Last week, the Federal Trade Commission approved the merger between internet-giant Amazon and Whole Foods, the original organic grocer. You may be surprised how quickly the merger passed regulatory muster, especially given the public’s desire for strong antitrust enforcement to promote vigorous competition and equity in our economy, including our digital one. You may be wondering: Is this a case of weak enforcement? Is it proof that today’s antitrust doctrine is useless for digital-age companies? Or are critics of growing digital market concentration simply wrong to express concern? My guess is “none of the above.” Here’s why.
Time to Push Antitrust Forward
It has become clear to a lot of people that many industries have grown excessively concentrated. Even industries with four competitors, like the airline industry, seem able to ignore their customers without losing profit. The internet, which was supposed to produce a world of unlimited competition by aggregating demand around the world, seems to have produced a handful of enormous “platforms” — Amazon for shopping, Google for search, and Facebook for social media. Even more disconcerting, no one seems to have a good understanding of all the businesses these platforms impact or why a software giant like Microsoft can’t seem to challenge Google for search, or why Google can’t seem to unseat Facebook for communications. Consumers feel squeezed between traditional business giants like Walmart and United Airlines on one side, and digital giants like Amazon and Apple on the other.
What to make of this? The Obama Administration tried to move the ball forward with incremental changes, challenging some mergers (such as AT&T’s attempt to buy T-Mobile in 2011) and conditioning others (such as Charter’s purchase of Time Warner Cable in 2016). But while the Obama Administration enjoyed some success, the current level of industry concentration in businesses as diverse as chicken farming to online messaging platforms shows the limits of the incremental approach.
In response to the slow pace of incrementalism, some seek to move antitrust enforcement to take on issues it once considered and challenge courts to totally rethink antitrust doctrine. Others seek to infuse new economic and social policy concerns within antitrust thinking. Mergers like Amazon-Whole Foods provide the perfect opportunity for advocates to make their case to the public and Congress that we need a hard course correction, rather than incremental changes, to make antitrust effective in the digital economy.
Antitrust Isn’t the Only Tool to Protect Consumers
Certainly antitrust needs to adjust to the times. That includes rigorous enforcement, serious discussion of antitrust goals, and how the digital economy may call for a very different set of tools than the industrial economy of the previous century. But in our re-examination of antitrust law, we should not neglect what may be better and more effective tools: traditional consumer protections.
Why should we differentiate between antitrust law and consumer protection? For one, efforts to move antitrust doctrine could easily take decades or may never take hold. The current highly restrictive view of antitrust that has allowed the existing levels of concentration to emerge did not come into existence overnight. Decades of academic literature and incremental judicial decisions moved antitrust away from its previous focus on market share to the modern “consumer welfare test” that demands that antitrust agencies must consider “pro-consumer efficiencies” or other theoretical justifications for allowing market concentration. Walking back more than 50 years of academic theory and jurisprudence doesn’t happen overnight.
It is impossible to fault the FTC for greenlighting the Amazon-Whole Foods merger when virtually nothing past court decisions have directed them to address in merger review were implicated by this transaction. Furthermore, if the goal is to challenge the weakness of a current applied antitrust principle (like the “consumer welfare test”), it is important to find a test case where enforcers and the courts will be most sympathetic (for example, this worked for the Department of Justice’s recent challenges to health insurance mergers where the Department asserted that quality of care would be diminished).
Also, by interjecting new goals into antitrust analysis, rather than bringing these arguments to bear as traditional reasons to enhance consumer protection law, advocates run the risk of alienating the people who are most sympathetic to their overall goals. Many antitrust experts and economists would happily support policies designed to prevent political dominance, economic inequality, and many other social policies, but they will vigorously challenge their relevance to the goals and efficient functioning of the antitrust laws. These policy goals can be pursued through enforcement of sector-specific laws, or general laws that establish standards for social and economic fairness. Almost all industries must abide both by antitrust and much broader legal directives, so why not use all policy tools in tandem to achieve our goals?
Indeed, the emphasis on antitrust as the best way to protect consumers from harm, rather than looking to enhance consumer protection directly, has been a mainstay of industry and industry-supported think tanks for decades. The elimination of important economic and consumer protections in the 1990s, such as the repeal of financial regulations under the Glass-Steagall Act, the modification of the FTC’s consumer protection standard to require “balance” with industry “efficiencies,” and the elimination of price regulation for cable and telephone services, were all justified in the name of competition. Antitrust, industry players promised, could do everything traditional forms of economic policy and consumer protection could do — making traditional consumer protections unnecessary or even a hindrance to the promised competition. Rather than accept the idea that antitrust is the only form of economic policy or consumer protection we need, we should embrace a revival of consumer protection in addition to more aggressive antitrust enforcement.
Consumer Protection Regulation, Rather Than Waiting for New Antitrust Doctrine, May Better Address Concerns About the Tech Sector
Of course, the one sector with the fewest tools for legal intervention is the previously unregulated and fast exploding tech sector. So is antitrust all we have to protect consumers? Should we put tech under enhanced antitrust scrutiny because that’s the only tool we have?
Before forcing all social policy into antitrust, it’s important to consider (since any option may take many years to effectuate) whether developing broad norms for how digital networks should behave and be structured works better in the short term than trying to solve all our consumer concerns with “antitrust on steroids.” What do we want Amazon, Facebook, Google, and anyone like them to do or not do? Are they or will they increasingly compete against each other? We should think more about the answers to these questions before recommending any major policy initiatives. In particular, we should consider that it is much easier for us to identify specific behaviors that harm consumers and competition and regulate these directly, than it is to go after these behaviors with novel theories of antitrust.
For example, we know that digital platforms and devices vacuum up huge amounts of our personal data. It makes much more sense for federal agencies, Congress, and the states to focus on creating strong privacy protections immediately than to wait for or expect antitrust to solve the problem.
Consumer Protections and Antitrust Law Work Together to Promote the Public Interest
We hope the result in the Amazon-Whole Foods merger will neither make people give up on antitrust as an important policy tool, nor drive people to focus all their efforts on a “new antitrust” that tackles everything from quality jobs to social justice. We suggest that advocates strategically use antitrust enforcement and competition policy principles to fully protect consumers and citizens in the digital age. Finally, we strongly encourage a renewed effort to invigorate antitrust enforcement and promote new laws that create the social and economic equity we expect as a society — and deserve.
Source: Public Knowledge
