Big Business is Not Bad Business | Citizens Against Government Waste

Big Business is Not Bad Business

The WasteWatcher

For more than 100 years, federal antitrust laws have been guided by the consumer welfare standard.  This doctrine, which was first established under the Sherman Antitrust Act in 1890 and reiterated in the Clayton Act in 1914, has encouraged competition and innovation, both of which benefit consumers. 

But over the past decade, some members of Congress have attempted to take antitrust enforcement in a new direction by attacking businesses based on their size rather than how their products and services benefit consumers.  The “Big Tech” companies like Amazon, Facebook, and Google have been the primary targets, but if the consumer welfare standard is abandoned for them, there would be no business in the country that would be safe from government intervention and enforcement. 

The  antitrust proposals being considered in the House and Senate include ideas that were included  in an October 2020 report by the House Judiciary Committee’s subcommittee on Antitrust, Commercial, and Administrative Law majority staff.  At the time, a Citizens Against Government Waste blog, “House Judiciary Committee Antitrust Report Is Anti-Competitive,” said that the  “449-page partisan and ill-informed treatise, which was a complete waste of the taxpayers’ money, strikes out at various digital platforms, many of which directly compete against each other.  It completely undermines the history and purpose of antitrust laws, which first and foremost are intended to protect consumers.  These laws should not be abused to achieve a political objective.  While the authors claim they are promoting the ‘public good,’ if the recommendations in the report were enacted into law, it would both harm the many digital platforms Americans use today and eliminate the opportunity for new businesses to enter the marketplace.”

The report led to the introduction of four bills in the 117th Congress: H.R. 3816, the American Choice and Innovation Online Act; H.R. 3825, the Ending Platform Monopolies Act; H.R. 3826, the Platform Competition and Opportunity Act; and H.R. 3849, the Augmenting Compatibility and Competition by Enabling Service Switching (ACCESS) Act.  All four bills were ordered reported by the House Judiciary Committee on June 23, 2021.

H.R. 3816 would prohibit 13 forms of “discriminatory conduct,” like “self-preferences” for the platforms’ own products over other businesses and interfering with the pricing of other businesses goods and services.  An August 13, 2021, Congressional Research Service report on the Big Tech Antitrust bills notes that the authors of the legislation admit the restrictions would apply only to Facebook, Google, Amazon and Apple.

H.R. 3825 would give unelected bureaucrats the power to determine conflicts of interest for platforms with more than 50 million users and a market cap of $600 million and would force companies to pay steep civil penalties for failing to sell off these “conflicts of interest” within two years of the bill’s enactment.  This forced sale abandons the consumer welfare standard and gives the government unchecked power to dismantle some of the country’s most successful and innovative companies.  If H.R. 3825 and other proposed antitrust legislation is signed into law, the U.S. would lose its place as a global technology leader and American consumers would lose out on future innovation and investment.  H.R. 3826, would require the Big Tech companies to show proof that any merger or acquisition greater than $50 million does not contribute to or sustain their dominant market share.  H.R. 3826 abandons the consumer welfare standard and essentially assumes the Big Tech companies are guilty until proven innocent.

H.R. 3849 address “network effects” and “switching costs” that supporters claim give Big Tech firms incumbency advantages and create barriers to entry for smaller companies. 

On November 5, 2021, Sens. Amy Klobuchar (D-Minn.) and Tom Cotton (R-Ark.) introduced their own version of the Platform Competition and Opportunity Act.

Congress is not the only place that the consumer welfare standard is at risk.  As CAGW Vice President for Policy and Government Affairs Deborah Collier noted in a July 9, 2021 blog post, “federal agencies, state legislators, and state attorneys general are now actively undermining and overturning the consumer welfare standard of antitrust law.  Legislation, regulations, and lawsuits are proliferating to address what they perceive as failings in the law that have allowed companies to become ‘too big.’”  On July 1, 2021, the Federal Trade Commission, whose foremost responsibility is to uphold the consumer welfare standard, reversed course in a party line vote and without any public input dismantled this standard by rescinding the bipartisan 2015 Statement of Enforcement Principles Regarding “Unfair Methods of Competition” under Section 5 of the FTC Act.

While some lawmakers claim big business is bad business, and existing antitrust enforcement has been inefficient and even a failure, totally reshaping the antitrust landscape will have disastrous effects on the economy.  As Alden F. Abbott of the Mercatus Center wrote, “Neo-Brandeisian proposals are based on faulty premises regarding the state of competition in the American Economy.  Moreover, those proposals, if adopted would tend to harm rather than benefit the economy and would interject new uncertainty into antitrust enforcement. …retention of the consensus consumer-welfare approach appears much preferable, as a matter of law and economics, to radically changing the antitrust laws.”

The consumer welfare standard has served the economy well and helped to keep the United States as the world’s leading economy.  Keeping the government out of the economy and upholding free markets while retaining the  current method of antitrust enforcement will continue to increase competition and innovation in all sections of the economy.  Unfortunately, it appears that progressive and anti-capitalist members of Congress, along with new commissioners in various federal agencies, are attempting to undo this progress, which will be detrimental rather than beneficial to consumers.

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