Henderson Response to a Particularly Weak NYT Editorial on Antitrust
Is antitrust enforcement good per se, no matter what its effect on consumers? Reading an August 26 New York Times editorial, one could easily conclude that the Times editors think so. Indeed, the content of the editorial is in tension with the editorial’s title. The title is “Americans Pay a Price for Corporate Consolidation.” You might think on that basis that the editors would point out how consolidation of corporations would create market power, causing consumers to pay higher prices. But you would be wrong. The editors explicitly reject the idea of judging mergers by their effects on consumers. There are powerful forces arrayed on their side, specifically the head of the Federal Trade Commission, Lina Kahn, and the head of the Department of Justice’s Antitrust Division, Jonathan Kanter. If Kahn, Kanter, and the Times editors get their way on enforcement of current law, the odds are high that we consumers will be worse off.
This is the opening paragraph of David R. Henderson, “To Antitrust Enforcers, Consumers Are Irrelevant,” Defining Ideas, September 14, 2023.
One of the striking things about the Times editorial is that the editors admit that the more stringent enforcement of antitrust will not help consumers. For example, the editors discuss the DOJ’s and the FTC’s proposed tighter rules for allowing mergers. They start by suggesting that the tighter rules will increase competition, which “keeps pressure on prices.” But then in discussing the looser restrictions that came about early in the Reagan administration and under subsequent administrations, they write:
It wasn’t enough to show a merger would reduce competition; the government generally sought to block deals only when it could show a merger would result in higher prices for consumers or that it would clearly cause some other quantifiable harm—a standard that was rarely met.
Did you catch that? The standard was rarely met. In other words, when companies proposed mergers and the federal government’s antitrust enforcers approved, those measures were not expected to hurt consumers. So much for the Times’s argument, then, that tighter rules on mergers will “keep pressure on prices.” That line makes sense only if the pressure is upward, that is, to keep prices high.
Finally, how to get more competition: allow it:
The Times points out that we are now left with “four major airlines, three major cellphone companies, and two dominant makers of coffins.” Of the three industries mentioned, the one I know best is airlines. The Timespoints out that US airfares are significantly higher than European fares. There’s a reason for that, a reason that immediately suggests a solution. The reason is that the EU allows many more airlines. Cut-rate Ryanair, for example, based in Ireland, flies between London and Sofia, Bulgaria, and charges a fare under $100. The US government should follow suit: allow foreign airlines to compete on domestic routes. If the federal government did so, we could conceivably have six or seven major airlines competing on heavily traveled routes such as San Francisco to New York or Los Angeles to Chicago.
Moreover, although I don’t know much about the coffin industry and hope not to for at least another twenty years, state governments in the past have helped cement the dominant position of the leading coffin producers. Indeed, one of the many victories of the pro-market public interest law firm called the Institute for Justice was in getting rid of the restrictions that prevented a bunch of monks in Louisiana from selling lower-priced coffins. Are the Times editors even aware of that victory for competition?
Read the whole thing.
HT@ Cyril Morong for alerting me to the NYT editorial.