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Theodore Roosevelt’s reputation is as a crusading “trust buster”, standing up to business and battling corporate concentration in the early years of the 20th century.
The US president was also a frustrated regulator, who argued that “a succession of lawsuits is hopeless from the standpoint of working out a permanently satisfactory solution” to the issues raised by excessive market power. “What we should have is a much stricter government supervision of these great companies.”
Today’s economies on either side of the Atlantic seem to need both, as might the antitrust enforcers who are struggling to make good on promises of a tougher approach.
The Federal Trade Commission last week suffered a high-profile defeat, when a judge ruled against its attempts to block Microsoft’s $75bn deal to buy games maker Activision. That, as its chair Lina Khan was reminded by a congressional committee, makes the agency zero for four in court under the current administration.
The decision left the UK competition watchdog, whose decisions face only limited judicial review, hanging as the only body globally to have blocked the deal: it took the unprecedented (and slightly baffling) step of agreeing that Microsoft could submit a restructured deal to try to address concerns.
This is a blow to those, like Khan and Department of Justice antitrust chief Jonathan Kanter, who want a reset of antitrust thinking after decades of lax enforcement. Economies in the US and Europe have become more concentrated across a wide range of industries. Globalisation or digitisation may have favoured larger firms. But since 2000, argue academics at New York University, increasing US concentration has looked inefficient, entrenching leaders, increasing barriers to entry and translating into lower investment and growth.
The agencies may have to continue taking their lumps in court. An imminent update to US merger guidelines could improve the policy backdrop. But thus far, the US courts have resolutely failed to embrace the concerns around vertical deals, where a company buys a supplier, shared by antitrust divisions in the US, UK and Europe.
The Microsoft judgment noted a “dearth of modern judicial precedent on vertical mergers”. This is particularly true of dynamic or potential threats to competition in fast-moving sectors, or where dominance in one market can spillover into an adjacent one, as has been seen in the tech sector.
It’s not that the guard dogs for competitive markets are without victories. Vertical deals, such as Lockheed Martin’s purchase of Aerojet, have been pulled in the face of opposition. But success in court (or legislative change) is still needed for the lasting shift in approach that Khan and others seek.
There should also be more focus on policing poor corporate behaviour — particularly in the tech world where the growth of the biggest companies has defied conventional antitrust thinking.
“I believe there is scope to be much more aggressive through the FTC’s consumer powers,” says William Kovacic, an academic and former FTC chair. “There will be a closer look at other policymaking tools that can achieve some of the same ends and where the FTC has more room for manoeuvre.”
This isn’t straightforward. A congressional push for new tech rules failed. The FTC’s existing rulemaking powers could also come up against a sceptical judiciary.
The agencies are being creative in dusting off old legislation, such as the 1936 Robinson-Patman Act on price discrimination in supply chains or a 1975 act on consumers’ rights, and in resurrecting dormant tools. The FTC has used its consumer powers on so-called dark patterns, or online practices that persuade consumers to do things to benefit the business.
A shift is more evident in Europe. The consumer powers of the UK Competition and Markets Authority are being strengthened. Britain’s digital markets unit (and the Digital Markets Act in Europe) will put watchdogs squarely into the role of regulator for Big Tech — a position that antitrust bodies, culturally law enforcers, have historically resisted.
“The inherent economics of digital platforms tend towards very few players being successful,” said one US antitrust practitioner. “As a pragmatist, I’d anticipate that you will need a lot of regulation because pure antitrust will not deliver robust competition.”
Tackling the trusts may require a bigger toolkit than ever.