us anything about the changes in competition that we’re interested in.”
Regardless, increased concentration does not necessarily imply decreased competition.
“Although the process may result in higher concentration, it is the result of the competitive process at work. As Assistant Attorney General Delrahim has said: ‘Rather than a failure of antitrust, concentration may be the byproduct of healthy competition as the most innovative and efficient firms grow and attract customers.’ Indeed, if firms are gaining market share because they are winning consumers through competition on the merits, that should be applauded not condemned.”
Finch reflects on the “four basic principles” guiding the Antitrust Division’s approach:
1. Competition, not concentration: “First, we have to remember that antitrust laws are concerned with competition, not concentration. Concentration may indeed be scary, but the relevant question is really whether competition is still working to benefit consumers. Our focus is on the competitive process and applying the consumer welfare standard to protect consumers’ interests in low prices, product quality, choice, and innovation. If concentration is the result of more efficient and better firms attracting customers through competition on the merits, we should conclude that antitrust is working exactly as it should.”
2. Law enforcement, not regulation: “Second, our job at the Antitrust Division is law enforcement, not regulation. We don’t have free-wheeling authority to regulate or break-up an industry. We bring enforcement actions where there are violations of the antitrust law, as supported by the facts and economics.”
3. Behavior, not size: “Third, in looking for antitrust violations, we need to remember, as Assistant Attorney General Delrahim likes to say, ‘Big is not bad. Big behaving badly is bad.’ As antitrust enforcers, we do not object when a firm gains market share by competing on the merits, including through superior quality or lower prices.”
4. Innovation, not stagnation: “Fourth, we need to keep in mind the need to preserve those incentives to innovate. Breaking up or regulating successful firms as if they were public utilities threatens to reduce incentives to innovate. The prospect of making it big motivates innovators and entrepreneurs to invest in new technologies and products.”