Economics

Antitrust Is Back in America

Mar 12, 2021 Eric Posner

With growing momentum behind efforts to reform and strengthen US antitrust enforcement, a decades-long trend toward increasing market concentration may soon be confronted head-on. But enforcement alone will not cure what ails the US economy – especially not when US consumers themselves are smitten with the monopolists.

CHICAGO – President Joe Biden is signaling that his administration will get tough on monopoly. With the appointments of Columbia University law professors Timothy Wu to the White House National Economic Council and Lina Khan to the Federal Trade Commission (FTC), he has selected two well-known proponents of breaking up the Big Tech monopolies.

Moreover, these appointments come on the heels of a major antitrust reform bill that Amy Klobuchar of Minnesota introduced in the US Senate last month. Klobuchar’s bill aims to bolster antitrust enforcement in a number of ways. It would increase funding for the FTC and the Department of Justice Antitrust Division, establish new bureaucratic offices to investigate and monitor antitrust compliance and market conditions, slap new civil penalties on violators, and expose firms to liability for anticompetitive business practices that currently fall through the cracks.

Notwithstanding the fierce Republican opposition the bill is expected to receive, there is good reason to think that the antitrust momentum in the United States will continue. Already during Donald Trump’s presidency, the Justice Department and the FTC launched investigations into the tech industry, which have (so far) resulted in lawsuits against Google and Facebook, filed just before Trump left office. While it may simply have been Trump’s unhappiness with culturally liberal tech companies that lit a fire under previously sleepy bureaucrats, other Republicans also have begun to rethink their traditional opposition to antitrust liability.

To continue reading, register now.

Subscribe now for unlimited access to everything PS has to offer.

As a registered user, you can enjoy more PS content every month – for free.

Already have an account? Log in

PS Events: What Economics is Missing

Our latest event, What Economics is Missing, is now live.

Click the link below for opening remarks from Dani Rodrik, followed by a discussion among Ashwini Deshpande, Raquel Fernández, Minouche Shafik, and Vera Songwe on how to achieve inclusivity in economics.

Watch Now

new comment has been posted. new comments have been posted.

0 Comments on this paragraph, 5 Comments on this article

j. von Hettlingen Mar 28, 2021

According to Eric Posner, the US has a history of monopolies, which are characterised by “greater market concentration and more anticompetitive behavior, which in turn has led to lower growth, higher prices, and greater inequality.” As Joe Biden seeks to “get tough” on monopoly, last month Senator Amy Klobuchar of Minnesota had introduced a major antitrust reform bill, which aims to “bolster antitrust enforcement in a number of ways.” After a decades-long trend toward increasing market concentration, it is time to reform competition policy for the 21st-century economy.
The author says the bill would “increase funding for the FTC and the Department of Justice Antitrust Division, establish new bureaucratic offices to investigate and monitor antitrust compliance and market conditions, slap new civil penalties on violators, and expose firms to liability for anticompetitive business practices that currently fall through the cracks.” Klobuchar’s proposals were seen as “moderate but meaningful,” which could provide a launchpad for cross-aisle cooperation.
It will take “a concerted effort by Congress and the Biden administration to reverse decades of antitrust neglect.” The recent era had seen the rise of internet giants - Google, Apple, Facebook and Amazon - that own wide swaths of the value-creation chain, controlling the majority of market share in their industry or sector with little to no competition. A huge range of businesses - “from airlines to wireless communications – have become more concentrated…. While technological change may play a role in this trend, it also reflects a hollowing out of antitrust enforcement since the 1970s.”
The damage market concentration inflicts on the economy is being highlighted in a 2019 book, “The Great Reversal: How America Gave Up on Free Markets.” The New York University economist Thomas Philippon “charts the growing concentration of US markets, and draws a sharp contrast with markets in Europe, which became more competitive during the same period, owing in large part to more aggressive antitrust law (or ‘competition law,’ as it is known everywhere outside of America).”
Indeed, “big firms that dominate markets harm not only consumers (by raising prices), but also workers (by lowering wages). Labor markets across the US are highly concentrated,” allowing employers to “suppress wages far below the competitive rate.” Market concentration “has undermined the efficient functioning of capital markets. Recent research shows that a handful of institutional investors, including BlackRock and Vanguard, have amassed a massive amount of economic power…. this consolidation is leading to higher prices in other sectors, such as the airline industry.”
According to the author, “antitrust law has long straddled ideological divides in the US.” Even before Trump left office, the Justice Department and the Federal Trade Commission (FTC) “launched investigations into the tech industry, which have (so far) resulted in lawsuits against Google and Facebook... While it may simply have been Trump’s unhappiness with culturally liberal tech companies that lit a fire under previously sleepy bureaucrats,” other Republicans - who see themselves as pro business and pro market - “also have begun to rethink their traditional opposition to antitrust liability.”
Although the US economy is “oligopolistic and increasingly sclerotic… lawsuits against Big Tech will not revive competition. Nor can Klobuchar’s bill be regarded as more than an admirable first step.” Congress faces “various hurdles to antitrust enforcement that the Supreme Court has erected over the years. Employing a death-by-a-thousand-cuts strategy, the Court has introduced procedural barriers to antitrust litigation, limited the scope of class actions, eliminated presumptions that previously helped plaintiffs, and instilled a culture of suspicion toward antitrust claims among lower courts.”
Another uphill battle for the bill is public opinion. Resentments towards the much loathed monopolists like John D. Rockefeller of the Standard Oil during the Gilded Age of the late 19th century sparked a “grassroots anti-monopoly movement” which helped get the “first” antitrust laws passed. Todays internet entrepreneurs and tech industrialists are “among America’s most admired” characters, because they embody many people’s American dream.
The Covid-19 pandemic has triggered an economic crisis of a magnitude not seen since the Great Depression, yet internet giants made hundreds of billions. Stuck at home Americans relied on Amazon for daily goods and used Facebook to communicate. Or they got their entertainment from Netflix and YouTube etc. Sadly these internet entrepreneurs have done little to narrow the income gap and pay back to the society, which had made them the richest persons on earth.
A new reply to this comment has been posted.
Michael Public Mar 17, 2021

In theory they are easy to break up. In practice - you either do nothing or outright destroy them and with them US tech supremacy. You can't have it both ways - monopolies abroad and many small firms at home. These firms mostly use 'the network effect' to provide value and making them smaller often just renders them useless : imagine you had to join 40 different networks to reconnect with old friends and colleagues.
A new reply to this comment has been posted.
Prashant Kotak Mar 12, 2021

There is a widespread assumption, that the rapid polorisation of the wealth generated by tech into a few hands can be checked and perhaps even reversed by waging war on the tech giants and breaking them up. This is a fundamental misunderstanding of the nature of tech. You will get an effect, but not the one you want. Tech driven disruption would not slow down, it will speed up.

Don't get me wrong, I am not a fan of the tech giants: it is only a (short) matter of time before they become unchallengeable even by governments and potentially very dangerous indeed, if current trajectories continue. However, the very fact that they are small in number and almost like mini nation states in their own right (without any of the geography but with all the governance structures of nations) means they are understandabe and auditable, and just about accountable (I wouldn't say regulatable). Breakups will cause dispersion of tech expertise to huge numbers of smaller entities, who will prove not just unpolicable but untraceable. You may stop polorisation of wealth, but at the cost of unleashing tech driven chaos. You will speed up effects like automation driven job loss, and the assault on government fiat by private blockchains. It's like whacking a hornets nest, you will simply create a different, potentially bigger, problem for yourself.
A new reply to this comment has been posted.

https://prosyn.org/zziF8lP

Antitrust Is Back in America

PS Events: What Economics is Missing

New Comment

Contact us

Log in/Register

Antitrust Is Back in America

PS Events: What Economics is Missing

Edit Newsletter Preferences

Set up Notification