Sorry, Government Antitrust ‘Enforcers’ Are Gaslighting You
Product brand names can become verbs: to Google something is to search on the internet, to FedEx something is to send it quickly. While products often become verbs, it is rare for a film to become a verb. The term “to gaslight” became a verb after George Kukor’s 1944 film Gaslight, in which a husband drives his wife mad and makes her question reality by dimming the gaslight in their house.
According to Wikipedia, gaslighting involves, “Using denial, misdirection, contradiction… Instances may range from the denial by an abuser that previous abusive incidents ever occurred to the staging of bizarre events by the abuser with the intention of disorientating the victim.”
Today, the Federal Trade Commission and Department of Justice are involved in the gaslighting of the American public when it comes to antitrust and the fight against monopolies.
On the one hand, regulators give speeches proclaiming their zeal in promoting competition, yet they have been aiding monopolists, undermining workers and sabotaging any efforts at reform.
It should be little surprise that this is the case. The revolving door in Washington means that almost all the top jobs in Washington at the FTC and DOJ are filled with people who have previously represented tech industry monopolists and will return to representing them after their stints in government.
Joe Simons, the Chairman of the FTC, has long represented monopolies and has already taken a few trips through the revolving door. He has previously represented Microsoft and Mastercard.
Makan Delrahim heads the DOJ’s antitrust division, but before that, he was one of Google’s lobbyists on the DoubleClick acquisition in 2007, for which he was paid $100,000. He has also represented Apple and Qualcomm. According to the Financial Times, “Lawyers say he is as concerned with over-enforcement as with under-enforcement.” Translated into English: he thinks it is better to do too little than too much when it comes to enforcing the laws.
If you thought that Delrahim and Simons had conflicts, the standout for conflicts of interest is Andrew Smith, the director of the Bureau of Consumer Protection at the FTC. He has a spectacularly long list of over 100 conflicts of interest. Smith has represented most of America’s monopolies, including Facebook, Amazon, American Airlines, Amex, BoA, Equifax, Microsoft, Uber, Verizon, Visa, Disney and Wells Fargo. Smith is in charge of investigating companies that abuse Americans, but it is unclear how he can even do his job with given he has so many conflicts.
Most of the other top appointments at the DOJ and FTC, besides Rohit Chopra are all part of the revolving door crowd.
As Steven Pearlstein wrote in The Washington Post, “the foxes are now in charge of the antitrust chicken coop. Under the guise of spurring innovation and protecting national champions, antitrust enforcement has now become another weapon in the service of corporate giants, political cronies and ideological fellow travelers.”
Delrahim professes publicly to defend competition. He spoke before the House antitrust caucus and said, “I view my position as the Assistant Attorney General for Antitrust as that of a protector of the rights of all American consumers to the fruits of vigorous competition…. I, and all employees of the Antitrust Division, are dedicated to carrying out that mission to the very best of our abilities.”
Yet for every antimonopoly speech, FTC and DOJ officials give many more pro-monopoly ones. Delrahim has argued, “Rather than a failure of antitrust, concentration may be the byproduct of healthy competition as the most innovative and efficient firms grow and attract customers.” (His statement is spectacularly ignorant; never mind that most concentration comes from four decades of mergers and lax antitrust policy by his own agency.)
In a speech in November, he asserted that “market power is a motivating factor for investment in a free-market economy” and disparaged rules to protect competitive markets as akin to “breaking a man’s leg to make him run faster.”
Andrew Finch, the Principal Deputy Assistant Attorney General (up until he went back through the revolving door to a private law firm in August), praised the Supreme Court’s Trinko decision where the judicial activist Justice Scalia argued that the “opportunity to charge monopoly prices—at least for a short period—is what attracts ‘business acumen’ in the first place; it induces risk taking that produces innovation and economic growth.”
In practice, the only way to describe the DOJ and FTC’s role in antitrust is as aggressive do-nothingism. They almost never block mergers or even scrutinize them. In 2018, the FTC and DOJ failed to scrutinize over 90 percent of the 2,111 proposed mergers were big enough to require reporting to the government. Ultimately, it brought only 39 merger enforcement actions. Almost all of these were settlements that are insignificant, minor divestitures and essentially insulate mergers from future breakups.
Despite decades of anticompetitive mergers, the FTC and DOJ almost never reverse past mergers or break up monopolies. There are only three instances of a breakup being used in non-merger cases, with the last being the breakup of AT&T in 1982.
While Delrahim tried to stop the AT&T/Time Warner merger, that is the exception. He has actively encouraged consolidation. As the New York Times recently revealed, Delrahim was assisting the consolidation of the U.S. telecoms landscape by helping the Sprint merger with T-Mobile. While it is not unusual for companies to speak to regulators in order to get approval for a merger, but it is unheard of for regulators to act as investment bankers and work to make deals happen.
According to the Times, “As the $26 billion blockbuster merger between T-Mobile and Sprint teetered this summer, Makan Delrahim…labored to rescue it behind the scenes, according to text messages revealed this week in a lawsuit to block the deal.” Mr. Delrahim introduced company executives to key people at the Federal Communications Commission and members of Congress and helped the executives navigate the political landscape.
In the end, the DOJ approved the deal. Today, 18 state attorneys general are suing to stop it. They fear the merger would hurt competition, raise prices, and lead to job losses and lower wages in a highly oligopolistic industry.
On the public speaking circuit, Simons and Delrahim often say the right things. They even give the appearance of listening to critics. In the face of mounting criticism and a slew of books on the rising problem of monopolies, the FTC been hosting a series of panels on antitrust with an eye on reform.
One of the key panels was on the monopsony problem. (In a monopoly, there is only one seller of goods, for example your local cable company. In a monopsony, there is only one buyer, for example, the local hospital as the only employer of doctors in a town with only one hospital.)
At the panel on monopsony, FTC Chairman Joe Simons said, “The FTC has always been committed to self-examination and critical thinking, to ensure that our enforcement and policy efforts keep pace with changes in the economy.”
The focus on workers was echoed by Doha Mekki, Counsel to Delrahim. She testified to Congress that when analyzing mergers, the DOJ will require parties to document any harm to workers. Likewise, Bruce Hoffman, Director of the FTC Bureau of Competition, testified to Congress last year that he had instructed FTC staff to examine the labor-market effects of all proposed mergers.
The panels, however, were packed in favor of pro-monopsonists and the conflicts were not disclosed. For example, Robert Topel, an economics professor at the University of Chicago, didn’t disclose his work with Charles River Associates, which represents monopolists, nor his testimony as an expert for Ultimate Fighting Championship. The UFC is being sued for acquiring monopoly and monopsony power over fighters and using its power to slash their payouts of fight revenue.
In practice, the DOJ is aggressively helping monopolists and monopsonists.
The DOJ’s Antitrust Division has ramped up its private litigation amicus brief program, to the dismay of antitrust reformers. It is intervening in cases it is not a party to in an aggressive, under-the-radar effort to revise antitrust law. In 2018 alone, the Antitrust Division filed 10 amicus briefs. Under the Obama Administration, the DOJ’s Antitrust Division filed only 25 in total over eight years, while under George W. Bush, the DOJ filed 47 briefs in its eight years.
The interventions are almost always against workers and in favor of monopolists. The DOJ has opposed ending no-poach agreements in the fast food industry. It filed an amicus brief in support of Uber and against the city of Seattle’s law giving collective bargaining rights to independent drivers.
The DOJ has intervened against writers’ union in Hollywood and in favor of their agencies. The government’s court filing argued that in directing its members to boycott the agencies, the guild had violated federal labor law. Such an argument, if adopted by the courts, would undermine the power of many other unions that are exempt from antitrust law. Meanwhile, the FTC has been aggressively pursuing cartels of ice skating instructors, organists, and music teachers.
The DOJ has even intervened against the anti-monopoly case facing Qualcomm and in favor of Apple when it was sued by app developers; coincidentally both companies were former Delrahim clients. Astonishingly, the Qualcomm filing was a brief that openly questioned the merits of the FTC case and stated that Qualcomm would succeed on appeal. It shouldn’t be a surprise. Delrahim was a registered lobbyist for Qualcomm from 2014 to 2016. He recently signed another Justice Department brief siding with Qualcomm on a related private case before the same federal judge.
The DOJ has also been busy asking federal courts to end older consent decrees. There are over 1,300 consent decrees outstanding barring companies from anti-competitive conduct after they have merged or following antitrust investigations. The DOJ is seeking to roll most of them back.
The DoJ’s argument is that many consent decrees are outdated. While some may be, for many they prevent monopolization. For example, it has sought to end the decades old decree that prevented big Hollywood studios from owning movie theaters. They were prohibited from forcing theaters to set minimum ticket prices or to take blocks of movies rather than pick the ones they wanted. The DOJ is essentially encouraging the recreation of the old Hollywood system that was vertically integrated oligopoly before the days of independent movies.
Given how often the DOJ and FTC have gone to bat for monopolists and against the little competitor and workers, any claims that they are fighting for competition or against monopolists is nothing more than gaslighting the public.
The situation is so extreme that Representative David Ciciline wrote a letter calling out the DOJ in unusually harsh language. He demanded answers to questions examining the DOJ’s antitrust enforcement record and how many attorney hours have been spent filing amicus briefs in cases supporting monopolists.
Representative Ciciline’s words are scathing and sadly accurate, “Not only has the Antitrust Division stonewalled congressional oversight, but now it’s beginning to look more like an industry funded think tank than our nation’s premier antitrust enforcer.”
Jonathan Tepper is a founder of Variant Perception, a macroeconomic research company, and co-author of The Myth of Capitalism: Monopolies and the Death of Competition. This article was supported by the Ewing Marion Kauffman Foundation. The contents of this publication are solely the responsibility of the authors.