ICYMI: Herbert Hovenkamp — Protect Consumers And Workers, Not Obsolete Rivals
Yesterday, Penn Law professor and antitrust expert Herbert Hovenkamp published an opinion in The Regulatory Review addressing Sen. Elizabeth Warren’s recent call for the “break up” of leading tech services. As Hovenkamp notes, “Senator Warren’s proposals seek to protect older technologies at the expense of consumers and workers.”
More on his arguments below.
Monopolies are a problem, but not for tech.
—”Although monopoly is a serious problem and margins have grown rapidly since the 1980s, the increases have mainly occurred in markets for manufactured products (such as cars), breakfast cereal, steel, airlines, household goods (such as batteries), and beer. By contrast, most of Google’s products are sold at a price of zero to consumers, although businesses pay for advertising.”
Under Warren’s proposal, firms would be faulted for using common tactics used to eliminate price premiums.
—”Firms also vertically integrate their distribution in order to eliminate price premiums that result from trademarks or entrenched brands.”
—”The proposal faults house brands for copying the goods of others. To be sure, intellectual property laws are not always effective at preventing copying. Nevertheless, making a cheaper generic copy of another firm’s trademarked brand is not any kind of theft at all. Rather, it serves consumers by giving them the opportunity to avoid paying for a trademark or name that they do not want. The result is less monopoly, not more.”
Protecting consumers and workers should be the purpose of antitrust laws, not protecting obsolete or less efficient rivals.
—”Any time a merger or other practice reduces a firm’s costs or improves its products or services, it boosts competition by putting pressure on obsolete or less efficient rivals. But protecting these rivals should not be the purpose of the antitrust laws. Rather, the focus of antitrust laws should be on maximizing output, which benefits both consumers and workers.”
—”Another problem is the lack of any concern about labor, whose wages have not come close to keeping pace with corporate earnings. Rather than looking out for competitors, antitrust policy should encourage maximum output, which helps both consumers and labor by providing more opportunities for jobs. If policymakers are truly concerned about workers, then they should urge that anticompetitive practices in labor markets receive greater attention from antitrust enforcers.”
—Neither consumers nor workers gain from Warren’s proposal:
—”Who gains from Senator Warren’s first proposal to keep large platform companies from selling their own merchandise? Not consumers or labor, both of whom benefit from high output and low prices. Indeed, the text of the Warren proposal is largely indifferent to output or pricing—and may even lead to lower output and higher prices.”
—”In that respect, the Warren proposals are also notable for what they do not say. One stark deficiency is the lack of concern about high consumer prices, even though Senator Warren made her career promoting the protection of consumers. Nevertheless, her proposal ignores them and is more concerned about protecting inefficient, higher cost competitors.”