26 United States The Economist July 17th 2021
CompetitionAnti-trust in me
T
wotrendsinAmericancapitalismin
past decades are too stark to be ignored.
The first is rising market concentration—a
phenomenon observed in 75% of indus
tries ranging from those that traffic in bo
dily fluids (kidney dialysis and bloodplas
ma donation centres) to those that traffic
in data (broadband providers, creditcard
companies, and the tech giants roaming
Silicon Valley). The second trend is the de
clining share, up until the mid2010s, of
spoils going to the suppliers of labour.
Whether these are unhealthy indicators
has been hotly debated. Some argue that
intense competition unleashed by globali
sation and technological progress may de
stroy the least efficient firms, leaving only
a small cadre of the most productive (the
“winner take most” model). Others insist
that it is a sure sign of market sclerosis.
On July 9th President Joe Biden indicat
ed that he identifies fully with the critics.
That was when he signed an executive or
der arguing that a lack of competition had
been increasing prices for consumers and
squashing wages for workers, and stating
that the federal government would not
stand for it. Casting himself as a latterday
Roosevelt (both Teddy and Franklin en
joyed a trust bust), Mr Biden vowed that the
whole federal government would devote
itself to “address overconcentration, mo
nopolisation and unfair competition”. His
order specified 72 initiatives for more than
a dozen federal agencies to work on, along
side the creation of a new competition
council made up of cabinet members and
senior White House staff.
For this to have teeth, competition reg
ulators would have to be more aggressive
than usual in bringing cases, and judges
more deferential to the newly expansive
definition of antitrust action. Gauged by
stockmarket movements on the day of Mr
Biden’s executive orders, investors were
undaunted. But analysts on a quarterly
earning calls with Goldman Sachs were
sufficiently perturbed to pepper David Sol
omon, the ceo, with questions about the
possible effect on the investment bank’s
mergers and acquisitions business (see Fi
nance and economics).
The most consequential changes, if
they materialise, would be to labour mar
kets. One of the spicier debates among la
bour economists is over “monopsony pow
er”, a rather ugly phrase meaning the de
gree to which concentration among the demandersoflabour(otherwise known as
firms) depresses the price paid for it (oth
erwise known as wages). The most irksome
source of this are noncompete clauses,
which prevent more than 36m workers
from easily leaving their jobs for better
paying ones. These are prevalent among
both highly paid and lowly paid workers,
including, according to one study by the
late Alan Krueger and Orley Ashenfelter,
58% of workers for lowwage franchises
like McDonald’s and Jiffy Lube.
Mr Biden wants the Federal Trade Com
mission (ftc), which has broad but conser
vatively employed authority to limit anti
competitive behaviour, to ban or limit this
practice. He also wants the ftc to end
needless occupational licensing, onerous
rules that turn some professions into glori
fied guilds. To be a certified interior de
signer in California, for instance, you must
have more than six years of experience and
pass an exam. The ftchas often issued ad
visory opinions to states contemplating
these sorts of licensing requirements; Mr
Biden is now urging it to intervene under
its existing legal authority.
Most of the president’s other goals are
more bitesized. Mr Biden thinks, justifi
ably, that lack of competition among in
dustry incumbents has led Americans to
pay too much for things like offpatent
drugs, hearing aids, internet connections,
and journeys on trains and planes.
An equally consequential, if more ar
cane, debate is also raging within the legal
academy over what justifies antitrust enforcement. Ever since its introduction by
Robert Bork, a conservative legal scholar,
the socalled consumerwelfare standard
has dominated American jurisprudence.
This holds that regulators and courts
should mainly scrutinise the effects of cor
porate actions on prices paid by custom
ers. Given that most big tech companies of
fer their services to consumers free, that
standard would suggest little ability for
regulators and state attorneysgeneral to
contest their growing market share. In
stead a more expansive definition of anti
trust, sometimes called the neoBrandei
sian school after the ideas of the monopo
lyhostile Supreme Court justice Louis
Brandeis, is gaining ground.
“At that time, people were laughing at
me,” says Barry Lynn, executive director of
the Open Markets Institute and a longtime
antimonopoly agitator, about his testimo
ny against the consumerwelfare standard
in December 2017. Lina Khan, an affiliate of
the Open Markets Institute for seven years,
who wrote a lawreview article making the
case for antitrust action against Amazon
while she was still a student at Yale, is now
the head of the ftc. On her shoulders rests
the fate of Mr Biden’s nascent competition
promoting agenda.
But it will also depend on whether judg
es are willing to accept more expansive
antitrust action. So far the signs are not
promising. In June a federal judge dis
missed a complaint against Facebook filed
by the ftcand 46 state governments argu
ing that the socialmedia giant had tried to
stymie competition by buying Instagram
and WhatsApp. However, Mr Lynn thinks
that the judiciary can be brought round.
“We’re going to get them into the 21st cen
tury. We’re going to get them out of Bork’s
garage. Justices of the Supreme Court,
judges in the usjudiciary—these people
don’t read! They justbaskin the adoration
of lesser people. Educatingthese people, it
ain’t easy. But we will.”nWASHINGTON, DC
Can the federal bureaucracy resuscitate market dynamism?