Sens. Mike Lee and Chuck Grassley: Team Act Centers Around Consumer Welfare Standard

June 23, 2021

While the House focuses on five antitrust, anti-Big Tech bills supported by Democrats – with the help of some renegade Republicans like Rep. Ken Buck – the Senate is focusing on wholesale revision of antitrust in ways that would impact the entire economy.
 
Sen. Amy Klobuchar, the lead Democrat on the Senate Judiciary Subcommittee on Antitrust, would dramatically expand federal regulation of all business. By requiring firms to predict any possible harms in advance, Sen. Klobuchar would put all businesses and the executives who run them in permanent crosshairs for prosecution. Sen. Mike Lee, joining with top Judiciary Committee Republican, Chuck Grassley, has introduced his own sweeping revision of antitrust law, the cutely named TEAM Act (for Tougher Enforcement Against Monopolists).
 
The TEAM Act proposes a number of policy changes – some commendable in my view, some questionably tempting the very heavy-handed, big government approach that the authors wish to avoid.
 
Consolidation:

Sen. Lee’s bill would centralize all antitrust enforcement in the Department of Justice. This would take antitrust out of the hands of political creatures like the suddenly elevated Federal Trade Commission Chairman Lina Khan and into the hands of professional enforcers of the law. This would focus antitrust actions on legal standards, and prevent the kind of rent-seeking that is apt to occur when politicians and their regulators hold coercive power over business. Sen. Lee justifies this consolidation thusly:

For over a century, American antitrust enforcement has been something of a two-headed creature sometimes at odds with itself. The results have been delays to enforcement and consumer redress, uncertainty for businesses, and even conflicting antitrust enforcement policy.
 
Focus on Harms Not Size:

Sen. Lee says he rejects the “big is bad” approach. Instead, enforcement should be aimed at specific conduct harmful to competition and consumers. Sen. Lee also rejects the idea that any kind of monopoly is inherently bad, pointing to the idea of patents, which “allow its holder to exclude competition for a limited period of time and charge the highest price that the market will bear.” Why permit such a ‘monopoly’? “We allow this because the prospect of collecting monopoly profits acts as an incentive to innovate and invest in new ideas.”

The same principle, Lee says, works in market monopolies.
 
The prospect of obtaining a monopoly through competition on the merits incentivizes competitors to offer consumers better products and services at lower prices. This free market system built on competition and innovation is responsible for many of the great achievements of mankind and the economic flourishing of the greatest civilization the world has ever known.
 
Thus, the TEAM Act returns to the “foundational principle” that the law should punish people for what they do, not who they are. The other bills are more punitive for companies with the temerity to succeed and grow large.
 
‘‘Big is bad’’ abandons that fundamental American principle of law. Instead, the facile insistence on being simply ‘‘anti-monopoly’’ belies the proponents’ true priorities. It means being anti-business even when it hurts consumers. It is the economic version of cutting off your nose to spite your face.
 
But there are elements of “big is bad” even in this bill. The TEAM Act would add $600 million in appropriations to DOJ’s Antitrust Division. Any transaction with effects on more than one-third market share would have to fight the presumption that the deal would substantially lessen competition. There would be a blanket ban on deals that result in market share greater than 66 percent of the economy, “except when necessary to prevent serious harm to the national economy.” So some bigness, at least, would be considered bad even under the TEAM Act.
 
Overall, however, Sen. Lee says he rejects the “Manichean belief” that big is always bad, while acknowledging that unfairly concentrated economic power can be just as dangerous as concentrated political power. Insightfully, Sen. Lee acknowledges that the first often leads to the latter.

Codifies the Consumer Welfare Standard

Sen. Lee mostly sees the ‘‘big is bad’’ approach as a rhetorical trick to undermine and overturn the Consumer Welfare Standard, the prevailing metric under which outcomes are judged by their impact on consumers and competition, not by their impact on less-efficient competitors. Sen. Lee says the Consumer Welfare Standard is misunderstood “often as a result of willful misrepresentation.”
 
It does not protect monopolists. It does not mean the government always loses. And it is not limited to a narrow focus on prices … Judge Robert Bork himself explicitly described the consumer welfare standard as being broader than an inquiry into price, and it is one that certainly includes an inquiry into quality, innovation, and consumer choice. In other words, whatever consumers value, that is what is captured by ‘‘consumer welfare.’’
 
Sen. Lee also describes the new breed of hipster antitrust advocates as misrepresenting the standard as being about price as a “Trojan horse for woke social policy.” To keep antitrust enforcement focused on the right goal, the TEAM Act specifies:

• Courts may only consider effects of a challenged conduct or transactions on consumer welfare, including price, output, quality, innovation and consumer choice.
  
• Courts may only consider benefits and efficiencies to the extent they are within a given market, are quantifiable, are aimed at consumers and are achievable. 

Is Tougher Better for Consumers?

I have to wonder, however, about the real-world results of other measures in the TEAM Act.
 

• The bill would invalidate Illinois Brick and Hanover Shoe, Supreme Court  precedents that keep indirect purchasers from recovering damages in antitrust cases, while disallowing the defense to argue that the plaintiff can just pass higher costs on to consumer. The intent here, combined with the codification of the Consumer Welfare Standard, would be to focus more than ever on consumer welfare.
  
  But how would this play out in the real world. Would it allow too many players down the chain to open the floodgates as plaintiffs, resulting in an overwhelming wave of antitrust cases? Would the trial bar foment antitrust shakedowns just as some now get in their cars and go looking for restaurants without handicapped ramps for ADA suits?
  
• TEAM allows DOJ to recover treble damages on behalf of claimants, commendably directing them toward “qualified claimants” (they presumably would be actual consumers and not politically connected NGOs).
   
• It provides civil fines capped at 15% annual revenues for each year a violation in which a violation occurred. For some companies, this could amount to a death penalty.
  
• TEAM would prohibit the award of federal contracts to companies that have violated the antitrust laws for the last five years. Another corporate death penalty?
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It seems unlikely, given the polarization in Congress, that the TEAM Act will gain much Democratic support, despite Sen. Lee’s professed desire for bipartisanship. But it could take on new life, however, if the Klobuchar bill fails. It is overall a thoughtful piece of legislation, but with cudgels that could damage a free enterprise system already under considerable strain.