Tim Wu’s The Curse of Bigness is a short and readable book with a compelling message. American antitrust policymakers and judges have let large firms stifle competition. They have done so on the basis of simplistic theories first proposed by right-wing ideologues and then gradually normalized by an intellectually moribund establishment. They have neglected the lessons of history, which teaches that monopolizing firms end up immiserating workers and controlling the politicians and agencies that should be controlling them. The sooner relevant agencies, such as the U.S. Department of Justice and the Federal Trade Commission, restore stronger antitrust law, the faster we can exit our new gilded age and broker a fairer future.
Wu joins a rising tide of public intellectuals now trying to rescue U.S. antitrust from the brink of obsolescence. The field, at present, is locked in a death spiral. Leading antitrust legislation is old and notoriously vague. Once interpreted broadly, antitrust became a victim of its own success once firms began demanding to know exactly when they risked being broken up by regulators.
By the 1960s, University of Chicago academics began providing a simple answer: in most cases, antitrust authorities should intervene only if they can demonstrate a business arrangement would raise prices, reducing “consumer welfare.” If a massive firm raises prices or reduces output, its defenders often argue that, since markets are in theory contestable, things will eventually sort themselves out and consumer welfare will rise. Another defense, common in “innovation markets,” is that high prices and profits are necessary to spur research. In other words: heads, the monopolist wins; tails, its challenger loses. There is always a rationale for laissez-faire.
This opportunistic framing helped legions of lawyers convince courts and agencies to raise the standard of proof necessary for government intervention to an almost impossibly high level. Firms now employ a cottage industry of economists to sing the praises of planned mergers and acquisitions (for big paychecks), even as empirical researchers continually document the failure of past corporate tie-ups to reduce prices.
In many industries, the Chicago School revolution in antitrust has been an abject failure on its own terms. For example, consumers have paid more for internet access in the United States than in many other countries with a more competitive—or better regulated—telecommunication landscape. But the real victory of advocates of big business has been setting the terms of the debate. Courts judging antitrust cases fixate on the bottom line, but bigness in business has negative consequences beyond price. Once banks get too large, they are “too big to fail,” and act accordingly, recklessly piling on risk because their counterparties count on a bailout. Concentrated airlines have made flying a miserable experience. And just as nineteenth-century cartoonists marveled at the power of the Copper Trust and the Oil Trust, we have only begun to reckon with the consequences of the Social Trust (Facebook/WhatsApp/Instagram—all controlled by Mark Zuckerberg) and the Search Trust (Google).