Justice Department Antitrust Chief Says Consumer Welfare Standard Still Works in the Age of Digital Masters of the Universe

Eight-year-old Mark Harman from London enjoying a game of Monopoly with his brother Graham and sister Belinda, from his bed of nails. Mark is being trained by world Champion Roy Singfield and spends two hours every other evening relaxing on his nail bed. (Photo by Ian Tyas/Getty Images)
Ian Tyas/Getty Images

Justice Department antitrust chief Makan Delrahim on Tuesday defended the traditional boundaries of competition law while arguing that they provide ample room for meeting the challenges presented by a corporate and media landscape increasingly dominated by emerging digital technologies.

Delrahim, who led his department’s challenge to the AT&T-Time Warner deal, said at a conference in Washington, D.C. that the traditional focus of antitrust law on consumer welfare remains appropriate and that an expansion of the mission of antitrust regulators would be risky.

Critics have argued that antitrust regulators should broaden the scope of enforcement to protect a broader set of democratic values. Delrahim said that this would invite antitrust enforcement officials to pursue their own subjective political goals and embroil antitrust officials in political struggles that could undermine their effectiveness.

“The problem with incorporating these values into antitrust enforcement decisions is the risks that doing so would be counterproductive,” Delrahim said. “Enforcement decisions targeting democratic ends would invite a self-defeating exercise of prosecutorial subjectivity.”

To illustrate the problem, Delrahim pointed to an antitrust policy paper published by the Open Markets Institute, the sponsors of Tuesday’s conference.

Open Markets’ own issue papers underscore this concern. On the Institute’s website is a feature titled “Democracy & Monopoly” that purports to explain how more vigorous enforcement could support our democracy.  After a brief historical overview, it points out the perceived problem with under-enforcement: it says that “Charles and David Koch provide a stark example.” The essay then describes over several paragraphs ten different political positions the Koch brothers have supported. It doesn’t say what anticompetitive conduct their companies have engaged in, or how they have impacted the competitive process, but it does point out that they’ve contributed to people “teaching Ayn Rand” and “funding [] Tea Party organizations.”

Is that really where we want antitrust enforcement to go? Whether it’s the Kochs or George Soros or anyone else, political positions should have no role in determining the propriety of antitrust enforcement actions. If we take antitrust down the path of considering who is funding Ayn Rand lectures, or the Clinton Foundation for that matter, we will have taken a dramatically wrong turn, in my view.

A broader mandate would also risk inviting lobbyists and special interests to attempt to influence the Antitrust division, Delrahim argued.

“The consumer welfare standard has helped to inoculate antitrust enforcement from the kind of rent-seeking and lobbying behavior all too common in government agencies. Abandoning consumer welfare and opening the door to broader arguments would, ironically, make antitrust agencies more open to the exercise of corporate influence and capture,” he said.

Consumer welfare is not, in Delrahim’s view, concerned only with consumer prices.

“The current standard also recognizes that consumer harm can arise from conduct that distorts the competitive process,” Delrahim said. “As I’ve spoken about recently, revealed consumer preferences can help us ascribe consumer values to zero-cost goods like those provided by some Internet platforms. As we consider consumer welfare in new kinds of markets, the standard allows for its application to new markets, just as it did in the Microsoft case in the 1990s.”

That’s likely an indication that companies like Facebook and Google are not immune to antitrust scrutiny despite not charging for the services they provide to consumers. It may mean that Amazon, which has generally put downward pressure on prices in markets it enters, could also run afoul of the consumer welfare standard if its actions were found to distort the competitive process.

“Enforcement of the free markets for the benefit of consumers can be achieved with greater success, and greater fidelity to the rule of law, within the contours of the consumer welfare standard, than without,” Delrahim said.