When was the last time you purchased something online?
If you’re like many people, you’ve probably bought something online this week. And more than likely it was from Amazon though many other companies provide online shopping.
In fact, a recent survey found that one out of every four Americans buy items from Amazon at least once per week.
If the Biden administration has its way, Amazon could fall victim to trust-busting by the antitrust radicals as the Federal Trade Commission (FTC) gears up to file a lawsuit that could break up the company. This would put a major damper on the satisfaction that so many people have with purchasing from Amazon.
But there’s more to this perplexing story.
Despite recently trying—yet failing—to stop Microsoft from acquiring Activision, the FTC’s Chair Lina Khan and Assistant Attorney General Jonathan Kanter of the Department of Justice’s antitrust division are doubling down on the administration’s aggressive approach to antitrust enforcement.
Americans are rightfully concerned about these radical moves.
In my recent co-authored paper, we note how antitrust laws were designed to protect consumers and promote fair competition but rarely achieve these goals due to over-politicization and centralized power. Inevitably, businesses become the antitrust enforcement targets, resulting in less economic growth, innovation, and job creation, leading to higher prices and hindered prosperity.
In short, consumers and employers are hurt by antitrust overreach.
Bureaucrats too often use antitrust laws to bully businesses in the name of political agendas or vote-seeking initiatives, including empowering labor over management or breaking up successful companies based solely on their large size.
This includes recent attempts to discourage “big tech” in the case of the trial against Microsoft.
The erratic and changing nature of antitrust laws as power and agendas change leaves employers and innovators uncertain about the future thereby limiting their ability to plan profitable endeavors.
For example, determining what constitutes a "restraint of trade" under Section 1 of the Sherman Act, the first-ever antitrust statute, can be challenging. An overly broad interpretation of this phrase can lead to many unintended consequences.
Following complications in the Sherman Act, the U.S. Supreme Court recognized the consumer welfare standard that has set the precedent for at least the last 50 years, focusing on a simple question: do economic actions make consumers better or worse off?
Protecting consumer welfare, which refers to the value consumers receive above the price they pay for goods and services, should be the driving force behind antitrust enforcement. This concept acknowledges that consumers have the sovereignty to make decisions that support the competitive market process.
This has been the standard until recently.
A much more activist group of antitrust scholars and practitioners have emerged as advocates for a radical transformation of antitrust enforcement. They largely reject the consumer welfare standard and make sweeping claims that failing to enforce antitrust laws has led to market concentration and wealth disparities, or even the flawed claim of “greed inflation.”
But antitrust radicals diverge from the focus on promoting consumer welfare and safeguarding competition.
Their main argument is that the consumer welfare standard has allowed concentration and enabled firms to limit output and charge higher prices. Moreover, they advocate that antitrust laws should protect various stakeholder groups, not just consumers, making the consumer welfare standard inadequate.
However, evidence suggests the opposite.
According to a study conducted by former FTC Commissioner Joshua Wright, there is no empirical basis to conclude that monopoly power is increasing. Other studies indicate that while markups may be rising, output has increased, and quality-adjusted prices have remained stable.
The radical approach by Khan and Kanter to antitrust enforcement will not help consumers or the economy, no matter their intentions. We should remember the wise words by Milton Friedman: “One of the great mistakes is to judge policies and programs by their intentions rather than their results.”
The key to achieving greater opportunity and prosperity lies in reducing government interference and allowing competition, such as the gains provided by Amazon and Microsoft, to drive better results rather than expanding government. In fact, someone should be addressing the monopolies created by government across the economy, which have questionable at best increases in consumer welfare.
If the Biden administration’s proposed new guidelines for mergers go through or other expansions of antitrust enforcement, expect the already strained economy to endure extended suffering as innovation is stifled and consumers bear the brunt. And the satisfaction you get from shopping online may soon not be an option.
Vance Ginn, Ph.D., is chief economist of Pelican Institute for Public Policy and previously served as the associate director for economic policy of the White House’s Office of Management and Budget, 2019-20. Follow him on Twitter @VanceGinn.