Submission to House Judiciary Committee Inquiry on Digital Economy
34 Pages Posted: 10 Jun 2020 Last revised: 17 Sep 2020
Date Written: June 9, 2020
To assist in its investigation of competition in the digital marketplace, the Judiciary Committee invited comments on topics relevant to that investigation. This response contains four sections. The first briefly describes my background and explains that I support aggressive antitrust enforcement when it will in fact benefit consumers. My experience in antitrust spans nearly five decades as a student, professor, scholar, enforcer, expert, consultant, and practitioner. I have served in multiple government positions, including at the Federal Trade Commission as Director of both enforcement bureaus — the only person ever to hold both jobs — as well as Chairman from 2001 to 2004. This section rebuts recent claims that applying the methodology underlying modern law, known as the consumer welfare standard, prevents an aggressive, pro-consumer Antitrust policy, particularly under Republicans. The two periods when I was most responsible for FTC antitrust enforcement — the mid-1980s and the beginning of this century — were the most active in the last 40 years using the FTC’s administrative procedures to attack a wide variety of anticompetitive practices ranging from those in healthcare and in professional associations, to the misuse of the machinery of government to harm competition, to preventing anticompetitive increases in energy prices. With respect to a topic of particular current interest, while Chairman the FTC filed four cases alleging single-firm monopolization over three years — an unusually high rate of activity in this very resource-intensive area of the law. For example, in one case, against the oil company Unocal, we successfully lowered the gas price at the pump for all California consumers.
The next section addresses the adequacy of existing laws regarding monopolization and anticompetitive transactions, questions that implicate the heart of the current debate on how antitrust law has been interpreted and enforced for decades using the consumer welfare standard. That standard, based in sound economic analysis, and its companion holding by American courts that the purpose of antitrust law is to protect consumers, not competitors, has been crucial to avoiding the many mistakes of antitrust’s past — especially a “big is bad” animus that too often lead the law and agencies astray. Because today’s critics ignore the mistakes of that past, I discuss them here, especially how the protection of competitors and not competition, as reflected in the Robinson-Patman Act (“RPA”), not only was one of antitrust’s worst mistakes, but also how RPA and the Justice Department's long war against the then largest retailer in America, the Great Atlantic and Pacific Tea Company (A&P), poisoned antitrust for decades to the great detriment of American consumers. Sensible application of the consumer welfare standard would have avoided those catastrophes.
Today’s critics base much of their hostility to the consumer welfare standard, and to the long-standing antitrust consensus that they seek to overthrow, on the claim that those associated with the University of Chicago seized control of antitrust law and remade it in their image. The next section shows that such arguments are bogus: many of the scholars who first helped antitrust escape the fallacies of the RPA and the associated crusade against A&P, although dedicated to the same pro-consumer use of economics that the consumer welfare standard demands, were not members of the so-called “Chicago school.” On the contrary, numerous scholars associated with Harvard, most notably Professor Phillip Areeda — an original author of the leading Antitrust treatise — and Supreme Court Justice Stephen Breyer have been at least as influential as those affiliated with Chicago in the development of modern antitrust law under the consumer welfare standard.
Finally, the last section addresses the continual need to address business practices as they evolve. Ever a UCLA Bruin, I remain devoted to legendary coach John Wooden‘s maxim that “when you are through learning, you are through.” The section offers multiple examples of successful, bipartisan FTC efforts to improve enforcement to the benefit of consumers. In the key healthcare sector, American consumers continue to benefit from the FTC’s hard work. After the government lost seven hospital merger challenges in the 1990s, upon my direction the FTC worked to devise a new enforcement plan by incorporating fresh economic thinking and issuing retrospective case studies showing that several hospital mergers had indeed harmed consumers. This plan resulted in a successful challenge to a consummated hospital merger that served as a template for future enforcement, leading to Obama administration victories in three separate courts of appeal endorsing the FTC’s approach. Such success did not require abandonment of the consumer welfare standard, nor a dramatic increase in agency resources. Indeed, my predecessor as FTC chairman, Bob Pitofsky, did much more for American consumers using the consumer welfare standard with just 1,000 staff than did the agency in the 1970s when it had far greater resources (1,800 staff by the turn of the decade), but was motivated by an antitrust policy that was, instead, at war with itself.
Keywords: antitrust law, pro-consumer Antitrust, consumer welfare standard, Robinson-Patman Act, RPA, hospital mergers
JEL Classification: K21, K23, K29
Suggested Citation: Suggested Citation