Originally published by The Hill
The Biden administration has been engaging in industrial policy under the guise of increased antitrust enforcement. The approach elevates the importance of market concentration and what the shapers view as “fairness,” and seeks to undercut the consumer welfare standard that has guided enforcement policy for nearly 50 years.
Current antitrust thinking has little to do with promoting competition or protecting consumers. It has much to do with targeting large firms to protect competitors where the outcome risks higher prices and less innovation.
This new wave of antitrust enforcement began in 2021 with President Biden’s executive order on promoting competition in the American economy. The order blamed industrial consolidation and the rise of corporate power for economic ills such as high prices and slow wage growth while emphasizing the negative effects concentration has on small businesses and startups.
Team Biden launched a whole-of-government approach to antitrust enforcement policy designed to prop up small firms at the expense of large ones. Rather than protecting competition, this regime hand-picks winners and losers to transform the structure of markets.
American industrial policy is nothing new, but the tools to implement it have expanded. President Trump used hefty tariffs for the purpose of elevating domestic manufacturing. President Biden has relied on subsidies and tax credits — for the stated purpose of mitigating climate change — to bolster certain favored industries. The latest effort co-opts antitrust enforcement to enact industrial policy and reshape the economy.
For much of the last half century, antitrust enforcement has been wielded as a tool to protect consumers. Enforcers at the Federal Trade Commission (FTC) and Department of Justice (DOJ) fought to stop business practices and block mergers that threatened to raise prices, reduce output, stifle innovation or otherwise hinder competition on the merits. These considerations matter less to current antitrust thinking.
Now the agencies are focused on deconcentrating markets. To rearrange the industrial deck, the agencies have launched repeated attacks against some of America’s most successful and innovative firms simply because they are big. The “big is bad” approach has led the FTC and DOJ to craft policy statements and propose rules to counter the size and scope of these firms to transform market structure in the administration’s preferred design.
Changes to merger enforcement illustrate the industrial policy bend in decision-making. Large firms seeking to acquire smaller firms have faced increased roadblocks, higher compliance costs and outright hostility unseen in prior administrations. The agencies elevated the importance of market concentration in their merger review process despite abandoning the practice decades ago. The FTC and DOJ have also proposed rule changes that would quadruple the up-front costs of mergers and suspended a process that allows competitively benign transactions to close quickly.
Even firms able to weather the increased regulatory burden face additional hurdles in court. The agencies have adopted new theories of harm and defined relevant markets so narrowly that they would be unrecognizable in practice.
Abusing antitrust to rejigger the composition of industries is likely to result in the very outcomes the agencies are tasked with preventing. Often, small firms and serial entrepreneurs seek to develop a product or service with the intention of being acquired. Moreover, venture capital funding these pursuits are often conditioned on the potential for acquisition. If the merger and acquisition market is disrupted simply because the administration prefers a greater number of firms, these products and services may never become commercially available.
Consumers and businesses would be best served by the antitrust agencies refocusing their mission on solely stopping business practices and blocking mergers that harm competition. Using antitrust as an industrial policy tool to impose a politically preferred market structure runs the risk of leaving consumers with higher prices and less innovation.
