Yesterday, the federal The Commerce Commission and 46 states, the District of Columbia and Guam parallel filed antitrust lawsuits against Facebook for the acquisitions of WhatsApp and Instagram, and practices that have excluded competitive threats in social networks and messaging. In October, the Department of Justice and 11 states filed a complaint against Google alleging monopolization of mobile search and search advertising. While Democrats will surely hope that President-elect Joe Biden will make a clean break with the Trump administration on many issues, the new president would be wise to embrace partial continuity in one area: antitrust law enforcement.
While there has been no shortage of antitrust action in recent months, Biden’s trustbusters can and should do even more to remind big companies that they cannot operate with impunity. Litigation, while important, is not enough. The current antitrust system is expensive, complicated and time consuming, guaranteeing little more than years of investigation and litigation – and billable hours for lawyers and economists. An effective and lasting attack on corporate domination requires new rules that ensure that powerful companies are promptly brought to justice for wrongdoing. Even with a potentially divided government until 2022, the Biden administration – through the FTC – can begin correcting the law immediately.
The slowness of our current system is, at least in part, due to decisions taken starting in the late 1970s, when the Supreme Court, FTC, and the Department of Justice reinterpreted antitrust law. Instead of rules that categorically prohibit certain business practices, the three institutions have adopted what is called the “Rule of reason” for most practices.
the rule of reason is based on the belief that mergers and monopolies could benefit consumers and should only be restricted if proven otherwise. Will a merger likely lead to higher consumer prices? Would the prices have been lower if it had not been for the exclusion of competitors by a monopolist? Even if the enforcers are successful in establishing these consumer harms, a company can still escape its liability by providing justifications for its conduct. The practical effect is costly and lengthy antitrust investigations and prosecutions. Federal authorities must go through millions of documents and detain economists – sometimes paid more than $ 1000 per hour of their services—Who are trying to predict the future or imagine another universe to determine if a company has broken the law. By imposing such extraordinary demands on government and private plaintiffs, the law is stacked favor of powerful companies.
Investigations and litigation against corporate titans take a long time. During the second half of the Obama administration, it took the FTC a year and a half to Stop the merger between Sysco and US Foods – a consolidation that would have given the two companies a 75 percent share in the large national food distribution service market. According to analysis, federal antimonopoly lawsuits between 1990 and 2008 took an average of almost three years to resolve.
A more effective and efficient system is possible. Instead of an antitrust system tied to the convoluted rule of reason, the United States can have a system based on simple “clear” rules that would make it clear to businesses and the public which competitive tactics are illegal. Think of them as bans on unfair trade practices comparable to speed limits for drivers.
At a time when Congress seems unlikely to pass a new antitrust law, the Biden administration can still act without legislation, using the expansive power of the FTC. With the appointment of hired antimonopolists to the FTC, the Biden administration could enact corporate consolidation rules prohibiting mergers based on specific market share and concentration thresholds. The FTC has a historical model to build on: the DOJ merger guidelines in the 1960s and 1970s. Under these parameters, two companies each holding a 4% or more share in a highly concentrated market would generally not be able to merge without taking legal action. By reinstituting such tests of market share and concentration, a merger like the one between Sysco and US Foods would probably not have been considered in the boardroom, let alone proposed.
In addition to merger rules, the FTC should ban unfair competitive methods in which a company uses its dominant market position or financial strength to beef up rivals. Consider exclusionary contracts: monopolists coerce or bribe their customers, distributors or suppliers not to do business with competitors. Google, for example, pays Apple up to $ 12 billion each year (roughly 20% of Apple’s worldwide annual net income) to make Google search tools the exclusive default solution on Apple devices. In July, the Open Markets Institute (where I work), along with over 30 food justice, labor and public interest groups, petitioned the FTC to ban exclusionary contracts by companies with a 30 percent or more share in a market.