For the past few decades, across different presidential administrations, antitrust policy has typically involved the following key points, which we discuss in Chapter 15, Section 15.6:
- Responsibility for antitrust policy is divided between the Federal Trade Commission (FTC) and the Antitrust Division of the Department of Justice (DOJ).
- For horizontal mergers, the DOJ and the FTC have published numerical guidelines that provide a benchmark for their decisions on whether to oppose a merger and give firms a good idea of whether a proposed merger will be allowed.
- Antitrust enforcement is focused on consumer well-being, so a merger that increases monopoly power while at the same time improving economic efficiency will be allowed if the net effect of the merger is to increase consumer surplus.
- If firms disagree with a merger decision from the FTC or the DOJ, those agencies typically file a law suit in a federal court to enforce their decision. Therefore, antitrust policy ultimately depends on how the federal courts interpret the antitrust laws. (We list the most important antitrust laws in Chapter 15, Table 15.2.)
During the 2020 presidential campaign President Joe Biden did not announce a detailed policy towards antitrust and the issue played only a small role in the campaign. Late in the campaign, a Biden spokesman did state that, “growing economic concentration and monopoly power in our nation today threatens our American values of competition, choice, and shared prosperity.” Once in office, Biden’s appointments to key antitrust positions favored a more aggressive approach to antitrust policy.
The views of most Biden appointees were similar to those of Louis Brandeis who served on the U.S. Supreme Court from 1916 to 1939. Brandeis was not familiar with economics and his views on antitrust as stated in his articles and court decisions can be contradictory.
But Robert Bork of the University of Chicago in his book the Antitrust Paradox provided an influential interpretation of Brandeis’s views. According to Bork, in the early twentieth century, “the dominant goal [of antitrust policy] was the protection of consumer welfare, though Justice Louis Brandeis … was the first to give operative weight to the conflicting goal of small-business welfare.” Bork argued that an implication of Brandeis’s views was that antitrust enforcement might end up “protecting the inefficient [firms] from competition.” Similarly, Daniel Crane of the University of Michigan refers to the “’Brandeisian’ tradition, associated with US Supreme Court Justice Louis Brandeis, [which] is often described as … supporting atomistic competition because of its beneficial effects on personal liberty and autonomy.”
President Biden has appointed several people who support the Brandeis approach to antitrust including Lina Khan of Columbia University as chair of the FTC; Tim Wu of Columbia University as an adviser to the president; and Bharat Ramamurti, a former aide to Massachusetts Senator Elizabeth Warren, as deputy director of the National Economic Council. John Cassidy, an economics writer for the New Yorker, summarized their position:
“Proponents of the New Brandeis-ism contend that these agencies should act proactively—carrying out broad investigations, publishing reports, and establishing rules of conduct for companies with a great deal of market power, including tech platforms and broadband providers.”
In July 2021, President Biden issued an executive order creating a White House Competition Council. According to a statement from the White House, the purpose of the council is to: “to coordinate the federal government’s response to the rising power of large corporations in the economy.” Also in July 2021, the FTC under Chair Khan’s leadership voted to move away from the consumer welfare standard for judging anticompetitive business strategies, including merging or acquiring other firms and certain pricing decisions, such as cutting prices to below those charged by smaller rivals. The result of the FTC’s new approach is that the agency will take action against business strategies that are not directly in violation of the federal antitrust laws. The FTC is particularly concerned by strategies used over the years by large technology firms such as Facebook, Google, Amazon, and Apple.
The Biden administration’s redirection of antitrust policy has run into criticism. An article in the Wall Street Journalquoted the president of the Consumer Technology Association as stating that: “The consumer-welfare standard grounds competition policy in objective facts and evidence. By protecting consumers rather than competitors, we ensure antitrust decisions are not subjective or political.” The “consumer-welfare standard” is the standard that had been used under previous presidential administrations as we outlined in points 2. and 3. above. A possible barrier to the Biden administration’s change in policy is that ultimately it is up to the federal courts to decide the legality of a business strategy. In recent decades, the federal courts have consistently required that for a strategy to be declared illegal it must be a violation of the antitrust laws.
Until the FTC or the DOJ use the new standard to bring actions against firms and until the courts either uphold or dismiss those actions, it won’t be possible to know whether the Biden administration’s antitrust policy will end up being much different from the policies of previous administrations. It could be a number of years before actions brought under the new standard make their way through the court system.
Sources: Brent Kendall, “New Policy Gives FTC Greater Control Over How Companies Do M&A,” wsj.com, October 29, 2021; Executive Office of the President, “Fact Sheet: Executive Order on Promoting Competition in the American Economy,” whitehouse.gov, July 9, 2021; John D. McKinnon, “FTC Vote to Broaden Agency’s Mandate Seen as Targeting Tech Industry,” wsj.com, July 1, 2021; John Cassidy, “The Biden Antitrust Revolution,” newyorker.com, July 12, 2021; David McCabe and Jim Tankersley, “Biden Urges More Scrutiny of Big Businesses, Such as Tech Giants,” nytimes.com, September 16, 2021; Daniel A. Crane, “Rationales for Antitrust: Economics and Other Bases,” in Roger D. Blair and D. Daniel Sokol, The Oxford Handbook of International Antitrust Economics, Vol. 1, New York: Oxford University Press, 2015; Robert H. Bork, The Antitrust Paradox: A Policy at War with Itself, New York: Basic Books, 1978; and Kenneth G. Elzinga and Micah Webber, “Louis Brandeis and Contemporary Antitrust Enforcement,” Touro Law Review, 2015, Vol. 33, No. 1 , Article 15.