Since Day One, the Biden administration has pursued an aggressive antitrust agenda, wrongly arguing that the concentration of market power is inherently harmful to consumers and the economy at large. This misguided approach will end up hurting small businesses and burden consumers with higher prices.
From social media to grocery stores to airlines to virtual reality to robot vacuums, the Biden antitrust agenda has cast a wide net. A key characteristic of this administration’s approach is its willingness to adopt novel theories of harm and to move away from long-upheld principles.
For example, in 2021, the Federal Trade Commission tossed away the consumer welfare standard, which essentially stipulated that FTC action should prioritize consumer’s general welfare before any other criteria. Despite being a fairly intuitive principle, FTC Chairwoman Lina Khan and other Democratic-leaning commissioners considered the standard “too limiting.”
Ironically, the consequences of this new approach will place a heavier burden on those who the Biden administration claims to defend: small businesses and consumers.
For example, between rules changes and the FTC lawsuit against the Meta-Within acquisition, the Biden administration has sent a message that mergers and acquisitions will face additional antitrust scrutiny in the future. This will ultimately take away a valuable exit option from companies that decide to innovate and endeavor in niche or risky markets. Indeed, after the Meta-Within case, it would not be shocking to see venture capitalists shy away from investing in virtual reality development studios altogether because an acquisition by a bigger company would likely face antitrust scrutiny.
The Biden administration’s antitrust agenda has also affected more traditional and established markets. The Department of Justice’s move to block the Spirit and JetBlue merger, for example, threatens to upend the travel industry. Spirit Airlines was seeking this merger to address its debt troubles, and the fallout could lower the supply of low-cost flight alternatives, as all of Spirit’s flight capacity would disappear. And, as anyone who has taken an Econ 101 course knows, a sudden drop in supply with a static demand would inevitably lead to a sharp increase in prices.
Antitrust regulators have justified their hostility to mergers and acquisitions with the myth of the “kill zone,” where big companies acquire rivals to maintain their dominant position, particularly in tech. However, this approach often ignores how mergers and acquisitions serve as a valuable lifeline for small businesses and a core driver of innovation in the economy. Such as in Spirit’s or iRobot’s cases, mergers and acquisitions can help companies offload significant debts, provide them with cheaper access to capital needed to scale up production, or consolidate resources to provide higher quality items.
For other small businesses, mergers allow them to operate in a more long-term perspective, as they are no longer constrained by the pressures of turning a short-term profit. It also incentivizes higher capitalization through venture capitalist funds, which are more willing to fund risky enterprises when they can cash out on short-term success by selling to larger companies.
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These are but a handful of examples of how the Biden administration’s antitrust agenda will ultimately harm consumers and small businesses. While some of the agenda’s shortcomings could be easily remedied by an administration or personnel change, some of these enacted policies could leave structural damage with long-term consequences. For example, the dismissal of the consumer welfare standard is likely to reshape antitrust enforcement for years to come.
Reining in the whims of unchecked bureaucrats should be a priority for the next Congress. Codifying the consumer welfare standard into law would be a welcomed first step to repairing the damage done.
Juan Londoño is a senior policy analyst at the Taxpayers Protection Alliance.