Why Republicans Must Rethink Antitrust

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For the first time in a century, Republicans find themselves on the brink of an antitrust revival. Though derided in some corners as the “hipster antitrust” of the “neo-Brandeisians,” the right has largely woken up to the threat of concentrated economic power, acting at scale, because it has been so overtly wielded against them.

Powerful tech companies, from Google to Amazon and Facebook, have suppressed conservative political views, prohibited circulation of news stories critical of the Democratic party, shielded progressive figures from criticism while deplatforming those on the right, kneecapped their conservative market rivals on transparently pretextual grounds, and memory-holed a president of the United States.

Collectively, these actions raise concerns about rights to speech and the nature of free discourse. But they must also be acknowledged for what they are: blatant expressions of market power. Absent market power, such actions ripple, but they do not overwhelm. But when unprecedented economic dominance is paired with activist progressive dogma, one witnesses an ideologically driven economic cartel: a handful of powerful tech firms able to alter the flow of information, crush small competitors, and change the nature of independent thought and public discourse in free societies.

When Google chooses to suppress or amplify content for ideological reasons it doesn’t affect merely a portion of the marketplace. With 90 percent of search market share in America, for all intents and purposes Google is the marketplace. When Facebook suspends political candidates, it cuts them off from one of the world’s most powerful digital advertising agencies—one which the company itself has acknowledged is critical to how candidates reach voters in the modern era. Amazon boasts 50 percent of the digital retail market, and sells more than half of the books in the United States. A single decision by Amazon to drop a book from its virtual shelves reduces the financial incentive for publishing houses to even send it to print.

The threats Big Tech poses to speech and thought, in other words, are downstream of market power. Distorting the marketplace of ideas is only possible if these same companies first control the marketplace itself.

Recovering A Lost Tradition

Antitrust law—the legal framework for ensuring a robust and competitive marketplace—is designed to deal with threats to the free market. But for the last 50 years or so, it has been a tool which many conservatives have been loath to use. It wasn’t always this way, however, and it bears examining why.

America’s antitrust laws emerged, in part, from a Republican tradition of skepticism toward centralized power, both in the government and outside of it. Indeed, it was Senator John Sherman, a pro-Lincoln, anti-slavery Republican from Ohio, who lent his name to the nation’s founding antitrust law, and a Republican president, Benjamin Harrison, who signed it. Just like democracies can be threatened by the tyranny of an unchecked majority, generations of classical liberal and libertarian-minded thinkers have understood that scaled and centralized economic power can tyrannize capitalism.

Friedrich Hayek’s intellectual case for the free market arose out of this belief. An immigrant from Nazi-controlled Europe, Hayek witnessed first-hand how centrally controlled economic activity inherently led to totalitarianism. Aggressive decentralization of both the state and monopoly power in the marketplace, he wrote, was the antidote to fascism.

Though one of the great advocates of the unfettered market, Hayek was aware that free markets require vigilant defense. It was for this reason he did not subscribe to “dogmatic laissez-faire” economic policy, acknowledging instead that certain governmental functions beyond the minimal state were not only justified, but necessary to preserve a free market system—particularly when confronting the nexus between big government and big business in the form of monopolies.

George Stigler, a Nobel Prize winning economist and key figure in the Chicago school of economics, made the same link early in his career. “The dissolution of big business is … a part of the program necessary to increase the support for a private, competitive enterprise economy,” he wrote in Fortune magazine in 1952, “and reverse the drift toward government control.”

Over time, however, Republicans began an ideological shift away from the traditional conservative embrace of an ordered liberty that flows from deference to custom, tradition, and community toward a more libertarian philosophy which emphasized freedom as an end unto itself. This narrowed what was once a comprehensive vision regarding where threats to liberty could arise to one in which the only conceivable threat to liberty was the one that arose at the point of a government gun.

Whereas historical conservative and classical liberal thinkers were keen to acknowledge that the American way of life could be undermined by all kinds of forces, including but not limited to the tyranny of the state, modern right-leaning ideology acknowledges only government as the sole perpetrator capable of harming democracy. This has informed the right’s approach to antitrust law.

The Chicago school of economics emerged with a novel legal approach to antitrust law built around what its adherents viewed as a key measurable metric: economic efficiency. Under the scholarship of Judge Robert Bork, Richard Posner, and others, the consumer welfare standard developed in response to a more progressive approach to antitrust law, which was legally dominant by the mid-20th century and characterized by judges imposing their own values onto consumers and businesses. Bork’s disciples took his approach even further, infusing antitrust with economic rhetoric about price theory, economic cost analysis, and consumer benefits.

While scholars can and do debate the merits of Bork’s consumer welfare standard, it has had two clear effects. The first was to ground the legal interpretation of antitrust law in economics. This is, in some way, common sense. The Sherman and Clayton Acts offer a fairly generous standard of enforcement but little in the way of particulars. The economic analysis of what is actually happening in the marketplace is a critical input toward determining the necessary nature of enforcement.

But over time, the role of economic analysis has evolved from supplementing enforcement to controlling it. It has acted as a one-way ratchet, with its proponents insisting on the primacy of increasingly speculative, complex, and theoretical economic claims that “interpreted” or “disproved” actual evidence of clear anti-competitive behavior by dominant firms. Pragmatic legal assessments of market distortion—the actual work of the antitrust statutes—became secondary.

Ironically, this was not how Bork originally anticipated his legal theories would be applied. In The Antitrust Paradox, Bork unequivocally warned against allowing the “economic extravaganza” to distract from the actual task of assessing anti-competitive behavior. “Antitrust must avoid any standards that require direct measurement and quantification of either restriction of output or efficiency,” he wrote. “Such tasks are impossible.” He went on, describing “performance tests and efficiency defenses in antitrust law” as “spurious,” and noting that “the judge, the legislator, or the lawyer cannot simply take the word of an economist in dealing with antitrust, for the economists will certainly disagree.”

The opposite has happened, however. Antitrust enforcement has been steered away from its broad congressional mandate to police concentrated power in the market and toward the exclusive terrain of complicated, theoretical economic models, and the esoteric ruminations of economists, often with no direct experience in the business world. In a sense, this has subjected antitrust law to the cult of the well-compensated expert, and well-heeled legal and economic practitioners. It is, as the British philosopher Edmund Burke mused, the age in which “the sophists, the economists, and the calculators” have triumphed, leaving the full market-policing remit of our antitrust laws to languish in their wake.

This distortion was on display as recently as 2013, when the Federal Trade Commission (FTC), in considering an antitrust claim against Google, allowed completely speculative economic analysis (which later proved to be hilariously wrong) to overrule clear evidence of anti-competitive intent. This was a mere six years after the same agency greenlit Google’s acquisition of one of its rivals, the internet ad company DoubleClick. The acquisition cemented Google’s unprecedented dominance in the digital ad space.

The lone FTC commissioner to dissent to the DoubleClick merger, Pamela Jones Harbour, wrote that she did so because “I make alternate predictions about where this market is heading, and the transformative role the combined Google/DoubleClick will play if the proposed acquisition is consummated.” The chairman of the FTC at the time, William Kovacic, a George W. Bush appointee, said in 2020 that if he had known in 2007 what he knows now, “I would have voted to challenge the DoubleClick acquisition.” Hindsight is 20/20, but it seems economists only look ahead.

The Reform Imperative

The right must do more than lament, however. Much of the contortion in antitrust enforcement has taken place away from congressional scrutiny, and with little regard for its intent. Rather, enforcement is guided largely by a body of jurisprudence that has transformed a broad mandate into a tiny keyhole, through which enforcement actions must be squeezed.

It is incumbent upon Congress to clarify its intent with regard to these laws. This is especially true as the economy continues to race forward. The digital economy, unlike analog markets, is driven by innovation as much if not more than price. Where antitrust law has been so narrowed as to assess harm exclusively as a function of price, it must be re-framed. Bork’s original proposal, for example, was far broader than mere considerations over price, and sought to encompass innovation, consumer choice, and quality.

Barriers placed in front of the government’s ability to bring antitrust challenges also must be examined. In the last 20 years, roughly 750 mergers and acquisitions have moved through the digital space, largely unchallenged. Congress must ask why. Supreme Court precedent in cases like United States v Philadelphia National Bank laid out the framework for challenging mergers in concentrated markets—specifically by establishing a presumption that mergers which cover at least 30 percent of the relevant market were presumptively unlawful. If agencies are not following established precedent, Congress should consider codifying it in law.

To the extent that later precedents have made it harder to bring enforcement actions in digital markets, Congress should consider legislatively overturning them. And if enforcement agencies are choosing to tie themselves instead to higher or more complex standards that are more difficult to meet, they must be statutorily directed to do otherwise. Likewise, Congress must only confirm nominees who pledge to vigorously enforce the law—and hold them to that promise with effective oversight.

Robust antitrust enforcement raises the obvious question: Will 10 Googles be any better than one? The answer is yes. Even if they remain ideologically similar, subjecting component parts of the company to market forces requires them to compete on their merits, rather than relying on sheer dominance or rent-seeking on smaller competitors as a means to success. Moreover, structural separation, if necessary, combined with aggressive enforcement against anti-competitive behaviors—as the Department of Justice’s case against Google does with its focus on the company’s network of exclusionary contracts—will prevent the re-formation of a de facto monopoly on contractual grounds.

The investigation and enforcement of the antitrust laws are designed to do what one-size-fits-all regulation, or even statutory stipulation on separating lines of business, cannot: identify specific contracts and behaviors that are anti-competitive, enforce against them, and thus free the market to work as intended. In this way, antitrust supplements activities in the market, rather than making assumptions about the market itself. It is incumbent upon lawmakers to ensure the antitrust apparatus has the resources, tools, and guidance to act with its full remit.

Overcoming Ideological Barriers

Accomplishing any of this, however, requires the right to rethink its reflexive hesitance to take action. This is especially true in the area of antitrust. Too many on the right conflate antitrust enforcement with regulation, when the two are quite distinct. Antitrust is targeted law enforcement. It addresses specific acts of marketplace conduct that must be thoroughly investigated by the Department of Justice or the Federal Trade Commission, and proven before a judge, before the law is enforced. Regulation, by contrast, goes after entire sectors of the economy with a one-size-fits-all approach, and does so without necessarily concerning itself with finding clear evidence of fault.

Ironically, it is lax antitrust enforcement in highly concentrated markets which often triggers the decision to regulate in the first place. In a real sense, antitrust is the antidote to an aggressive regulatory approach. Regulation is what tends to give the government more unchecked power; antitrust enforcement merely polices the market under due process.

The right must also stop taking at face value the notion that well-meaning attempts to ensure our antitrust laws are properly enforced, in line with congressional intent, is somehow a politicized attack on innovators. Antitrust enforcement has already become politicized, in the direction of corporations rich enough to spin complex econometric tales that undermine evidence of anti-competitive conduct. This imbalance must be rectified.

Antitrust enforcement, when done correctly, is designed to unleash the market, not to stymie it. It should not entrench incumbents but rather liberate the marketplace for new entrants to compete on their merits. There is precedent for this.

Microsoft, which was the last big conduct case the government brought against a tech platform, never dominated the internet the way it had dominated the personal computer. This was due to the federal antitrust enforcement that prevented Microsoft’s monopoly control of the browser market, and subsequently changed the way users were able to engage content online. The open internet that Microsoft was forced to allow meant it could not block a new, innovative search engine called Google from reaching Microsoft customers through the web.

IBM, AT&T, and RCA all faced similar antitrust suits which cracked their dominant holds on technological expertise, exploding markets for data processing, consumer electronics, and telecommunications, and laying the groundwork for the modern software industry.

The Necessity of Prudent Change

The conservative intellectual tradition has long placed an emphasis on prudence: the ability to assess an action for its long-run consequences, rather than merely by temporary advantage. “Sudden and slashing reforms are as perilous as sudden and slashing surgery,” conservative traditionalist Russell Kirk was fond of saying. But importantly, Kirk also argued for the necessity of prudent change, particularly that which preserves customs, traditions, and practices that animate “the community of souls” we call America.

As the right reconsiders both the use of antitrust and bolstering its application, it must consider the nature of the threat it now faces. The most powerful corporations the world has ever seen are increasingly undermining the values of free speech and diversity of expression, pluralism, and dissent. In changing how we gather and see information, in placing significant costs on the freedom of expression, these companies are changing who we are, and how we live together.

Inaction is, of course, a choice many on the right still call us to embrace. But to take no action when presented with clear evidence of market distortion, of companies powerful enough to meaningfully alter the flow of information in overt political directions and that feel justified in removing the speech of democratically elected leaders, suggests that an ideology and idolatry of markets has trumped the principle of their prudent structural defense. It is a posture which, ultimately, calls upon democracy to be subservient to corporate power, as the latter decides what economic and social order is best for us.

This inverts the nature of self-government to one in which citizens, with natural rights, agencies, and freedoms, are turned into consumers, their worth and flourishing defined solely by economic outputs. “What future have a people whose schooling has enabled them, at best to ascertain the price of everything,” Kirk asked, “but the value of nothing?”

As Senator Mike Lee (R-Utah), the Senate’s antitrust subcommittee’s lead Republican pointed out in February, the threat of state coercion is increasingly “rivaled by another: the soft totalitarianism of a corporate shadow state. It is not the government’s monopoly on force that today’s left uses to punish wrong think, but the economic monopolies of multinational corporations. While the means are different, the effect may in some cases be the same.”

Antitrust cannot solve every problem related to Big Tech. What it can do is solve ongoing abuses of market power and prevent future anti-competitive concentration. Managing the market concentration which lax enforcement has already allowed to form will require further legislative and perhaps regulatory efforts to constrain and limit how these massive firms are able to exercise their market power. Section 230 reform, interoperability, data privacy, and perhaps even common carrier status and public accommodation laws, as Justice Clarence Thomas has argued, all must be thoughtfully considered.

But so much of Big Tech’s power—its ability to crush small competitors, limit and distort the flow of news and information, and anoint itself as primary arbiter of who can speak in the digital public square—is directly linked to its market power. Breaking this nexus and ensuring that a free market is available to allow competition to take many of these concerns away is not rocket science. It is antitrust enforcement, a tradition the right once embraced, and one which it must revisit. “Sometimes,” as Walter Isaacson ascertained in his study of the digital revolution, “innovation means recovering what has been lost.”

Rachel Bovard is the senior director of policy at the Conservative Partnership Institute. She is the co-author of Conservative: Knowing What To Keep with former Senator Jim DeMint and a member of the TAC advisory board.

This article was supported by the Ewing Marion Kauffman Foundation. The contents of this publication are solely the responsibility of the authors.

The post Why Republicans Must Rethink Antitrust appeared first on The American Conservative.

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