Tirzah Duren

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Theodore Roosevelt may be the most famous trust buster, but the most recent recipient of the title is Lina Kahn, the chair of the Federal Trade Commission. Unfortunately, while members on both sides of the aisle champion Kahn’s approach to antitrust, the reality is that abandoning an economically constrained enforcement will hurt consumers and repeat past mistakes.

While not a perfect label, neo-Brandeisian, or New Brandeis, is proudly worn by many champions of Kahn’s approach, including Tim Wu. Proponents see this movement as returning antitrust to its original intent, which was concerned not just with consumers but with competitors and society. Wu, in his book “The Curse of Bigness: Antitrust in the New Gilded Age,” frames this approach as a strategy to not only rein in large businesses but also as a protection against political outcomes such as fascism, which he sees as an inevitability of market concentration and private power.

Such broad political goals partly explain why this approach to antitrust casts a wide net of potential harm that includes workers and direct competitors. Proponents see the narrowed focus from adopting the consumer welfare standard (CWS), which focused antitrust enforcement on cases with established or likely consumer harm, as constraining enforcement and contributing to increased concentration in markets.

The shift in approach that neo-Brandeisians frequently point to occurred in the 1970s and is primarily attributed to Robert Bork and his book “The Antitrust Paradox.” Bork asserted that the original intent of the Sherman Act, the first national antitrust law, was to protect consumer welfare. While this has been heavily debated, his emphasis on contradictory enforcement struck a chord.

Before the courts accepted the CWS, prominent cases highlighted how enforcement was overzealous when not constrained by precise standards.

Von’s Grocery is a prime example. As noted by Bork and Wu, the courts rejected a merger that would have only amounted to 7.5 percent of grocery store sales in the relevant market. Even Wu states that this decision indicates aggressive enforcement focused on “relatively minor mergers.”

Part of the justification for the decision in Von’s Grocery was a concern about “creeping” concentration. This idea is again taking root, as the FTC and the Justice Department requested information on serial acquisitions, which refer to acquisitions that may not be individually harmful but may lead to increased concentration. 

The problem with antitrust being untethered to measurable harm is that enforcement becomes highly subjective. Theoretically, any growth, internal or through mergers and acquisitions, could be seen as increasing concentration and “creeping” toward market power.

Another example is Brown Shoe, which stopped a merger that would have resulted in a market share of just 7.2 percent of U.S. retail shoe stores. The justification was that cost savings would make it harder for competitors despite being beneficial to consumers. The decision was partly guided by the belief in “Congress’ desire to promote competition through the protection of viable, small, locally owned business.”

The perspective shown in Brown Shoe is coming full circle with Wu’s emphasis on creating an economy full of small businesses and asserting that successful large companies can serve as barriers to entry and are, therefore, uncompetitive.

This perspective doesn’t leave much room for are the potential benefits derived from scale. As noted in the American Consumer Institute’s comments regarding the revised merger guidelines, economies of scale often offer consumer benefits through lower prices. While Wu maintains that economies of scale tend to take a U-shape with diminishing returns, it is difficult to argue that diminishing returns start at the low level shown in Von’s Grocery.

Returning to such rigid enforcement would mean forgoing consumer benefits and societal progress.

What proponents of neo-Brandeisian antitrust should be slow to forget is the reason for the CWS in the first place. Before replacing a standard for measurable harm with one that allows the punishment of size, no matter how marginal, they should remember that returning to untethered enforcement will repeat past mistakes.

Tirzah Duren is the vice president of policy and research at the American Consumer Institute. She wrote this for InsideSources.com.