One of the most important decisions facing Congress as it returns from its recess is whether to enact legislation that would impose antitrust liability on large companies without requiring any showing of wrongful conduct. Members evaluating these proposals should remember that Congress has rejected similar efforts in the past. Prominent examples include the Concentrated Industries Act initiated by Lyndon Johnson to bolster his later-abandoned presidential reelection campaign, the Industrial Reorganization Act, first introduced by Philip Hart in 1972, and the congressional inquiry recommended by the Carter administration.
All of them would have found companies in violation of the antitrust laws simply for being persistently large. None was enacted into law for reasons that still resonate today.
One of antitrust law’s central conundrums is that companies can grow large and even achieve market dominance in one of two ways. On the one hand, companies often succeed because they are more innovative — that is, by building the proverbial “better mousetrap” or, in the words of the landmark Alcoa decision, “by virtue of superior skill, foresight and industry.” In other words, their expansion may be the result of successfully competing on the merits. Congress should design laws to encourage this type of conduct. On the other hand, a company’s expansion may be the product of harmful actions that deviate from the type of business rivalry that benefits all of society, conduct that the law should be designed to suppress.
The challenge is how to devise rules that separate the wheat from the chaff. Rules that penalize companies that succeed because of pro-competitive conduct that benefits society run the risk of discouraging them from undertaking the type of innovation that long has been the hallmark of the U.S. economy. To again quote the words of Alcoa, “The successful competitor, having been urged to compete, must not be turned upon when [it] wins.” Any other rule threatens to disincentivize precisely the type of innovation and entrepreneurial risk-taking on which our nation’s continued growth and innovative edge depends.
Antitrust law traditionally has solved this problem by finding violations only when companies engage in conduct that causes harm through means other than competition on the merits. The precise contours of what falls within this category are a subject of enduring debate.
What is so radical about the current antitrust proposals under consideration is that by removing conduct as a relevant consideration, they would punish companies without considering whether their size resulted from attempts to evade or frustrate competition or from the type of beneficial rivalry that drives economic growth. These proposals would render what normally would be the critical question irrelevant, and consumers would pay the cost in higher prices and less innovation.
In short, enactment of these proposals would mark a return to the structuralist paradigm that held sway with courts through the 1960s and that based antitrust liability purely on companies’ size without considering the conduct that led to that structure. Thankfully, legislative efforts to enshrine that approach in statutes failed, allowing for its eventual rejection by the judiciary in favor of a conduct-based analysis better designed to foster business acumen and innovation. The structuralist school of thought has been disavowed by essentially every mainstream judge, scholar and antitrust advocate, and by the 1970s, support for it had collapsed.
Any legal regime that treats large companies as violating the antitrust laws without any evaluation of their conduct would represent a return to a long-superseded perspective that all-too-often punished businesses simply for being successful. Enacting such legislation would ignore the negative effect on innovation that led Congress to reject similar proposals in the past. Worse yet, it risks removing a key cornerstone of U.S. economic success at a time when every American business is facing a global market that is becoming increasingly competitive, one in which countries skew the playing field in favor of their own companies.
Congress would do well to heed the well-known admonition that those who forget history are doomed to repeat it and not to allow the heat of the “techlash” moment to overshadow lessons that are as important now as they were then. The innovation that serves as the foundation for our country’s future prosperity depends on it.
Christopher S. Yoo is the John H. Chestnut Professor of Law, Communication, and Computer & Information Science and the founding director of the Center for Technology, Innovation & Competition at the University of Pennsylvania.