the democrats can’t decide how radical they want to be on antitrust

The other day I wrote about the current moment in the spotlight for antitrust. (Here’s the latest along these lines from Noah Smith.) Today I’ll say something about the new Democratic proposals on antitrust and how to think about them in terms of the larger policy space.

The Democrats are basically proposing three things. First, they want to limit large mergers. Second, they want active post-merger review. Third, they want a new agency to recommend investigations into anticompetitive behavior. None of these—as long as you don’t go too far with the first—is totally out of keeping with the current antitrust regime. And by that I mean however politically unlikely these proposals may be, they don’t challenge the expert and legal consensus about the purpose of antitrust.

But the language they use certainly does. The proposal’s subhead is “Cracking Down on Corporate Monopolies and the Abuse of Economic and Political Power”. The first paragraph says that concentration “hurts wages, undermines job growth, and threatens to squeeze out small businesses, suppliers, and new, innovative competitors.” The next one states that “concentrated market power leads to concentrated political power.” This is political language, and it goes strongly against the grain of actual antitrust policy.

Economic antitrust versus political antitrust

Antitrust has always had multiple, competing purposes. The original Progressive-Era antitrust movement was partly about the power of trusts like Standard Oil to keep prices high. But it was also about more diffuse forms of power—the power of demanding favorable treatment by banks, or the power to influence Congress. That’s why the cartoons of the day show the trusts as octopuses, or as about to throw Uncle Sam overboard.

The Sherman Act (1890) and the Clayton Act (1914), the two major pieces of antitrust legislation, are pretty vague on what antitrust is trying to accomplish. The former outlaws combinations and conspiracies in restraint of trade, and monopolizing or attempt to monopolize. The latter outlaws various behaviors if their effect is “substantially to lessen competition, or to tend to create a monopoly.” The courts have always played the major role in deciding what that means.

Throughout the last century, the courts have mostly tried to address the ability of firms to raise prices above competitive levels—the economic side of antitrust. For the last forty years, they have focused specifically on maximizing consumer welfare, often (though not always) defined as allocative efficiency. Since the late 1970s, this has been pretty locked in, both through court decisions, and through strong professional consensus that makes antitrust officials very unlikely to challenge it.

Before the 1970s, though, two things were different. For one thing, the focus was more on protecting competition, and less on consumer welfare per se (the latter was assumed to follow from the former, and was thought of a little more broadly). For another, the courts sometimes took concerns into account other than keeping prices low.

The most common such concern was the fate of small business. Concern for small business motivated the Robinson-Patman Act of 1936, which prohibited anticompetitive price discrimination. It was clear in the Celler-Kefauver Act of 1950, which restricted mergers out of fear that chain stores would eliminate local competition. And the courts acknowledged it in cases like Brown Shoe (1962), which prevented a merger that would have controlled 7% of the shoe market by pointing to Congress’s concern with preserving an “economic way of life” and protecting “local control of industry” and “small business.”

Today, Brown Shoe is seen as part of the bad old days of antitrust, when it was used to protect inefficient small businesses and to pursue confused social goals. This is a strong consensus position among antitrust experts across the political spectrum. While no one thinks that low prices for consumers are the only thing worth pursuing in life, they are the appropriate goal for antitrust because they make it coherent and administrable. Since those experts’ views dominate the antitrust agencies, and have been codified into law through court decisions, they are very resistant to change.

The Democrats’ proposal: radical language, incremental proposals

So when the Democrats start talking about “the abuse of economic and political power,” the effects of concentration on small business, and limiting mergers that “reduce wages, cut jobs, [or] lower product quality,” they are doing two things. First, they are hearkening back to the original antitrust movement, with its complex mix of concerns and its fear of unadulterated corporate power.

Second, they are very much talking about political antitrust, and political antitrust is deeply challenging to the status quo. But their actual proposals are considerably tamer than the fiery language at the beginning, and are structured in a way that doesn’t push very hard on the current consensus. New merger guidelines could make some difference around the margins. Post-merger review would definitely be good, since there’s currently no enforcement of pre-merger conditions that firms agree to, and no good way to figure out which merger approvals had negative effects. I have a hard time seeing a new review agency having much effect, though, since it’s just supposed to make recommendations to other agencies. Even I don’t like bureaucracy that much.

So my read on this is that the Democrats feel like they need a new issue, and it needs to look like it helps the little guy, and they want to sound like populist firebrands. But when you get down to the nitty gritty, they aren’t really so interested in challenging the status quo. That is, basically, they’re Democrats. Still, that the language is in there at all is remarkable, and reflects a changing set of political possibilities.

Next time I’ll look at some of the problems people are suggesting antitrust can solve. Because there are a lot of them, and they’re a diverse group. Tying them together under the umbrella of “antitrust” gives an eclectic political project some nominal coherence. But is it politically practicable? And could it actually work?

Final note: If you are interested in the grand historical sweep of antitrust in capitalism, I recommend Brett Christophers’ The Great Leveler. Among other things, he totally called the emerging wave of interest before it actually happened. Sometimes the very long lens is the right one to use.

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