The time for an antitrust reform summer has run out. For companies under threat of agency action, the court system has offered some respite through its adherence to traditional interpretations of antitrust, which focus on consumer harm rather than the size of a firm. However, as seasons change, there are those in Washington, D.C. who would like antitrust laws to do the same. New legislation would codify “big is bad” while ignoring the consumer impact of that philosophy.
American antitrust law began in 1890 with the Sherman Act, which essentially prohibits actions that restrain trade or are intended to create a monopoly. In 1914, Congress added to the Sherman Act with the Federal Trade Commission (FTC) Act, which prohibits “unfair methods of competition” and “unfair or deceptive acts or practices,” and the Clayton Act, which bans mergers that would “substantially lessen competition” and addresses situations where one individual oversees two competing firms.
According to the FTC, these three pieces of legislation all serve the same goal: “to protect the process of competition for the benefit of consumers, making sure there are strong incentives for businesses to operate efficiently, keep prices down, and keep quality up.” While recent legislative efforts — and agency actions — attempt to shift away from this historical purpose toward a codification of “big is bad,” the courts have not embraced the change.
The lawsuit brought against Apple by Epic alleged that the tech giant was an illegal monopoly and was asserting its power by forcing app developers to use its payment system. While Judge Yvonne Gonzalez Rogers did end up ruling that Apple must allow consumer access to third-party payment systems, she also determined that Apple was not shown to be a monopoly. Specifically, Gonzalez Rogers stated that “success is not illegal,” affirming that size doesn’t determine competitiveness. This decision protected Apple’s right to control their product, while also giving consumers the option, through mechanisms such as external links, to use other outside payment systems if they desire.
The size of a company was also not enough to justify the complaint brought by the Department of Justice (DoJ) against the proposed merger of United Sugars and Imperial Sugar. The complaint alleged that the merger would reduce competition within the defined marketplace — which, in its broadest interpretation, includes 12 states and Washington, D.C. The full decision is sealed; however, permitting the merger to move forward demonstrates that market share and size are not enough to demonstrate anticompetitive or monopolistic behavior.
While the courts have been resilient in maintaining the original intent of antitrust laws, this would not matter if new legislation were enacted.
Senator Amy Klobuchar (D-MN) introduced legislation that would target the tech industry with new laws to restrict companies based on size rather than conduct. The American Innovation and Choice Online Act (AICOA) and the Platform Competition and Opportunity Act (PCOA) would target platforms over certain size thresholds by prohibiting self-preferencing and deeming mergers and acquisitions equal to or greater than $50 million unlawful.
These two pieces of legislation specifically target “Big Tech,” despite the almost $4 trillion contribution to global GDP and the direct and indirect creation of 12 million jobs contributed by America’s five largest tech companies. Still, the tech sector is not the only one that should be concerned with efforts to change antitrust.
Klobuchar has sponsored an additional bill called the Competition and Antitrust Law Enforcement Reform Act (CALERA), which would establish a stricter standard by which to measure potential mergers regardless of the industry. A similar piece of legislation, the Prohibiting Anticompetitive Mergers Act (PAMA) introduced by Representative Mondaire Jones (D-NY), would automatically ban all mergers deemed too big. Senator Cory Booker’s (D-NJ) bill, the Food and Agribusiness Merger Moratorium and Antitrust Review Act (FAMMAR), also targets agriculture mergers. If passed, FAMMAR would place a moratorium on vertical mergers for agriculture firms with over $160 million in annual net sales or total assets. These proposed bills all ignore consumer benefits derived from economies of scale and operate on the assumption that large firms are automatically anticompetitive.
The traditional interpretation of antitrust laws, which focused on the impact companies’ behavior has on the consumer, has worked for over a century. It has protected consumers while allowing the American economy to grow to the largest in the world. Instead of weaponizing antitrust to target successful companies, lawmakers should focus on creating universal rules that allow companies to grow and better serve consumers.