Tim Wu, a Columbia law professor who just became one of US president Joe Biden’s top antitrust advisors, thinks it’s time to crack down on the Big Tech. In his view, nothing less than the fate of democracy is at stake.
“The road to fascism and dictatorship is paved with failures of economic policy to serve the needs of the general public,” Wu wrote in The Curse of Bigness, a short book released in 2018 laying out his antitrust argument. Rather than focus on consumer welfare (read: low prices) as decades of monopoly theory has insisted, Wu argues that regulators should think more broadly about creating an economy that allows mom and pop shops and democratic government to thrive.
Wu’s philosophy is part of an ascendent school of antitrust theory originating in the writings of former Supreme Court justice Louis Brandeis, who saw anti-monopoly protections as a crucial check on the power of private industry during the early 20th-century. “The broad tenor of antitrust enforcement should be animated by a concern that too much concentrated economic power will translate into too much political power,” Wu writes, “and thereby threaten the Constitutional structure.”
Wu advocates breaking up Big Tech firms like Facebook, creating stricter merger review rules, and unleashing enforcement agencies to launch a slew of investigations and lawsuits that will dissuade dominant companies from bullying competitors. Taken together, his prescriptions amount to nothing less than a fundamental overhaul of contemporary American antitrust doctrine. His appointment to the National Economic Council, which has been cheered by progressives and booed by the tech industry, is an early signal that the Biden administration plans to get tough on tech.
The new school of antitrust targets Big Tech
Wu is part of a broader movement rethinking the US approach to antitrust enforcement. The group — sometimes referred to as the Columbia School, transformationalists, or the rather unwieldy “Neo-Brandeisians”—also includes Lina Khan, another Columbia law professor who earned much academic and media attention for her paper on “Amazon’s Antitrust Paradox” (and is a possible front-runner for Biden’s nomination to a seat on the Federal Trade Commission (FTC)).
The school’s main argument is that antitrust enforcement should be about more than keeping prices low for consumers; it should also be concerned with the fate of small businesses, how workers are treated, and how much influence big companies have on politics. That’s a sharp break from the reigning orthodoxy among antitrust lawyers and economists. Starting in the late 1970s, antitrust doctrine has shifted toward a focus on maximizing “consumer welfare,” usually low prices, as well as things like product quality and innovation.
The Neo-Brandeisians’ thinking has defined the economic agenda of progressive antitrust crusaders from Massachusetts senator Elizabeth Warren, who based her presidential run on calls to break up Big Tech companies, to Minnesota senator Amy Klobuchar, who recently proposed a bill to give federal regulators stricter oversight of mergers. A recent landmark report from the House of Representatives, co-authored by Khan, put congressional backing behind many of the Neo-Brandeisians’ preferred policies.
“The debate about the future of antitrust policy and competition policy in the United States has changed dramatically as a consequence of their field of work,” said former FTC commissioner and George Washington University law professor Bill Kovacic. “It’s an extraordinary example of a public policy advocacy campaign carried on many levels with great success.”
Even critics, such as University of Michigan law professor Daniel Crane, acknowledge the impact of the movement. “A small cadre of committed scholars and activists have succeeded in fundamentally changing the terms of the antitrust debate in a very short period of time,” Crane wrote in a critique of the Neo-Brandeisian movement. “It remains to be seen, of course, whether they will be able to move from a seat at the table to regime change.”
Wu’s main antitrust proposals
In The Curse of Bigness, Wu lays out three major prescriptions for reforming antitrust enforcement, which he’ll soon be in a position to advocate for from his seat on the National Economic Council (NEC).
Overhauling merger review. Wu critiques the current application of the consumer welfare standard, which tends to hinge on highly technical economic models that attempt to determine how consumer prices may change as the result of a merger. (He bemoans the federal government’s recent challenge of a merger between AT&T and Time Warner, which turned into a protracted argument about whether or not the deal would raise the price of a TV subscription by 45 cents.)
Wu instead calls for deemphasizing complex microeconomic models in favor of simpler rules, like a ban on mergers that would drop the number of companies in a field below four. He supports new laws that would set stricter rules for mergers worth more than $6 billion. He also argues in favor of increasing transparency in the judicial merger review process, and offering more opportunity for public comment.
More big cases. Wu argues the Justice Department and the FTC should be encouraged to launch more hulking, multi-year lawsuits, like the 2000s Microsoft case and the investigation that ended in AT&T’s breakup in 1984. He believes regulators should stop settling for consent decrees, in which businesses agree to change their behavior under federal oversight, and instead go for full-on breakups.
A new form of investigation. Wu thinks the US should follow the UK’s example of using market investigations, which allow regulators to scrutinize an entire sector that appears to be harming consumers through concentration. Wu defines these as markets that have been dominated by a small number of firms for more than a decade and show no signs of being disrupted by a competitor. “The market investigation,” he writes, “would serve as a particularly effective tool for stagnant and longstanding but not particularly abusive or aggressive monopolies or duopolies.”
Some of these proposals would represent a return to an earlier era of American trustbusting, while others would expand federal oversight further than it ever stretched in the past. Wu’s appointment to the NEC grants him real power to agitate for his preferred policies at the highest levels of the executive branch.
That has tech companies sweating. As Carl Szabo, vice president of the tech industry group NetChoice told Protocol’s Emily Birnbaum: “It should not be hand-waved away,” he said. “This could be dangerous.”