How the ‘anti-monopoly’ left overturned the US antitrust consensus

To achieve a sea change in policy, the most important task is to legitimize a favored approach and delegitimize a disfavored one. That is exactly what progressives have done over the past decade when it comes to antitrust issues. In a multi-pronged advocacy campaign, they have demonized big business, discredited longstanding bedrock principles of antitrust policy, and advanced a new doctrine that happens to align neatly with a redistributionist economic agenda.

Their basic contention is that the economy has fallen into the grip of rapacious monopolies, which are crushing competition to the detriment of small businesses, workers, and many other societal interests. It’s a case built on half-truths, faulty research, and dubious economic theory, but it seems to be winning the day — as evidenced by last week’s Senate Judiciary Committee hearing titled, unsubtly, “Competition Policy for the Twenty-First Century: The Case for Antitrust Reform.”

This was among the latest installments in a dramatic miniseries that began in the last session of Congress with similar hearings in the House Judiciary Committee. If you have been following along with any of this, you have been treated to an impassioned evisceration of U.S. antitrust doctrine and policy, which since the 1980s has been based on four key principles: 1) Large firms are not inherently problematic; 2) market power can increase or decrease economic welfare; 3) antitrust should protect competition, not competitors; and 4) the ultimate goal is to improve consumer welfare by spurring innovation.

Those principles provide the analytical framework for what is known as the “consumer welfare standard” in antitrust enforcement. In short, when regulators scrutinize a business practice or a proposed merger, they try to judge whether it helps or harms consumers. But the antitrust crusaders have reframed the debate to introduce a new “public interest standard,” which would be conveniently malleable enough to serve a wide range of purposes, such as protecting small firms, saving jobs, reducing income inequality, and more.

To rally support for their cause, progressives have spun an intricate narrative in which virtually all economic problems stem from large corporations. Thus, in the words of Roosevelt Institute scholar Nell Abernathy, it is time for antitrust to “tame” the corporate sector. Contributing to the drumbeat, there has been recent White House appointee Tim Wu’s “The Curse of Bigness”; Matt Stoller’s “Goliath: The 100 Year War Between Monopoly and Democracy”; Barry Lynn’s “Cornered: The New Monopoly Capitalism and the Economics of Destruction”; and the book with perhaps the catchiest title, if not the most eloquent, Sally Hubbard’s “Monopolies Suck: 7 Ways Big Corporations Rule Your Life and How to Take Back Control.”

These books almost all start with a description of an idealized world before the 1980s, when corporations were supposedly much smaller and everyone else much better off. Then, according to the narrative, a host of economic problems ensued, thanks to the rise of so-called “monopolies” and the emergence of a corrupt new school of antitrust, enabled by craven antitrust scholars in the pocket of big companies. And as in a three-act play, the finale involves the progressives arriving to save a long-lost American dream by taking the antitrust hatchet to big, bad corporations.

In truth, the progressives’ monopoly fears are vastly overblown. There are a host of causes for recent U.S. economic maladies, including the rise of China, investor-driven corporate short-termism, and underinvestment by government in the factors that drive growth. But the anti-monopolists have forged ahead with their argument anyway — often by manipulating statistics. One example has been implying that correlation equals causation, as when they asserted, wrongly, that a decline in new firm startups has been caused by an increase in industry concentration. Another has been to use misleading methods, such as when antitrust scholars argued that industry price markups (a measure of economic concentration) had vastly increased, which they did not.

But the anti-monopolists’ boldest stroke has been to use Big Tech as a stalking horse for attacks on Big Everything Else. There had to be a villain in this story, and large internet platforms like Google, Facebook, and Amazon have become the perfect targets. There was a time when it might have proved difficult to convince many Americans they were being harmed by companies that provide either free or incredibly convenient service, but these days conservatives have their own, equally dubious reasons to bear a grudge against Big Tech — so there is an opportunity for progressives to make common cause. (Full disclosure: Google, Facebook, and Amazon provide financial support to my organization.)

This represents a perilous moment. Getting antitrust right — which means focusing on consumer welfare and innovation — is critical for U.S. economic growth and competitiveness. While the current antitrust system can always be improved, such as by increasing funding for enforcement agencies, attempts to turn antitrust into a populist tool to dismantle large corporations will yield slower growth in living standards, static wages, and weak competitiveness. Before policymakers go down such a transformative path, they should stop and carefully assess the evidence behind the progressives’ case.

Robert D. Atkinson (@RobAtkinsonITIF) is president of the Information Technology and Innovation Foundation (ITIF), the leading think tank for science and technology policy.