Do We Need A New Deal With Competition?
Noam Chomsky usually decries the neoliberal state (of which he usually has America in mind), as having no moral consistency other than in serving the interests of the elite. To critics, current anti-trust laws partially vindicate Mr. Chomsky’s claim. According to this view, contemporary antitrust laws and [a lack of] enforcement serve to epitomise the evolution in how the state has come to view its role during the neoliberal era that has underpinned the economic dogma of various governments across the west in the past 40 years. Such critics, typically liberals, leftists, and anyone in-between, usually call for at least one of two things.
A redefinition of antitrust ‘suitable’ for the 21st century is a given. The argument for this goes that the enforcement of antitrust laws has become increasingly lax over the past 40 years. And because of this, corporate power has increased; competition has been killed; market concentration has borne fruit thereby harming both consumers and companies in the process. The second argument is innately more hard-line and calls for more intrusive action. This is that to go with more stringent antitrust laws, the beneficiaries of antitrust leniency, namely big and large market cap companies, should be broken up or given more than what they understand to be a slap on the wrist for their antics.
However, there is also some intellectual and economic grounding that the anti-anti-trust movement falls back on which requires their claims to be taken seriously. Antitrust laws, like any other form of government regulation, have an intertwined relationship with innovation, markets, and consumers. One powerful argument that comes out of the moderate wing of the anti-trust reform movement is that a redefinition of antitrust would seemingly
provide the impetus for disruptive innovation and market dynamism, all the while limiting the power and market influence of large-cap companies without having to break up such companies. Such innovation would be the result of freer and fairer competition where the ability of companies to buy their competition is limited, thereby meaning that they cannot relax their innovative impulses in the process. Indeed, this argument, which is essentially one premised on the benefits of innovation and the ability of the state to play a role in it, is one which is made in other areas of public policy by respectable left-wing economists such as Mariana Mazzacato.
But if innovation economics, free and fair market competition, and a check on power are the motivations for the proponents of moderate antitrust reform, the same appears not to be the case for hardliners. The contention that ‘big is bad’ is the guiding principle for people in this camp and a redefinition of antirust is seemingly not enough, if anything it’s folly. What worries some, and what appears to be worrying big tech is that people in the latter camp or those who hold both views, appear to be growing in influence. Lina Khan, a member of the US Federal Trade Commission authored the paper, Amazon’s Antitrust Paradox, wherein she blasted Amazon for its supposedly anti-competitive practices and claimed it should be broken up. Mrs. Khan appears keen to rein in big tech and her nomination by Joe Biden appears to demonstrate the fact that she bears some influence over the President of the United States and other leading Democrats. Her presence on the FTC should make big tech
anxious, and it sure has. Amazon sought to recuse Mrs. Khan from investigating the company because of her past comments and in August 2021 Mrs. Khan re-filled an antitrust campaign bought forward by the FTC that seeks to break up Facebook.
But amid all the intellectual drum-banging and multi-billion-dollar squabbles on the status of antitrust laws, the standing of antitrust as a hot topic presents a real opportunity for what is arguably necessary reform. Central to the enforcement and definition of antitrust laws in the UK and US is the principle of consumer welfare standard (CWS). The CWS principle places a significant emphasis on a consideration of consumer prices. Therefore, only if a proposed merger or acquisition is believed to make the goods or services provided more expensive is it thereby a violation of antitrust laws.
Seemingly, the issue with the prioritisation of consumer welfare when considering whether it’s legitimate for one company to acquire or merge with another is that it relies on a counterfactual assessment of what would and would not happen if company A did and did not acquire company B. To critics, this is flawed as any counterfactual assessment that is implied within the CWS relies on unsubstantiated interpretation of the way a particular industry would (or wouldn’t) be affected if the merger or acquisition never took place. More problematically still is that it relies on an unsubstantiated understanding of a company’s intentions when acquiring another, and such intentions could be anti-competitive in nature.
Facebook’s acquisitions of Instagram and WhatsApp in 2012 and 2014 respectively may not have appeared as anti-competitive at the time. As a matter of fact, as the owners of WhatsApp, in 2016 Facebook eliminated the cost to consumers by getting rid of the $1 annual fee paid after 12-months by WhatsApp users. However, in hindsight, many people would regard Facebook’s acquisition of these platforms, and their continued appetite for more acquisitions such as the GIF maker, Giphy, as a cynical attempt by the company to suppress competition and consolidate its domination of social media. This may explain why Facebook is amongst the chief culprits according to anti-big tech activists and progressives that want to see such companies broken up or significantly reined in by the state.
A new deal with competition that enforces market competition as the guiding principle would ensure that any suspected anti-competitive practices, rather than those which merely have an effect on prices, are neutralized without having to forcibly break up companies. This would also ensure that there is an upholding of the rule of law by respecting the limits of government, something that has served countries such as Britain and America so well, whilst simultaneously tackling the market concentration problem that exists, especially in the US. It would also protect workers, many of whom are worse off as a result of market concentration or market monopsonies. Take the leading Mixed Martial Arts (MMA) franchise, UFC for example, its fighters have supposedly been the victims of a lack of choice and market concentration stemming from the anti-competitive actions of the UFC franchise. A host of former UFC fighters have bought lawsuits forward against UFC accusing it of being a
monopsony and limiting the pay of fighters who have no other option but to accept being ripped off by their employer because of a lack of choice within the professional MMA industry.
Instead of debating whether companies should be broken up, we should be discussing the root cause of this discourse in the first place. Breaking up companies does not resolve the ‘antitrust paradox’ if an outdated definition of antitrust remains. The need for companies to be more innovative and industries to become more dynamic has never been greater amid the challenges of climate change and Covid-19. If competition is not quickly addressed then consumers, companies, and capitalism may have further issues to deal with.