Winter is coming.
That’s the brutal message delivered on Friday – after an abysmal jobs report and the NASDAQ 100 plunging into correction territory. Maybe these chill winds are a warning and not an actual harbinger of an imminent recession. But one has to take note when Warren Buffett sells off his favorites to pile up mountains of cash.
In such a precarious time, the Biden-Harris Administration is doubling down on its progressive antitrust campaign against the most successful American businesses. On Thursday, Federal Trade Commission Chair Lina Khan promised an investigation into why food items at large grocery chains cost 25 percent more than they did four years ago. On the same day, Department of Justice antitrust chief Jonathan Kanter listed actions against virtually every business sector. He is doing this, Kanter said, because he had toured the country to talk to Americans who “were tired of getting squeezed, they were tired of living paycheck to paycheck, they were tired of worrying whether the economy would work for working people.”
That fatigue is real. But who is responsible? The use of antitrust regulators to pin durable high prices on corporate greed overlooks the fact that for decades food prices, to cite one example, increased on average about 2.5 percent a year – a far cry from the 11.4 percent jump in prices in 2022. Did businesses suddenly become greedy, or could rising prices be the result of inflation from an administration that followed up on breakneck pandemic spending with more breakneck spending – now adding $1 trillion to the national debt every 100 days?
Often overlooked is the role of the consumer as the driver of the economy. Americans’ inflation-adjusted earnings have declined in recent years and expenses have soared. The logical response to such an economy by antitrust regulators would be to stick with the consumer welfare standard, by which courts judge business deals based on their impact on consumers in terms of price, supply, choice, and innovation. How are regulators like Kanter and Khan responding to declining consumer confidence and spending sustained by rising personal debt? They are creating a blizzard of antitrust cases seeking to persuade the courts to jettison the consumer welfare standard and harass the nation’s most successful businesses at this exact moment of economic weakness.
To be sure, there are sometimes good reasons to hit dominant firms with antitrust lawsuits. When I worked with my father in the 1990s in support of the government’s antitrust case against Microsoft, action was justified. Microsoft at that time maintained a stranglehold on 95 percent of the operating systems market. Microsoft strongarmed Apple, software developers, and internet access providers to exclude its competitors.
The antitrust actions of today have no such justification. Consider Kanter’s case against Apple for “monopolizing the smartphone market.” Unlike Microsoft, Apple is not remotely a monopoly. It is engaged in daily, cut-throat competition to win the allegiance of consumers for its iPhone against Google (owner of the world’s dominant mobile operating system), Samsung (the global leader in smartphone sales) and others. Its U.S. market share is about 55 percent, well below the level that the Supreme Court defines as a monopoly.
To prevail in a Section 2 case under the Sherman Antitrust Act the government must not only prove that the company has monopoly power – which Apple clearly doesn’t have – but that it also uses that power for anticompetitive conduct to create anticompetitive effects. Remarkably, DOJ does not allege either anticompetitive conduct or effects. Apple’s purported crime is setting terms and conditions on third parties’ access to its platform and technologies. Justice is going after Apple for setting terms that force third-party developers – many of them formidable corporations – to respect Apple’s design decisions that protect the security of its customers and the quality of its product.
In its motion to dismiss, Apple says, “it is simply not a viable theory of antitrust law for the Government to contend that Apple must open its own platform and its own technologies to third parties on the terms and conditions that those parties prefer.” The courts do not require a “duty to deal” that grant advantageous terms to competitors. Yet that seems to be the government’s new theory.
Apple’s elegant designs, industry-leading security, and intuitive operations make it notably popular with consumers. As consumers suffer, the administration is doing all it can to persecute pockets of efficiency and excellence like Apple on the misguided theory that this will somehow redistribute wealth, instead of evaporating it. In many ways, President Biden’s last days in office mirror the strategy of President Xi Jinping of China, whose response to economic malaise in his country is to flagellate the private sector even harder.
Expect these beatings to continue, but don’t expect consumer morale to improve.
