How Would Federal Antitrust Legislation Impact The Economy?

As Connecting the Dots reported back in April, the Metals Service Center Institute, the U.S. Chamber of Commerce (USCC), and more than a dozen trade associations sent a letter to the U.S. Department of Justice (DOJ) and the Federal Trade Commission (FTC) regarding federal merger reviews. Broadly, the letter argued the federal government should not make mergers too difficult. The letter advised that “any revised guidelines should continue to recognize that most mergers promote competition” and that agencies should update the guidelines — not rewrite them — in an incremental fashion in order to build on their long and successful record of informing the courts, agencies, and business community.

The letter also argued, “Mergers drive capital formation, create efficiencies, reduce costs, and lead to innovative new products and services. They provide acquired companies with critical financing and allow acquiring companies to bring new products to consumers faster, better, and cheaper.”

Now, the USCC is raising warnings about an antitrust bill that could be considered by federal lawmakers this month. The American Innovation and Choice Online Act would give the FTC and DOJ the power to decide who is covered by the antitrust law, what is unlawful, and the penalty for breaking it. Last week, bipartisan sponsors of the legislation urged House and Senate leadership to call floor votes on the bill in June, arguing members of Congress have had months to review the legislation.

The bill could potentially threaten U.S. economic growth by empowering the federal government to micromanage the economy.

Specifically, here are some of the powers the bill offers DOJ and the FTC:

• The power to decide what is and what is not.The bill specifies 10 actions that are deemed unlawful for companies covered by the law to engage in. (These same activities are not unlawful for companies not covered by the bill). The unlawful actions are vaguely defined and are a matter of judgment by the FTC and DOJ.
• The power to decide to whom the law applies and to whom it doesn’t.The bill sets size thresholds, the number of users and revenue or market cap, that a company must exceed to be covered under the act. The actual decision as to whether the law and all of its restrictions apply to an eligible business is made by the FTC and DOJ.
• The power to decide how broadly to apply the law across a captured enterprise. The legislation has very few safeguards to prevent a captured company from having all of its various lines of business subject to enforcement.
• The power to define the penalty for breaking the law.The bill provides that civil penalties for violating the act should be “sufficient to deter violations,” but then leaves the determination of appropriate penalties up to the FTC and DOJ to define. The FTC, for example, could impose a penalty for a violation, on which a company made no money and the consumer was not harmed, equal to 10 percent of the revenue of the entire company.
• The power to break their own rules.The bill requires the FTC and DOJ to issue guidelines outlining policies and practices for the enforcement of the provisions that bar companies from engaging in certain conduct. But then the bill explicitly exempts the FTC and DOJ from having to follow the guidelines, stating that the guidelines do not “confer any rights upon any person…” or “operate to bind the [FTC]…to the approach recommended in the guidelines.”

The bottom line, USCC explains, is the bill would give unprecedented authority to federal bureaucrats to pick winners and losers in the marketplace.