Senate Antitrust Subcommittee Explores Consumer Welfare as Market Concentration Increases
It’s unclear whether consumers are at risk in an era of increasing market concentration, experts told a Senate Judiciary Antitrust Subcommittee hearing Wednesday. “The real question is whether concentration has led to a decline in competition,” said Chairman Mike Lee, R-Utah. “Higher output almost always translates to a better experience for consumers.” That’s not what ranking member Amy Klobuchar, D-Minn., said she's hearing from constituents: “Everyday citizens have started coming up to me about antitrust issues, with some wondering whether our antitrust laws are being underenforced.”
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The hearing focused on whether the consumer welfare standard is still the right yardstick in judging competition. The “essence” of that standard “is both reasonably clear and worthy of the very strongest defense,” said Abbott Lipsky, professor at George Mason University Antonin Scalia Law School. Scholars “rightly” are debating the merits of the standard, but there isn’t a “plausible candidate” to be a substitute guiding principle in antitrust law, he said. It sounds good, but the philosophy opened the door to a surge in market concentration, said Barry Lynn, president of the Open Markets Institute. "In America today we are witnessing a whole new level of concentration -- of wealth, power, and control -- in the hands of the people who control Amazon, Google, and Facebook and a few other giants that grew to power on the internet."
The expiration next year of conditions on Comcast buying NBCUniversal raises worrisome prospects for consumers, with "numerous complaints" the consolidation hurt consumers, said Sen. Richard Blumenthal, D-Conn. He wrote DOJ Antitrust Division Chief Makan Delrahim Wednesday asking for an investigation into the “anticompetitive threat consumers will face if Comcast-NBCU is allowed to continue as a merged entity." If DOJ investigates and “determines that the Comcast-NBCU acquisition will produce anticompetitive threats, even if the merger conditions are retained, you may need to consider separating Comcast and NBCU in order to fully restore competition,” the letter said. DOJ’s decision to sue to block AT&T’s acquisition of Time Warner “suggests that the Department has come to recognize the advantage of structural remedies over behavioral remedies,” Blumenthal wrote.
Comcast sees “no credible basis to pursue an extension or modification of the consent decree or conditions," a spokeswoman emailed: The company has "met or exceeded all of the commitments and obligations under the NBCUniversal transaction" and filed required compliance reports. "All of the market segments in which we do business are more robust and more competitive now than they were before our NBCUniversal transaction,” she said. “There is simply no precedent and no need for the conditions to be extended or modified, or our transaction revisited."
Calls to break up tech giants must be judged against whether they arise from concerns about political power, said Carl Shapiro, University of California, Berkeley professor-business strategy. "Any call to break up large tech firms based on economic considerations needs to address the concern that dismembering some of our most successful companies will significantly reduce economic efficiency," he said, and "makes me rather nervous." Shapiro said he doubts whether there would be much interest in "setting up specialized agencies to prevent today’s dominant technology companies from exploiting their market power by regulating the prices they can charge."
More vigorous enforcement is essential, including revitalizing enforcement against abusive corporate practices, said Diana Moss, president of the American Antitrust Institute. Enforcement "ideology" over the past several decades "has likely contributed to higher concentration, higher prices, higher profits to relatively few firms, and growing inequality," Moss said. Remedying this demands a bipartisan approach to reforming antitrust enforcement and competition policy priorities, and crafting a national competition policy, she said.
The current debate is "healthy," but it's important to revisit whether antitrust law and enforcement institutions can actually carry out their mission of protecting competition, said Joshua Wright, George Mason University Antonin Scalia Law School professor and a former FTC commissioner. It would be a mistake and "dramatic step backwards" to abandon the consumer welfare standard in antitrust law, Wright said. The standard has proven flexible enough to rise to challenges, though there are "plenty of real debates about [its] application that the antitrust community can -- and does -- have," he said. Policies aimed at maximizing social and political goals over consumer welfare "have taught us a lot" -- primarily that consumers experience real harm through diminished competition, higher prices, reduced output, lowered quality and less innovation, he said.