Federal Trade Commission (FTC) Chair Lina Khan did not act like someone who was leaving a position. In November, Chair Khan launched an investigation into Microsoft. Then in December the FTC sued Southern Glazer’s Wine and Spirits, the nation’s largest distributor of wine and spirits, for allegedly violating the Robinson-Patman Act.
This is the first case brought under the New Deal era law since 2000. Robinson-Patman forbids distributors, such as Southern Glazer’s, from selling their products to large retailers like Total Wine at a lower price than that offered to smaller retailers. The legislation was intended to protect small “mom-and-pop” stores from “unfair competition” from bigger retailers.
Like many federal laws, Robinson-Patman ignores the reasons distributors like Southern Glazer’s offer discounts to big retailers. The reason is that a larger retailer like Total Wine or Walmart can take advantage of economies of scale to sell more of a product at a cheaper price. This enables distributors like Southern Glazer’s—as well as the companies who make the products—to earn higher profits even if they have to sell their products to the large retailers at a discount. This also benefits consumers—who can buy more for less.
The law does allow price “discrimination” if a distributor can show it incurs greater costs to supply some retailers than others, or if the distributor has to offer a discount to a retailer to match a competitor’s offer. It is up to federal bureaucrats, lawyers, and judges to determine whether a distributor has a legitimate reason for charging different prices or whether it is engaging in unfair discrimination. The subjectivity of deciding which discounts are proper and which are not, combined with the fact that the law forces consumers to pay higher prices, explains why it has been over two decades and four presidents since the government sued a business for violating this law.
Robinson-Patman’s revival fit Chair Khan’s “Neo (or hipster) Brandeisian” approach to antitrust. This approach seeks to replace the “consumer welfare standard” which has dominated antitrust policy for almost half a century with an updated version of the old “big is de facto bad” standard. This neo or hipster approach allows the government to use antitrust as a weapon to second guess almost any decision private businesses make.
Under Chair Khan’s leadership, the FTC filed a record number of lawsuits—but lost many—a fact which does not bother Khan. She has admitted that she sees value in bringing “long shot” cases since they can send a signal to Congress on how antitrust laws need to be changed. Chair Khan’s “hyper litigation” strategy was also “successful” in that it led some businesses to consider the possibility that their mergers would be challenged by the FTC. Even if the merger in question ultimately won approval, the cost of having to defend it would make the deal unprofitable. No wonder CNBC commentator Jim Cramer called Chair Khan a “one woman wrecking crew” — while several of Kamala Harris’ big donors publicly urged the Vice President to fire Chair Khan if she won the presidency.
President Trump’s pick to replace Lina Khan, FTC Commissioner Andrew Ferguson, shares Chair Khan’s desire to rein in big tech, although for different reasons. Chairman Ferguson wants to use antitrust to punish big tech for using their market power to silence conservative views and promote a progressive agenda and/or the interests of Democratic politicians. Ferguson also wants to use antitrust against any business promoting wokeness—even though consumers are already doing a good job of punishing “woke” businesses by refusing to patronize businesses that promote things they find offensive.
However, Ferguson will likely restore the consumer welfare standard and, with the two exceptions mentioned above, take a hands off approach to antitrust. He will do less economic damage than his predecessor, but using his position to punish private businesses for their political or social views sets a disturbing precedent. If a conservative (or Khanservative) FTC Chair can punish businesses for putting up a rainbow flag, then a progressive FTC Chair can punish businesses for letting their workers wear MAGA hats.
So, while we should be hopeful of Chairman Ferguson’s new direction, Lina Khan’s departure brings to mind Oliver Cromwell’s remarks to the British Parliament: “You have sat too long here for any good you have been doing. In the name of God, go.”
