The Federal Trade Commission and the Department of Justice, the two federal agencies tasked with enforcing antitrust law in the US, announced Tuesday that they will rethink how they’ve been evaluating proposed corporate mergers, and large tech firms, already widely resented by politicians in both parties, have reason to be nervous about the outcome.
Essentially, the FTC and the DOJ are saying that the price isn’t always right, that judging a merger by whether it will make customers pay more doesn’t capture the possible harms of a corporate combination.
That “consumer welfare” standard has dominated US antitrust policy from the 1970s onward–even as the digital economy has made free services an increasingly large part of the US consumer experience since the last revision of these merger guidelines in 2010.
“Just as we must revise our theories and models to fit new facts and evidence, we must ensure that our merger guidelines accurately reflect the realities of the modern economy.” FTC Chair Lina Khan said in a Tuesday press conference.
President Biden’s quick appointment of Khan, a skeptic of the consumer-welfare standard and a critic of Amazon’s market power, provided early evidence of this administration’s interest in revisiting antitrust orthodoxy. In July, a White House executive order to promote competition asked the DOJ and FTC to review their merger guidelines.
A subsection of the 10-page document prepared by the FTC and DOJ covers digital markets in particular. It asks a series of questions that can be read as an expression of regulators’ remorse over approving past tech tie-ups:
- “How should markets be defined in the case of mergers in the digital sector where products and services undergo rapid change?” (Think about how much more you can do in WhatsApp than what that messaging app allowed when Facebook bought it in 2014.)
- “How should the guidelines analyze mergers in markets subject to tipping toward oligopoly or monopoly, such as may result from significant network effects?” (The FTC is now seeking to break up Facebook, citing its monopoly on “personal social networking.”)
- “How should the guidelines approach market definition in zero-price markets, negative-price markets, or markets without explicit prices?” (Facebook and Instagram didn’t charge for use when the feds approved Facebook snatching up the photo-sharing service in 2012, and both remain free today.)
- “How should the guidelines evaluate mergers in two-sided simultaneous transaction platform markets?” (Federal approval of Google buying such ad-tech platforms as DoubleCick has placed that tech giant at the center of many digital-advertising transactions, which a sweeping antitrust lawsuit brought by a Texas-led coalition of states alleges has led to Google ripping off both publishers and advertisers.)
The FTC and DOJ now want to hear from interested parties, which agency officials in the press conference noted should include not just consumers but also workers as well as investors and startup founders, as it writes draft guidelines and then posts them for further comment.
“We need your input,” Jonathan Kanter, Assistant Attorney General at the Justice Department, said during the conference. “We hope to finish this year, but we have a lot of work to do along the way.”
One former tech entrepreneur now in public service tentatively applauded this move in a statement Tuesday.
“I know the incredible possibilities that can be achieved when companies bring together their resources and expertise in a merger,” said Sen. Mark Warner (D.-Va.), who before running for office co-founded the company that became Nextel and then invested in numerous telecom startups. “However, over the past few years, with the increasing concentration of power in the hands of a small group of companies, acquisition has become the only exit strategy for most startups, as the built-in advantages are too great to overcome.”
