Antitrust policy is having a moment. Led by Federal Trade Commission Chair Lina Khan, US President Joe Biden's administration is turning its attention to suspect activity not only in Big Tech and Big Oil, but also in Big Alcohol, Big Hotel and Big Concert. The rationale for this new push, however, is ambiguous: Is antitrust law a tool to protect consumers from higher prices, or to defend small businesses against big ones?
The implications of the answer are more than theoretical. One approach to antitrust is shiny and new and has won Ms Khan praise from both the left and right -- but is untested legally. The other is a bit dull and often criticised -- but has a lot of legal precedent behind it.
The Department of Justice's move last month to break up Ticketmaster-Live Nation illustrates is an example of the consumer-welfare approach to antitrust, and illustrates some of the problems with it. The company was created by a 2010 merger that was seen at the time as potentially anticompetitive. The Justice Department responded not by blocking the merger but by placing a series of conditions on it: The new company was forced to sell a subsidiary, license some software and enter into a consent decree.
This was, for a long time, the dominant merger-review philosophy of the US -- look for ways to get to yes on potentially anticompetitive mergers through narrowly tailored remedies. In practice, however, this approach has proved very difficult to enforce. When Comcast purchased NBC Universal in 2011, for example, it agreed not to use its control of the cable pipes to favour Comcast-owned cable networks. But there are a lot of subtleties to running a cable business, and Comcast found ways to make life marginally more difficult for competitors.
So, some scepticism about the efficacy of conduct remedies seems warranted. Companies can have perfectly good reasons for wanting to merge that have nothing to do with anticompetitive intent. But when a merger appears to be anticompetitive on its face, there is a good argument for simply blocking it instead of trying to manage it.
This is a big change in approach, yet it does not involve any huge new conceptual leaps in antitrust doctrine. By the same token, there's a solid case that there have simply been too few resources devoted to antitrust enforcement over the years. As face-to-face services have become a larger part of the economy, concerns have grown that relatively small mergers -- of regional hospital chains, for example, rather than multinational behemoths -- can serve anticompetitive ends.
But Ms Khan did not achieve antitrust superstardom based on a critique of conduct vs structural remedies. Her seminal article, "Amazon's Antitrust Paradox", published in 2017, argues that the internet retailing giant had obtained a troubling level of economic power in ways that antitrust regulators noticed but antitrust doctrine excluded. The "current framework in antitrust -- specifically its pegging competition to 'consumer welfare,' defined as short-term price effects -- is unequipped to capture the architecture of market power in the modern economy", she wrote. She worried that "current doctrine underappreciates the risk of predatory pricing" -- ie, a major retailer selling goods at a loss to drive competition out of business -- and that the US should move away from the effort to "measure competition primarily through price and output".
These arguments echo ones made about a decade earlier by the writer Barry Lynn -- except he was writing about Walmart. Like Ms Khan, who thanks Lynn in her article, I was taken by Lynn's argument. I later moved on, however -- in part because of the rise of e-commerce and Amazon. It turned out that, for all of Walmart's ruthlessness and apparent power, it was, in fact, not a major threat to retail competition. It was a good thing that the government did not step in to halt "everyday low prices" out of fear that undercutting the competition would create a hypothetical future risk to consumers.
Agree or disagree with Ms Khan's analysis of the issue, the very contours of her critique made her a somewhat odd choice for FTC chair. Her whole point was that existing judicial doctrine did not allow for a viable antitrust case against Amazon. Either the Supreme Court would have to reinterpret the Sherman Antitrust Act, or Congress would have to pass a new law directing the courts to consider factors other than consumer welfare.
As FTC chair, Ms Khan can push enforcement in new directions. But she also has to work within the current statutes and judiciary. Thus, the FTC's actual lawsuit against Amazon, filed last September, argues that the company's business practices are, in fact, harming consumers.
Whether the contradiction between the theories is legally relevant is something for the courts to figure out. But it's clear that Ms Khan still likes her original theory -- and the evidence is the FTC's investigation of the largest wine and spirits distributor in the US. The theory is that the company violated the Robinson-Patman Act, which prohibits price discrimination, usually between suppliers and retailers. Passed in 1936, the law has rarely been enforced in recent decades, especially as courts have turned to the consumer welfare standard for antitrust litigation.
Ms Khan has touted the law as a "big focus" of hers, so this case against Big Alcohol is notable. It's possible, of course, to spin this case as fighting for consumers -- that the law requires everyone to get the low price. But the government ended enforcement because in practice the law was protecting the interests of small retailers rather than those of consumers.
It is worth insisting on the difference between these two rationales, especially in this period of heightened concern about inflation. As chair of the FTC, Ms Khan's goal is to win cases. As the leader of the hipster antitrust movement, her goal is to rewrite doctrine.
The latter role has more glamour, and a touch of bipartisan appeal: It serves the interests of the kind of provincial elites who are often the mainstay of conservative politics -- owners of car dealerships, regional hospital presidents, and so on. That may explain the support Ms Khan has received from Republican senators such as Josh Hawley of Missouri and J D Vance of Ohio. On the other hand, as consumers have made it abundantly clear over the past few years that they really care about high prices, it's fair to ask: Is this really the right moment to fight this battle? ©2024 Bloomberg
Matthew Yglesias is a columnist for Bloomberg Opinion. A co-founder of and former columnist for Vox, he writes the Slow Boring blog and newsletter. He is author of 'One Billion Americans'.