March 17, 2022
Interest in the competitiveness of American markets has rarely, if ever, been higher. Both houses of Congress have proposed bills that would implement sweeping changes to the antitrust laws that exist to maintain and protect competition. These bills include the Competition and Antitrust Law Enforcement Reform Act, the American Innovation and Choice Online Act, the Platform Competition and Opportunity Act, and others. In general, these bills are designed to increase the scrutiny of mergers and other types of competitive conduct, such as by altering the burdens of proof borne by plaintiffs and defendants in litigation.
We strongly agree with these bills’ supporters that competition is important and worth protecting. However, we are deeply concerned that in their zeal for vigorous antitrust enforcement, these bills could do more to harm than help American consumers and workers.
Although there is a need to ensure that a merger does not pose an anticompetitive threat, most mergers represent an opportunity to transfer assets to the person or persons best able to create value with them. In so doing, mergers provide an important exit strategy that may incentivize entrepreneurs and investors to create new firms and to develop new technologies. A consequence of these bills would be to impose significant barriers to merging, which would, in effect, constitute a barrier to entry, thereby limiting the creation of new products and jobs. The evidence that the present antitrust regime leads to underenforcement does not come close to establishing that such potentially significant costs to consumers and workers are worth bearing.
Furthermore, there may be other unintended consequences of these bills that also risk harming consumers and workers: Many types of normal, aggressive competition, which accrue to the benefit of consumers, may expose firms to litigation risk if rivals complain about being outcompeted. Rather than risk antitrust scrutiny by aggressively seeking to win new customers, competing firms may instead accommodate each other’s presence and charge higher prices. Far from leading to more competition, then, these bills run the risk of softening competition to the detriment of consumers.
Overall, the evidence points strongly to the possibility that these bills represent a cure worse than the disease. The history of the US antitrust agencies shows that they can, and do, investigate and challenge precisely the types of conduct animating the underlying concerns about anticompetitive mergers and other business activity. Given this history, it is unclear what benefits can be expected that would offset the potentially very large costs of abandoning a system the evidence shows is working.