Mythbusters: Antitrust Edition
In case you missed it, competition law experts John Mayo and Mark Whitener, both of Georgetown University, explained five common myths about antitrust law in a piece for The Washington Post. Their explanations help clarify the often misunderstood realm of antitrust policy, which has been in the spotlight recently as technology-based firms face scrutiny.
MYTH: Monopolies are illegal.
FACT: Antitrust laws do not outlaw the possession of a monopoly. “[T]he potential for economic rewards is what incentivizes investment and risk-taking. The resulting competition for marketplace supremacy can be fierce, and weaker firms often fail along the way. Those left standing should not be punished for their success—even if only one survives.”
FACT: The U.S. Supreme Court notes that the way a monopoly is obtained or preserved is what should motivate any antitrust enforcement—not the fact that a monopoly exists. “As the Supreme Court said more than 50 years ago, monopolies should be targets of antitrust enforcement only when there is ‘the willful acquisition or maintenance of [monopoly] power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.'”
MYTH: Antitrust protects smaller firms from their big rivals.
FACT: Antitrust laws are meant to protect competition, not competitors. “As the Supreme Court has said, their purpose ‘is not to protect businesses from the working of the market; it is to protect the public from the failure of the market.'”
FACT: Consumer welfare remains the standard for evaluating potentially anticompetitive behavior. “Consumers are the main beneficiaries of competition, and antitrust is intended to protect them from business conduct that damages such competition. Knowing this, enforcers and courts tend to take competitors’ complaints about their rivals’ behavior with a grain of salt and focus on the impact on consumers.”
MYTH: Antitrust laws are too old to be relevant to the tech economy.
FACT: Enforcement agencies have been able to apply the antitrust legal framework to many cases involving new-economy issues. “In traditional industries like retail, antitrust analysis has long had to evolve to deal with shifting forms of competition, from local grocers to big-box stores to, now, online retailing. In the 1990s, there were concerns that the tech behemoth of the times (Microsoft) and its complex new products (browsers, operating systems) were beyond antitrust’s comprehension. Yet the Justice Department prosecuted a successful case challenging Microsoft’s unlawful actions to exclude competition and preserve its monopoly position.”
MYTH: Antitrust enforcers are asleep at the switch.
FACT: Data show regulators are more likely to challenge mergers today. “A study one of us co-conducted, drawing on government enforcement data from 1979 through 2017, found that regulators have become more likely to challenge proposed mergers over time. Indeed, controlling for the number of merger proposals submitted to the agencies, the likelihood of a merger challenge has more than doubled over this period.”
MYTH: Antitrust enforcement can fix the tech-sector’s problems.
FACT: Antitrust law is focused narrowly on protecting consumers from any harm resulting from anticompetitive behavior, and it can’t be stretched to achieve other unrelated regulatory concerns. “The question courts will ask, therefore, is whether dubious behavior by companies results from diminished market rivalry — or rather, perhaps, from firms’ independently following business models that tend to lead to controversial practices.”
Read the full piece here, via The Washington Post.