Americans struggling with high prices and shortages may be in for more economic difficulties courtesy of the Biden Administration. This is because, with the Senate recently confirming Alvaro Bedoya to the Federal Trade Commission (FTC), the FTC board now has a full five members, three Democrats and two Republicans.
This gives Biden’s FTC Commissioner Lina Khan an opportunity to implement her radical agenda.
Khan is a leading “neo-Brandeisian.” Neo-Brandeisians are disciples of Supreme Court Justice Louis Brandeis, one of the 20th Centuries’ most influential “progressives.” Brandeis believed that antitrust laws should be used to protect people from “the curse of bigness.” Neo-Brandeisians want to return antitrust law to the simplistic “big is bad” view of antitrust enforcement, rather than the consumer welfare standard which has dominated antitrust enforcement since the 1980s.
As the name suggests, the consumer welfare standard limits antitrust actions to those cases where business actions verifiably harm consumers. The consumer welfare standard is better since it reflects the way businesses operate in a free market. As it was put by Judge Robert Bork, the consumer welfare standard’s leading advocate, in his classic work The Anti-Trust Paradox, “Business units should prosper or decline, live or die according to their abilities to meet the desires of their consumers.”
That should be the goal in Congress passing the antitrust laws (or better yet not passing them).
Khan would actually go further than Brandeis. She has suggested using antitrust to tackle issues ranging from online surveillance, cancelling subscriptions, investigating if pharmacal middleman raise the cost of prescription drugs, and the role industry consolidation contributes to supply shortages. Khan wants to use antitrust laws to, in the words of one of her supporters, “ take charge of the entire economy.”
Khan has a particular animus toward big tech. Khan, who at 32 is the youngest FTC commissioner in history, first came to prominence for an article she wrote while in law school arguing that the rise of Amazon necessitated expanding the justifications and goals of antitrust. One of her first acts as FTC chair was renewing the Trump-era FTC lawsuit against Meta (the parent company of Facebook, Instagram, and What’s App).
She may even attempt to reverse the FTC’s approval of Amazon’s acquisition of MGM studios.
Khan’s threats to Amazon illustrate the dangers of returning to the “big is bad” standard. Amazon’s position in online commerce does not mean the online market is not competitive. Amazon has competition from every major retailer, plus many smaller businesses and there are no real barriers to entry in the online marketplace. Amazon thrives because it offers consumers a wide range of products and efficient delivery. Federal antitrust actions could impede Amazon’s ability to continue providing the same level of customer service.
So, there is no reason to believe that antitrust action against Amazon would in any way improve the marketplace or benefit consumers. And if Khan successfully crippled Amazon, she’d blame “capitalism” rather than take any credit.
There is also no justification for the FTC to block Amazon’s purchase of MGM, which was done to bolster Amazon’s streaming service. To say the streaming marketplace is uncompetitive is even more absurd than saying the online commerce market is uncompetitive. Amazon streaming services face competition from Netflix, Disney+, Hulu, HBO Max, and other steaming services. Many of these services are owned by movie or television studios and they can produce their own content. It thus makes sense that Amazon would want to own a movie studio in order to better compete with Netflix and Disney.
But, if we again return to the consumer welfare standard, the ultimate beneficiaries of Amazon’s acquisition will be the consumers.
Fortunately, Khan faces two obstacles in implementing her agenda. One is the recent Supreme Court ruling limiting the ability of federal agencies to act in areas where Congress did not clearly intend the agency to act. The second is the likelihood that the Republicans take control of one or both houses of Congress this November. If Republicans do gain control of Congress, there are few more important tasks than aggressively using their oversight and funding authority to reign in Khan and her fellow neo-Brandeisians.