10/11/21, 02:13 Antitrust’s New Mission: Preserving Democracy, Not Efficiency - WSJ

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CAPITAL ACCOUNT

Antitrust’s New Mission: Preserving Democracy, Not

Efficiency
Neo-Brandeisians like FTC Chairwoman Lina Khan target concentrated economic and political power

Lina Khan, who is now chairwoman of the Federal Trade Commission, testifying at a Senate hearing
in April.
PHOTO: POOL/REUTERS

By
Greg Ip
July 7, 2021 11:07 am ET

Amazon.com Inc.’s
proposed acquisition of film studio MGM would ordinarily provoke
little antitrust concern. MGM’s share of box office receipts is tiny and Amazon’s
entertainment footprint is relatively small.

But Amazon of course does much more than make movies: it is the country’s largest e-
commerce and cloud-computing company, and a dominant seller of books, videos and
music. Founder and Executive Chairman
Jeff Bezos
owns the Washington Post. In their
totality, then, Amazon and Mr. Bezos represent a significant concentration of economic

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and cultural influence. For a new generation of trustbusters, that’s a bigger concern than
the efficiency benefits a merger might bring.

“There is sound reason to ask whether permitting Amazon to leverage its platform to
integrate across business lines hands it undue economic and political power,” then law
student Lina Khan wrote in a now famous law journal article in 2017.

Last month, President Biden named the 32-year-old Ms. Khan chairwoman of the Federal
Trade Commission. At a confirmation hearing in April, she said antitrust’s historical role
is to “protect our economy and our democracy from unchecked monopoly power.”

Ms. Khan embodies the neo-Brandeisian movement, named for Louis Brandeis, a
crusading lawyer and later Supreme Court justice who argued bigness was both
inefficient and antithetical to liberty. “Size, we are told, is not a crime,” he wrote in 1914.
“But size may, at least, become noxious by reason of the means through which it was
attained or the uses to which it is put.”

For Brandeis, democracy included the freedom of a worker to negotiate with their
employer, a supplier with a retailer and vice versa, and a farmer with his bank, which
required a plurality of market participants. “He feared that as the corporations became
large and powerful, they took on a life of their own, becoming increasingly insensitive to
humanity’s wants and fears,” Columbia University law professor
Tim Wu
wrote in a 2018
book. Mr. Wu now serves on Mr. Biden’s National Economic Council.

For decades that’s how courts and regulators interpreted antitrust laws, regularly ruling
against mergers and business practices such as exclusivity deals between suppliers and
customers.

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Legal scholar Robert Bork at the White House in 1987.

PHOTO: BARRY THUMMA/ASSOCIATED PRESS

In the 1970s that approach came under attack by conservatives led by the late legal
scholar Robert Bork, who had served under Richard Nixon. “The only legitimate goal of
American antitrust law is the maximization of consumer welfare,” he wrote in his 1978
book “The Antitrust Paradox.” Companies got big by becoming more efficient, which
benefited consumers, he wrote. Judges and regulators, lacking even a “rudimentary
understanding of market economics,” deprived consumers of these efficiency benefits
when they blocked mergers in pursuit of a “grab bag” of political and social objectives.

The consumer welfare standard has come to govern antitrust. But in the last decade
rising economic concentration, high profit margins, declining business startups and
subdued investment all suggest monopoly power is growing again.

Meanwhile, Mr. Biden’s election has coincided with a backlash against the pro-market
principles that have governed economic policy for decades. Progressives blame the
obsession with efficiency for aggravating inequality and racial disparities; conservative
populists blame free trade for hollowing out manufacturing.

Big Tech is ground zero for this backlash. One or two companies now dominate social
media, smartphone app stores, Internet search, web advertising and electronic
commerce. Judged only by consumer welfare, this doesn’t seem to present a problem:
their products are cheap or free, and extremely popular. Judged by concentrations of
power, it’s problematic: their control of essential platforms leave individual merchants,
app developers, content providers and users next to no bargaining power since they have
so few alternatives. Barriers to entry are high to insurmountable for potential

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competitors. They determine what artistic and political content billions of users share
and see.

Before becoming FTC chair Ms. Khan had advocated either barring platform operators
like Amazon from competing with users of that platform; or regulating them like utilities.
She would ban vertical mergers—that is, between two components of the same supply
chain, for example a supplier of content such as MGM and a distributor such as Amazon—
once a platform operator has reached a dominant size. She hasn’t commented on Amazon
since becoming chair. Nonetheless, citing these views, Amazon has asked Ms. Khan to
recuse herself from FTC investigations of the company.

Amazon.com has agreed to acquire the Hollywood studio MGM.

PHOTO: ERIC THAYER/BLOOMBERG NEWS

Under Ms. Khan’s vision, the risk that a business structure could enable anticompetitive
behavior matters more than evidence of that behavior such as higher prices.

But that approach carries risks of its own. Lack of evidence could lead to weak cases that
fail in court. A federal judge dismissed a lawsuit by the FTC and most state attorneys-
general for failing to establish that
Facebook Inc.
is a monopoly. Bills proposed by
Democrats in the House of Representatives would lower the bar for winning such suits,
but their fate is unclear. Barring firms from getting big could deprive consumers of the
benefits that only big firms can deliver. Millions relied on Amazon’s heft when the
pandemic kept them out of stores.

And while neo-Brandeisians worry about abuse of corporate power, Mr. Bork’s acolytes
worry about abuse of antitrust authority. In 2018, the Department of Justice tried,
unsuccessfully, to stop
AT&T Inc.
from acquiring Time Warner Inc., in a move many saw as

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motivated by then President

Donald Trump’s
personal animosity toward CNN, a unit of
Time Warner.

For all its flaws, antitrust governed by the consumer welfare standard is less at risk of
politicization than beliefs about what’s good or bad for democracy.

Write to Greg Ip at [email protected]

Appeared in the July 8, 2021, print edition as 'Latest Antitrust Approach Has Its Own Risks.'

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