Antitrust Déja Vu

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Antitrust law isn’t—or shouldn’t be—about breaking up businesses just for being big.

When it comes to private industry, the Biden administration clearly thinks big is bad. The same president who called for a multitrillion-dollar expansion of the federal government came out swinging against big business in a July 9 executive order, blaming concentrated economic power for everything from low wages to declining “democratic accountability.”

Biden vowed to crack down on tech giants like Amazon and Google, which he says “use their power to exclude market entrants, to extract monopoly profits and to gather intimate personal information that they can exploit for their own advantage.”

To the uninitiated, it might look like a fresh new take on antitrust law, a bold approach for an economy that has been transformed from smoke-belching factories to humming server farms.

Guess again. The Biden administration’s “new” approach to antitrust law is actually an old approach that was discarded decades ago by legal scholars and regulators as outmoded, unjustified by economic data and counterproductive.

The newfound focus on size for size’s sake “is coming up for the third time in my career, and it’s just as specious as it’s always been,” said Abbott “Tad” Lipsky, a professor at George Mason University’s Antonin Scalia School of Law and an antitrust enforcement official in the Reagan administration. “These companies got the lion’s share of the market because they are the most successful, the most innovative, and they got the most customers.”

The late Robert Bork triggered a Copernican shift in antitrust law in the 1970s with his highly influential bookThe Antitrust Paradox, which urged regulators to focus on how business combinations affect consumers, not their competitors. If a company grew large by providing consumers with more choices and lower prices—think Walmart—Bork said antitrust cops had no business trying to break it up simply because the local dry-goods merchant complained.

The so-called consumer welfare approach soon pervaded antitrust law. There were attempts to revive the old-school approach toward judging companies based on size alone but even as late as 2010, the Obama administration’s Justice Department revised its merger guidelines to deemphasize industry concentration as a reason for rejecting business combinations.

Now Biden wants to reverse all that. The president’s 32-year-old chair of the Federal Trade Commission, Lina Khan, gained fame at Yale Law School with a paper provocatively titled “Amazon’s Antitrust Paradox,” seeking to replace the Borkian consumer-welfare test with a renewed focus on industry concentration and company size.

One of Khan’s Yale Law professors was George Priest, who in the 1960s and 1970s belonged to the cadre of revolutionaries who helped transform antitrust law. Priest now writes extensively about how consumers benefit from the network effects of large companies, whether that is airlines with extensive feeder connections or Amazon with its vast network of suppliers and product choices.

Priest said Khan “was a smart student, but she has no regulatory or legislative experience.” People who think companies are too big and we need to do something about it “have not really come to grips with the fact of networks,” he said.

“No one realistically thinks consumers will be better off if Amazon has fewer choices for you to make,” Priest concluded.

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