Consumers Win When Their Welfare is Protected | Citizens Against Government Waste

Consumers Win When Their Welfare is Protected

The WasteWatcher

When the Sherman Act was enacted in 1890 and amended by the Clayton Act in 1914, the protection of consumer welfare was the driving force behind their enactment, and it has remained as the antitrust standard.  As noted by Federal Trade Commission (FTC) Commissioner Christine Wilson in a 2019 speech at the George Mason University’s Mercatus Center, “Generally speaking, if consumers are not harmed, the antitrust agencies do not act.” 

But members of Congress, 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.” 

The most recent action (although it seems like something happens every day) occurred on July 9, 2021, when President Biden issued his Executive Order on Promoting Competition in the American Economy, calling for action to be taken across dozens of federal agencies against “consolidation,” “lack of competition,” and “dominant tech firms” that are “undermining competition and reducing innovation.”  CAGW issued a statement on this EO, noting that it would grow the size, scope, power, and control of the federal government, stifle innovation and investment, harm the economy, and be anti-competitive.

The Biden EO came one day after House Judiciary Committee Republicans issued their “Agenda for Taking on Big Tech” on July 8, 2021.  They called for faster trial court review of antitrust cases against Big Tech, amending Section 230, consolidating antitrust enforcement in the Department of Justice, increasing the power of state attorneys general to intervene in antitrust cases, and improving the transparency of content moderation. 

One day earlier, on July 7, 2021, 36 states and the District of Columbia attorneys general filed suit against Google for“using anticompetitive tactics ‘to diminish and disincentivize competition in Android app distribution’, and said that developers have “no reasonable choice but to distribute their apps through the Google Play Store.”  A Google spokesman responded that “anyone, including our competitors, can customize and build devices with the Android operating system — for free,” and that Android devices allow downloads directly from a developer’s website if it is not on Google Play.

While state AGs are certainly within their rights to pursue antitrust actions, caution should be used in filing these suits to ensure that they are not targeting companies simply because of their size.  “Big Tech” is currently in the line of sight for these lawsuits, but these actions will likely filter down to other industries and soon encompass not just large companies but also small businesses across the country. 

This threat to all businesses became clear at the July 1, 2021 meeting of the Federal Trade Commission (FTC), when the agency voted along party lines, without any opportunity for public comments, to dismantle the consumer welfare standard by rescinding the bipartisan 2015 Statement of Enforcement Principles Regarding “Unfair Methods of Competition” under Section 5 of the FTC Act.  The 2015 statement, which occurred during the Obama-Biden administration (President Obama was the first President to visit the agency since 1937), with a Democratic majority on the commission, reiterated the FTC’s commitment to the “public policy underlying the antitrust laws, namely, the promotion of consumer welfare,” the “rule of reason,” and that the Commission “is less likely to challenge an act or practice as an unfair method of competition on a standalone basis if enforcement of the Sherman or Clayton Act is sufficient to address the competitive harm arising from the act or practice.” 

This statement, more than 100 years after the Clayton Act was signed into law, should have settled how antitrust laws would be enforced, particularly since it was adopted during a Democratic administration.  Its rejection without any discussion of the potential consequences is outrageous.  The FTC’s decision came three days after a federal district court dismissed the agency’s case against Facebook.  The judge found that the FTC did not prove its claim that Facebook holds monopoly power in the personal social networking market in the U.S. 

The state AGs lawsuit and the FTC’s radical decision came on the heels of the markup of six antitrust bills by the House Judiciary Committee on June 22, 2021.  The bills, which were ordered reported from the committee, would severely curtail, if not break up, many of the activities conducted using digital platforms, and potentially put consumer privacy at risk.  These bills, which were opposed by the Council for Citizens Against Government Waste in a June 22, 2021 letter, would not just affect the targeted large digital platforms, but also would have unintended consequences that would trickle down to much smaller online platforms that promote their own products online.  Some of the bills derive their reasoning directly from the flawed October 6, 2020 Committee Majority Staff Report, which CAGW President Tom Schatz noted, “pre-determines that the digital platforms are monopolies, simply because of their size, and questions why these companies would decide to purchase other platforms to expand their business, equating this success with the ‘oil barons and railroad tycoons’ of a bygone era.”

These widespread attacks on Big Tech and longstanding principles of antitrust laws across the legislative and executive branches of the federal government and the state AGs are ominous developments in the early days of the Biden administration.  Failing to maintain the consumer welfare standard is very likely to eliminate choice and increase costs, since the technology industry has successfully provided greater choices at lower costs year after year since the internet was invented.