Across the American economy, in industries ranging from air travel to veterinary medicine, big companies keep getting bigger and more powerful. Swallowing smaller rivals has become a widely accepted practice.
This concentration of corporate power, however, is neither inevitable nor desirable for the health of the American economy.
The Biden administration is embarking on a wide-ranging effort to check corporate power by promoting competition — a stated goal of both parties — and it needs Congress to support its effort with bipartisan legislation. It has proposed new rules, like a ban on noncompete agreements that prevent workers from changing jobs more freely. It is seeding competition, for example, by investing more than $1 billion to open and expand smaller meatpacking plants. And it has taken a tough line on mergers, blocking some big deals, dissuading companies from pursuing others and even suing to unwind Facebook’s 2012 acquisition of Instagram.
Last month, the Department of Justice and the Federal Trade Commission, which are charged with enforcing antitrust laws, proposed new merger guidelines that would formalize this turn toward stringency, ending decades of acquiescence to corporations by both Democratic and Republican administrations. The document explains what the administration regards as illegal, creating a basis for consistent enforcement, putting companies on notice and preparing judges for the cases that may come before them.
This reassertion of an active government role in protecting competition has the potential to deliver significant benefits. Competition keeps pressure on prices. It encourages the development of better and more diverse products and services. It holds open the gates of opportunity so workers can pursue other jobs or start their own businesses. It helps to ensure that prosperity and political power are broadly distributed.
“In my view, it’s the most important economic policy thing that the Biden administration will do this year,” said Tim Wu, a Columbia Law School professor who served until earlier this year as President Biden’s adviser on technology and competition policy. Mr. Wu, who was not involved in creating the proposed guidelines, said the document reflected a determination to end a “green light” era in which American antitrust enforcers largely declined to enforce antitrust laws.
But the shift comes with real risks, too. Tighter enforcement could inhibit the growth of companies that have prospered through innovation or through the delivery of goods and services at lower costs. Bigger companies may be better equipped to compete in the global marketplace.
For several decades, beginning under President Ronald Reagan, both Democratic and Republican administrations embraced the idea that corporate concentration was often economically beneficial — and that companies engaged in harmful behavior would be disciplined by market forces. The merger guidelines issued by the Reagan administration in 1982 set the tone: “Although they sometimes harm competition, mergers generally play an important role in a free enterprise economy,” the guidelines said. Under subsequent administrations, the government refined an approach that gave corporations the benefit of the doubt. It wasn’t enough to show a merger would reduce competition; the government generally sought to block deals only when it could show a merger would result in higher prices for consumers or that it would clearly cause some other quantifiable harm — a standard that was rarely met.
Under this E-ZPass approach to antitrust enforcement, industries rapidly consolidated until the United States was left with four major airlines, three major cellphone companies and two dominant makers of coffins. A 2018 analysis concluded that concentration had increased in three-quarters of domestic industries, giving companies more power to raise prices, squeeze suppliers, suppress wages and influence policymakers.
Americans have been living as subjects in a large-scale experiment in letting big companies do as they please, and the consequences are increasingly apparent in daily life. Compare the United States with Europe, where authorities have more successfully resisted the consolidation of major industries. Airfares in the United States are now significantly more expensive; North American airlines pocketed more than twice as much in profits from each passenger in 2022 as their European counterparts did. The internet costs more, too: Americans pay more than twice as much for broadband, and the cost of cellular service is also, on average, more than twice as high in the United States as the average in other developed nations. The economist Thomas Philippon wrote in a 2019 book about the decline of competition in the United States that the American economy would be roughly $1 trillion larger than it is today if the United States had simply maintained the level of competition that prevailed in 2000.
The turn toward stringency reflects some of what has been learned in recent years about the effects of corporate concentration, for example, in a new emphasis on protecting workers. Economic circumstances also have changed. The rise of online business models in particular has created challenges not fully anticipated by earlier generations of policymakers, such as the ways that user data can be used to limit competition. In December, Amazon settled an antitrust complaint brought by European Union regulators by agreeing to stop using data gathered from third-party sellers on its site to calibrate its own retail business decisions.
The most important change, however, is a reconsideration of the role of economics in making policy. The guidelines treat the economic analysis of corporate concentration as a valuable source of information, rather than the measuring stick by which decisions are made. Antitrust authorities have failed in their responsibility to the American people by assigning to themselves the burden of trying to figure out which mergers may be harmful, rather than taking seriously their marching orders from Congress to prevent concentration.
Some harms are difficult to quantify. Some are difficult to anticipate. And sometimes the damage is cumulative. In separate interviews, Jonathan Kanter, the assistant attorney general who heads the Justice Department’s antitrust division, and Lina Khan, the chairwoman of the Federal Trade Commission, argued that the changes should be seen as a restoration of the plain meaning of the nation’s antitrust laws, which place limits on corporate concentration even when it isn’t possible to show negative economic effects in advance. Mr. Kanter said his department is focused on protecting competition because that is the goal that Congress enshrined in law and he is in the law enforcement business. “We’re going back to enforcing the law to its fullest extent,” he said.
To achieve this goal, the administration will need to overcome the skepticism of federal judges, many of whom are steeped in the minimalist approach to antitrust enforcement. The regulatory agencies have lost several cases in which they sought to enforce antitrust laws more stringently, including decisions allowing the tech giant Meta to buy Within, a maker of virtual reality apps, and to let Microsoft proceed with its acquisition of Activision Blizzard, which makes video games.
A key element of the Reagan administration’s antitrust revolution was to put on the bench legal scholars who had played leading roles in developing what might be called the anti-antitrust movement. The Biden administration so far has not emulated that strategy. Through the guidelines, however, it is at least seeking to change minds. The document can be understood as an open letter to the judiciary, encrusted in footnotes and references, pressing the argument that a shift is not just good policy but also good law.
Congress can help. Prominent politicians in both parties regularly express concern about the effects of concentration and the power of corporations, but Congress has not passed a significant law addressing antitrust enforcement in more than 70 years. The proposed guidelines seek to apply those old laws to the modern economy, but it’s an imperfect fit. The United States needs to update its antitrust laws to place stronger limits on corporate concentration and specifically to curb the power of tech companies. Bridging differences between the two political parties won’t be easy, but enduring changes in antitrust policy have always required bipartisan support.
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