Ever have the teacher tell you to redo your homework? What did you do?
You probably made your paper longer, added more facts and footnotes. Not surprisingly, government works the same as well.
As you will recall, the Federal Trade Commission launched an antitrust lawsuit against Facebook. In June, U.S. District Judge James Boasberg tossed that FTC suit, complaining that the FTC failed to offer a coherent description of the market that the social media company supposedly dominates.
“The FTC’s inability to offer any indication of the metric(s) or method(s) it used to calculate Facebook’s market share renders its vague ’60%-plus’ assertion too speculative and conclusory to go forward.” The FTC did not even bother to say who made up the other 40 percent.
Judge Boasberg did add, however, that there was some “meat” on the bones of FTC’s argument, encouraging FTC to come back and try to transform a “D” paper into an “A” paper.
So now Chair Lina Khan and the FTC have refiled with some meat, in the form of an additional 27 pages to its original 53. So what do these pages add?
Not much in terms of new facts or logic.
The FTC continues to define the market as “personal social networking services.” But it redacts the actual math that describes the components of that market. Why? Why hide from the public the very companies and their market shares that the judge demanded to see?
Is it possible that the FTC is afraid that its numbers are too shaky?
The FTC Khanate – with its staff under severe restrictions and gag orders, so it will be hard to query their reasoning – also identifies TikTok as being outside of the “personal social networking services” market. If one were to define the market by percentage of cat videos, TikTok is a vicious, toe-to-toe competitor. More to the point, doesn’t TikTok’s “friends” application make it a competitor of Facebook? The latter certainly thinks so.
Antitrust law was designed with Standard Oil, railroads, and the steel and the copper trusts in mind. These were giants who made necessities and had deals to lock out competition, harming consumers. It is abuses like those which the venerable Consumer Welfare Standard has sorted out for almost half-a-century.
Does it make sense to apply antitrust law against social media platforms that provide services for free, almost none of them necessities, and that anyone can abandon with a single click?
However Boasberg rules, the real danger is that we will degrade and diminish the one clear standard that makes antitrust work.
For decades, the prospect of a dream acquisition by a large company has driven startups to innovate by developing the next “killer app.” The acquisition model leaves founders and their employees with fortunes, relieves them of the need to scale and monetize their technology, and often results in them serving in high-level executive positions under the parent company (see Will Cathcart, still heading WhatsApp owned by Facebook) – or with enough capital to fund their next startup (see PayPal’s Elon Musk, currently packing his bags for Mars).
For decades now, large companies and platform hubs have in effect acted as bottomless venture capital funds, encouraging and developing outside technologies. What will happen now that Washington, D.C., is working overtime to kill these incentives?
If Sen. Amy Klobuchar manages to pass her antitrust legislation, corporations seeking mergers and acquisitions would need to prove – in advance – that a proposed deal would do no harm to competition. In many cases, measuring competitive harm is a highly subjective enterprise, a warning to any executive that a different interpretation of the law, facts or economics of a deal could result in prosecution.
Even if Klobuchar’s legislation outlawing “predatory” acquisitions fails to pass, the steroidal regulators at the Federal Trade Commission, the Department of Justice antitrust division and the White House – Lina Khan, Jonathan Kanter and Timothy Wu – stand over every potential deal like a trio of housemothers showing up at a raucous frat party. Talk about a buzz kill for innovators!
Does their “predatory” argument even make sense? Jonathan M. Barnett of the University of Southern California School of Law, writing in Bloomberg, reports that there is no existing research confirming instances of “predatory” acquisitions as a general phenomenon.
He points to a well-regarded paper conducted by scholars at the London School of Business and Yale School of Management, which defines “killer acquisitions” as those solely meant to choke off innovation and preempt a future competitor. In the pharmaceutical space, these scholars found that only 5.3 to 7.4 percent of all acquisitions could be characterized in this way. Israel’s competition authority examined acquisitions of Israeli firms by large foreign companies over a recent five-year period, and could not find even a single “killer acquisition.” Even under the London-Yale standard, that would mean that almost 95 percent of all acquisitions are not harmful. If they increase efficiency, they should be beneficial to the market, competition, and ultimately to consumers. Yet all of them under the current standard run the risk of falling under the rubric of being “predatory” and anti-competitive.
This makes no sense, as Barnett makes clear:
This exit-by-M&A pathway has been facilitated by the fact that regulators have generally viewed acquisitions of startups by incumbents as posing little risk to competition. The logic is straightforward.
If an emergent firm represents a small portion of a much larger market, the transaction is unlikely to increase the acquirer’s market power, and hence, consumer harm is unlikely.
Barnett speculates that startups will now have to look instead to IPOs and internal growth. This means that technologists will have to transform themselves into CEOs and marketing geniuses. Many gifted innovators are simply not good at such tasks, or able to find the right people to commercialize their innovations. How all this will shake out is not clear, but it is foolish in the extreme for the Biden Administration – and their antitrust Republican enablers – to pretend that these policies will boost innovation, create more jobs or benefit consumers.
The blood-boiling excesses of woke corporations can and should be curbed. But there’s no need to destroy the American free-market system in the bargain.
AEP President, Robert H. Bork, Jr., shares in the National Review how conservatives are being trapped into antitrust although their focus should be on Section 230. This puts the Consumer Welfare in jeopardy and lawmakers cannot let that happen.
Our President, Robert H. Bork, Jr., discussed on Fox Business' Larry Kudlow on how Joe Biden is neglecting the consumer welfare and how Biden's new competition policy is a power grab that will hurt our economic growth and investment.
Where's the Consumer Welfare? Our President, Robert H. Bork, Jr., writes how Joe Biden's new competition policy is a power grab that will hurt our economic growth and investment.
AEP's President, Robert H. Bork, Jr.:
What’s been needed all along is a way to protect conservative speech on social media without resorting to a punitive antitrust regime that would put all business under the thumb of Lina Khan and her ilk.
Jim Jordan and House Republicans responded this week with legislation that consolidates antitrust enforcement in the Department of Justice, where professional lawyers follow the law.
House Republicans would fix the content cancellation crisis by updating Section 230, which would require more of the social media companies in exchange for their liability protections. Facebook, Twitter, Google and other companies would have to be more transparent and precise about their content policies. They would have to adhere to objective standards and announce their reasoning in public for a given cancellation. And conservatives and other silenced groups would have a cause of action in court.
I haven’t read the details of this legislation yet, so I can’t speak to any possible long-term unintended consequences. But this general approach is the right one. I hope Republicans in the Senate are listening.
Sen. Lee: Promises Ambiguity During Fragile Economic RecoverY
Lina Khan’s announcement that the Federal Trade Commission will vote within days to rescind a 2015 policy statement upholding the agency’s commitment to the Consumer Welfare Standard is as about as surprising as a wolf suddenly devouring a lamb. Who knew they did that?
With opposition from only two Republican commissions, the stripping of this standard –under which the United States has prospered for almost half-a-century – should be almost pro forma. Scratch the “almost.” Chair Khan is allowing public comment, but only after the vote is held.
It will then be up to courts to act as the bulwark that upholds the position of the Consumer Welfare Standard in antitrust law.
Commissioner Noah Phillips tweeted that this and other items on Khan’s ambitious agenda will “reduce clarity in law, limit public understanding of rulemaking, and remove commission oversight of decisions that impose substantial costs on the agency and businesses alike.”
Republican Sen. Mike Lee said, “Should the FTC rescind the statement, it will replace clarity with ambiguity in the midst of a fragile economic recovery. Rescinding the statement would also signal that the commission rejects the idea that there are any limits to its power or regulatory reach.”
Sen. Lee notes that the 2015 policy statement occurred under the Obama Administration, and that the Biden Administration would do well to focus on a bipartisan approach to antitrust.
My take is that there is no room for bipartisanship in antitrust for the foreseeable future. Conservative anger over Big Tech content decisions are best considered in adjustments to Section 230 that would require more transparency and an appeals process.
Tim Wu Proves the Peter Principle “Authoritarian Proposals in the Language of ‘Freedom’ and ‘Openness’”
Elizabeth Nolan Brown has an insightful piece in Reason on Tim Wu, the “neo-Brandesian,” “big is bad” antitrust theorist now in a senior policy position in the Biden White House.
Brown notes that Wu had warned of a dystopian hell that would descend upon the world if his net-neutrality policies were not enacted. Wu would have, he wrote in Slate, explicitly rejected lower consumer prices as a goal. He would have given all internet players equal bandwidth, “potentially making the user experience at highly trafficked sites poorer – while consumers across the board must pay more, possibly placing the digital reach world out of reach for some.”
Failure to embrace his scheme, Wu said, would mean the internet as we know it would cease to exist. Flash forward to 2021: It still exists.
“In many professional arenas, such a swing and a miss would have consequences,” Brown writes. “At the very least, it might make people think twice before trusting your sky-is-falling predictions again. In Wu’s case, it landed him an advisory role in the Biden Administration.”
She catalogs Wu’s hyperbole and errors from his writing. He says that there are “no longer hundreds of stores that everyone” goes to “but one everything store,” meaning Amazon. This ignores the multitude of stores on and offline, including the world’s largest retailer, Walmart.
His policy proposals are equally at odds with reality. Wu wants, she writes, “the Federal Trade Commission to automatically investigate companies—even those suspected of doing nothing wrong—if they have been a market leader for 10 years or more.”
Brown asks: “What incentive would U.S. companies have to innovate or build long-term relationships with customers if after 10 years of success, the government is guaranteed to intervene?”
She quotes a critic who notes that while Wu worries about the supposed power of private actors, he is complacent about the fact that only the State has a monopoly on force in society and can thus penalize and imprison people. All that matters for Wu is to put the government in firm control.
“All of this, he asserts, would somehow ‘free the political process’ and protect democracy, economic security, and human flourishing. It’s a signature move for Wu, who often couches authoritarian proposals in the language of openness and freedom.”
Lawrence Summers: Khan’s Antitrust Approach “the Way to American Failure ”Stick with Policies that Best Benefit Consumers
Former Treasury Secretary Lawrence Summers tells Bloomberg that FTC Chair Lina Khan’s approach to antitrust “is the way to American failure.” Watch Summers at the 3:25 mark or read his comments below:
I’m halfway with the critics. A new economy needs new thinking and new approaches. The old concepts weren’t designed with issues like platform companies in mind. But I part company completely with the legal scholars who frankly in many cases are not very familiar with economic reasoning in its intricacy. The people who call themselves neo-Brandesians and want to go back to what Justice Brandeis said in 1916.
Ultimately, an efficient economy that serves consumers well is the right criteria for antitrust policy.
Any attempt to change the goal of antitrust policy to be protecting competitors rather than protecting competition, I believe will do grave damage to the American economy.
So yes, we need new approaches, possibly new laws, but they need to be ultimately grounded in an economic approach that is based on having a more functional and efficient economy and [not] the idea that big is bad per se, or the idea that big should be broken up just so that smaller companies have a better chance to compete even when they are less efficient. You read the traditional antitrust decisions of the 1960s and they are a horror show in terms of their economic illiteracy, where companies make efforts to defend themselves by saying that they are inefficient therefore they are not going to win out over competitors in competition …
That is the way to American failure.