Wired - Antitrust Litigation Isn't Enough. Biden Needs to Go Further
Sandeep Vaheesan, legal director for Open Markets Institute, writes in Wired about how antitrust suits, like the one filed against Facebook, are long, costly, and often ineffective. The next president can fix the system—without Congress.
Yesterday, the Federal Trade Commission and 46 states, the District of Columbia, and Guam filed parallel antitrust suits against Facebook for the acquisitions of WhatsApp and Instagram, and practices that excluded competitive threats in social networking and messaging. In October, the Department of Justice and 11 states filed a complaint against Google alleging the monopolization of mobile search and search advertising. Though Democrats surely hope President-elect Joe Biden makes a clean break with the Trump administration on many issues, the new president would be wise to embrace partial continuity in one area—antitrust enforcement.
While there’s been no shortage of antitrust action in recent months, Biden’s trustbusters can and should do even more to remind large corporations that they cannot operate with impunity. Litigation, while important, is not enough. The present antitrust system is costly, complicated, and time-consuming, guaranteeing little besides years of investigation and litigation—and billable hours for lawyers and economists. An effective and durable assault on corporate dominance requires new rules that ensure that powerful firms are quickly brought to account for wrongdoing. Even with a potentially divided government through 2022, the Biden administration—through the FTC—can begin fixing the law immediately.
The slowness of our current system is, at least in part, due to decisions made starting in the late 1970s, when the Supreme Court, FTC, and Department of Justice reinterpreted antitrust law. In place of rules that categorically prohibit certain business conduct, all three institutions adopted what’s known as the “rule of reason” for most practices.
The rule of reason rests on the belief that mergers and monopolies could benefit consumers and should only be restricted when proven otherwise. Will a merger likely lead to higher consumer prices? Would prices have been lower if not for a monopolist’s exclusion of rivals? Even if enforcers do manage to establish these consumer harms, a corporation still can escape liability by presenting justifications for its conduct. The practical effect is expensive and prolonged antitrust investigations and lawsuits. Federal enforcers must pore through millions of documents and retain economists—sometimes paid more than $1,000 per hour of their services—who try to forecast the future or imagine an alternate universe to determine whether a corporation broke the law. By imposing such extraordinary demands on the government and private plaintiffs, the law is stacked in favor of powerful corporations.
Investigations and litigation against corporate titans are lengthy. During the second half of the Obama administration, it took the FTC a year-and-a-half to stop the merger between Sysco and US Foods—a consolidation that would have given the two companies a 75 percent share in the national broad food distribution services market. According to one analysis, federal antimonopoly suits between 1990 and 2008 took, on average, nearly three years to resolve.
A more efficient and effective system is possible. Instead of an antitrust system tied to the convoluted rule of reason, the United States can have a system based on simple “bright line” rules that would make clear to businesses and the public which competitive tactics are illegal. Think of them as prohibitions on unfair business practices comparable to speed limits for drivers.
Read the full article on Wired here.