Antitrust regulation in the US is in need of a big broad revival
PremiumCompetition needs a boost and industrial-age laws are ineffective
Over the course of many years, US laws meant to foster business competition have been beaten into submission. Now, US President Joe Biden, his controversial antitrust enforcer Lina Khan and members of Congress are trying to restore and maybe even rewrite the nation’s antitrust laws. It’s not clear how far they’ll get busting the tech giants that are their chief targets. But it could accomplish quite a lot just by sending a strong message to regulators: Do your job.
On 1 July, two weeks after Khan was sworn in as chair of the US Federal Trade Commission (FTC), the agency voted along party lines to rescind a key policy statement from 2015 that had limited the scope of the FTC’s enforcement capabilities. It directed the FTC to view so-called competitive harm through the narrow lens of consumer welfare, disregarding potentially anti-competitive effects on rivals, suppliers or employees. The rule blunted the agency’s own power at a time when it might be helpful in regulating the amorphous tech industry, especially giants like Amazon.com, Apple, Facebook and Google. In rescinding it, Khan is seeking to restore the original mandate Congress gave the FTC long ago to police “unfair methods of competition", a duty the agency says “extends beyond the Sherman Act and the Clayton Act," the two main antitrust laws governing the US today.
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There are parallel efforts in Congress to modernize these laws; others argue that they’re already sufficient as written, despite being more than 100 years old. The FTC’s dissenters last week also voiced concern that broadening beyond the consumer-welfare standard will leave more room for politically-motivated actions. When it comes to most corporate mergers, current laws probably should suffice, even if their focus on consumer prices makes them less easily applied to tech giants that otherwise would seem to have monopolies in their markets.
Big Tech isn’t the whole story, though, and you don’t have to be an antitrust scholar to see signs of harmful market concentration in other industries where the law should have been clear cut. Anyone who’s flown lately, enjoys craft beer or has filed a health-insurance claim may have spotted the effects of allowing very few companies to dominate entire industries. In 60 cases since 2011, companies were able to buy a competitor worth at least $20 billion. If the law as written is up to the task, why are regulators letting so many deals get around it?
The wireless space has some of the most egregious examples. Last year’s merger of T-Mobile US and Sprint—at the time, the No. 3 and No. 4 wireless carriers in a four-player market—was exactly the sort of deal seen as running afoul of the Clayton Act. Even so, the Trump administration of the time approved the transaction. This set a precedent for allowing mergers between direct competitors in already highly concentrated industries. Setting new precedents that run counter to antitrust law makes it harder to bring future cases and makes the laws we have less potent.
The same industry shows how well current laws work to promote competition when they are followed. After AT&T was blocked from buying T-Mobile in 2011 and forced to hand over wireless spectrum to its weaker rival, market competition flourished, leading to lower prices, unlimited-data plans and a spirited race for 5G technology. Remember, T-Mobile and Sprint argued that blocking their merger would hinder their 5G efforts; AT&T and T-Mobile argued the same thing a decade ago with 4G LTE, and yet rolled it out anyway.
Still, courts and regulators are being pushed in “a less interventionist direction," Jonathan Baker, a research professor of law at American University and former member of the FCC and FTC, has written. That’s especially true for ‘vertical mergers’, where the companies operate in different portions of a supply chain, such as AT&T’s 2018 takeover of Time Warner. The judge in that case criticized the government’s lawyers for failing to provide enough evidence of harm and relying on speculation, which regulators had to do because the streaming-TV industry was still being formed.
This backward focus—on evidence of what’s already happened and legal precedent—creates an uphill battle in regulating industries being transformed by tech and dominated by conglomerates because it makes the question of who’s being harmed and how more difficult to answer.
Khan wrote this in 2015: “Breaking companies up is not a radical act. Corporate managers do it all the time." However you feel about her views, she’s not wrong about that. It’s the advice Wall Street bankers sell every day. Lo and behold, AT&T and Time Warner are now breaking up. There’s an abundance of evidence that antitrust enforcement has been in detrimental decline. There’s scant proof that restoring it will hurt America.
Tara Lachapelle is a Bloomberg Opinion columnist covering the business of entertainment and telecommunications, as well as broader deals.
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