So, it has finally arrived, the highly anticipated “Investigation of Competition in the Digital Marketplace: Majority Staff Report and Recommendations” from the House Judiciary Committee’s Subcommittee on Antitrust, Commercial, and Administrative Law. The subcommittee’s lawyers and investigators (but not a single economist) spent 16 months digging into the business activities of just four of the thousands of companies in the “digital marketplace.”
The outcome of the investigation was never in doubt. Subcommittee Chairman Cicilline told the Washington Post that he “predicted that the probe would find that the Internet had become ‘broken’ — overcome with ills, including privacy scandals, resulting from years of neglect in Washington.” The report “confirmed his fears.” Of course it did.
Hipster antitrust proponents eager for a return to the Brandeisian good old days will toss the 450-page report onto the fire they have been kindling for the last few years with calls for a more “public-interesty” approach to competition law and policy. Those consumer-welfare standard skeptics have received support from some unlikely allies whose ideology generally tilts firmly against government intrusion.
American Enterprise Institute’s National Affairs journal released a timely article today online in which authors Josh Wright and Jan Rybnicek aim a challenge at those unlikely allies: “A Time for Choosing: The Conservative Case Against Weaponizing Antitrust.” Wright, a former FTC Commissioner and current professor at George Mason-Scalia Law School (and a WLF advisory board member), and Rybnicek, a Freshfields Bruckhaus Deringer attorney, warn against following the path set out in documents like the House Judiciary report: “expanded government control of tech firms for the ‘greater good’ designed by regulators and bureaucrats.”
Wright and Rybnicek remind readers how, prior to the 1970s, antitrust was “intellectually bankrupt” and untethered from the rule of law. Rigorous economic analysis and the advocacy of neutral principles, applied by “jurists like Bork, Thomas, Scalia, Easterbrook, and Doug Ginsburg,” wrested antitrust law away from “undefined notions of populism” and grounded it in consumer welfare. This development fueled free enterprise, the authors write, by creating “a stable and predictable environment for private actors and firms to invest and innovate.”
One point not made in the National Affairs article, but which Wright and Rybnicek (plus co-author Elyse Dorsey) made in an April 2018 CPI Antitrust Chronicle piece, is how a vague “public-interest” standard for antitrust will favor large, well-capitalized incumbents like those the House committee investigated.
“Calls to replace the consumer welfare standard with a new ‘public interest’ test,” they wrote, “would . . . open the door to rent seeking by interested parties and, ultimately, create an antitrust regime that focuses on corporate welfare rather than consumers.” Large, incumbent market participants would be more adept at gaming a flexible antitrust regime than smaller competitors, either filing private suits of their own against rivals or convincing regulators to act in their incumbent’s interest.
It is, indeed, time to choose, not only for the targets of Wright and Rybnicek’s National Affairs article, but also for elected officials and regulators champing at the bit for new antitrust rules. Everyone involved should bear in mind the iconic Grail Room scene in “Indiana Jones and the Last Crusade.” The knight counsels Donovan to “choose wisely” from a large collection of chalices. Brody allows his collaborator Elsa Schneider to choose. She grabs a shiny, jewel-encrusted cup and hands it to Donovan. He drinks water from it, and, well, as the knight utters, “he chose poorly.” Dr. Jones grabs a simple, sturdy cup and drinks. “You chose wisely,” the knight remarks.
Also published by Forbes.com on WLF’s contributor page.