The Biden administration’s antitrust regulators doubled down on their skepticism of corporate mergers Wednesday, with critics arguing that the administration is aiming to do away with a bipartisan, consumer-centric approach in favor of one that boils down to the maxim: “Big is bad.”
In a 51-page document released by the Federal Trade Commission (FTC) and the Department of Justice, the regulators adopted guidelines for reviewing mergers both in the tech sector and across the economy. FTC chair Lina Khan and the DOJ’s Jonathan Kanter are spearheading the effort despite their dismal track record challenging mergers up to this point.
Last week, the FTC lost in its effort to block Microsoft’s takeover of video-game company Activision. Earlier this year, the agency lost in its effort to block Meta from acquiring a virtual-reality startup. However, Kanter has had more success than Khan, stopping Penguin Random House’s acquisition of fellow book giant Simon & Schuster. Politico reported that the DOJ adopted a novel theory centered on labor more than competition, focusing on the financial injuries authors might suffer from losing a buyer for their books.
Robert Bork Jr. of the Antitrust Education Project said in response to the news that the administration is persisting in its pursuit of “radical reforms” to antitrust, but added that courts are still likely to remain skeptical of the administration’s approach.
Bork previously explained in the Wall Street Journal that Biden and Khan “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.”
Under the standard, antitrust actions should be judged by their effects on product prices, choice, and quality, not just their effects on market structure. Bork’s father, an ex-federal judge and nominee to the Supreme Court, pioneered the approach under which big is not necessarily bad. Khan and other progressives of her view are often called “neo-Brandeisians” after Supreme Court Justice Louis Brandeis, who called economic concentration “the curse of bigness.”
The guidelines come two days after 22 House Republicans wrote a letter to Khan urging her to stop her crusade against the Microsoft–Activision merger.
“Since 2021, the Federal Trade Commission (FTC) has sharply veered from established antitrust policy, toward an anti-consumer, anti-innovation, and anti-American policy that jeopardizes the health of our economy and threatens to increase costs to consumers,” wrote the lawmakers.
“The FTC’s case against Microsoft’s acquisition of Activision is the latest in a series of actions that are clearly designed to impede legitimate mergers and acquisitions, while ignoring decades of settled FTC practice across Republican and Democratic administrations,” continued the lawmakers. “Instead of protecting competition as Congress intended, the FTC has spent taxpayer resources seeking to block a deal that promises to expand consumer choice and insulate a dominant foreign company from competition.”
Signatories included chair of House Oversight James Comer (R., Ky.) and House Judiciary chairman Jim Jordan (R., Ohio). The representatives noted that Microsoft’s Xbox business has been the much smaller challenger in the video-game publishing and video-game-console market. Its acquisition of Activision would increase the availability of games for consumers, the lawmakers explained.
Microsoft has made commitments to share Activision’s content with competitors like Sony.
The Microsoft-Activision merger is a vertical merger between companies that don’t directly compete, which courts generally regard as beneficial to consumers. According to Politico, the agencies have been issuing merger guidelines since the 1960s, but the new guidance ends the distinction between vertical and so-called horizontal mergers, deals between direct competitors, for the first time.
Like Bork, ex-FTC commissioner Joshua Wright recently told National Review that the reforms are only achievable with buy-in from the judiciary, arguing: “An antitrust revolution is really hard if you can’t persuade judges, and you can’t win a revolution by losing cases.”
However, even if courts remain fairly skeptical, Khan and Kanter’s actions may chill future mergers. The antitrust regulators are not only pursuing their approach through judicial proceedings, but are also making the process more difficult on the front end and more like the European process. This entails arduous disclosures for mergers of a certain size, increasing the cost and effort to assemble the information that is required.
This would make every large merger more expensive, difficult, and time-consuming and thus less attractive.
Critics have also pointed to the focus of regulators on tech companies as wrongheaded. The five largest tech firms pay for a quarter of all research and development in America, reported the Economist.
The Economist also explained that antitrust has obvious limits and many other areas, like land-use and occupational-licensing restrictions as well as rising barriers to trade, deserve attention.
In a statement to National Review, the president of the Job Creators Network, Alfredo Ortiz, noted that if the Biden administration really wants to promote competition it ought to get rid of the many government barriers that exist for small businesses.
“The best way to promote vigorous economic competition to keep prices low and selection varied is through a robust small business economy. Rather than picking winners and losers among big businesses through blunt antitrust policy, the government should focus on encouraging entrepreneurship to compete with established interests,” Ortiz said.
The Republican lawmakers signaled there may be congressional appetite to take a close look at the FTC’s budget.
“We cannot help but wonder if the FTC would need increased resources were it not wasting time and money on challenges such as the one it has brought against Microsoft’s acquisition of Activision — an acquisition which, according to a federal judge, multiple other antitrust regulators from around the world, and simple common sense — is not anticompetitive,” the lawmakers conclude.