A New Era of Trustbusters

President Joseph Biden laid out a plan which could alter the map of America’s business world and potentially define his legacy.

Labeled by the White House as an effort to “promote competition” and by opponents as an attack on big business, the sprawling executive order hits many points including policies designed to lower prices on prescription drugs, make it easier for employees to change jobs and enter industries, help small farmers, and most notably, provide direction for more aggressive enforcement of antitrust laws.

The order is a shot across the bow for tech giants Google, Amazon, and Twitter, whose industry dominance has been under scrutiny, but have yet to face any significant consequences.

Noting the trustbusting legacy of Presidents Theodore Roosevelt and Franklin Roosevelt, President Biden touted his plan as the modern-day chapter in their work.

“I’m a proud capitalist. … Capitalism without competition isn’t capitalism; it’s exploitation. Without healthy competition, big players can change and charge whatever they want and treat you however they want,” he said at the order’s signing.

Opinions of politicians, economists, legal experts, and business leaders differ widely as to what effects the order will have. As most of the order’s 72 points are guidance to government agencies (not all of which are under White House control), questions remain on what will translate into action — a question further complicated by shifting political plates on big business on both sides of the aisle.

Give the People What They Want

Many of President Biden’s plans will likely meet with broad popular approval.

The two most significant steps the present order takes on the issue are a direction for the Health and Human Services Administration (HHS) to support generic and other substitutes for “brand-name” prescription medicines and another that tells the FDA to take steps to allow importation of more drugs from Canada.

Another health-care feature lifts a ban on inexpensive hearing aids to be sold over the counter.

The order asks the Federal Trade Commission (FTC) to “ban or limit” non-compete clauses which were originally designed to protect trade secrets, but have been used to keep employees from getting higher pay by going to competitors. It also encourages the agency to review barriers to employment posed by licensing requirements for many fields that have long been seen by members of both parties as unfair impediments for job seekers.

“This executive order recognized that government sometimes is the problem,” said Daniel Crane, a professor at the University of Michigan Law School and an expert in antitrust law and government regulations. “If government can minimize its own interference and realize that it’s not just the private sector that’s the problem, it’s the whole ecosystem of government and business, that could be helpful.”

Menachem Lubinsky, whose marketing firm Lubicom advises many small and midsized companies, mostly rooted in the Orthodox community, cheered new regulations aimed at opening up competition and lower prices for broadband service saying that alone would help many entrepreneurs.

He said that more scrutiny on mergers and protections for smaller banks that might more easily give small business loans would give entrepreneurs a leg up.

“It opens up the market a little bit and helps small companies compete against the big boys,” he said. “If you are looking from the perspective of small to midsize businesses, most of what’s in here is good for them and if the White House is looking to boost small businesses, that might end up with some of them getting priority for government contracts.”

Big Tech in the Crosshairs

Far thornier will be the administration’s goal to take on big tech.

The order directs agencies to scrutinize mergers and acquisitions by internet giants. It also urges the FTC to regulate big tech’s use of data gathering and to create rules that protect small businesses from their grasp.

The road toward bringing the administration’s hopes to fruition will be bumpy. The first impediment is the FTC itself, whose board is bipartisan and not under the President’s direction. Many observers are skeptical of whether its five members will agree on implementing a plan that would move the needle on big tech’s dominance.

Whatever actions the administration takes are sure to be fought by tech giants and the Department of Justice (DOJ) and courts will play a pivotal role in the administration’s effort. In the last months of the Trump administration, the DOJ sued Google for monopolist conduct. The FTC also brought suit against Facebook, but the case was dismissed in June.

“I’m quite skeptical that there’s much Biden can do by executive order on big tech,” said Professor Crane. “The executive basically acts like a prosecutor, but the courts will be the ones to decide.”

Tech giants have pushed back against accusations, saying their position is a result of providing the best product. Professor Crane said that given the level of public reliance on those companies, the administration and Congress might be slow to take bold actions that would break them up.

“It’s a big risk politically,” he said. “Its fine to make noise about market dominance, but if you go and make it impossible for Google to operate its search engine you will anger a lot of voters.”

The Enemy of My Enemy

Another potential impediment to President Biden’s goals is that his reach will be limited without action from Congress. Getting buy-in is likely to be challenging, but the battle lines are rapidly shifting.

Trustbusting was long a cause célèbre for Democrats, with Republicans acting as guardians of the free market to organically determine what is best for consumers.

To a significant degree these attitudes remain, as Senator Bernie Sanders is one of the leading champions to break up big tech and Senator Amy Klobuchar is the author of a recent sweeping anti-monopoly bill.

Yet, as big tech poured millions into Democratic campaigns and used its power to tilt news narratives leftward, many Democrats have shied away from pursuing them with the vigor their ideological predecessors showed in the past.

What could signal an even deeper ideological shift, however, is conservatives embracing the call to break up big tech. Complaints about tech companies’ unfair treatment of right-leaning voices were growing for some time, but following the Capitol Riots when Twitter unilaterally banned then-President Trump from its channels and Apple shut down Parler, a right-wing platform, more Republicans called for action against Silicon Valley.

In recent months, a bipartisan group of Congressmen advanced six separate pieces of new antitrust legislation. In April, Senator Josh Hawley introduced his “Bust up Big Tech Act,” which would go further than any Democratic proposal in aggressively limiting the ability of large internet companies to dominate their fields.

Josh Hammer, a syndicated opinion columnist and research fellow at the Edmund Burke Foundation, said it was time for the party to reconsider its positions.

“Republicans have to get over their decades-old resistance to so much as considering antitrust enforcement against all but the truly most egregious actors,” he said. “Antitrust was initially developed as a Republican-led policy initiative and the current rise of woke Big Tech oligarchs who control the means by which modern Americans access the public square directly mirrors the rise of the late 19th-century robber barons.”

While some of the President’s and Republicans’ objectives sound ostensibly similar, conservatives like Sen. Hawley are focused on cutting down big tech’s censorship, not a major concern for Democrats.

“It’s an interesting moment; there’s a sentiment against big tech coming from the right and the left wing,” said Professor Crane. “Although they have a common enemy, the reasons are different; the Republican side has to do with the bias against conservative viewpoints, it’s less of a traditional antitrust approach and has more to do with the way these companies have exercised their power. The left’s issues are more structural. It will be interesting to see if they can get together on something. I don’t think they’ll pass radical legislation, but it’s likely we’ll see antitrust organizations getting significant increases in their budgets.”

New Age Trustbusters

At the heart of President Biden’s efforts is a plan to reframe the nation’s antitrust mindset.

During the “Progressive era” of the late 19th and early 20th century, and again during the New Deal, America pursued policies aimed at breaking up monopolies in industries like railroads and steel production. In the postwar era, trustbusting zeal waned, but leftover legal theories and regulations still governed many areas of the economy.

During the 1970s, high inflation and two recessions prompted a reevaluation of government’s economic role and Congress passed several measures rolling back regulations. Several key laws passed with bipartisan support (including from then-Senator Biden) including deregulation of airlines, railroads, and trucking.

The deregulation movement was broadened during the Reagan years. With this trend came increasing judicial embrace of a method of the “Consumer Welfare” standard of antitrust law. Associated largely with the late Judge Robert Bork, this method measures consolidation’s legality by whether effects on consumers will be lower quality goods or higher prices. If not, the move is viewed as positive as economies of scale can drive prices down.

In recent years, a new school of antitrust thought emerged arguing that consumer welfare is too narrow to prevent other negative outcomes such as barriers to entry and conditions for workers. This new school, dubbed neo-Brandeisians, after antitrust legal crusader Justice Louis Demitz Brandeis, argues that assessing a merger’s effects on competition should play a larger role. Their approach has gained a great deal of traction in progressive economic circles associated with Senators Bernie Sanders and Elizabeth Warren.

President Biden was not shy about embracing the new school in his remarks about the executive order.

“We’ve lost the fundamental American idea that true capitalism depends on fair and open competition. Forty years ago, we chose the wrong path, in my view, following the misguided philosophy of people like Robert Bork, and pulled back on enforcing laws to promote competition,” he said. “I believe the experiment failed. We have to get back to an economy that grows from the bottom up and the middle out.”

The administration made three key appointments to champion this cause. Tim Wu, who now serves as special assistant to the president for technology and competition policy in the White House National Economic Council, Lina Khan, chairwoman of the Federal Trade Commission, and Jonathan Kanter, head of the DOJ’s antitrust office, are all proud neo-Brandeisians with stated goals of breaking up tech giants.

“The progressive Brandeisian wing has won out in the Democratic Party, but the question is will they be successful in shifting the way antitrust law operates,” said Professor Crane. “The administration can’t make these changes on its own, they mainly have to come from the courts … [and] I think that there you will see a lot of resistance; courts are not going to stop on a dime and throw out the doctrine they’ve used for 30 years.”

A New Generation of Bull-Moose Republicans?

While most Republicans argue that the neo-Brandeisian model will lead to higher prices and shrink the economy, some conservatives are re-evaluating their relationship to big business. While corporate America was once a bastion of the GOP, even beyond big tech, Coca Cola, Delta airlines and many others have lined up squarely against the party’s message and goals, swearing off political donations to its candidates.

Combined with growing support from rural America and the anti-globalism of the populist wing, Republican fiscal policy could shuffle.

“Whatever merit a partnership between the GOP and Big Business may have once had is now gone,” said Mr. Hammer. “Big Business has clearly and obviously gone fully woke, and it is time for Republicans to pay attention and respond accordingly.”

Even conservatives advocating for a shift on big business have not embraced the neo-Brandeisian vision and are weary of its effects on the market and consumers.

Republican Senators Mike Lee and Senator Charles Grassley proposed their own roadmap for a new era of conservative antitrust policy, raising the bar of the consumer welfare standard and giving agencies more leeway and tools to break up harmful monopolies.

“We need a holistic approach that deals with all of these concerns, and that benefits all consumers, in every industry — without massively increasing regulation and imposing a command-and-control grip over the economy,” said Senator Lee in a statement about his bill.

Is the Sky Falling?

The President and neo-Brandeisians argue that radical change is needed, evidenced by what they see as unreasonable barriers to entry for small businesses and too much power over the market in the hands of a few actors.

A White House fact sheet blames consolidation for driving down wages as much as 17% and for a 50% drop in the formation of new businesses since 1970.

Professor Crane said that the question of whether the barriers small companies face warrant major change is “very much contested.”

“There’s no question that some markets have become more concentrated, but whether it’s a broad problem is a different question,” he said. “There are a lot of differences between industries, antitrust did not do a good job on airlines, but by any measure the car industry is more competitive than 20-30 years ago. If you look at a market like craft beer, it’s become much more competitive.”

One of the executive order’s points addresses how large internet providers and companies like Amazon study the sales data of smaller competitors and then use the information to out-maneuver them — one of several similar practices the administration aims to clamp down on.

Mr. Lubinsky said that from the perspective of his clientele whose entrepreneurial endeavors are largely untethered from large corporations, he saw the executive order as a net gain, but was pessimistic that the competition they face from Amazon could be altered.

“To the extent that this opens doors for little guys to compete with Amazon, it’s a good move, but given their scope, I can’t see anything that would really put Amazon in a weaker position,” he said.

Considering the growing consensus for more scrutiny on monopolies, Professor Crane was confident that approaches would shift, but warned that they would not stick if taken in too radical of a direction.

“There’s always been an ambivalent relationship in the public mind between enjoying the benefits of economies of scale and being afraid of consolidated power,” he said. “This is not the first time we’ve had a moment like this where we saw a shift in a new direction, but if it’s overplayed, it will shift back very quickly.”