Time for shutdown reality check
New FTC commissioners should follow four critical principles
Antitrust enforcement is becoming front and center in our political economic debate. Some commentators question whether antitrust enforcement has become too restricted and suggest a broader regime in which antitrust, reinterpreted, should address not only anticompetitive conduct but larger societal ills, such as stagnant labor markets, lack of viewpoint diversity, and economic inequality.
Others decry antitrust over-enforcement, questioning the excessive cost of investigations that permit the authorities to secure remedies that go beyond the law.
Still, others wonder if antitrust enforcement is too slow to bring about meaningful relief in high technology markets where the market may evolve rapidly before any enforcement action can be brought, while others see these as examples of healthy markets with highly innovative firms making the current outcries overblown and unwarranted.
That is the daunting challenge that a slate of new commissioners at the Federal Trade Commission face as they take office this week. In a world where the nature of competition is evolving rapidly, with some demanding that enforcement needs a new course, where should the commission direct its efforts?
As a former FTC enforcer who participated in the transition between the Bush and Clinton administrations, here are four proposals for setting a sound course for a renewed enforcement agenda:
1. Focus on direct benefits to consumers.
The ultimate lodestar for antitrust enforcement is that it must benefit consumers. The fact that competitors may not like a rival's conduct or may be harmed and might exit the market matters only if at the end of the day consumers suffer through higher prices, lessened choice, lower quality, or decreased innovation.
As Supreme Court William J. Justice Brennan explained over 50 years ago, the purpose of the antitrust laws is to protect consumers, not competitors. This focus remains vital today, as competitors would gladly sidetrack antitrust enforcement to hobble rivals and give themselves a leg up. This rent-seeking is not what we need, and antitrust should stick to focusing on the well-being of consumers.
2. Use your enforcement resources wisely.
This is essential. The agencies have extremely limited resources. They must marshal those resources efficiently to focus on those matters that have the biggest bang for the buck.
Before beginning any matter especially a costly and resource intensive investigation the enforcers must look in the mirror and ask "how will this affect consumers pocketbooks and is this the optimal use of our resources?"
To give just one example from my time at the FTC, before we arrived the "pharmaceutical" enforcement program dallied on many cookie cutter cases prosecuting pharmacies from trying to increase reimbursement by some pocket change. That was not a prudent use of resources, so we changed the focus to prosecuting branded pharmaceutical companies for tactics delaying generic competition that cost consumers hundreds of millions. The result was focusing on cases that mattered most: a significant increase in generic substitution leading to billions in consumer savings.
3. Use all the commission's powers.
The Congress that created the commission 100 years ago recognized that enforcement was often an inept and inadequate tool to address the full range of competitive problems in a market. So Congress gave the FTC the power to conduct studies, hold hearings and provide special advice to Congress.
While the FTC has robust policymaking in the consumer protection arena, there are much fewer workshop, reports, and studies to support its competition mission, which could be used to develop guidelines for pro-competition practices to improve pricing, innovation, and consumers' ability to shop for better products.
4. Make sure remedies are worth the candle.
Trying to implement remedies to change conduct is daunting, and that is why many remedies, especially merger remedies, do not succeed. While the Obama FTC rightly was proud that 75 percent of their merger remedies succeeded, more can be done to improve that record so that fewer consumers ultimately are paying higher prices and enduring poorer services. The remedies must address the identified harm and not merely be politically expedient. If a harm has no antitrust remedy, then that is probably an indication that some other policy tool is a better fit for the job and the FTC should use its non-enforcement powers to find a more appropriate solution.
The problems faced by the antitrust enforcers may seem daunting. But like any explorer attempting a challenging journey - the key is to find and follow the lodestar. And for antitrust enforcers the lodestar is the impact on consumers, ensuring they benefit from a healthy marketplace that drives better products and prices for their pocketbooks.
David Balto is a public interest antitrust attorney based in Washington, DC. He previously served as policy director at the Federal Trade Commission, as an attorney in the Justice Department's Antitrust Division, and as a senior fellow at the Center for American Progress and the New America Foundation. David advises and has advised a number of small business and consumer advocates, and tech companies such as Broadcom, Asus, and Google, and is an expert in antitrust, consumer protection, financial services, intellectual property and healthcare competition. His views are his own.