‘Hipster antitrust’ movement is all action, no plan

Antitrust is cool again. But its new supporters are a bit like the old Looney Tunes character Elmyra, who tended to hug her pets to death.

A new populist movement, labeled by its supporters as “neo-Brandeis” and by its detractors as “hipster antitrust,” has fixated on antitrust law as panacea for all the worlds ills. Those in this movement believe that the consumer welfare standard (the one policy goal antitrust law was actually built for) is too narrow and that antitrust law should fix such wide-ranging problems as underemployment, income disparity, political power, and wealth accumulation. Neo-Brandeisians advocate for dramatic change in our antitrust laws, and specifically call for a setting aside of the consumer welfare standard that guides antitrust today for a more expansive standard that accounts for many policy goals.

{mosads}The consumer welfare standard is surprisingly simple. Alleged anticompetitive activities are held to one measure: whether they lead to more consumer harm than benefit. These harms can be in the form of higher prices, lower output, reduced quality or lost innovation. The neo-Brandeisians think this standard is too limiting, because what is good for consumers could potentially be bad in some other way.

But if you look closely at the neo-Brandeis movement you will see that it is surprisingly shallow in its details: all action, no plan. There is no consensus on how a new standard would work in courts. What we are left with are calls for change for change’s sake. This is not the way to build policy that needs to be as stable and forward looking as antitrust law. The impacts of enforcement can ripple out for decades and errors in either pursuing or not-pursuing cases have long-lasting effects.

The problem with populist antitrust is that without a coherent policy framework it is entirely self-defeating. How can we accomplish the goals of lowering prices and keeping jobs if a merger lowers prices by forming a more efficient company that needs fewer workers? And what if the merger leads to laying off some workers but hiring more workers in other areas? Do we lower the quality of popular products by breaking up the company that produces them because we fear that company has too much political influence? And once we adopt an antitrust policy goal that looks at politics, how do we keep enforcement from simply being used by the party in power to hurt companies supportive of those not in power?

While I admire the enthusiasm of these advocates, and share many of their goals, they need to recognize that their ideas are outside of the mainstream for a reason — they just don’t work. Here we see a stark contrast between the antitrust scholars, such as pro-enforcement stalwarts like Herbert Hovenkamp, Steve Salop, Diana Moss, and Carl Shapiro, and the antitrust newcomers. Those in the antitrust world tend to agree that we already have the right tools to protect competition, we just need to make better use of them.

We need less revolutions, and steadier hard work in building out the framework we already have. This requires things like better funding for our antitrust agencies and more work by economists in understanding new markets. We need to be able to identify behavior that is anticompetitive and then prove that the behavior is unlawful to a judge. And most importantly, it means we need to stick with the consumer welfare standard that has provided us with the tools to build winning cases. We can’t just wave our hands in court and say this company is bad because we say so. Law enforcement always requires proof.

This is no time to throw out the consumer welfare standard and introduce chaos into our antitrust enforcement regime. That would have the immediate effect of weakening enforcement through confusion. Especially since U.S. litigators would be stuck with the task of determining a new standard that can win at trial in addition to the already daunting task of bringing important enforcement cases. Modern antitrust law has thrived on the consumer welfare standard. Other policy goals are better suited to other forms of policy. 

David Balto is an antitrust attorney based in Washington, D.C.. He previously served as policy director at the Federal Trade Commission and as an attorney in the Justice Department’s Antitrust Division. He is an expert in antitrust, consumer protection, financial services, intellectual property and health care competition.

Matthew Lane is outside counsel to the Computer and Communications Industry Association.