OPINION:
The Biden administration’s proposed changes in how mergers are treated by the Federal Trade Commission and the Department of Justice will harm our economy. The government should instead maintain a consumer-welfare standard rather than going back to the “big is bad” rule.
The White House’s recently announced plan for the latter, more interventionist approach to regulating U.S. corporations will not be a success.
The changes proposed by the FTC are 13 new “merger guidelines” that the FTC and DOJ will consider using to analyze mergers and acquisitions.
The first one is that mergers should not significantly increase concentration in highly concentrated markets. This standard tosses aside a far better consumer-welfare standard that was used in prior administrations of both parties that looked at factors such as whether prices were coming down.
The consumer-welfare standard looked at the level of actual competition, including overseas competitors, that existed in the marketplace that affected consumer prices.
Many experts are concerned about the Biden administration’s plan to revive discredited legal doctrines from 40 years ago.
Scott Lincicome, vice president of general economics and trade at the Cato Institute, argued on Aug. 2 in the Dispatch that “the guidelines, 13 in all, reflect the Biden administration’s desire to aggressively regulate supposedly ‘anti-competitive’ business activities and, in particular, to move away from a legal standard centered on ‘consumer welfare’ to a broader and more subjective one that considers many factors, including ‘bigness’ itself.”
He argues that these are a radical departure from current interpretations of antitrust law. He is correct to worry that a departure from the traditional standard to a vague and ambiguous one is dangerous for the economy and the consumers the law is supposed to protect.
One can look back at the harassment of AT&T and IBM to see what to expect if the current administration is allowed to continue down an anti-corporate road. In the end, markets, not the government, shrank AT&T and IBM.
Innovation, competition and diversity are far better than bureaucrats implementing new vague and subjective guidelines that will give even greater power to the federal government to micromanage America’s greatest and biggest corporations.
The market should govern mergers, not politicians. Thanks to politicians, companies can be accused of improper behavior regardless of what they do.
If they charge more than their competitors, they are guilty of monopolistic behavior. If they charge the same, then they are colluding with competitors. If they charge less, then they are using predatory pricing to drive out competition. It is a Catch-22 for corporations.
These new guidelines will enable class warfare and will hark back to a Progressive Era regulatory framework that harmed consumers. Former Sen. Phil Gramm, Texas Republican, and Mike Solon wrote in The Wall Street Journal on April 3, 2022, that the Biden activists, “like Progressives before them, they view the rule of law not as a cornerstone of liberty and democracy, but as an impediment to equality. … Unlike most Americans, progressives view low prices as a problem, not a benefit. … With the consumer-welfare standard uprooted, antitrust would become a license to control the American economy, capriciously rewarding favored businesses and punishing disfavored ones.”
The government regulatory agencies should focus on prices, quality and volume of output for a good or service instead of these new 13 vague guidelines that are intended to be an easy way for bureaucrats to micromanage the economy.
Antitrust laws are a product of self-interest. The government will always seek to expand its power, and politicians will come up with excuses or guidelines that will allow them to grab more power over individuals and the private sector.
As we have seen in the United States, corporations have a strong incentive to hire more lawyers and lobbyists who don’t produce anything, detracting from resources to innovate and expand. The more the government redistributes wealth, the more they want to expand and do more.
These incentives are bad for economic growth, and the per-person gross domestic product numbers reflect advanced economies going in the wrong direction.
Big is not bad when it comes to mergers and acquisitions, and the new guidelines put out by the Biden administration should be scrapped by moderates in the administration who do not want to enable the FTC and DOJ to further constrict economic growth.
• Dan Mitchell is co-founder of the Center for Freedom and Prosperity and chairman of the board. He is an expert in international tax competition and supply-side tax policy.
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