It's Not Just Amazon. Antitrust Needs a Revival.
(Bloomberg Opinion) -- Over the course of many years, U.S. laws meant to foster business competition have been beaten into submission, and the regulatory powers that be have been undermined — at times by their own doing. Now, President Joe Biden, his controversial antitrust enforcer Lina Khan and members of Congress are trying to restore and maybe even rewrite the nation’s antitrust laws. It’s not clear how far they’ll get busting the technology giants that are their chief targets. But this marked change of tone at the top could accomplish quite a lot just by sending a strong message to regulators: Do your job.
On July 1 — only two weeks after Khan was sworn in as Federal Trade Commission chair — the agency voted along party lines to rescind a key policy statement from 2015 that had limited the scope of the FTC’s enforcement capabilities. It directed the FTC to view so-called competitive harm through the narrow lens of consumer welfare, disregarding potentially anticompetitive effects on rivals, suppliers or employees more broadly. The rule blunted the agency’s own power at a time when it might be helpful in regulating the amorphous tech industry — especially giants like Amazon.com Inc., Apple Inc., Facebook Inc. and Alphabet Inc.’s Google. In rescinding it, Khan is seeking to restore the original mandate Congress gave the FTC long ago to police “unfair methods of competition,” a duty the agency says “extends beyond the Sherman Act and the Clayton Act,” the two main antitrust laws governing the U.S. today.
There are parallel efforts in Congress to modernize these laws; others argue that they’re already sufficient as written, despite being more than 100 years old. The FTC’s dissenters last week also voiced concern that broadening beyond the consumer-welfare standard will leave more room for politically motivated enforcement actions. When it comes to most corporate mergers, current laws probably should suffice, even if their focus on consumers and prices makes them less easily applied to tech giants that otherwise would seem to have clear monopolies within their respective market silos.
Big Tech isn’t the whole story, though, and you don’t have to be an antitrust scholar to see signs of harmful market concentration in other industries where the law should have been clear cut. Anyone who’s flown lately, enjoys craft beer or has had to file a health-insurance claim may have spotted the effects of allowing very few companies to dominate entire industries. In 60 instances since 2011, companies were able to buy a competitor worth at least $20 billion and plenty of these deals were much larger, at $50 billion and above. If the law as written is up to the task, then why are regulators letting so many deals get around it?
I prefer to look at the wireless space because it’s one I know best, but it also contains some of the most egregious examples. Last year’s merger of T-Mobile US Inc. and Sprint Corp. — at the time, the No. 3 and No. 4 wireless carriers, respectively, in a four-player market — was exactly the sort of deal seen as running afoul of the Clayton Act. Even so, former President Donald Trump’s Department of Justice and Federal Communications Commission approved the transaction, which also went on to defeat a multistate legal blockade. This set a precedent for allowing mergers between direct competitors in already highly concentrated industries. Setting new precedents that run counter to antitrust law makes it harder to bring future cases and makes the laws we have less potent.
The same industry shows how well current laws work to promote competition when they are followed. After AT&T Inc. was blocked from buying T-Mobile in 2011 and forced to hand over wireless spectrum to its weaker rival, market competition flourished, leading to lower prices, the introduction of unlimited-data plans and a spirited race to 5G technology. Remember, T-Mobile and Sprint argued that blocking their merger would hinder their 5G efforts; AT&T and T-Mobile argued the same thing a decade ago with 4G LTE, and yet they rolled it out anyway, because competition.
Still, courts and regulators are being pushed in “a less interventionist direction,” Jonathan Baker, a research professor of law at American University and former member of the FCC and FTC, has written. That’s especially true for so-called vertical mergers where the companies operate in different portions of a supply chain, such as AT&T’s 2018 takeover of Time Warner Inc. The judge in that case criticized the government’s lawyers for failing to provide enough evidence of harm and relying on speculation, which regulators had to do because the streaming-TV industry was still being formed.
This backward focus — on evidence of what’s already happened and legal precedent — creates an uphill battle in regulating industries being transformed by tech and dominated by conglomerates because it makes the question of who’s being harmed and how more difficult to answer. (AT&T’s hard-won Time Warner deal did produce a concerning advantage but it was more than offset by the sour effects that the debt-ridden purchase ultimately had on its business and stock price. )
Khan wrote this in 2015: “Breaking companies up is not a radical act. Corporate managers do it all the time.” However you feel about her views, she’s not wrong about that — it’s the same advice Wall Street bankers sell every day. Lo and behold, AT&T and Time Warner are now breaking up. That is to say, there’s an abundance of evidence that antitrust enforcement has been in detrimental decline. There’s scant proof that restoring it will hurt the country.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tara Lachapelle is a Bloomberg Opinion columnist covering the business of entertainment and telecommunications, as well as broader deals. She previously wrote an M&A column for Bloomberg News.
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