Neoliberal columnist Matt Yglesias recently weighed into antitrust policy in Bloomberg, claiming falsely that the “hipsters” in charge of Biden’s antitrust agencies were abandoning consumers and the war on high prices. Yglesias thinks this deviation from consumer welfare makes for bad policy during our inflationary moment. I have a thread that explains all the things he got wrong. The purpose of this post, however, is to clarify how antitrust enforcement has changed under the current regime, and what it means to abandon antitrust’s consumer welfare standard as opposed to abandoning consumers.
Ever since the courts embraced Robert Bork’s demonstrably false revisionist history of antitrust’s goals, consumer welfare became antitrust’s lodestar, which meant that consumers sat atop antitrust’s hierarchy. Cases were pursued by agencies if and only if exclusionary conduct could be directly connected to higher prices or reduced output. This limitation severely neutered antitrust enforcement by design—with a two minor exceptions described below, there was not a single (standalone) monopolization case brought by the DOJ after U.S. v. Microsoft for over two decades—presumably because most harm in the modern (digital) age did not manifest in the form of higher prices for consumers. Under the Biden administration, the agencies are pursuing monopoly cases against Amazon, Apple, and Google, among others.
(For the antitrust nerds, the DOJ’s 2011 case against United Regional Health Care System included a Section 2 claim, but it was basically included to bolster a Section 1 claim. It can hardly be counted as a Section 2 case. And the DOJ’s 2015 case to block United’s alleged monopolization of takeoff and landing slots at Newark included a Section 2 claim. But these were just blips. Also the FTC pursued a Section 2 case prior to the Biden administration against Qualcomm in 2017.)
Even worse, if there was ever a perceived conflict between the welfare of consumers and the welfare of workers or merchants (or input providers generally), antitrust enforcers lost in court. The NCAA cases made clear that injury to college players derived from extracting wealth disproportionately created by predominantly Black athletes would be tolerated so long as viewers with a taste for amateurism were better off. And American Express stood for the principle that harms to merchants from anti-steering rules would be tolerated so long as generally wealthy Amex cardholders enjoyed more luxurious perks. (Patrons of Amex’s Centurian lounge can get free massages and Michelle Bernstein cuisine in the Miami Airport!) The consumer welfare standard was effectively a pro-monopoly policy, in the sense that it tolerated massive concentrations of economic power throughout the economy and firms deploying a surfeit of unfair and predatory tactics to extend and entrench their power.
Labor Theories of Harm in Merger Enforcement
In the consumer welfare era, which is now hopefully in our rear-view mirror, labor harms were not even on the agencies’ radars, particularly when it came to merger review. By freeing the agencies of having to construct price-based theories of harm to consumers, the so-called hipsters have unleashed a new wave of challenges, reinvigorating merger enforcement, particularly in labor markets. In October 2022, the DOJ stopped a merger of two book publishers on the theory that the combination would harm authors, an input provider in book production process. This was the first time in history that a merger was blocked solely on the basis of a harm to input providers.
And the DOJ’s complaint in the Live Nation/Ticketmaster merger spells out harms to, among other economic agents, musicians and comedians that flow from Live Nation’s alleged tying of its promotion services to access to its large amphitheaters. (Yglesias incorrectly asserted that DOJ’s complaint against Live Nation “is an example of the consumer-welfare approach to antitrust.” Oops.) The ostensible purpose of the tie-in is to extract a supra-competitive take rate from artists.
Not to be outdone, in two recent complaints, the FTC has identified harms to workers as a critical part of their case in opposition to a merger. In its February 2024 complaint, the FTC asserts, among other theories of harm, that for thousands of grocery store workers, Kroger’s proposed acquisition of Albertsons would immediately weaken competition for workers, putting downward pressure on wages. That the two supermarkets sometimes poach each other’s workers suggests that workers themselves could leverage one employer against the other. Yet the complaint focuses on the leverage of the unions when negotiating over collective bargaining agreements. If the two supermarkets were to combine, the complaint asserts, the union would lose leverage in its dealings with the merger parties over wages, benefits, and working conditions. Unions representing grocery workers would also lose leverage over threatened boycotts or strikes.
In its April 2024 complaint to block the combination of Tapestry and Capri, the FTC asserts, among other theories of harm, that the merger threatens to reduce wages and degrade working conditions for hourly workers in the affordable handbag industry. The complaint describes one episode in July 2021 in which Capri responded to a pubic commitment by Tapestry to pay workers at least $15 per hour with a $15 per hour commitment of its own. This labor-based theory of harm exists independently of the FTC’s consumer-based theory of harm.
Labor Theories of Harm Outside of Merger Enforcement
The agencies have also pursued no-poach agreements to protect workers. A no-poach agreement, as the name suggests, prevents one employer from “poaching” (or hiring away) a worker from its competitors. The agreements are not wage-fixing agreements per se, but instead are designed to limit labor mobility, which economists recognize is key to wage growth. In October 2022, a health care staffing company entered into a plea agreement with the DOJ, marking the Antitrust Division’s first successful prosecution of criminal charges in a labor-side antitrust case. The DOJ has tried three criminal no-poach cases to a jury, and in all three the defendants were acquitted. For example, in April 2023, a court ordered the acquittal of all defendants in a no-poach case involving the employment of aerospace engineers. (Disclosure: I am the plaintiffs’ expert in a related case brought by a class of aerospace engineers.) Despite these losses, AAG Jonathan Kanter is still committed as ever to addressing harms to labor with the antitrust laws.
And the FTC has promulgated a rule to bar non-compete agreements. Whereas a no-poach agreement governs the conduct among rival employers, a non-compete is an agreement between an employer and its workers. Like a no-poach, the non-compete is designed to limit labor mobility and thereby suppress wages. Having worked on a non-compete case for a class of MMA fighters against the UFC that dragged on for a decade, I can say with confidence (and experience) that a per se prohibition of non-competes is infinitely more efficient than subjecting these agreements to antitrust’s rule-of-reason standard. Again, this deviation from consumer welfare has proven controversial among neoliberals; even the Washington Post editorial board penned as essay on why high-wage workers earning over $100,000 per year should be exposed to such encumbrances.
Consumers Still Have a Cop on the Beat
If you take Yglesias’s depiction literally, it means that the antitrust agencies under Biden have abandoned the protection of consumers. But nothing can be further from the truth. Antitrust enforcers can walk and chew gum at the same time. The list of enforcement actions on behalf of consumers is too long to reproduce here, but to summarize a few recent highlights:
- FTC blocked Illumina’s acquisition of Grail on behalf of cancer patients;
- FTC induced Nvidia to call of its attempt to acquire Arm on behalf of direct and indirect purchasers of semiconducter chips;
- DOJ blocked a merger of JetBlue and Spirit to protect travelers;
- FTC persuaded a federal court to force generic drug maker Teva to delist five unlawful patent listings on asthma inhalers in the FDA’s Orange Book on behalf of asthma patients;
- FTC is pursuing Amazon for alleged subscription traps and dark patterns on behalf of subscribers of Amazon’s Prime video service; the FTC pursued fraud cases against firms, including Williams-Sonoma, for made in the USA claims;
- FTC took action against bill payment company Doxo for misleading consumers, tacking on millions in junk fees;
- DOJ has joined with multiple states to sue Apple for monopolizing smartphone markets on behalf of iPhone users;
- DOJ induced a subsidiary of Chiquita to abandon its proposed acquisition of Dole’s Fresh Vegetables division on behalf of vegetable consumers; and
- DOJ secured guilty pleas from two Michigan companies and two individuals for their roles in conspiracies to rig bids for asphalt paving services contracts in the State of Michigan.
Presumably Yglesias and his neoliberal clan have access to Google Search, Lina Khan’s Twitter handle, or the Antitrust Division’s press releases. It only takes a few keystrokes to learn of countless enforcement actions brought on behalf of consumers. Although this view is a bit jaded, one interpretation is that this crowd, epitomized by the Wall Street Journal editorial board and its 99 hit pieces against Chair Khan, uses the phrase “consumer welfare” as code for lax enforcement of antitrust law. In other words, what really upsets neoliberals (and libertarians) is not the abandonment of consumers, but instead any enforcement of antitrust law, particularly when it (1) deprives monopolists from expanding their monopolies to the betterment of their investors or (2) steers profits away from employers towards workers. In my darkest moments, I suspect that some target of an FTC or DOJ investigation funds neoliberal columnists and journals—looking at you, The Economist—to cook up consumer-welfare-based theories of how the agencies are doing it wrong. All such musings should be ignored, as the antitrust hipsters are alright.