“It is a fundamental tenet of capitalism that consumer welfare is protected and enhanced through free and open competition,” said Christine Varney, assistant attorney general for antitrust at the Department of Justice at CAP’s Monday event, “Antitrust and the New Economy.”
CAP’s Executive Vice President Sarah Wartell introduced Varney and CAP’s Senior Fellow David Balto moderated a follow-up discussion with a panel of experts including: Ed Black, president of the Computers and Communication Industry Association; Bert Foer, president of the American Antitrust Institute; Andrew Pincus, partner at Mayer Brown LLP; Peter Swire, CAP Senior Fellow; and Caroline Holland, chief counsel and staff director to the Antitrust Subcommittee of the Senate Judiciary Committee.
Pursuing sound antitrust enforcement will need to be front and center in the government’s response to the economic crisis. “The lessons learned from history are twofold,” said Varney. “First, there is no adequate substitution for a competitive market during a difficult economic time. Second, vigorous antitrust enforcement must play a significant role in the government’s response to economic downturn.”
The lack of effective antitrust regulation largely contributed to the development of “too big to fail” companies in the banking and finance industries, a system that the current economic crisis has proved severely flawed. “Antitrust enforcement in the financial sector will enable a transition from crisis management to long-term competition,” said Swire. This will facilitate the industry’s move away from the “too big to fail” model and ensure increased consumer protection.
AAG Varney’s first major action was to rescind the Bush administration report on dominant firm conduct. As Varney observed “Despite [the report’s] comprehensive evaluation of the risks and benefits of specific [antitrust] enforcement strategies, I believe the report’s conclusions missed the mark and am hereby withdrawing the report,” announced Varney. The Department of Justice’s decision is part of the Obama administration’s sweeping call for corporate accountability and transparency.
This change of mind couldn’t come at a better time. The dominant “Chicago School” approach to antitrust analysis has been overly cautious about enforcement. The result is a minimalist course that makes mistakes by failing to bring sound enforcement actions. As Balto observed, “by taking certain steps, such as restoring the ability to litigate mergers and reversing the constriction of antitrust laws, the Justice Department can begin to spur economic growth and deter anticompetitive conduct.”
“There’s a new sheriff in town,” said Black. “Companies that have been overly tempted to abuse their market power need to do some self-correcting before they get corrected by the government.” The corporate world will have to do some internal re-evaluation about their current practices and restructure according to the new set of rules.
Several panelists also stressed that innovation, which has been stifled by a lack of enforcement among dominant companies, will always be crucial to economic prosperity and key to escaping economic crisis. “A hard line [however], needs to be drawn between allowing [companies to innovate] and making sure that innovation is not used as a smokescreen for anticompetitive approaches,” said Pincus. Competition breeds innovation and without strong antitrust enforcement both are at risk.
Despite the consensus for more regulation, it will be important to have large-scale public understanding and trust for the Congress and the Justice Department to effectively enforce antitrust laws. This is where education comes in. “The antitrust subcommittee can play a role in educating the public and making sure they know the importance of why these laws impact them on a daily basis, every time they go to the department store,” said Holland. The media will also have a role to play in public education, and “this will be crucial to gain political support,” said Foer.
A central message of the Obama administration is a call for a new era of accountability. Antitrust enforcement will play a central role in this endeavor and protect consumers across America. It all boils down to a simple rule, Varney explained: “When companies compete, we get better products for better prices.”
For more on this event, please see the events page.
Restoring Trust in Antitrust, by David Balto
A Different Approach to Enforcement, by Andrew J. Pincus