“Trust-Busting” Bill Harms Big and Small Businesses Alike

By SBE Council at 14 April, 2021, 6:10 pm

by RAYMOND J. KEATING-

U.S. Senator Josh Hawley (R-MO) doesn't seem to like large businesses and mergers. He also isn't too fond, apparently, of the work economists can do in terms of informing public policy on such matters.

Senator Hawley has just introduced the 'Trust-Busting for the Twenty-First Century Act.' If the title sounds a bit over the top, the details about what the legislation would actually do are far worse.

'Busting Up' U.S. Success, Innovation and Global Leadership

In his announcement introducing this legislation, Senator Hawley served up assorted statements clearly meant more for stirring up emotions, like anger and fear, rather than providing sound reasons for legislative action.

For example, Senator Hawley was sweeping in terms of his contempt for U.S. businesses that have grown from small firms into industry leaders: 'While Big Tech, Big Banks, Big Telecom, and Big Pharma gobbled up more companies and more market share, they gobbled up our freedom and competition. American consumers and workers have paid the price. Woke corporations want to run this country and Washington is happy to let them. It's time to bust up them up and restore competition.'

To top it off, Senator Hawley adds:

'A small group of woke mega-corporations control the products Americans can buy, the information Americans can receive, and the speech Americans can engage in. These monopoly powers control our speech, our economy, our country, and their control has only grown because Washington has aided and abetted their quest for endless power.'

Does any of this have anything to do with business, economic or political realities? The obvious answer is: No.

Market share is only gained by serving consumers well, such as via innovation, increased efficiency, improving quality, lower prices, meeting needs and desires, and creating new demands.

Freedom (including free speech and ever-increasing access to information, goods and services) and competition are thriving. For example, both conservative and liberal voices have more means for being heard now than in the history of mankind.

No businesses in the marketplace rank as traditional monopolies, nor do they wield 'monopoly power.' Instead, no matter what their current size or their history, businesses have to continue to improve and innovate; for if they don't, they will be overtaken by current, emerging and future competitors.

As for mergers and acquisitions, the success, failure, or something in between, will rest upon such matters as improved management, efficiency gains, reduced overhead, synergy, combined and complementary expertise, enhanced abilities to enter new markets, and so on. In the end, mergers ultimately will, and should, be put to the test of competition and consumer decision-making in the marketplace, rather than being subject to political preferences, or bias against mergers and 'bigness' per se.

Leading technology companies - including favorite targets of Senator Hawley and other members of Congress: Apple, Amazon, Facebook and Google - along with large telecommunications businesses have provided lifelines for individuals, families, entrepreneurs and small businesses throughout this pandemic, not to mention expanding opportunities before and after the pandemic.

(Also see SBE Council's Small Business and Government 'Protection' in the Modern Economy, Small Business and 'Big Tech': Friends or Foes? and Small Businesses Empowered, Not Shut Out, by So-Called 'Big Tech.')

Oh yes, and there's the fact that the pharmaceutical industry has invested and worked tirelessly to come up with the vaccines that are now being distributed to put an end to this pandemic.

(Also see SBE Council's No Intellectual Property (IP) Protections, No New Vaccines.)

And while 'big banks' have long been favorite targets of populists, it pays to keep in mind that banks are in the business of providing loans - to customers of businesses of all types and sizes, and to businesses, again, of all types and sizes.

This 'Trust-Busting' Will Not Promote Freedom

As for Senator Hawley's proposed legislation, it is far reaching in scope and impact:

● It would ban all mergers and acquisitions by companies with market capitalization exceeding $100 billion;

● Empower antitrust regulators to overrule consumers in the marketplace with 'a standard emphasizing the protection of competition in the U.S.,' thereby enhancing the power of special interests such as complaints by competitors;

● Empower the Federal Trade Commission (FTC) to designate 'dominant digital firms,' and thereby prohibit those firms from buying out 'potential competitors' and limit their business models; and

● …'drastically increase antitrust penalties by requiring companies that lose federal antitrust suits to forfeit all their profits resulting from monopolistic conduct.'

Also, the Hawley legislation would effectively jettison any notion of 'monopoly' from antitrust, which would vastly expand the power and reach of government. As stated in the bill:

'In any case alleging a violation of this section or section 1 in which a plaintiff establishes by a preponderance of the evidence (including direct evidence) the existence of substantial market power or the anticompetitive or otherwise detrimental effects of particular practices, a plaintiff need neither define the scope of a relevant market nor establish the share of such a market controlled by the defendant.'

Or, in the case of mergers:

'No acquisition shall be presumed not to substantially lessen competition or tend to create a monopoly only because the parties to the acquisition do not compete directly against one another at the time of the acquisition.'

This entire bill is a clear step to oppose big business for the sake of being 'big.' Never mind the actual economics. In his announcement, Senator Hawley doesn't hide the fact that he seeks to replace economics with politics in this entire debate:

'Reform the Sherman and Clayton Acts to make clear that direct evidence of anticompetitive conduct is sufficient to support an antitrust claim, which will allow enforcers to effectively pursue the breakup of dominant firms and prevent antitrust cases from devolving into battles between economists.'

Senator Hawley goes on to cite an example:

'Facebook's complete acquisition of a major competitor, Instagram, should be sufficient to justify antitrust action without needing to bring in specialists to define the 'social networking market.''

Apparently, it's time to get rid of those pesky economists who actually want to discuss and debate the economics of antitrust regulation.

Antitrust Is Regulation (at its most extreme)

The bottom line with this Hawley legislation is that it allows the politics of the moment to trump decisions made by entrepreneurs, businesses and ultimately consumers in the marketplace, not to mention serious economic reasoning as to how markets actually work. For Senator Hawley and others in Congress, the politics of the moment is to attack and regulate large businesses - whether the reasons for such government action reside in a distrust of bigness, a distrust of free enterprise, or disagreements of a political nature.

Indeed, supporters of antitrust action like to say that antitrust is better than regulation. In reality, antitrust action is regulation. And it is regulation at its most extreme, in that it involves government intervening to dictate business models, operations and firm size; deny decisions to merge or acquire other businesses; and even break up companies.

When one considers that large businesses were once small enterprises, that these large businesses provide goods and services to small businesses and entrepreneurs, that small businesses provide goods and services to large firms and their employees, that entrepreneurs benefit from large firms who stand willing to acquire smaller businesses, that government attacking successful businesses sends disturbing messages to entrepreneurs and investors, and that antitrust activism means that the decisions of politicians and political appointees override the decisions of consumers, legislation such as the 'Trust-Busting' act wind up not only being anti-big business, but anti-small business, anti-entrepreneur, anti-worker, anti-consumer, anti-innovation, anti-investment and anti-growth.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

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