FEDERAL TRADE COMMISSION

MISSION/OVERVIEW

America’s antitrust laws are over a century old. In 1890, the U.S. Congress enacted the Sherman Act,1 the first federal prohibition on trusts and restraints of trade. The Clayton Act,2 adopted in 1914, builds upon the Sherman Act, outlawing certain practices, such as price fixing, while bringing other business combinations, such as mergers and acquisitions, under regulatory scrutiny.

The Federal Trade Commission Act (FTCA),3 also adopted in 1914, gives the federal government legal tools to combat anticompetitive, unfair, and deceptive practices in the marketplace, empowering the Federal Trade Commission (FTC) to enforce provisions of the Sherman and Clayton Acts. The FTCA prohibits “unfair methods of competition and unfair or deceptive acts or practices in or affecting commerce.” Sections 3, 7, and 8 of the Clayton Act empower the FTC to block unlawful tying contracts, unlawful corporate mergers and acquisitions, and inter- locking directorates. Under an amendment to the FTCA, the Robinson–Patman Act,4 the FTC has authority to prohibit practices involving discriminatory pricing and product promotion. While the FTC has enforcement or administrative respon- sibilities under more than 70 laws, the FTCA and the Clayton Act are the focus of its regulatory energy.

FTC actions, therefore, turn on the antitrust principles and market principles it adopts. Modern approaches to antitrust stress that the objective of antitrust law is to assure a competitive economy—which in economic terms maximizes both allocative efficiency (optimal distribution of goods and services, taking into account consumer’s preferences, so that prices tend toward marginal cost) and productive  efficiency (using the least amount of resources for optimal output)—and thereby maximizes consumer welfare.5

Recently, however, many in the conservative movement have taken a broader view of antitrust. They point out that the authors of our antitrust laws did not intend this purely economic understanding of competitive markets—and the normative assumptions that undergird it—to guide their legislation. First, these principles were only imperfectly worked out at the time the antitrust laws were passed. Second, contemporaneous statements concerning the Sherman and Clay- ton Acts demonstrate Congress’s concern about the political and economic power of the oil and railroad trusts of the first Gilded Age, and their influence on dem- ocratic institutions and civil society. Antitrust law can combat dominant firms’ baleful effects on democratic institutions such as free speech, the marketplace of ideas, shareholder control, and managerial accountability as well as collusive behavior with government.

Republican Senator John Sherman explained to Congress in support of his eponymous legislation: If we will not endure a king as a political power, we should not endure a king over the production, transportation, and sale of any of the necessaries of life. If we would not submit to an emperor, we should not submit to an autocrat of trade, with power to prevent competition and to fix the price of any commodity.6

Similarly, identifying the institutional threats that market concentration can pose, the former Republican President and future Supreme Court Justice William Howard Taft wrote at the time, The federal antitrust law is one of the most important statutes ever passed in this country. It was a step taken by Congress to meet what the public had found to be a growing and intolerable evil in combinations between many who had capital employed in a branch of trade, industry, or transportation, to obtain control of it, regulate prices, and make unlimited profit. Taft saw in this economic threat broader implications for American society since “the building of great and powerful corporations which had, many of them, intervened in politics and through use of corrupt machines and bosses threatened us with a plutocracy.”7

Others in the conservative movement have maintained for numerous decades that an economic justification is the only coherent approach to the antitrust laws. Many view the first 90 years of U.S. antitrust policy as unprincipled in its approach, often resulting in policies that, by trying to protect smaller competitors, ended up

[T]here is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays in the rules of the game, which is to say, engages in open and free competition, without deception or fraud.10

For Friedman, market mechanisms, not political mechanisms, are the appropri- ate way to determine the allocation of scarce resources to alternative uses. Business managers appropriate shareholder wealth when they use corporate resources to further their personal political beliefs, even when pursuing what they consider a “socially responsible” or “moral” agenda. The business of American business is business, not ideology.

More broadly, there is less and less debate around the growth of monopoly rents throughout the U.S. economy. The current data strongly suggest that U.S. corpo- rations are systematically earning far higher profits than they were 25 or 30 years ago. Combined with other evidence that large corporations are accounting for an increasing share of revenue and employment, it certainly appears that many large U.S. corporations are earning substantial incumbency rents, and have been doing so for at least 15 years, apart from during the depths of the Great Recession that began in 2008.

raising prices for consumers. Judge Robert Bork in his influential book The Anti- trust Paradox found economic justifications for previously denounced behavior including small horizontal mergers, all vertical and conglomerate mergers, vertical price maintenance and market division agreements, tying arrangements, exclusive dealings and requirements contracts, “predatory” price cutting, and price “discrim- ination.” Bork also defended corporate “bigness” if it came about through internal growth or acceptable mergers. He also defended agreements between competitors on prices, territories, refusals to deal, and other “suppressions of rivalry” that are “ancillary” to some economic efficiency. The practical contribution of his work was to put consumer welfare at the heart of competition law.8

Beyond antitrust injury, we are witnessing in today’s markets the use of eco- nomic power—often market and perhaps even monopoly power—to undermine democratic institutions and civil society. Practices such as Environmental, Social, and Governance (ESG) requirements on publicly traded corporations and their inclusion in business agreements, the so-called “de-banking” of industries and individuals, and the interference of large internet firms with democratic political discourse undermine liberal democracy, a truly open society, and, indeed, rule of law. Without rule of law, markets themselves will wither.9

Critical of the “social responsibility” agenda, Milton Friedman in his provoc- atively titled essay “The Social Responsibility of Business Is to Increase Its Profits” states,

While the explanations for this shift are not clear, what is particularly disturbing is the possibility that these rents are extracted at least in part through regulatory capture—which can function as a bar to entrance for new competitors. In addition, the sheer cost of compliance with regulation favors large firms, which can more efficiently spread the cost of regulation over a larger revenue base and have the resources to invest in sophisticated government relations. The FTC must consider, therefore, the role of government itself in maintaining market concentration in areas ranging from pharmaceuticals and healthcare to avionics, banking, and real estate brokerage.

Beyond undermining small businesses and reducing their salubrious moral effect on American civil society, concentration of economic power facilitates col- lusion between government and private actors, undermining the rule of law. The continued emergence of evidence documenting collusion—between the Big Tech internet platforms and the Biden White House and administrative agencies—to censor criticism, scientific fact, and uncomfortable political truths demonstrates this unfortunate development.

But, there are some caveats. First, the FTC lacks the power to revisit developments in antitrust laws, which have brought an invaluable rigor to the antitrust law—mat- ters such as analyzing vertical integration, for example. Nor should it. Second, the FTC’s recent rescinding of its 2015 Policy Statement was undoubtedly ill-consid- ered.11 Of course, the consumer welfare standard must guide FTC action, but, in appropriate situations and with strong evidence, this standard must be expanded to include more factors than just price. Further, a similar standard of proof used to establish that a practice challenged by the Commission causes harm to competition must also apply in demonstrating the efficiencies that justify the practices. President Harry Truman reportedly made the famous quip, “Give me a one-handed economist.

All my economists say ‘on the one hand…’, then ‘but on the other.’” When it comes to some of the more vexing issues in antitrust regulation, the conservative movement is in the same predicament. Many wish to preserve the productivity and efficiency focus of an economic-based consumer welfare standard approach to antitrust enforcements; others are more willing to look at the effects of business concentration in certain industries on innovation, the institutional resilience of our democracy, and children’s development. The following discussion sets forth policy principles and initiatives on which there was agreement among the contributors to this chapter, and notes and explains where there was dissent.