The NY Times (HT: Danny Sokol) decided to run an editorial blasts the DOJ’s Section 2 Report, asserting that the “antitrust division is supposed to be the agency looking out for the interests of American consumers, not big companies — a role it has clearly forgotten over the last eight years” citing the familiar bullet points (e.g. “Throughout the entire Bush administration, it has not brought a single case against a dominant firm for anticompetitive behavior and “it has argued enthusiastically on behalf of monopolists before the Supreme Court”). Its a superficial treatment of the issues at best (see here or here for my views and some links to others). Here’s the best line:
The new doctrine bends over backward to protect big firms from accusations of anticompetitive behavior. It requires proof that the harm done by a monopolist’s actions — say, bundling new applications into a computer operating system to keep rival software makers out — be “disproportionately” greater than the potential gains to consumers.
Yes, how dare those deregulatory radicals over at Justice!? Demanding that, consistent with the last 40 years of economic knowledge in antitrust economics and industrial organization more generally, we require proof that conduct actually harms competition rather than infer it from firm size. Who needs proof anyway? Radical indeed.
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Good point. And I appreciate the comment. That is a very fair point with respect to the quoted line. But the op-ed as a whole earned this sort of reaction and criticism. With respect to “disproportionality”, the belief that there is some self-correcting mechanism for false positives in markets no self-correcting mechanism for false negatives is understood by economists of all stripes. So is the difficulty of distinguishing anti from pro-competitive single firm conduct. Imposing an evidentiary requirement (whether “disproportionality” or something else) to ensure that we steer clear of false positives makes sense for consumers in these conditions.
But here’s a better example. The very next line complains that: “If a dominant firm made an exclusive deal with a distributor to lock out a competitor, it would be illegal only if the competitor were denied access to least 30 percent of the market.”
Again, there they go requiring proof. The op-ed tries to paint the DOJ here as “favoring” businesses with large shares over consumers rather than advocating rules that make sense for consumers. What they leave out of this quick little hit on the DOJ’s approach to exclusive dealing contracts (the DOJ who brought Dentsply, you may recall) is that the substantial foreclosure of distribution large enough to deprive rivals of access to minimum efficient scale is a NECESSARY condition of consumer harm. In fact, DOJ’s 30% threshold is lower than some circuits have required to survive summary judgment. So this is no extreme tilting of the scales in favor of monopolists. It is repeating a simple and basic economic proposition that is accepted both by economists (foreclosure is necessary condition of raising rivals’ cost theory of competitive harm with exclusive dealing contracts) AND the law (substantial foreclosure required).
Again, requiring proof of a condition that must be satisfied in order for exclusive dealing contracts to harm consumers rather than generate efficiencies is not favoring monopolists or tilting scales. Its adopting rules that favor consumers that will bear the significant burdens of both false positives and false negatives.
Instead of honestly grappling with these issues, the Times plays fast and loose with its description of the content in the Report. Its a newspaper, so I’m less disappointed in the Times reaction than a few of the things the FTC Statement said about the Report because the latter knows better.
You are being a bit unfair here: the quote you give complains (rightly or wrongly) about the alleged requirement that harm be “disproportionately” larger than benefits; it does not say that no proof of harm should be required. And the complaint can be perfectly reasonable – depending, of course, from the meaning of disproportionately: surely you would not claim that the proven harm to consumers must be a hundred times larger than the potential gains to consumers before intervention is needed.