Joe Biden’s Antitrust Paradox: Where’s the Consumer Welfare?

By Robert H. Bork Jr.July 12, 2021 1:20 pm ET

His new competition policy is a power grab that will hurt economic growth and investment.

‘Forty years ago, we chose the wrong path,” President Biden told Americans on Friday, “following the misguided philosophy of people like Robert Bork, and pulled back on enforcing laws to promote competition.”

What was that path, exactly? And where have these 40 years in the wilderness led us?

These aren’t academic questions for me. I remember my father in the late 1960s working in his cramped attic study in New Haven, Conn., beginning to develop his theory of antitrust law. He was 40, sitting at a desk my mother made from an old door, scribbling with his Scripto mechanical pencil on yellow legal pads, wreathed by a cloud of smoke from the Kent cigarette hanging from the corner of his mouth.

My father taught himself calculus because he believed a specialist in antitrust should understand the complexities of price theory. The product of this decadelong labor and his rigorous study of antitrust was his 1978 masterpiece, “The Antitrust Paradox: A Policy at War with Itself.” By paradox, he meant that laws designed to protect consumers ended up protecting everyone but consumers.

Earlier in the century, Justice Louis Brandeis had denounced the “curse of bigness” against “small dealers and worthy men.” He thought the law should protect small firms against the predations of larger, more efficient ones. Justice William O. Douglas took up this cudgel in the 1960s and ’70s, thwacking businesses for being too successful. The conclusion of my father’s work was the profound declaration that antitrust law shouldn’t try to decide who is “worthy” or to defend smaller or less efficient competitors. The sole aim of antitrust law is to protect consumers.

Enter Mr. Biden and Lina Khan, the “neo-Brandeisian” newly installed as chairman of the Federal Trade Commission. They are executing a campaign to undo the consumer-welfare standard and replace it with a full-on effort to regulate pharmaceuticals, healthcare, agriculture, telecom, technology and manufacturing. Through a “sweeping” executive order signed Friday, Mr. Biden aims to empower the alphabet of federal agencies to use their authority to second-guess and undo business decisions that could “harm competition.” Should these agencies falter, the new White House Competition Council and Ms. Khan will be there to remind them who is boss.

Mr. Biden’s justification for this sweeping campaign is simple: “We are now 40 years into the experiment of letting giant corporations accumulate more and more power. And what have we gotten from it? Less growth, weakened investment and fewer small businesses.”

Mr. Biden and Ms. Khan could do worse than to follow my father’s example and learn a little math themselves. In Joe Biden’s America, “less growth” means the economy almost tripled in size from 1980 to 2020 under the consumer-welfare standard. Over this time, the World Bank reports that Americans’ per capita income has nearly doubled.

In Joe Biden’s America, a 9.99% inflation-adjusted annual rate of return from 1980 to 2020 is “weakened investment,” although it is more than 2 points above returns during the prior 40 years before the consumer welfare standard. If you had invested $1,000 in the S&P 500 in 1980 and reinvested the dividends, by 2020 you would now have $97,885.

What about “fewer small businesses?” The overall trend under the consumer welfare standard has been strong. But in Joe Biden’s America, a 54% increase in small businesses since 1980 amounts to “fewer small businesses.”

If Mr. Biden can steamroll every industry and protect inefficient, rent-seeking competitors over consumers, his executive order will certainly succeed in transforming America if it is ever backed by statutory force. Sen. Amy Klobuchar (D., Minn.) is pushing a sweeping antitrust bill, a companion to the raft of antitrust bills in the House, to “promote economic equity.” Many Senate Republicans are eager to hop on this train, including Sen. Josh Hawley (R., Mo.), who would outlaw any mergers or acquisitions for the more than 80 large U.S. companies valued over $100 billion. Together, Sens. Klobuchar and Hawley would petrify American capitalism.

There may be enough bipartisan support for Mr. Biden to succeed. His speech was certainly a masterpiece of demagoguery masquerading as common sense. He wrapped his proposal in popular items, from reduced costs for prescription drugs and internet services, to access to low-cost over-the-counter hearing aids. He invoked the legacies of both Roosevelts. Joe Biden may appear small in the shadows of these giants, but if he succeeds, he will have pulled off a government power grab that is at least the equal of the New Deal, without its benefits.

Mr. Biden said “our economy isn’t about people working for capitalism; it is about capitalism working for people.” If Congress and the courts roll over, it will be about working for the government.

Mr. Bork is president of the Washington-based Antitrust Education Project.