Yglesias, Singer and the Socialist Siren Song of Progressive Antitrust

July 1, 2024

The Khanservative movement – those on the right increasingly supportive of FTC Chair Lina Khan’s progressive, aggressive antitrust policies – is expanding within the MAGA movement and Republican politics. Some conservatives, like Sens. J.D. Vance and Marco Rubio, are Khanservative adjacent, expressing reservations about corporate power, impacts on workers, and Big Tech content curation. Others, like Reps. Matt Gaetz, Ken Buck, and Sen. Josh Hawley, are all-in for Lina, gleefully supporting anything that brings a bad day to woke C-suites and the many mansions of the tech mogul kingdom.

Into this fray steps Matthew Yglesias in Bloomberg Opinion with a piece entitled “Lina Khan’s Hipster Antitrust Policy Is Actually Conservative.”

“No!” I shouted after seeing the headline, terrifying my dog Lucy, “This shall not stand!” Then I read the piece and was reminded, as was so often the case in my days as a young journalist, that the headlines that copy editors slap on pieces often don’t reflect their nuances. So it was with the Yglesias piece. He takes a critical look at the traditional, consumer-welfare standard of antitrust enforcement. His analysis is thoughtful and well-grounded in an understanding of antitrust enforcement, such as conduct remedies and how they’ve worked out over time.

Yglesias discusses the consolidation of face-to-face services, like hospitals, that are merging, possibly to the detriment of consumers. This is not, however, a dramatic departure for the FTC. The agency’s longstanding program of reviewing hospital mergers is probably the most empirically well-informed aspect of its enforcement. It’s not remotely new for the FTC and has been about as “conservative” as it gets in the sense of being measured and rooted in non-politicized, traditional, consumer-welfare-based practices. (For a contrary view of how the FTC under Khan treats a hospital merger under Khan, consider a federal judge’s denial of FTC’s injunction against a North Carolina hospital merger, which if allowed, would have closed hospitals, denying health care to consumers across wide areas.)

Yglesias also shows considerable humility, a saving grace lacking in the champions of progressive antitrust. He looks back to the days when it was au courant to worry about Walmart superstores killing jobs and small businesses like so many neutron bombs. He writes that “for all of Walmart’s ruthlessness and apparent power, it was in fact not a major threat to retail competition. It was a good thing that the government did not step in to halt ‘everyday low prices’ out of fear that undercutting the competition would create a hypothetical future risk to consumers.”

Yglesias’s piece ends by asking whether, whatever the merits of challenging the reining consumer welfare standard, this time of inflation is really the right moment to fight this particular battle. So, Yglesias, it seems to me, is not really advocating forcefully for Khanian antitrust enforcement, but for perhaps more aggressive, traditional enforcement. His critics, however, were predictably appalled.

It was not conservatives who were triggered by Yglesias’s thoughtful public inquiry. But he did provoke a rebuke from progressive economist Hal Singer (“Sorry Matt Yglesias, Hipster Antitrust Does Not Mean the Abandonment of Consumers. But It Does Mean New Ways to Protect Workers”) in The Sling. Singerdeclares: “The consumer welfare standard was effectively a pro-monopoly policy, in the sense that it tolerated massive concentrations of economic power throughout the economy and firms deploying a surfeit of unfair and predatory tactics to extend and enrich their power.”

Missing from antitrust enforcement, Singer writes, are “labor harms.” It is out of concern for labor that Singer praises the FTC action against Kroger’s proposed acquisition of Albertsons.

So, is this what a truly “conservative” antitrust program would look like? There is superficial appeal here for conservatives looking to broaden the Republican base from the S&P 500 to small businesses and union halls. But conservatives looking to sign up for the approaches of progressive antitrust had best consider where they are being led.

The need for progressive antitrust’s broad and aggressive enforcement is, we are told by its proponents, to protect workers, reduce concentration (including by protecting less efficient operations), and even, according to FTC Commissioner Rebecca Kelly Slaughter, to address “systematic disadvantages facing communities of color.”

Let’s examine those ideas, starting with concentration. Under the consumer welfare standard, first adopted in the U.S. Supreme Court’s Reiter v. Sonotone opinion (1979) and extending to today, industrial concentration has actually declined. “In both the U.S. manufacturing sector and the broader U.S. economy,” write economists Robert Kulick and Andrew Card of NERA, “industrial concentration has been declining since 2007.”

For the manufacturing sector, Kulick and Card examine a key metric, the Herfindahl-Hirschman Index (HHI), used by federal antitrust regulators at DOJ and the FTC. A market with an HHI of less than 1,500 points is considered unconcentrated. These economists find that this index has declined from 821 in 2007 to 619 in 2017. The average HHI for manufacturing in 2017 was 150 points below its 2002 level. They also find that the percentage of economic activity accounted for by the four largest firms within a given industry is showing more competition. A raft of other economic studies has corroborated this finding, showing that concentration has decreased and/or that competition has increased even where fewer companies are competing.

What about helping workers? History demonstrates that the only way to grow wages is to have a growing economy with low inflation. Alternatively, the administration’s leading light on progressive antitrust, Tim Wu, says that the purpose of progressive antitrust is to place a “policeman at the elbow” of business. Does that sound like a path likely to lead to growth, innovation, and competition – and thus higher wages? How innovative would you feel with a policeman at your elbow?

Riddle me this: Does progressive antitrust offer a way to combat corporate “greedflation?” This is partly the administration’s justification for opposing the Kroger-Albertsons merger. Somehow, under the consumer welfare standard, food prices rose at a stable 2.5 percent for more than 40 years. Did corporations wait until 2022 to conspire against the consumer? Or is the astonishing 11.4 percent increase in the price of food in 2022 the result of bad fiscal policy, as the administration was warned by former Treasury Secretary Larry Summers?

What about countering the structural legacies of racism? That’s a certainly worthy goal. But how to factor in such a vague concept in any rational, evidence-based way? Here’s a better idea: Let’s fix the biggest structural barrier of them all – grossly underperforming public schools in urban areas.

The genius of the consumer welfare standard is that it forces antitrust to consider the primary goal of business: to serve consumers on price, quality, choice, and innovation. The warning I make to conservatives flirting with progressive antitrust is that when one applies so many value-based judgments on a sliding scale, we give regulators unlimited discretion to scratch up an antitrust violation against any business and any executive at any time for any (political) reason. This is the opposite of the rule of law and a recipe for government interfering with, not promoting, competition.

That would put all of business in the thrall of the progressive, regulatory state. In the spirit of Jeff Foxworthy, if you are a conservative who believes the antidote to capitalism is bigger and more powerful government, you just might be a socialist.