There are concerns that leading technology companies are too powerful and have too much market share, thus making them inherently dangerous and harmful to consumers, have led to growing calls to break up big tech companies and to abandon the long-standing consumer welfare standard for antitrust policy.
Today, Krisztina Pusok, Director of Policy and Research at the American Consumer Institute, interviewed the former commissioner of the Federal Trade Commission Joshua Wright, Professor of Law at Antonin Scalia Law School at George Mason University and Executive Director of the Global Antitrust Institute.
Here is audio recording.
And, the following is the interview transcript:
0:00
Good afternoon, everyone, and apologies for the couple of minutes of delay over here, we’re trying to get Josh connected to video, as well.
0:10
However, again, welcome to our entire audience, joining us for another American Consumer Institute webinar.
0:18
Today, we’ll look into why we need to preserve the Consumer Welfare Standard, an antitrust policy, and I am very excited, for a very fabulous speaker today, an expert on this issue, who is joining us today. Josh, right? And before I go ahead and introduce Josh, I do want to say that everyone in the audience is in listen only mode. And also, just a reminder for those of you joining us for the first time, the American Consumer Institut is a non-profit educational and Research Institute committed to be a reason voice for consumers by improving the understanding and impact of public policies. If you’d like to learn more about The American Consumer Institute, please go visit our website at the American Consumer Dot org and subscribe to our newsletter.
1:12
So I’m very delighted and delighted to be joined today by Josh.
1:18
Josh is a professor of law at Antonin Scalia Law School, at George Mason University, and also the Executive Director director of the Global Antitrust Institute.
1:30
Holds a court, has the appointment in the Department of Economics and has served as commissioner at the Federal Trade Commission.
1:39
He’s a leading scholar in antitrust law.
1:42
Economics, intellectual property, and consumer protection and has published more than 100 articles and book chapters, co-authored a leading antitrust casebook, and edited several bulk volumes focusing on these issues.
1:58
So I’m very delighted to have Josh with us today because the topic that we’re covering is particularly salient at the moment. Antitrust has become a very hot topic and it seems that antitrust law appears to be at a at a crossroads.
2:15
There is a growing popular perception, especially on the Hill that corporations in the United States, and I’m talking about large digit digital platforms, have come to excessive political power, and they are shareholders have wrapped too large, a share of the pie at the expense of workers and consumers. So some also argue that antitrust has been unable to keep what the developments in high-tech findings and communications industries. The DOJ and the FTC have launched investigations into Amazon, Apple, Facebook, Twitter, and Google. And meanwhile, the House Judiciary Committee recently released its conclusions on whether these companies are violating antitrust law and recommended performing antitrust laws. So Josh, welcome.
3:11
I just want to see, are you able to join us with video?
3:15
I am trying my best, and I would love to, but I have not been able to get access to the camera yet.
3:22
Also, I’ll keep trying while we’re talking, just in case it would be nice to be able to see and talk at the same time, but I’m happy to be here, and thank you for having me.
3:31
Yeah. I didn’t know. Of course. I mean, if you can join via video, that’s fine. If not, we’ll definitely love to hear your your opinion. So, Josh, why does sudden antitrust fever? What are you, and what are you making up these claims?
3:49
Sure.
3:50
So I think the way he described in the introduction is, is absolutely right.
3:56
There is a a fever pitch around antitrust four, I won’t say the the first time, but certainly.
4:09
The most politically salient and sort of policy salient antitrust has been in quite some time. And I think it’s a combination of reasons.
4:17
I think on the political front, there is a sort of joining of the two poles of each party, sort of on the farm progressive left.
4:27
And on the very populist right, you’ve got sort of a joining of forces that wants to target big tech, in particular, for slightly different reasons.
4:40
Josh Hawley in the Senate, and some conservatives have targeted big tech, because they feel like they’ve used a platform to favor democrats in elections, and so forth.
4:53
And I’ve had big tech in their sites for quite some time, and have decided antitrust is, uh, nice and convenient weapon for doing so.
5:02
And for the progressives, I think it’s been sort of an extension of the normal policy platform, just with sort of more aggressive ideas than normal.
5:15
There’s a growing sense that just doing antitrust business as usual, sort of Allah, an Obama administration or a Clinton administration. Antitrust enforcement style would not be enough.
5:28
And so you’ve got sort of a, an odd joining forces from Senator Hawley and Senator Warren on essentially the same antitrust platform.
5:39
I think a very interesting byproduct of that platform has been Wyle.
5:46
Most of the political targets involve big tech firms.
5:52
Most of the ideas proposed.
5:54
Don’t. Most of their ideas proposed are aimed at the heart of antitrust and apply from everything from supermarkets the hospitals that, you know, brick and mortar retailers, and the platforms to get get swept in to that, so a very interesting time.
6:12
I agree. Interesting times, Indeed. So are you concerned about these efforts specifically, to build, to bring this new ideas and new proposals to antitrust? Do you think this is a move in the wrong direction?
6:28
Yeah, I do.
6:28
I do an, for those of your, you know, in, in your audience, too, not had a lot of exposure to antitrust. I think antitrust history is particularly relevant here.
6:39
So, to oversimplify, if you look at the history of antitrust from 18 90 to the mid seventies, United States antitrust law was not clear about its goals. We did not have the consumer welfare standard.
6:54
Sumer Welfare Standard said, let’s organize our antitrust institutions and procedures and legal rules around the singular and exclusive goal of making the economic pie bigger around consumer, you know, put to put it to work in an economic sense for, for consumers.
7:12
Prior to that, we had just about everything as a goal of the antitrust system. The antitrust laws you could read. I’ll save you the trouble and report these decisions for you.
7:25
But if you read all of the Supreme Court decisions prior to the adoption of the Consumer Welfare Standard, in the late seventies, the Antitrust laws purported to help small businesses. Sometimes they were about economic welfare Sometimes. They were about a hodgepodge of socioeconomic goals that range from sort of bailing out particular industries to intervening in employee employer relationships and having nothing to do with market power.
7:53
They sort of did everything, And like most systems, that have six goals, they don’t do one of them, particularly well, right? If you want a little bit of more, more of goals, 2, 3, 4, 5, you’re gonna get a little bit less than one.
8:06
And so, most of the consensus among antitrust academics, and practitioners, and course, frankly, was that the multi gold, antitrust system failed consumers miserably.
8:20
And he had this wave of Supreme Court decisions starting in the seventies and moving on, and is often credited as a great success of the conservative legal movement.
8:30
But if you read those decisions, seeds are nine, nothings, Scalia and RPG, sort of join in and looking at old decisions and saying, this isn’t working.
8:39
For consumers. It’s not working as a matter of rule of law, right? You can’t read those decisions and know what’s illegal and what does not.
8:46
And so, there was this sort of great revolution in the cases in the agencies that meshed with economic thinking.
8:55
Alright, I think the consensus has been, that there is a was a, at least from the experience from 18 90 to the mid seventies, did that, that was a wild success. And so, I land was a long detour to answer your question.
9:09
I’m sorry, but I land yes, I’m quite concerned because I think most of the proposals about whether in that house report or or elsewhere are attempts either to whittle away or to turn on its head immediately, the consumer welfare standard in favor of not very well specified alternatives.
9:34
But to the extent they’ve been specified, I think they are largely problematic.
9:40
So, and I’m very glad you brought up the Consumer welfare Standard, because it’s very important, Like, in the bait. And I do want to like if you could just go into more detail in sharing with the audience: What specifically can antitrust law and or what does it do right now under the Consumer welfare standard?
10:07
Sure, So it is best to think about the consumer welfare standard as an articulation of the goals of the antitrust system.
10:19
The most common mistake, there are two common mistakes that I think people make when thinking about and talking about the consumer welfare standard and what it does and doesn’t do. I’m going to tell you two things. It’s not an and then, hopefully, what it is.
10:36
So, one thing, it’s not, it’s not what we would call a liability standard. So, it’s not as if the consumer welfare standard is not a rule that says a plain dependent case comes in and shows that a practice does more harm than good for consumers to practice it, is illegal.
10:51
All right, the Consumer Welfare Standard is not a rule that courts count up the harms and benefits to consumers, to the penny. And if the harms outweigh the benefits, then the practices illegal.
11:00
It’s often described that way, and that’s just not what it is.
11:05
The second thing, as I think it is often misunderstood, as in articulation of a standard, where the only thing that matters in antitrust analysis is price and output.
11:18
Right.
11:19
And so, I think a little bit of a straw man, criticism gets leveled at the consumer welfare standard and says, I can’t handle tech cases or Can’t handle cases. Where at.
11:29
issue is, not whether a practice results in a change in price, but maybe something like we get, whether we get more or less innovation.
11:39
The consumer welfare standard is neither of those things.
11:44
It’s best to think about it as an articulation of the goals of the antitrust system as a whole.
11:51
And so for merger cases, we have one set of liability rules. one test for whether a merger is illegal or not.
11:59
And the test is aimed at answering in the context of mergers, whether the merger is good or bad for competition, whether it helps or harms consumers.
12:08
DOJ, sued Google, It’s monopolization, case involving, quasi, exclusive dealing, and Search.
12:17
And we have tests for that. Right.
12:19
And those tests also are guided by the consumer welfare standard, but we’ve got individualize legal tests for different types of conduct.
12:28
There’s not one test for everything. But the consumer welfare standard is the the glue that holds that together.
12:34
If you will, it says, for all of these legal tests, the consumer welfare standard, guides them, and ensures that the purpose of the antitrust system and the antitrust rules, are that we have a series of legal tests and procedures that are focused exclusively on whether the conduct at issue makes consumers better, off or worse off mm hummed.
13:00
And do you think, Kurt?
13:03
I mean, since you describe what the scope of the consumer welfare, Sharon, do you think the current laws are sufficient enough to protect consumers or or have a weekend? And I’m specifically talking about a consumer welfare standard or of handling, you know, new threats to competition, especially in the context of digital markets.
13:28
I do, I do, so, a couple of points that I think your audience may find quite interesting on that.
13:37
one is, I’ll use the DOJ suit as an example, right? The DOJ filed suit in district court in Washington, DC. Why did it do that?
13:48
It did that because the DOJ won a case against Microsoft 20 years ago in a case 2, 2 decades ago.
13:56
That had very little to do with price. It was an argument that Microsoft used its platform to do anti competitive things and operating system and browser markets.
14:06
They sued there because they were able to win cases that were about as high-tech as they came 20 years ago with with the operating system and they they prevailed in that case and that’s why they’re suing in that court is to take advantage of of that precedent.
14:22
The agencies bring cases in and win them.
14:26
In cases involving innovation, in cases involving tech.
14:31
To give an example, in the merger context, because many of the proposals that have been raised about changes are focused on market concentration and mergers.
14:42
The agencies have lost three litigated cases in the last 10 years.
14:48
That’s a pretty good win rate that a lot of plaintiffs in other areas during the federal government, and private plaintiffs would be jealous of a crisis of losing cases.
14:58
Because the law is preventing them is not, is not something.
15:02
There’s not a claim that sort of stands up to any real look at the data or what’s actually happening when these agencies go to court.
15:11
You! So, you mentioned the DOJ sood on against Google.
15:17
And so some of the alleged consumer harms included in the complaint were reduction of inequality of search services, including privacy and data protection, fewer choices in general services and impeding innovation.
15:32
So, how difficult or easy wouldn’t are these things to prove?
15:40
Right, So, I think what’s going to happen is, you know, hard to prove they are, they are hard to prove.
15:50
But with the consumer welfare standard does, in these cases, as it says, the plaintiff has the burden of proof of showing some form of competitive harm, and it can choose to show it in a lot of different ways. So, in Microsoft, what they were able to show was that the combination of Microsoft’s Practices, contracts with Internet Access providers.
16:15
You know, people like AOL at the time that sold, You know, you step by Internet access through an Internet access provider, like AOL. And they would either get, use Microsoft search technology, excuse me, browser technology, or or something else.
16:29
But it was tying Browser code to the operating system.
16:33
It was contractual arrangements that Microsoft had was a sort of a broth of different claims together, and what Microsoft was able to show and persuade both the district court and DC. And the DC.
16:47
Circuit Court of Appeals was that in combination, these practices, foreclose, the ability of rivals to enter the market and compete in that that resulted in or would be likely to result in harm to consumers.
17:05
They would had the burden of showing that, but, for the Microsoft conduct, or in this case with the DOJ, you know, But for Google’s agreements, like the one they focus on and the complaint a great deal, is, pain, essentially for prominent placement Is the default on Apple products.
17:25
So, they gave Apple, I don’t know, 12 gazillion dollars or whatever number is in the complaint. I think it’s $12 billion.
17:32
And the allegation is that no pain to make search the default, made it really difficult for other search engines to compete.
17:42
The difficulty that they’ll face in a case like that is, are sort of twofold, one showing that life for a rival search engines are sorta not not enough to get you off square want an antitrust case. It’s gotta be both harm to the rival. And you have to show it made consumers better off. So it’s really got to show, is consumers who wanted to select a different search engine.
18:03
We’re not able to, because of Google’s practices, sort of a difficult story to tell.
18:09
We have all got access to a bunch of search engines.
18:13
Being the default is certainly valuable to Google, that that’s why they’re paying for it.
18:19
But, the idea that, keep those contracts while they, you know, they, they promoted Google’s search engine much the way that, you know, co-pays for the high level shelf space in your supermarket, but you can find the Pepsi if you want it.
18:34
The idea that those prevented rival’s for my getting access to consumer eyeballs, I think, is the biggest obstacle for for the DOJ in a case like that.
18:45
The second is, I think it was, I think it is fairly well-known because disclaim was investigated back when the FTC closed a similar Google investigation in 20 15. That Apple had gone out and said, Yeah, If we didn’t get the payments, we probably would have picked Google anyway because it was a better search engine.
19:07
That makes the types of claims that the doge wants to bring.
19:12
Pretty difficult.
19:13
They know this and they’ll try to put the best evidence on they can, but I think those are the places where you’re going to see you’re going to see evidentiary fights. And where I suspect that the DOJ will struggle.
19:27
OK, so if we go back to, you know, the great Breaking Up Big Tech movement. So there are too many slated arguments, and which leaves us unclear about what exactly we should be outraged about. So are there any shortcomings antitrust law that are fueling these concerns?
19:50
That big is bad, and when it comes to antitrust enforcement is big, necessarily bad.
20:01
So I think you are absolutely right that a lot of the arguments and concerns get conflated in this area and I think it’s because the critics of the current system haven’t made up their mind.
20:15
And that has made it somewhat somewhat frustrating conversation as someone who who participates in it most most days.
20:23
The way that I think about it is there have been two types of two buckets or categories of criticisms leveled at the, the, the antitrust, the current antitrust system.
20:36
one is within the consumer welfare standard, So there are critics who say, according to your own goals, the antitrust system is there to do consumer welfare.
20:48
You’ve not done a great job.
20:50
And they’ve got a couple of really narrow complaints.
20:54
You should bring a couple more merger challenges here, A couple more there.
20:58
Then there’s a second bucket of complaints that says, the consumer welfare, so we ought to have a more ambitious vision for antitrust.
21:06
It should we should go back to the 19 sixties, or thirties, or 19 tens, where what we did with antitrust is we used it not just as a tool, to do consumer protection and protect competition, but we should sort of dust off the old antitrust ideas and have antitrust law play.
21:26
A more prominent role in our, in our lives, antitrust, should do social policy and antitrust should do.
21:32
The design of your i-phone and antitrust should do should determine whether Google gets to make a map product or not.
21:42
And that, I think, is the the fight that you’ll see among the critic’s.
21:49
one of the interesting things for me to watch us, somebody who is sort of firmly entrenched on antitrust sort of right of center, is people who I have.
22:01
I have thought as a sort of effective advocates of the antitrust left. People who served in leadership roles in the Obama administration or Clinton administrations.
22:11
I’ve been pilloried by at least sort of one wing of the new antitrust critics as being sort of insufficiently receptive to the idea that the consumer welfare standard is, is, is limiting. And so you’ve got, I think the loudest critics come in that second camp.
22:31
The loudest critics are not fighting a battle sort of on consumer terms, and I think that’s unfortunate, because it is this vision of sort of antitrust aza.
22:43
You know, a hammer for all, you know, a tool for all jobs, including ones where not only is it inappropriate, but historically we have tried and failed and done poorly and done a disservice to consumers and, and in doing so.
22:59
one of those arguments, of course, is big itself is bad. There’s an economic version of that argument but it was discredited long ago by an economist You have for a long time now.
23:13
No. Inside the antitrust agencies, nobody is counting the number of firms with their fingers to predict whether a merger is going to increase or decrease bryce’s. They’ve got so far more sophisticated economic tools.
23:24
And so, the biggest bad argument tends to instead be invoked by that second bucket of critics to say, well, the benefit of having a bunch of small firms around is, you know, no. one firm has political power.
23:40
You know, we can, we can sort of reduce the political power of firms by having a lot of small firms.
23:46
We also end up getting significantly higher prices and taking a lot of money out of consumers’ pockets in exchange for, well, I don’t know what we get in exchange, but that seems to be the deal they’re offering mm. Hmm.
24:00
And we are running short on time, but I do want to get to what, actually, what consumers ones want. Right? So, and there are many surveys, consumer surveys that reveal that the majority of them, while they are concerned about data privacy policies, most consumers are not on board with breaking up big tech.
24:24
We definitely You know, we want innovation, And we want to see lower prices.
24:28
So, would a structural separation like help consumers at all? And I do also want to ask, like, what do you think the future holds for the consumer welfare standard?
24:42
Go ahead.
24:44
Great.
24:45
I think in terms of structural separation, I think it’s probably one of the worst ideas on the menu.
24:55
In terms of the various proposals, I think, gifts that have been offered have been offered up. I think it’s getting a great deal of attention.
25:05
But what structural separation means and does is prevents firms’ from doing two things at the same time, Right? And, you know, we can think about examples of that, that run the gamut. I mean, people like to raise the tech examples. Google has Maps, or Apple has Apps, and its App Store.
25:25
But we can get outside of tech. You can think about private label products in the grocery store. Wal-Mart sells your socks.
25:33
All of those things would be rendered unlawful by a structural separation and sort of keeping businesses in their lane.
25:42
It’s an odd argument.
25:44
I find, because it’s a tensioned, very much so, width, the ideal of competition. It seems like a very odd strategy for one that wants to increase competition.
25:57
too systematically prevent firms’ from entering new product areas and competing.
26:04
Maybe it is blatantly anti competitive we have history with structural separation, United States, too.
26:10
And I should surprise nobody to learn that largely the result of regulatory experiments, where structural separation our consumers get left holding the bag.
26:21
And so I would expect very much the same here, in terms of the future of the consumer welfare standard.
26:30
Look, I think one of the points I made in the beginning was that the evolution in the law, it’s sort of been a common law development of the consumer welfare standard in the courts. I don’t think that the consumer welfare standard in the courts is going anywhere.
26:47
And so and I think that the critics know that too, which is why you’re seeing such an intensified battle and Congress trying to go sort of after the Consumer Welfare Standard, not in the courts, but rather through legislation or agency rulemaking.
27:06
And that’s where I think the battle’s will be the next 4 or 5, 6, 10 years is not so much in individual litigations like DOJ versus Google, although cases like that are, are really important.
27:24
I think what you’re going to see is the battle on the Policy, and Legislative Front, to try to undo key decisions, overturn key decisions, pass rules that take away the Consumer Welfare Standard piecemeal.
27:41
And that that does great greatly concern me because this is probably the first time that I’ve seen at least some political support for those ideas on both sides of the aisle, maybe not enough to get something as radical as undoing the consumer welfare standard done right away.
28:03
But it is something that I worry about.
28:07 And with that, Josh, I want to thank you for sharing your valuable time with us today. And also, thank you to the audience, too, for tuning in today. So, thank you all, and have a terrific day.