Anthony W. Swisher is a Partner in the Washington, DC office of Baker Botts LLP and serves as the WLF Legal Pulse blog’s Featured Expert Contributor on Antitrust & Competition Policy — U.S. Department of Justice.
Antitrust practitioners often toil in the shadows. Many antitrust matters are just not that interesting to people beyond the parties involved and those of us who practice antitrust law for a living. Occasionally, however, an issue will arise that catches the public’s attention, and antitrust enjoys a moment in the spotlight. The recent public interest in “Big Tech” companies is one such moment. Firms such as Google, Facebook, Amazon, and Microsoft suddenly find themselves the subject of increased antitrust attention. Recent months have seen numerous calls from political leaders and policy pundits to investigate the activities of Big Tech, some even going so far as to call for the firms to be broken up.
It is in this context that the DOJ Antitrust Division recently announced a review of “market-leading online platforms.” According to the DOJ’s press release, its review will consider “whether and how market-leading online platforms have achieved market power and are engaging in practices that have reduced competition, stifled innovation, or otherwise harmed consumers.” At first blush, announcing a review in this environment might be risky. An antitrust investigation launched in the context of heightened calls for the government to “do something” risks being incorrectly labeled as advancing questionable antitrust policy in service of a desire to appear proactive.
Many of the objections about Big Tech firms raised by political leaders and pundits—on both sides of the political aisle, it should be noted—are inconsistent with long-established principles of antitrust enforcement. Concerns voiced over impacts on “small business” risk elevating the interests of competitors over those of consumers. Calls to break up firms not because they are exercising market power or engaging in exclusionary conduct, but simply because they are “too big,” risk undoing decades of advancement in antitrust policy. Former Acting FTC Chairman Maureen Ohlhausen cited this trend in recent testimony before the House Judiciary Committee, noting that some believe that “current events have overtaken the hard-won political consensus that antitrust should principally focus on protecting consumers.”
DOJ’s review might, however, provide an opportunity; an opportunity for the Antitrust Division to reiterate that established antitrust principles still hold true, and that firms can continue to order their affairs secure in the knowledge that they will not be labeled an antitrust violator simply because of shifting political winds. Many of the calls to investigate and even break up Big Tech firms seem to disregard at least two long-established antitrust principles: the consumer welfare standard, and the notion that “big” is not necessarily “bad.” These are not partisan principles, but fundamental tenets of antitrust policy that Democratic and Republican administrations alike have relied upon for decades to guide their enforcement efforts. DOJ can take this opportunity to reiterate that these ideas still hold true.
The consumer welfare standard has long been recognized as the guiding principle of U.S. antitrust enforcement. It provides the antitrust enforcement agencies with a standard for enforcement decisions, and it provides guidance to economic actors as to what types of conduct may violate the antitrust laws. As former FTC Chair Tim Muris put it, “[t]here is now general agreement that consumer welfare should be the touchstone of antitrust enforcement.” This idea was echoed by former AAG Joel Klein, who noted that “we are concerned with consumers, not competitors,” and called on antitrust enforcers to “resist the temptation” of using the antitrust laws “to protect competitors rather than competition.” Professor and former Acting Director of the FTC Bureau of Competition Tad Lipsky repeated the idea in his 2017 testimony before the Senate Judiciary Committee, where he correctly asserted that the consumer welfare standard is “the best guide for the millions of businesses throughout our economy in understanding how to comply with antitrust rules.”
A similarly well-established principle of antitrust enforcement is the notion that “big” does not equal “bad.” To violate Sherman Act § 2’s prohibition against “monopolizing,” being “big” is not enough. Even being big and charging high prices won’t get you there. A firm must also engage in some form of exclusionary conduct. As the Supreme Court held (without dissent) in Verizon v. Trinko, “The mere possession of monopoly power, and the concomitant charging of monopoly prices, is not only not unlawful; it is an important element of the free-market system. . . . To safeguard the incentive to innovate, the possession of monopoly power will not be found unlawful unless it is accompanied by an element of anticompetitive conduct.”
Officials from numerous administrations and on both sides of the political aisle have consistently echoed the Supreme Court’s statement in Trinko. For example, former FTC Commissioner Edith Ramirez noted during her term that, “In many cases, being big is a consequence of being better than rivals at offering customers what they want. We are rightly hesitant to view success, and by extension size, with automatic suspicion.” Commissioner Ramirez’s comments echoed those of AAG Klein, who argued that “it’s important to emphasize that big is not necessarily bad when it comes to antitrust enforcement. Bigness can lead to efficiency – through a synergistic merger, for example – which in turn is good for consumers.” Professor and former Obama administration Antitrust Division chief economist Carl Shapiro wrote in his paper Antitrust in a Time of Populism, “[L]et these inquiries proceed when suspicious conduct can be identified. But in doing so, let us avoid a ‘big is bad’ mentality and let us truly have the interests of consumers in mind.” More recently, AAG Makan Delrahim has repeated the same principle, recognizing that a “crucial element” of a monopolization claim is the requirement that the defendant acquired or maintained monopoly power “through anticompetitive conduct that is ‘exclusionary’ or ‘predatory’ in nature.”
Indeed, both of these principles—the consumer welfare standard and a refusal to treat size alone as an antitrust problem—have been espoused by current Antitrust Division leadership and by enforcers across the political spectrum stretching back decades. To the extent the voices calling for the investigation and break up of Big Tech are encouraging a move away from these principles, they should be rejected. Causing businesspeople to “set sail on a sea of doubt” as to what might constitute an antitrust violation is not sound policy.