What Is Antitrust For—And Not For?
Today’s leading tech companies are often at the center of discussions about privacy and data security under the guise of antitrust issues. As some people try to thread the needle between competition and other political objectives, it’s important to have a clear understanding of the scope of antitrust. What is antitrust for? And, similarly, what is it not for?
— The goal of antitrust is to maximize consumer welfare.
— Antitrust frameworks are aimed at protecting competition, not competitors.
— Political and policy goals should not factor into the antitrust regimes.
The goal of antitrust enforcement is to maximize consumer welfare.
The Supreme Court has repeatedly embraced consumer welfare as the foundation of its decisions in competition cases. In 1979, the Court recognized the Sherman Act as a “consumer welfare prescription.” Since then, the Court’s rulings in Brooke Group Ltd. v. Brown & Williamson Tobacco Corp and Leegin Creative Leather Prods. v. PSKS, Inc. use consumer welfare as a central rationale for its decisions.
Former FTC Chair Edith Ramirez explains the FTC’s role in antitrust enforcement, emphasizing its foundation in consumer welfare. “Like the lifeguard, at the FTC we must keep a watchful eye on markets to ensure fair competition that enhances consumer welfare. We are not in the business of picking winners or losers; our job is to enforce the rules that safeguard vigorous competition if we see them being broken. We prefer to leave markets alone, allowing customer preferences to dictate what will be produced and sold, and competition to determine which firms make what goods and at what price. Competition leads to lower prices, higher quality, and innovation, all to the benefit of consumers.”
The consumer welfare standard is widely accepted as the lodestar for antitrust enforcement, argues former FTC Commissioner Joshua Wright. “Today, the overwhelming consensus among those who do antitrust for a living—be they established antitrust scholars, practitioners, or law enforcers serving under both Republican and Democratic administrations—is that the consumer welfare standard has served antitrust well, is the best available legal framework, and that abandoning it now will have serious detrimental effects for consumers, the American economy, and international antitrust.”
Antitrust frameworks are aimed at protecting competition, not competitors.
The U.S. Supreme Court clarifies that the Sherman Act is not intended to shield smaller or less successful companies from their rivals. “The purpose of the Act is not to protect businesses from the working of the market; it is to protect the public from the failure of the market. The law directs itself not against conduct which is competitive, even severely so, but against conduct which unfairly tends to destroy competition itself. It does so not out of solicitude for private concerns but out of concern for the public interest.”
Over the years, the Supreme Court has explicitly distinguished that antitrust’s priority is to foster competition, not punish successful competitors.
— From the Court’s 1945 decision in United States v. Aluminum Co. of America, et. al: “The successful competitor, having been urged to compete, must not be turned upon when he wins.”
— From the Court’s 1977 decision in Brunswick Corp. v. Pueblo Bowl-o-Mat, Inc: “The antitrust laws, however, were enacted for ‘the protection of competition, not competitors.'”
The Supreme Court’s historic precedent is reflected in the FTC’s & DoJ’s present-day mission to promote competition.
— “Aggressive competition among sellers in an open marketplace gives consumers—both individuals and businesses—the benefits of lower prices, higher quality products and services, more choices, and greater innovation. The FTC’s competition mission is to enforce the rules of the competitive marketplace—the antitrust laws. These laws promote vigorous competition and protect consumers from anticompetitive mergers and business practices,” according to the FTC’s Guide to Antitrust Laws.
— William Kolasky, former Deputy Assistant Attorney General of the Department of Justice’s Antitrust Division, explains: “Punishing dominant firms for their success, and handicapping them to protect their rivals, may have some appeal and may even produce short-term gains, but all too often the only longer-term winners are inefficient rivals protected from the rigors of competition.”
Political and policy goals should not factor into the antitrust regimes.
FTC Commissioner Noah Phillips underscores that antitrust legal decisions should not—and are not—used to achieve ulterior motives aside from protecting competition. “American courts have taken welfare maximization as their magnetic north, rejecting attempts to use competition law to achieve or protect ends beyond guarding the competitive process.”
Former FTC Commissioner Terrell McSweeny makes the important distinction between the FTC’s privacy and competition enforcement mandates, saying antitrust analysis should not be leveraged to advance issues unrelated to competition. “Even if data privacy does play a meaningful role in our antitrust analysis, the focus of a merger investigation is always on the effect of the transaction on competition–and thus privacy protection as a quality dimension of non-price competition. I believe it will continue to be important that competition enforcers not use their power over a transaction to exact privacy or data protection concessions unrelated to the underlying competition analysis.”