President Joe Biden is attempting to resurrect an archaic and interventionist theory of antitrust enforcement that “big is inherently bad” (Never mind the operational efficiencies and other consumer benefits economies of scale commonly generate). Policymakers who subscribe to this theory, —known as “neo-Brandeisians,” after the famed, Progressive-era trustbuster, Justice Louis Brandeis—want to expand the power and role of antitrust agencies. They would have the federal government burrow regulators deeper into markets and the day-to-day decision-making of businesses.
Despite the fact that the antitrust theories on which the neo-Brandeisians rely are long discredited as economically foolish and legally suspect, the President has placed neo-Brandeisians in key roles. Jonathan Kanter, Department of Justice (DOJ) Assistant Attorney General for Antitrust, and Lina Khan, Federal Trade Commission (FTC) Chair, are prime examples of this flawed philosophy. However, as Kanter and Khan file lawsuits to enshrine their theories in precedent, they’ve received from the judiciary a mixed reception at best.
While policy circles have made much of the DOJ and the FTC’s more overt attempts to vest themselves with more authority, less discussed is the degree to which the mere threat of legal actions can shape economic choices. The burdensome expenses required for a legal defense—even a successful one—are a powerful incentive for companies to avoid any sort of behavior that might draw scrutiny. Given the highly-interventionist philosophy of both Kanter and Khan, that category is quite broad.
The neo-Brandeisians recognize the power of this deterrence. “On the merger front, there is no success greater for us than deterrence, and deterrence comes in many forms,” Kanter said recently. “We have had six public abandonments, but I can tell you there have been many more non-public abandonments,” he added. Sure enough, in the Biden era, “companies have changed their behavior, structuring deals to avoid accusations that they break antitrust law,” Reuters reported last year. Moreover, “attorneys advising companies on antitrust risk also acknowledge the current stance at both the FTC and DOJ is scuttling deals before they make it out of the boardroom,” according to Politico.
Kanter suggests this deterrent effect stems from enforcers’ legal victories, citing his thwarting of Penguin Random House’s attempted acquisition of Simon and Schuster. Also notable, however, are the myriad courtroom setbacks where judges have rejected the government’s interpretations of its own authority. For example, in September (2022), the DOJ failed to block UnitedHealth Group’s purchase of Change Healthcare, a case the agency permanently shelved in March. Just days after that September setback, another federal judge declined to block a DOJ-challenged sugar-industry merger. Further, the agency in December dropped an anti-merger suit against Booz Allen Hamilton Holding Corporation after still another loss in court.
The FTC has done just as poorly. In a high-profile attempt to block Meta from purchasing virtual-reality (VR) company Within Unlimited, the agency argued that the government ought to disallow the merger not to protect actual competition, but to foster the potential for future competition. “It was a very silly argument,” Reason’s Elizabeth Nolan Brown noted, and a federal judge duly rejected it. The FTC thereafter abandoned the action.
As companies forgo otherwise profitable business arrangements to dodge regulators’ wrath, the losses are likely to fall hardest on everyday citizens, who will be unable to enjoy the savings. They will also miss out on expanded availability, faster delivery times, and other consumer benefits mergers often promote. In a policy statement issued in November, the FTC contravened the “consumer welfare” standard and explicitly rejected “rule of reason” test, instituting instead an “I-know-it-when-I-see-it” approach.
The statement’s language was far too broad and vague, then-Commissioner Christine Wilson argued in dissent. The agency provided “no meaningful guidance for courts and businesses to analyze unfair methods of competition.” A dramatic reinterpretation of once-settled precedent, Wilson wrote, the statement “provides that merely labeling conduct with an appropriate adjective can establish liability.”
Fervent antitrust enforcers have historically proved creative in justifying all manner of ill-advised antitrust suits. The historical record itself is less malleable: The merger history the neo-Brandeisians glorify featured interventions so economically nonsensical and haphazard that, as phrased by then–Supreme Court Justice Potter Stewart, the “sole consistency that I can find is that…the Government always wins.” Such excesses led to a bipartisan consensus against it, a consensus that re-centered antitrust litigation on protecting consumer welfare. Nonetheless, regressives like Kanter, Khan, and others seek to drop pro-consumer, modern precedent in favor of the debunked antitrust of yore. Congress—and voters—ought not look kindly on it, and certainly ought not delegate them more power.
