Ends, Means, and Antitrust

Ben Thompson on the European Commission’s €2.42 billion fine levied on Google for anti-competitive behavior:

The United States and European Union have, at least since the Reagan Administration, differed on this point: the U.S. is primarily concerned with consumer welfare, and the primary proxy is price. In other words, as long as prices do not increase — or even better, decrease — there is, by definition, no illegal behavior.

The European Commission, on the other hand, is explicitly focused on competition: monopolistic behavior is presumed to be illegal if it restricts competitors which, in the theoretical long run, hurts consumers by restricting innovation.

This is quite obviously true — best exemplified by, as Thompson himself writes, “the absurdity of the U.S. Justice Department successfully suing Apple for building a competitor to Amazon, the actual e-book monopolist.” That decision was entirely about the retail price of e-books.

But on the surface doesn’t this feel backwards? Shouldn’t the U.S. — the country where free-market capitalism is effectively a religion — be the country that values competition above all else? With genuine competition, fair prices should naturally result. Competition is the cause, fair prices are the effect. With a monopolist like Amazon that strategically keeps prices artificially low (Amazon sold bestselling e-books for $9.99 at a loss), not only does competition not follow as a result, the predatory pricing is the cause and lack of competition is the effect.

U.S. antitrust policy is blinded by the assumption that a monopolist’s only goal is to raise prices.

★ Friday, 30 June 2017