Antitrust Legislation Would Hurt the U.S. and Aid China

A new mantra is permeating Washington when it comes to regulating businesses: “Big is bad.” Another way of saying this is: “Successful is bad.” You can make a profit, but not too much profit — whatever that means.

This rallying cry has gripped politicians on both sides of the aisle, from the liberal senator Elizabeth Warren to the conservative senator Josh Hawley. Some in Congress are now targeting companies they see as using their market power to raise prices on consumers and crush their competition. If their efforts succeed, these self-styled trustbusters will bust America’s economy.

While there are many proposed antitrust bills, every “solution” would increase the size of the government and vastly expand the power of federal regulators. The complaint is that companies such as Amazon, Apple, Google, and Walmart have seized too much market share in industries that they helped create and that never even existed 20 years ago. Their competitors that have been left in the dust or were late to the game are the biggest cheerleaders of all for these “anti-monopoly” actions. So now iconic American companies that have added trillions of dollars of consumer surplus, added trillions to shareholder wealth, and hired hundreds of thousands of workers are suddenly villains. Instead of trusting in the time-tested efficiency of market forces and competition, these politicians want a government that’s $30 trillion in debt to pick winners and losers.

In many ways these Big Tech companies are their own worst enemies. The deplatforming of conservative voices because of the liberal slant in Silicon Valley is indefensible and an incredibly dumb business strategy. It seems that Facebook, Google, and Twitter, among others, go out of their way to antagonize half their customers with their censorship and biased algorithms against right-of-center voices. But arming government regulators — who are hardly friendly to conservatives either — will not solve that bias problem.

I should add that the old-fashioned notion of “antitrust” was based on the pre-technology and pre-globalization world, when markets were much smaller and the massive array of product choices today didn’t exist. Now a manufacturer or a tech company feels competition not just from down the street but from halfway around the world. In almost every industry — especially in technology — the only way to increase the customer base is to increase efficiency and lower prices.

The Biden administration has recently announced that it intends to rapidly ramp up antitrust enforcement, which it says has been dormant for the last several decades. It says that this will bring down prices and relieve Americans of the inflation that is harming consumers.

The White House has appointed progressive antitrust activists to key positions at the Federal Trade Commission and the Department of Justice. Those agencies are already taking steps to strengthen merger guidelines and supercharge antitrust enforcement. Laughably, the administration and its allies have even pointed to antitrust enforcement as a cure for inflation.

Though some conservatives are hopping on the antitrust train, these policies originated as a leftist myth. At the end of the 19th century, left-wing and (as the word was then understood) progressive politicians pushed for an expanded role for government to counter the alleged excesses of capitalists. Even as prices fell and Americans’ quality of life improved, Congress passed legislation targeting the companies that had built the railroads and the factories that had propelled America to success.

At first, these laws wreaked economic havoc because of their “vague social and political goals,” but judges reined in these excesses in the early 1980s by crafting a narrow consumer-welfare standard that limited the scope of government power. This standard forces the government to prove that alleged anticompetitive behavior hurts consumers. Hypothetical models showing that a company is gaining too much market share aren’t enough to justify government intervention unless there is tangible proof that consumers are suffering.

The neo-trustbusters want to discard this tried-and-true standard and replace it with nebulous guidelines that protect less efficient industry competitors, not consumers. Under these new rules, a company that lowers its prices or produces a new product could face antitrust penalties because these actions hurt its competitors. This change would empower the government to do more industry regulation. But wait: A new analysis by economist Mark Perry at the American Enterprise Institute finds that the industries with the fastest rise in prices over the last 20 years are health care and education — already the industries most heavily regulated by government.

How many consumers feel gouged by Walmart or Apple or Amazon or Google? Apple faces enormous competitive pressures from a handful of other cell-phone companies in Korea, China, and Japan. They have gained dominance in the industry by outcompeting their rivals through constant investment and innovation to create new-generation products that people want.

At the same time, the digital economy expanded 6.5 percent annually between 2005 and 2019, according to Bureau of Economic Analysis (BEA) estimates in June 2021. The same BEA document shows that digital companies employed 7.7 million workers in 2019, and these workers earned tens of thousands more than the average worker. The U.S. is far and away the leader in the tech-driven digital economy — so much so that the Europeans are suing American companies on bogus antitrust claims. That edge will quickly fade if we implement aggressive government regulations that needlessly hobble successful companies and will only strengthen China’s attempts to overtake America’s technology leadership. But this is sour-grapes economics by the Europeans: They can’t compete with technological prowess, so they accuse our companies of being monopolies. The U.S. government should be protecting American companies from these spurious lawsuits. Instead, Congress wants to pile on.

Even more troubling is a provision of the Klobuchar antitrust legislation that would outlaw many mergers and acquisitions. It used to be that the government had to prove a merger would hurt consumers, but now its lawyers are stopping mergers if they may hurt startups, even though startups often from the get-go have the end goal of being acquired by a bigger company. In reality, research finds that small shareholders and consumers benefit more from mergers than do big companies.

The late Justice Antonin Scalia powerfully wrote, “To safeguard the incentive to innovate, the possession of monopoly power will not be found unlawful unless it is accompanied by an element of anticompetitive conduct.” Building a better mousetrap is innovative, not anticompetitive. If the U.S. government defines success as monopolistic, then America will soon forfeit its technological and economic lead over our rivals. China will be the biggest winner.