NRPLUS MEMBER ARTICLE {O} n August 3, a judge dismissed a lawsuit challenging Kroger’s acquisition of Albertsons, its rival supermarket chain. The dismissal should be a non-event. The Supreme Court’s 2007 decision in Bell Atlantic Corp. v. Twombly mandated private plaintiffs present plausible evidence of antitrust harm before proceeding with litigation. The Kroger-Albertsons case was a lawsuit without much proof or a convincing theory of harm, so it was tossed out.

That’s something to celebrate. In creating a higher standard to bring these cases, the Court highlighted the complicated nature of competition enforcement and recognized the perverse incentive to use antitrust law to disadvantage one’s competitors. This lesson is one that should be squarely at the center of any attempt to reform antitrust regulation and enforcement.

Today, the Twombly standard, along with the entire foundation of American antitrust law, is under review. Drastically expanding antitrust liability and removing standards of proof such as those established in Twombly were at the core of the recommendations made in a 2020 400-page report from the House Subcommittee on Antitrust during the time when the House was controlled by the Democrats.

However, the Republicans are not without blame. The document highlights that Senate Republicans such as Josh Hawley have introduced congruent legislation, and committee members from both sides endorsed probes into companies such as Amazon and Google.

The report, written with the assistance of future FTC chairwoman Lina Khan, serves as a playbook for current antitrust actions at the FTC. A year later in 2021, then-ranking member Jim Jordan outlined an agenda to accelerate antitrust cases against Big Tech. The Department of Justice’s current lawsuit against Google was foreshadowed in that report, along with Senator Amy Klobuchar’s 2021 bill targeting “Abuse of Dominance” and the Biden administration’s new draft merger guidelines.

The report’s authors expressed skepticism that antitrust should be predicated on consumer welfare; in fact, the term is never mentioned in the body of the report. Instead, according to the report’s recommendations mergers concerning “a dominant platform would be presumed anticompetitive.” 

Despite these reformers’ goals, they neglect to consider that private antitrust plaintiffs are also actors just as profit-hungry as the alleged monopolies they are challenging. Even federal enforcers are motivated by personal agendas and ambitions, and are often supported by private actors. To protect consumers, reformers must be cautious of private litigants who leverage antitrust laws to hinder their competitors without having to create value themselves.

Plaintiffs Are Greedy Too

The bulk of current antitrust attention is focused on the potential for large firms dominant in a particular market to harm consumer welfare by using unsavory tactics to suppress competition without creating superior products or decreasing prices. While some antitrust lawsuits seek to remedy legitimate injustices, others seek to impose legal costs and obtain artificial advantages over rivals without any benefit for consumers.

Fred McChesney, a professor at Northwestern’s law and business schools, notes that for every antitrust action brought by the government, ten are brought by private plaintiffs. McChesney highlights research about how the two largest groups of litigants are firms in vertical contractual arrangements with the defendant and direct competitors. Those in vertical arrangements typically try to convert their contract disputes into antitrust lawsuits which allow plaintiffs to extract triple the monetary damages.

Lawsuits brought by direct competitors are, by definition, designed to attack their competition. The recent case against the Microsoft-Activision merger may be a good example of private competitors leveraging antitrust to halt a rival from gaining a competitive advantage.

Although the FTC was a party in this matter, one of the primary private opponents of the merger was one of Microsoft’s competitors in the gaming-console industry. Sony argued that Microsoft’s merger would allow the company to make Activision’s popular Call of Duty franchise exclusive to the Xbox, a rival to Sony’s PlayStation. However, the evidence demonstrated that Microsoft did not intend to constrain Call of Duty to Xbox. Rather, Microsoft had the resources and incentives to improve the franchise and expand access, not use it as a tool to trap gamers on the Xbox platform.

Companies far smaller than Sony are willing to use the courtroom to make up for their inability to compete in the open market. This reality led economists William Baumol and Janusz Ordover to suggest in 1985 that, on a net basis, the costs created by “abusive antitrust” outweigh the benefits of pro-competitive cases. Although the data on this matter is imperfect, a study produced by Competition Policy International found that from 2002 to 2007, antitrust cases had a 73 percent dismissal rate. Following Twombly, that number rose to 78 percent, but pretrial dismissal rates also dropped from 88 percent to 82 percent, demonstrating that heightened burdens of proof are not necessarily preventing meritorious cases from being heard.

Although some antitrust lawsuits can bring a useful check on the excesses of dominant corporations, others merely serve to benefit their rivals at consumers’ expense: higher prices and lower-quality products. Our understanding of economics has dramatically improved since the early- to mid-20th-century presumption that “big is bad,” and our antitrust policy should continue to reflect that rather than revert to the prejudices of the past. The focus for reform should not be more antitrust, but on better antitrust that promotes efficiency and benefits consumers.