Competition Corner by Alden Abbott - FTC's Amazon Lawsuit & More
Today, the FTC announced another major lawsuit against Amazon. This time it contends that the exclusive offerings provided to Amazon Prime subscribers, such as lower prices, bundled service packages, and faster logistics, “exclude competition” and somehow harm consumers- necessitating major sanctions. According to FTC Deputy Director Newman, “seldom in the history of U.S. antitrust law has one case had the potential to do so much good for so many people.” Once you replace the word ‘good’ with the word ‘harm’, he's absolutely right. The lawsuit threatens to punish a highly competitive enterprise for providing immense value to consumers- imperiling the very competition that FTC and DOJ enforcement actions are meant to promote.
The announcement comes shortly after opening arguments began in the DOJ’s lawsuit against Google over its popular search engine and digital advertising services. My colleague Satya Marar wrote about that case for The Hill, noting that it’s based on a spurious theory of harm that’s at odds with the evidence, thereby failing consumers and wasting the agency’s taxpayer funding.
These lawsuits top off an incredibly busy month in the world of antitrust, and a very busy month for us here at Mercatus, as we continue fighting for a solid law and economics approach to competition that favors consumer welfare, innovation, human progress, and a robust, productive world-leading economy.
Draft Merger Guidelines
I’d especially like to commend our colleague, Dr. Greg Werden, who has released not one, but two briefs, dismantling the FTC and DOJ’s new draft merger guidelines. As I noted last month in Truth on The Market, when Greg speaks, courts may be expected to listen. He is the leading expert on the history and technical analysis of modern merger guidelines, having worked on the 1982, 1984, 1992, 1997, and 2010 versions as a senior DOJ antitrust economist.
As he notes in his expert commentary for The Hill, the “guidelines” provide very little “guidance” at all to business parties about the kinds of mergers they won’t prosecute, thereby failing their main historical purpose of providing predictability and clarity to businesses through objective principles. They thus undermine the rule of law. Greg expounds further on the rule of law issues that permeate the draft guidelines in his new policy brief, noting that this lack of clarity threatens to chill pro-competitive merger activity.
In his next brief, Greg notes that the guidelines abandon sound, objective principles previously adopted by the agencies to define the relevant markets for ascertaining whether a merger will lessen competition. This will result in entirely arbitrary, self-serving “gerrymandered” market definitions that are likely to be widely rejected by courts.
For an analysis of the Guidelines’ misinterpretations of important case law, see my comment for the record submitted to the FTC. You should also have a look at Greg’s insightful summary of these issues in Competition Policy International.
Intellectual Property & Pharmaceutical Innovation
It was great to sit down with IP Watchdog CEO Gene Quinn this month for a podcast session considering pharmaceutical innovation, antitrust enforcement and patent law. Unfortunately, current proposals to undermine patent rights in the pharmaceutical sector threaten future cures and innovations- potentially costing millions of human lives. I also discuss my latest book on trade and intellectual property: "Trade, Competition and Domestic Regulatory Policy", which I co-authored with Shanker Singham.
FTC & DOJ Tendrils Spill Into Banking & Labor Markets
When President Biden promised that his administration would take a “whole of government approach” in various policy areas, he didn’t mention that it would involve building cooperation on bad ideas.
As I note in Truth on The Market, the FTC and US Department of Labor just signed a memorandum of understanding (MOU) “to strengthen the Agencies’ partnership through greater cooperation and coordination in information sharing, investigations and enforcement activity, training, education, research, and outreach.” Given that most labor-related matters are outside the FTC’s stated mission to protect consumers and address impediments to competition, this is likely to serve as further unjust overreach into the competitive economy by the agency.
Elsewhere, my colleague Satya Marar writes about the growing consensus among the Biden DOJ Administration and legislators, about the need to more harshly scrutinize and police mergers in the banking sector. There’s certainly much that can be done to improve competition in that sector, but it ought to begin with addressing the many regulations that create substantial costs without always delivering commensurate benefits in safeguarding depositors and investors, or making our financial system more secure.