Business & Economics

Antitrust Law Shouldn’t Be Used to Break Up Big Tech

Alden Abbott and Rob Atkinson discuss competition, consumer welfare, data security and more

Image Credit: MR.Cole_Photographer/Getty Images


In this episode of the Discourse Magazine Podcast, Mercatus senior research fellow Alden Abbott speaks with Rob Atkinson about the Biden administration’s recent executive order on competition, privacy and free speech issues in Big Tech, two competing philosophies of antitrust law and much more. Atkinson is the founder and president of the Information Technology and Innovation Foundation, a think tank focused on science and technology policy. He has served on various presidential commissions throughout the Clinton, Bush, Obama and Trump administrations, and he has also authored several books, most recently “Big Is Beautiful: Debunking the Mythology of Small Business.”

ALDEN ABBOTT: Greetings. I’m Alden Abbott, senior research fellow at the Mercatus Center at George Mason University. I oversee the center’s program on antitrust and competition policy. I’m a veteran of the federal antitrust enforcement agencies, the Justice Department’s antitrust division, and the Federal Trade Commission, or FTC. From 2018 to 2021, I served as the FTC general counsel.

Today, I’ll be having a conversation with Rob Atkinson, founder and president of the Information Technology and Innovation Foundation, or ITIF. The ITIF is a think tank whose mission is to formulate, evaluate and promote policy solutions that accelerate innovation and boost productivity to spur growth, opportunity and progress. Dr. Atkinson is an internationally recognized scholar and a widely published author, whom The New Republic has named one of the three most important thinkers about innovation.

Washingtonian magazine has called him a tech titan. Government Technology magazine has judged him to be one of the top 25 “doers, dreamers and drivers of information technology,” and Wharton Business School has given the Wharton Infosys Business Transformation Award to him. Today, Dr. Atkinson and I will discuss one of the hottest policy topics of the day, antitrust and competition policy.

Much attention is focused recently on alleged anti-competitive practices or speech censorship by certain big high-tech companies, especially Google, Facebook, Amazon, Apple, Twitter. Congress is considering legislation that would sharply limit business transactions these companies can enter into and effectively regulate them. Legislative proposals would also make it easier, in general, for government enforcers to challenge mergers and alleged monopolistic prices and practices by large companies throughout the economy. “Big is bad” is the watchword of many of the supporters of these changes.

What’s more, a July 9 executive order on promoting competition in the American economy would effectively regulate or reshape business practices in many sectors of U.S. economy, including transportation, agriculture, telecommunications, Big Tech, pharmaceuticals, among others. The big issue of the day is, would a fundamental legal reshaping of Big Tech platforms and large businesses benefit consumers and American innovation, or would it be harmful?

There’s a lot to unpack because we’re talking about perhaps the most fundamental, broad-based effort by government to reshape business practices throughout the American economy in a century. I cannot think of a better person than Rob Atkinson to address questions raised by this issue. Rob, you’re an expert on technology policy and its effects on industry. What are the implications of the recent proposals to regulate, break up or control high-tech digital platforms through antitrust? What would you do if you were in charge of policy in this area?

Are American Markets More Monopolistic Today?

ROB ATKINSON: Well, first of all, Alden, thank you so much for having me join you on this to discuss this set of really important questions. First of all, I think it’s important to understand that tech is the camel’s nose here. They know—what are called the neo-Brandeisians, or the anti-big company advocates, activists—they know that tech is an easy thing for people to get their heads around. We all use Google or Amazon or whatever, but we should be under no illusions. Their goal is not just about Big Tech, it’s big everything.

Somebody recently wrote about Big Cheerleader or something, something to do with cheerleader market power. That’s really what’s at risk here, is breaking up companies just because they’re big. Second thing that’s important to recognize is this whole initiative, this whole effort, of moving antitrust back towards its structural approach—in other words, just bigness is bad, as opposed to antitrust focused on conduct or a company’s doing something bad or anti-competitive. That’s really what antitrust should be focused on. The argument now, though, is that somehow we’ve developed into a monopolistic economy and monopoly everywhere, market power everywhere.

What’s striking to me is that nobody or very few people have actually looked at the data. So we did, and we looked at the most recent U.S. Census data, basically, on 900 different industries at the very detailed level, like tortilla makers. We looked at how much market share the top four have in 2002, and how much market share the top four have today. What you find is essentially very little difference, very little change. In fact, there were more industries that were less concentrated today than there were 15 years ago or 20 years ago. A lot of this is just all much ado about nothing. The U.S. economy has not measurably gotten more concentrated or monopolistic. We should just start with that.

ABBOTT: That’s a very interesting comment, Rob. I think looking—empiricism is always useful. I also point that—I think a February 2020 report by the Council of Economic Advisers, which surveyed research on concentration, suggested that the measures of concentration were often flawed because they didn’t really measure real economic markets. Plus, factors such as sometimes the local market can become more concentrated, and it can raise competition—for example, when Walmart or Costco enters into a local rural market where you have smaller stores.

That almost hearkens back to the 1930s and the concerns of something called the Robinson-Patman Act to protect small businesses. That’s very fascinating. As you said, this all seems to get drowned out. And the fact is that some legislative proposals, as you said, refer not just to the big platforms, but to have general market share or asset size limits. If you get inflation and so on, more and more firms will suddenly—if they reach a certain asset size, without regard to what they’re doing—be subject to regulatory proposals that would really limit their ability to make acquisitions, things of that sort.

ATKINSON: Yes, absolutely. As you said, this is all coming from a “small is beautiful” kind of philosophy, that if firms were just small and we were all small shop owners and small farmers, we’d go back to this republic era of harmony and goodness. The reality is America became the richest country in the world not because we had small firms, but because we had big firms. We had the biggest firms in the world after 1900. We were able to get firms that had economies of scale.

There was a very good FTC report, Federal Trade Commission report, from about 30 years ago, and it looked at the light bulb industry. It said, “The efficient market size for the U.S. light bulb industry would be to have two players,” because the economies of scale for light bulb factories was so big. Same thing with banking. We hear all the time, “Oh, we have too few banks.”

In reality, if you look at the Treasury reports, they find that we could cut the number of banks in half in the U.S. and significantly increase banking productivity because we just have too many. We don’t have the economies of scale that, say, the Japanese have or the Canadians have in their banking system. To me, the biggest thing is we just got to get rid of this ideological view that bigness is inherently bad.

There could be some sectors, and I’m sure there are some sectors, where there may be just too much monopoly. Sometimes you hear about that in local hospital mergers. But in most of these industries that are technology-driven, what you find is that scale and network effects—in other words, if you have ten customers, it’s better than having two customers for everybody—that they really do matter.

This goes back to a notion of economics and antitrust and innovation of Joseph Schumpeter, the famous innovation economist, who argued that if you want innovation, you can’t have your profits at the cost of capital because you can’t take risks then. If you’re going to take a big risk, and the best you can get from it is the cost of capital, nobody’s going to take a risk.

ABBOTT: The first-year economics students have this model they study of perfect competition, which was the ideal where you price at marginal costs. But that model, as you say, doesn’t account for the entrepreneur. Where are you going to get the incentive to create new products and processes, or to improve them?

ATKINSON: Exactly. It’s interesting. We saw that with the COVID vaccine, where you hear now people complaining, “Oh, the vaccine, the two main ones that made—the Moderna and Pfizer, oh, they’re making money.” What that debate misses is, there were so many vaccine companies that put a billion dollars into developing a vaccine that failed.

There were multiple vaccine companies that failed. They’re not going to make a cent. Everybody in that business knows this is a little bit like playing the lottery. If you’re going to bet and you buy a dollar lottery ticket and you win a dollar—one—you’re not going to bet. You need to know that if you win—in other words, if you’re successful—that you’re going to make some money because there’s a lot of other people that didn’t just not make money, they lost their shirt on it.

ABBOTT: I guess it’s no coincidence that despite our imperfections, two-thirds of the new pharmaceutical products in the world are developed in the United States. That says we must be doing something right with our intellectual property and other systems.

ATKINSON: Absolutely. As is most of the venture capital for biotech, biopharma startups, it’s here, because entrepreneurs know that if they can develop a drug that meets the market need, meets patient needs, you can make your money back.

Free Speech and Censorship

ABBOTT: Well, I think—music to my ears, but more people need to hear this message, I think. Now, switching gears slightly, of course, a lot of attention—and really focusing on certain big digital platforms—a lot of attention has been paid by people on different sides of the political spectrum to speech censorship, or so-called censorship, by the big digital platforms. Is there anything that technology and antitrust policy has to say about this, or is that a topic that should not be dealt with by antitrust enforcers?

ATKINSON: It shouldn’t be dealt with antitrust. There are many different policy areas we have. We have policies around privacy, around information. Not everything has to be put into the antitrust bucket. And what these, what are called neo-Brandeisians—that’s a term meaning people who follow the intellectual philosophy of Justice Brandeis, who in the early 1900s, his whole motivation was to oppose the Industrial Revolution, the rise of large corporations. He hated that. He had a line, a famous quote, where Brandeis said, “The size is the mark of Cain.”

In other words, if you became a big firm, it was only because you were a sinner, and that’s similar to what we have with antitrust. Everybody wants to put these problems in antitrust. Imagine that we broke up Facebook and Google, and instead of having one or two or three or four platforms, we had 30. Does anybody really think that these issues of speech and censorship, and speech you don’t like, speech that you think you should stop, speech you don’t want to stop, would that get better?

I got an email yesterday from Parler. I subscribe to Parler as I do Twitter, and Parler was seen as an alternative, more of a free speech alternative, a little bit more conservative alternative to Twitter. And long story, it got taken down, but now it’s back up. Well, there’s competition for you. There are plenty of different voices. So we can have a discussion about speech on the internet, but it’s not an antitrust issue.

ABBOTT: Now, I think that’s certainly consistent with, at least until recently on a bipartisan basis in recent decades, the U.S. enforcer told foreign enforcers, “Look, you should focus on anti-competitive behavior and consumer welfare in applying antitrust. Leave labor law problems or other environmental law problems for your laws dealing with labor or the environment, but if you muck that up and put it into antitrust, it becomes indeterminant and uncertain.”

ATKINSON: Absolutely. It becomes internally inconsistent what you are going to achieve. With the consumer welfare standard, it’s pretty clear whether you achieve the goal: Consumers are better off or they’re worse off. But now you could have something that, well, maybe it makes workers worse off but consumers better off, and that maybe hurts the environment a bit but helps speech. Well, now what do you do because you have multiple goals?

When Michael Lind and I were writing our book “Big is Beautiful: Debunking the Myth of Small Business” for MIT Press, I really reviewed a lot of what the antitrust and anti-monopoly folks were writing. One of the most interesting things that I read was one of the advocates was saying, “Look, fellows and gals, we’re making this whole mission against big companies. There’s no way we can attack Amazon for hurting consumers because everybody in America loves Amazon. We have to come up with some new reason. Maybe they have too much political power, or maybe they don’t treat their workers right.”

Even those folks knew that consumer welfare is pretty powerful and that most Americans would just say, “Wow, Amazon’s making my life better. What in heck are you doing trying to break it up?” Putting more of those things in the mix just makes antitrust enforcement almost impossible for regulators. It makes it very capricious as well.

ABBOTT: All the concerns about Amazon. There’s a famous article by Lina Khan, who’s now Chair of the Federal Trade Commission, and there was a very interesting article by Jon Nuechterlein and Tim Muris. Nuechterlein—bipartisan lawyers, but Nuechterlein was general counsel of FTC in the Obama administration, and Muris was chair of the FTC in the Bush 43 administration.

They basically found a lot of the critiques that she was making about Amazon were the same critiques you found about A&P and in the monopolization case brought against them. And it turns out that they really didn’t have a lot of basis when you look behind them, because none of the critiques really, as you said, got to this issue about how consumers have a greater variety of products to choose at lower price, somehow.

ATKINSON: Well, it’s really interesting, because Mike and I dealt a lot with that history. There’s another very good book by Marc Levinson—I think it’s called “The Great A&P”—the history of A&P (Atlantic and Pacific Tea Company), became the Walmart or the Amazon of its day, the whole era called the chain store wars. What you found back then is who was pushing this, who was pushing to limit and break up this big company like A&P? It was small shop owners and wholesalers.

It was really not about consumers at all. In fact, what was very interesting back then is some of the biggest defenders of A&P were things like the NAACP, the consumers’ unions. Those groups whose interests were to help their members, the average people, they were supportive of A&P. It’s the same thing today with Amazon, the idea that somehow you would want antitrust to prevent competition from making another company go out of business. Isn’t that what a market system is all about?

We don’t tell small companies, “When you’re doing well, we’re going to limit your profits.” Now we want to say, “If you’re doing poorly, we’re going to protect you and limit your downsides.” You’re in the market. It’s take a risk. If you do well, you thrive. If you don’t, you go out of business. That’s not my business. It shouldn’t be anybody’s business except the business owner’s business to figure out how to do it.

Privacy and Data Security

ABBOTT: Right. Well, that’s great. Now, what about privacy and data security? More and more, those are being referred to as big issues concerning the digital platforms. The question is, are they antitrust issues? They’re certainly issues, or just consumer protection issues. Should they be dealt with differently? We already talked about labor laws or environmental laws shouldn’t get intermixed into antitrust. What about privacy, data security?

And there are various proposals, really, to regulate it. Now, you have, obviously, three states have privacy laws. There’s talk about a federal preemptive law. And is this an area where the federal government should clarify and preempt things? What are your general thoughts?

ATKINSON: It is not an antitrust issue at all. It is not a Big Tech issue at all. Yes, we need a federal law, if only and principally to preempt states. Because otherwise, we’re going to have a panoply of 50 different rules that the big companies might be able to comply with because they have a lot of lawyers and a lot of privacy people. But a small company, just the compliance costs relative to their costs would be crazy.

The reason it’s not a tech issue is if I go to a hotel—I was on vacation—if I went to a hotel, they have my information. Why is that any different? If I go to a grocery store and I use a loyalty card, they have my information. If we’re going to talk about privacy, we have to talk about all data privacy, not just online, certainly not “big internet.” Privacy is privacy. There’s no difference. It drives me crazy when I go to Europe—you have all these cookie notices all the time, constantly. When I go to a hotel in Europe, where’s my privacy notice?

ABBOTT: That’s different now.

ATKINSON: No, it’s not different. They’re exactly the same. It’s my information that could be used in a certain way. When you talk about the California bill, a number of states have this. The California bill is interesting because I believe it was the attorney general there who commissioned a study—and ITIF has written about that—and I’m going to get the number wrong, but the compliance costs were in the tens of billions of dollars a year. Tens of billions of dollars a year.

The compliance costs, if the United States Congress were to adopt the GDPR [General Data Protection Regulation], the European bill and the California bill, we’re talking about $130 to $140 billion a year that consumers are going to pay, ultimately. We can and should have a good privacy bill, but it should be opt-out—if you don’t like this thing, you can opt out of it—and it should give companies the ability to use data in legitimate ways and not the ability to use them in unfair ways. Not that hard, but it’s not an antitrust issue by any stretch of the imagination.

In fact, one last thing on that. If you look at cybersecurity on average—of course, these are all averages—the small firms have much worse cybersecurity and computer security than big firms because they just don’t have the sophistication. Again, we talk about big first with cybersecurity because when Fred’s Hardware Store has a cybersecurity breach, nobody notices, but when a big company has one, we notice. Actually, small companies are the ones that have the worst practices for cybersecurity and are putting consumers’ information most at risk.

ABBOTT: There’s certainly been lots of efforts, sometimes controversy about the FTC to enter into consent decrees with companies for allegedly having adequate privacy policies. Those cases really haven’t been litigated. Without a federal privacy law, there’s a lot of uncertainty about what would stand up in court.

I’m glad also you mentioned the GDPR, by the way, because I know there’s evidence out there that supposedly that would limit the power of Google and a few other big American platforms. But it seems that Google’s market power and market share has risen, all things being equal, since the GDPR’s passage in Europe, precisely because, as you indicated, they have the lawyers and the investment in mechanisms to deal with new legal questions that the smaller companies don’t. Lots of smaller potential entrants have been scared away from entering into platform markets in Europe because of that, it seems.

ATKINSON: I was talking to a firm in California, a venture-backed firm—I won’t say who it was—in a very interesting market. Wow, this is amazing. They were using data, collecting data, but using it for real economic benefits for its customers. I said, “Are you going to Europe?” They said, “I don’t know, maybe eventually, but the idea of having to deal with the GDPR in Europe just scares the bejesus out of us”. Now, you’re Google, you have to be in Europe, and you figure out how to do it.

Now, the other problem—there was a study done on this effect, just as you alluded to it. One of the advantages that the larger firms have, particularly depending on their business model—like search, you put a search term in like, “I want to know about tennis rackets.” You’re probably going to get a tennis ad.

But if you’re a firm that can’t do that, just because you’re a small little app company that has games, what ads do you put on that? Because the GDPR makes it so much more difficult to have any clue who’s on the other side, who’s the eyeball on the other side of that. They don’t need to know, nor do they know, that it’s Alden Abbott. They just need to know it’s some guy in D.C. who maybe has shown an interest in vacations in Vegas, so they give you a Vegas ad. In any case, the bottom line on that, there’s a very good study that showed that this really, really hurts smaller companies because now their ad revenue just goes way, way down, because it’s just a random crapshoot now.

Progressivism and the Antitrust Reform Debates

ABBOTT: Interesting. Sometime, as a general issue, I’ll show you my views that the unintended consequences of regulation and so on are often very costly to both businesses and consumers. Now, you’ve already spoken about your book “Big is Beautiful.” I guess I’m going to ask you about applying proposed legislative antitrust reforms to other sectors of the economy, which I don’t think is a good idea.

I think you made it clear you don’t think so, but perhaps you can say a few more things about what your “Big Is Beautiful” book, which I guess came out about a couple of years ago, had to say about these antitrust debates that are being pushed by Senator Klobuchar and some other distinguished legislators.

ATKINSON: Well, I wrote a piece recently, an ITIF piece, and it was basically about the rise of anti-corporate populism. I know a lot of folks who are more on the libertarian side or whatever just look at the rise of—sorry, anti-corporate progressivism. They look at the rise of progressivism, say 1910s, 1920s, and not really fans of it. But one of the things about progressivism—from the very beginning, it was never anti-corporate. It recognized that large corporations had an important role to play in American society.

Now, it might want to limit them a little bit. It might want to make sure there were good labor regulations, environmental rights, whatever. But it didn’t oppose large corporations per se. What’s happened to the progressive side of the Democratic party is much of it has turned anti-corporate, and that’s a very important development really because, for many years, a lot of progressives actually looked at big companies as supporting progressive goals.

For example, in our book, we found that large companies, again, on average, they pay higher wages. They injure their workers less; they’re more likely to be unionized; they’re more likely to employ women and minorities; they’re more likely to spend on protecting the environment. Last I looked, I thought those were progressive goals. Now, they’re goals, obviously, for pretty much anybody who cares about our country, but certainly progressives have worked for those goals. What’s happened today is that progressives have just decided they don’t want an economy with large corporations.

What we really should be doing in antitrust, as you alluded to, is retain the consumer welfare standard, or I would even go further and go back to the overall economic welfare standard. Is it helping the overall economy? I would even go a little bit further in the sense of one of the problems with looking at antitrust historically, not everybody always looked at dynamic effects. So they might look at a merger and go, “Well, what’s going to happen?”

The famous one I liked the most was, I think it was Oklahoma v. New Ice. I think it was a 1930s issue where the court came out and they wanted to break up this ice company, which went out and dug up ice in the winter and then froze it and gave it to people in the summertime. What they didn’t realize was, there was this thing out there called the refrigerator ice maker that was taking over the country. And within three to five or ten years, this ice company was out of business anyway because innovation had superseded it.

I think we need to recognize that Schumpeter’s creative destruction is pretty powerful. One quick example of that is three or four years ago, everybody was saying, “Oh, YouTube and Facebook, man, they’re monopolies. Nobody can ever get into that”—except for TikTok, [chuckles] which is now this pretty fast-growing, super large competitor. I think antitrust really needs to look at dynamic effects. That’s why we created the Schumpeter Project at ITIF. Technological innovation is a pretty powerful disruptor and competitive force.

ABBOTT: It makes me think about over a decade ago, back in the early 2000s, when in one of my stints at the FTC, there was lots of concerns about proposed mergers and mergers of DVD rental companies because there was a danger of monopolizing the DVD rental sector, which makes me think of your ice example.

ATKINSON: Yes, that’s exactly right.

Should the U.S. Actively Promote Antitrust Worldwide?

ABBOTT: Now, turning to the global implications, antitrust is very much a global enterprise. And indeed, the U.S. has pushed the adoption of antitrust laws overseas. Many of them do, at least in theory, give lip service to consumer welfare, although in practice many don’t. What are the pluses and minuses of the U.S. getting involved in, perhaps, trying to support more binding agreements on antitrust decision-making, whether it’s recognition of foreign enforcement decisions or, even more dramatically, developing common statutory principles for single-firm conduct for mergers, things of that sort?

ATKINSON: It’s one of those situations where if I could be czar, I’d say that would be a great idea—or if the U.S. could be czar, let’s put it that way. If we could be assured that the frameworks or the principles, the agreements would reflect U.S. antitrust doctrine and jurisprudence, not counting where we are today with the neo-Brandeisian wing and Lina Khan and Tim Wu, I’d say, sure.

I don’t think we can get that, though. And so what worries me is that you have two kinds of antitrust outside the U.S. You have essentially mercantilist antitrust. This is China. China uses their anti-monopoly law as a weapon to go after non-Chinese companies and extort them. That’s what they do; they extort them. They say, if you don’t license this product at a vastly reduced rate in China, relative to elsewhere in the world, you’re going to have a big court case and you’re going to be in big trouble. They weaponized antitrust. That’s a huge problem.

The second-place problem you have is, you have neo-Brandeisians run amok in Europe, where you have the new—what’s called the Digital Markets Act, the proposed act that would single out a small number of American companies for enforcement action. In fact, there was even a German official who’d said, there’s no way we should expand this because right now it’s just taking into account American companies, and we don’t want to have it affect European companies. That’s not legitimate law. That’s not legitimate regulation.

What I think the U.S. has to do—and unfortunately, they can’t do it under this administration because this administration, when it comes to antitrust, is very much of a European administration. It’s not going to defend U.S. interests, in my view. Well, let me put it this way, there are components of the Biden administration, particularly in the FTC and Tim Wu, the National Economic Council, who won’t defend U.S. interests. There are others in the National Security Council and DOD who recognize that antitrust can be weaponized against U.S. national security and economic interests. But I worry that, if we go down that path, we’re just going to end up being like them and adopt a “big is bad” approach.

ABBOTT: My own experience I was involved in was something called the International Competition Network, which is a non-binding organization—but most of the antitrust agencies in the world are members—trying to be a conspicuous exception. They did not want to be, I think, in the spotlight there. But there have been a lot of efforts to try and have common understandings on timing for merger filings. Back about a decade ago, you got more and more documents talking about the importance of consumer welfare being a primary concern.

I think things were moving in a direction—not in a perfect direction, or at least trying to through moral suasion or understanding to try and get the new agencies to think about consumer welfare. But my concern is that now with the new policies, certainly coming out of the FTC and so forth, that this will be very hard for the U.S. to make those arguments in the international sphere with fellow agencies. And this was—even USTR would say, “Well, talk to our antitrust counterparts here. They’ll tell you, you should really focus on consumer welfare or use your other laws.” But I don’t know how we do that anymore, frankly.

ATKINSON: I wasn’t clear enough in my answer, Alden, because what I should have said was I absolutely think that that antitrust network was really, really important. I remember being over in Brussels at the airport one time and seeing a bunch of FTC commissioners and DOJ officials, and we were all waiting to get on the plane back to D.C., and they’d been over there for that purpose.

I think us going out and working with, and frankly educating, antitrust officials around the world—because they still listen to us because they see us as, rightly so, as an innovative, dynamic economy. I really do worry that we’re not going to be able to do that, or we won’t do that now, when our message is, “Break up big firms just for being big.” That could really, really harm us and set us back maybe for a decade, if not more.

Antitrust and Trade Policy

ABBOTT: Speaking about antitrust law, its intersection with different sorts of law, what about trade law? There’s some who have argued that trade law sanctions should be introduced and applied to foreign government-supported actions that undermine American companies and prevent them from competing effectively. You mentioned China. There’s been talk about the trade laws, 301 of the Trade Act and so forth, other provisions. Antitrust policy—is it a bad idea or good idea or costs-and-benefits idea to think about aligning antitrust policy more closely to trade policy?

ATKINSON: I think we need to do that. The reason we need to do that is, for example, you see some countries block mergers because they don’t like the idea that a more powerful and stronger competitor could emerge that might challenge their own domestic companies. Well, that’s not the purpose of antitrust law. Antitrust law is not to prevent competition; it’s to encourage competition. That’s a good example.

Another good example is where you see—again, China really is the culprit here, where they go out and they not only allow mergers, but they encourage mergers to create national champions, mergers that would never be allowed in the U.S. or in Europe or Japan. For example, they went out and they got their two state-owned enterprises that made rail cars, high-speed rail, and they forced them to merge to become a behemoth with 60% of the global market.

There’s no way that we should allow trade with that—I’m blanking on the name of the company. We wrote a big report about the high-speed rail, my colleague, Nigel. There’s no way we should allow that company to sell in the U.S. because we would never have allowed that merger in the U.S. At least this is my opinion. I believe that.

I think when we see countries abusing antitrust to create national champions, or to limit mergers that involve U.S. companies for solely capricious regions—I’m looking at the case of Qualcomm. Qualcomm had cases investigated—and you were in the FTC at the time—for their patent licensing in the U.S., Japan and Europe, and all three countries said what you were doing was legal. But the Chinese said, “No, we don’t want to pay those licensing fees. You got to give the licensing to Huawei and ZTE for bargain-basement prices.” They had no choice. I think the U.S. should have defended Qualcomm on that, and I’m not just singling out Qualcomm. There are many companies like that, that have seen that problem.

ABBOTT: That’s interesting. I think your point is subtle, and it’s lost on some. Some people have said, “Well, trade law somehow is mercantilist. If you mix it in with antitrust, you’re going to get bad results.” Your point is that you should only be looking at those issues where consumer welfare—specific antitrust is being abused and that the end result of that would be a harm to consumer welfare. In those cases, a targeted trade remedy might be appropriate.

I know a friend of mine, Shanker Singham, who’s an academic and a trade and antitrust lawyer, has written articles. Actually, we’re trying to write a book right now on putting trade and antitrust principles more closely aligned so as to deal with lots of these anti-competitive market distortions, of various sorts, that somehow fly under the radar of trade law rules, but also really aren’t reached by antitrust law because often the government is indirectly involved.

The idea is maybe you could have some internal, not at the border, tariff—but some internal adjustment where you can show a competitive distortion and actual consumer harm. That’s an idea we’d been playing with, and it’s tough to implement. I think now with Brexit and a few new trade treaties that U.K. is doing with Europe, there are some possibilities for developing that idea.

ATKINSON: I wrote something recently. I was talking about why China, economically, was a problem. I use the example, imagine that the U.S. economy, the government says there are two kinds of corporation. There are C-Corps, the normal kinds of corporation. We’re going to create a B-Corp. The B-Corps can merge whenever they want. There’s no antitrust. They get subsidized up to 20% to 30% of their revenues by the government.

There’s no IP enforcement against them. They can steal whatever they want. Now tell me, do you think that the economy would be better or worse off because of that? Clearly, if you believe in markets and market forces and businesses, it would be worse off. I’ve exaggerated the point, but that’s really what we have now in an integrated global economy, when one country is doing that and abusing antitrust in ways we would never allow in the U.S. So I agree with your point that that’s the direction we need to be exploring.

Antitrust and the Biden Administration

ABBOTT: Good. Interesting. You’ve mentioned earlier Tim Wu, distinguished Columbia professor, who is now at the National Economic Council and is said to have had a role in President Biden’s executive order on competition issued July 9. Now, that order actually called for new regulation of the antitrust challenges, directed against a wide variety of industries: telecom, agriculture, transportation, healthcare, transport.

Do you have any big-picture reactions to the order or any particular proposals in the order? And overall, do you think this is a good way to go, or should traditional antitrust enforcement be just a better way to address competitive issues? It’s a complex question because there was a lot to unpack from that order.

ATKINSON: I think what you have to do is, you have to go back and understand what is the underlying political economy philosophy behind what Tim is wanting to do and many in the Biden administration want to do. It comes down to this notion which they use called pre-distribution. The historical notion from mostly left-of-center people was, we don’t want to have the outcomes from just the market alone, that we need the government to affect distributions. That’s why we have a minimum wage or why we have progressive taxation. That’s why we have welfare payments and home heating subsidies and the like.

What the new anti-business progressives have realized is that they don’t think they can get as far as they want because of the filibuster and the fact that they’re highly unlikely that they’re going to have 61 votes in the Senate. They’ve gone in their whole approach to say, we can do this through pre-distribution. If we limit corporate profits, then the proletariat, the masses will get more. That’s really what’s behind all of this. If we break up companies somehow and get more competition, there’ll be fewer profits and more money going to workers.

The only problem with that is it just fundamentally doesn’t obey; it doesn’t follow the facts. For example, the reason why the labor share of income has gone down, according to the Department of Commerce, has nothing to do with profits going up. It has to do with more self-employed workers. It has to do with more housing prices going up. That hasn’t been a problem. Workers are not losing share because profits are going up.

Similarly, when you look at the rise of corporate profits, particularly domestic profits—who cares whether these companies are making big profits overseas? That’s somebody else’s problem. We want that, given all the mutual funds and the like. We want American companies to make big profits overseas. It’s domestic profits that we should be thinking about. When you look at the profit rate on domestic nonfinancial profits, it’s no different than it was for the last 40 years. It has not gone up.

With all that as the background, then you look at a lot of what that executive order wants to do is, it is premised on this idea that we don’t have enough competition. Alden, you were at the FCC—you look at broadband. “Oh, well, we need more competition.” Well, if that’s the case, then shouldn’t the European broadband profits be a lot lower than ours because they have forced competition through what’s called unbundling? Basically, they get to have markets there but there’s five, ten competitors; shouldn’t their profits be lower?

Well, actually, when you look at the profit data from Europe or the U.S., you find out their profits are essentially exactly the same. It’s this sort of illusionary thing that if we could break up these companies—again, look at aviation. “Oh, we only have four big airline companies.” Before COVID, their profits were lower than the corporate average of profits. Their capital investment was much higher. The productivity was higher.

In a lot of cases, you really have to look at individual industries and say, are these not functioning in the way we think they should be functioning? Then and only then can you rationally, logically justify some kind of intervention. But these broad, overarching statements that say our economic policy is more competition—I don’t think it makes any sense.

ABBOTT: You mentioned the time to regulation. I think of the Carter administration, which was after all a Democratic administration. It did a lot to push deregulation that helped consumers. For instance, you mentioned aviation: There was a Civil Aeronautics Board that created a basically price-fixing cartel that was administered and controlled by government.

Lots of profits were dissipated on services, but prices were very high. Fewer Americans could afford to fly. Despite all of the problems with imperfections in our system now, the percentage of Americans who are able to fly is much higher than it was 50, 60 years ago. There seems to be a bit of a loss there. There were certainly—I’m old enough to remember the Carter Council of Economic Advisers and people like the future Justice Breyer, who actually did believe in regulatory reform.

ATKINSON: It’s a great example. The “anti-monopolist” people like Barry Lynn have complained about airline deregulation because certain communities saw a price increase. Yes, but that’s not the point. Certain communities where it made no economic sense to run five flights a day from one pair to one pair, they have been hurt, but those tend to be very small communities. When you look at the overall pricing of aviation, it has gone up significantly less than the Consumer Price Index.

I remember when I was a young man, right out of college, I didn’t have any money. I was paying my own college my way, and I had to go back across country to see my mother after my father died. I took a bus because airlines were so expensive. Now anybody almost can take an airplane because the prices are so good.

That was exactly to your point, Alden. We did that because we enabled competition. The neo-Brandeisians would say we should have 25 airlines competing. Well, no, you don’t need that, not in a network-based industry where you have high fixed costs. These companies have an enormous incentive to fill up every airplane and lower prices to do it.

Net Neutrality and Broadband

ABBOTT: Great. I’ll mention one more thing. You mentioned broadband. There’s this whole issue of net neutrality. It seems the FCC may once again—it’s like ping pong. It was a net neutrality regulation 2015, and that was rescinded. Now it looks like it may be coming back. Well, what are your thoughts on that issue?

ATKINSON: Well, it’s two things. One is, look, this is much ado about nothing. The United States built the internet and had the most vibrant internet economy and broadband economy in the world through 2015 with no net neutrality rules. There was essentially only one case that anybody who is not biased can point to. And that was a small telco called Madison River that blocked using the internet to make a telephone call because they didn’t want the competition. That lasted about three days before the FCC brought the hammer down on them just by saying you can’t do that, or you shouldn’t do that.

Look, the reality is internet service providers—they don’t block content, they don’t want to, and they’re not going to. They’re not going to say, “You can’t use Zoom.” We’re on Zoom now. They’re not going to say that. We don’t really need a set of regulations to fix that. The big problem with where Tom Wheeler went, the FCC chairman, is—Wheeler’s initial proposal was one that ITIF more or less supported, and it reflected what we wanted. Then under pressure from the White House to politicize this, he put it into what’s called Title II, which is this kludge of a regulatory thing in the FCC related to telephony. Broadband is not telephony.

We could solve this problem just having a simple law, a new title that says, “Internet service providers can’t block or degrade traffic without a purpose.” For example, you should be able to block child pornography or malware, of course, those things like that. That’s all. You pass that law; we’re done with it. But what’s interesting is the progressives oppose that law. They don’t want a law. They want to have these ISPs regulated because, ultimately, they don’t want private provision of broadband. They look at it as roads or something like that. They want the government to provide it.

ABBOTT: Yet, I think, not to get into the weeds too much, but there’s some studies that municipal provision of broadband is not necessarily efficient. In fact, there are properly structured—there are incentives for private sector to provide broadband. It takes time to expand, but it gets there. And municipal provision could be inefficient and could get inefficient subsidies, make it harder for two competitors to come in or want to come in.

ATKINSON: We have a series called the Broadband Myths, and the most recent one was on the myths of municipal provisioning. You’ve seen many of these go out of business and saddling the—Burlington, Vermont, a good—saddling the community with a municipal bond debt that has to get paid off by raising taxes. My favorite was this little town in Utah somewhere where they were like, “We’re going to have municipal broadband.” They already had a cable broadband and a telephone broadband. It might’ve been AT&T, I’m not sure, but they were going to give you broadband.

First of all, they were only going to serve places that were wealthy. Exactly what the advocates—“Oh, well, we should serve everybody at once.” But the towns always served their most wealthy people because those are the people who can afford it. Then they said, “To sign up to broadband, you have to pay a $1,600 sign-up fee.” What? I have Fios at my home. I didn’t pay $1,600; I didn’t pay any sign-up fee. They just brought it to my home when I signed up. You’re absolutely right. Municipal broadband is a last resort, not a first resort.

If there’s someplace where, just for some reason, the private sector just won’t go there and whatever, sure. What I really worry about with this new infrastructure bill—thankfully we did put money into broadband, which we should have for rural broadband—what I really worry about is it’s being left up to the states. And a lot of states, because of ideological reasons, they may just decide, “Oh we’ve already got cable broadband and telephone broadband, but we don’t really like that. We’re going to put money into a third and wire everybody’s home, the municipal broadband.” What a waste of money.

The Need for Consensus

ABBOTT: Anyway, this has been a fascinating discussion. I think it points out that issues about competition, consumer welfare and actually regulatory reform—I’m old enough to remember that these were not really viewed as partisan issues or shouldn’t be. Indeed, antitrust enforcers from—I guess you’d say from 1990 till about 2015—there were differences on the margin about some marginal cases to bring or not bring. But you look at the actual statistics and the numbers, it was really a bipartisan, generalized consensus about the main goals of antitrust law.

And it was, in my view, unfortunate that seems to be disappearing because it created a greater certainty and was also useful, as we’ve mentioned, in talking to regimes overseas about sound economic policy.

ATKINSON: I couldn’t agree more, Alden. I remember the first time—I would go up to the Hill a lot, meet with subcommittee staff on various issues, and it was always you’d go in and you’d meet and there’d be—you’re meeting with the Republican staff or you’d be meeting with the Democratic staff.

I remember the first time I went to the judiciary antitrust subcommittee, and both Republicans and Democrats were there in the meeting. I said, “Oh, this is interesting.” Little did I know. They said “Oh, no, all our meetings are—we don’t have separate meetings. Republicans and Democrats always meet together when it deals with antitrust.” We’re a long way away from that, unfortunately. We need to be going back in that direction, I would say.

ABBOTT: Good. Any closing thoughts, Rob?

ATKINSON: Well, look, at the end of the day, a lot of this really comes down to one fundamental issue, and that’s do you value growth and innovation, or do you value redistribution? That’s what’s at stake here. I don’t mean to say that they’re completely antithetical. It’s—ideally you have both, but at the end of the day you’ve got to choose. What I think the neo-Brandeisians are doing, they don’t want more growth.

They think growth is probably bad for the planet. What they want is this pre-distribution distribution that’s—well, I still think that the average American household would love to have 25% more income in a few years, would love to have more innovation. I think Americans want growth. They deserve growth. They need growth and innovation, and that’s, to me, what policy should focus like a laser on.

ABBOTT: Very provocative, and I think sound closing words. Let me say, I’ve really enjoyed getting your views, Rob. I hope that a lot of people tune in, and as these important public policy issues proceed on Capitol Hill, and proposed legislation, I think it’s good for people to understand the full economic context. I think we’ve advanced that ball through our conversation. Thank you very much.

ATKINSON: Thank you, Alden. It was really a pleasure to talk with you.

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