Last week, the Senate Judiciary Committee’s antitrust subcommittee held an extraordinary hearing, challenging an entrenched consensus that has dominated for nearly four decades. Lawmakers and panelists didn’t debate a new law but the interpretation of a century-old one. And in the process, they revealed something about how corruption works in our key institutions. It’s not solely about self-enrichment or looting the treasury on behalf of donors. It’s about closing off debate, building a wall around critical decisions so only they and their friends get to weigh in. This cloistered, pinched, incestuous establishment went on trial last week, and it didn’t fare well.
The hearing concerned the “consumer welfare standard” for antitrust law, a concept conjured up by Robert Bork and his pals at the University of Chicago in the 1970s. Under this standard, mergers are judged under the Sherman and Clayton Acts based solely on whether they provide benefits to consumers. Other by-products of market concentration—negative impacts on worker wages (as shown in a compelling new research paper), squeezing of suppliers, fragility in the supply chain, reduction in innovation, and constraints on personal liberty and democracy—sit in the background, behind the consumer-based frame. It essentially cuts people in half, presuming that only their rights as buyers of goods matters.
Prior to Bork’s revolution, bright-line rules limiting market shares in a particular sector could nullify mergers or even break up companies. The adoption of consumer welfare under the Reagan administration in the 1980s radically shifted antitrust into a technocratic debate among economists, who corporations could always supply to assert massive efficiencies from any merger. It limited discussion of antitrust to a handful of accredited experts, shutting out public scrutiny.
The next 35 years reveal how that went: increased consolidation in virtually every market sector, coinciding with declining quality of service, stagnant wages, low corporate investment, record corporate profits, soaring inequality and a growing sense that politics only works for the wealthy and powerful. President Obama’s economic team released papers signifying the role of concentration in many of these trends. And Mike Lee, chair of Senate Judiciary Committee’s antitrust subcommittee, arranged the hearing on whether to alter the consumer welfare standard.
The hearing was a bit of an ambush, designed to marginalize alternative views. The five panelists included two hardcore Bork-ian conservatives, and two experts from the left that supported the consumer welfare standard as well. Only Barry Lynn of the Open Markets Institute disagreed. “America was made to protect the citizen against concentrated power,” Lynn said in a fiery opening statement. “We face challenges much like those of the Founders.”
His fellow panelists didn’t see it that way. Carl Shapiro, an antitrust veteran from the Clinton and Obama administrations, found himself repeatedly agreeing with Joshua Wright, a former Republican commissioner of the Federal Trade Commission. “I don’t know any serious antitrust scholars who want to move away” from the consumer welfare standard, Shapiro said. Any changes would dangerously politicize antitrust, he added (as if there’s no political cast to the concentration of corporate power). Asked about numerous news items demonstrating effects of increases in concentration, not only did Shapiro disagree that there was a problem, he sniffed that “journalists tend to be herd animals.”
This mentality, that only “serious” people can play a role in antitrust policy, stood in for any real argument. “They believe that anti-monopoly is something the Justice Department and the FTC do,” said Lynn in an interview with me. “If you’re not there you’re not involved. They’ve radically restricted where the discussion should take place.” You could certainly make an argument, as the American Antitrust Institute’s Diana Moss did at the hearing, that consumer welfare is durable enough to be used to vigorously protect competition, and that the real problem is lax enforcement. But her counterparts seemed to be arguing by authority, pointing to their degrees to explain why alternative viewpoints should be excised from the public square.
This narrowness plays out in insidious ways. At the hearing, Senator Richard Blumenthal asked about the Comcast-NBC merger, approved in 2011. Conditions attached to the merger, which force Comcast to offer content to rival cable and broadband distributors at a reasonable rate, expire next September. If they aren’t extended, that “will pose a very serious threat to competition,” Blumenthal said. He even suggested that, even if the conditions are re-upped, the entire merger might have to be undone to help restore competition in media.
Diana Moss agreed with Blumenthal, explaining specifically how the Justice Department could take steps to ask for a structural separation of Comcast and NBC, under the “look-back” authority of the Sherman Act, or even the authority to address concentrated markets. “Undoing mergers is pretty rare, but it may be the ultimate lever here,” she stated.
Indeed, the entirety of the Justice Department’s case against the AT&T/Time Warner merger can be applied to Comcast/NBC. In both instances, the same company would own content and distribution, and could punish rival distributors with high carriage rats, or reward its own content with privileged access to customers. The Justice Department has concluded that behavioral constraints, like the ones applied on Comcast, don’t work. Given the complaint that DOJ is only challenging the Time Warner deal because of President Trump’s dislike of CNN, the perfect way to rebut that would be to apply the same scrutiny to a top competitor exhibiting the same threats to competition.
So will DOJ look back at the Comcast/NBC merger? It’s certainly less likely when you consider that Makan Delrahim, the head of the Antitrust Division, lobbied for Comcast during the NBC merger talks. He also worked for AT&T, but only until 2008, not during the time of the Time Warner merger. So to break up Comcast, Delrahim would have to defy his former client and expose his prior advocacy as a sham.
It’s quite common to have antitrust enforcers turn around and defend mergers. The lead lobbyist on the AT&T/Time Warner case is Christine Varney, Obama’s first Antitrust Division chief. One Washington law firm, Arnold and Porter, has hired nearly all the top antitrust officials from the Obama and Bush years.
The group of people who get to decide how big and powerful companies can become is exceedingly narrow; they all went to the same schools and studied under the same teachers. This ideological groupthink has arguably led to the extreme concentration we see today. So the real corruption in antitrust policy is not necessarily Donald Trump rewarding friends and punishing enemies. It’s in the small clique of economists and lawyers who see their mission has guarding the gates of antitrust to keep the barbarians who don’t agree with them out.
Last week’s hearing breached those gates. “America has a huge monopoly problem,” Lynn said during the hearing. “Everyone sees the problem except maybe Carl (Shapiro).” For years these voices could safely be ignored. They can’t anymore. Even Delrahim, a member of the clique, is challenging mergers that would normally have been waved through. The antitrust orthodoxy may have wanted to use the hearing to buttress its defenses. And they surely still exercise a great deal of policy control. But the erstwhile outsiders can feel the shift. “They’re no longer relevant,” Lynn said. “We won. It’s like 1942. It still looks tough, but you know the outcome.”