“Hipster Antitrust” Movement Takes Center Stage in Congress

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On Wednesday, July 29, 2020, the House Judiciary Committee’s antitrust subcommittee held a widely publicized hearing in which representatives questioned CEOs from Amazon, Apple, Facebook and Google about allegedly anticompetitive business practices. This hearing had its genesis in a 2017 Yale Law Journal article by Lina Khan, which gave rise to what became known informally as the “hipster antitrust” movement. (Not coincidentally, Khan is advising Rep. David Cicilline, the chairman of the Antitrust Subcommittee, and she sat near him during the hearing.)

Since the Reagan administration, the development of antitrust law has focused on consumer welfare – typically indicated by low prices – to determine whether competition had been harmed unlawfully. This development was based on then-professor (and later judge) Robert Bork’s influential book, The Antitrust Paradox, and the libertarian “Chicago school” of economics. If prices stay low and customers are happy, then courts are typically reluctant to find any antitrust violation. If the complaining party was a competitor whose business was harmed, it is often met with the response that the antitrust laws exist to protect competition, not individual competitors.

More recently, scholars such as Khan have argued that this historical view is too narrow, and they advocate for a broader focus on market structure and the power and influence large tech companies wield. They argue that, rather than merely analyzing whether corporate actions result in lower consumer prices, the law should recognize that the excessive concentration of economic power in a handful of large companies is inherently bad, because it exacerbates other ills, such as income inequality and labor abuses, and gives undue political influence to too few people. Khan’s article was specifically about Amazon, a company that famously offers low prices on a wide variety of consumer goods and that has for the most part been well-liked by customers, but which, she argued, exerts a dangerous amount of power to effectively control the online retail economy.

The view that companies should not be too big or too powerful is not new; the “hipster” label is a pejorative term based on the movement’s embrace of the views of older scholars, most notably Justice Louis Brandeis, who wrote in the 1930s about the “curse of bigness.” However, this view is not currently the law. No major antitrust opinions or government enforcement actions this century have been based on the notion that antitrust law prohibits mere “bigness.”

At this point it is impossible to tell whether Congress will actually take any meaningful action to change the law, and the upcoming elections could impact political appetites to make such a change. At various points the “Big Tech” hearing devolved into political venting and grandstanding, with several representatives routinely interrupting the CEOs’ answers to make their own scripted pronouncements. But the hearing was nonetheless a shot across the bow of those firms, signaling that they are being scrutinized more closely than they previously realized. (This may or may not cause those firms to voluntarily alter their practices.) There does appear to be considerable sentiment among both liberals and conservatives that something should be done to check the power of these large companies, and representatives on both sides of the aisle remarked that this was an issue that had unusually high bipartisan support.

It is unlikely that companies such as Google or Facebook would be “broken up” entirely, in part because, despite their faults, they are so popular among their users. But it is possible that certain aspects of their businesses could be spun off or regulated. Congressional action, if any, could take several forms. One possibility is legislation to supplement or amend the existing federal antitrust laws. For example, prior to 2004, some courts recognized “monopoly leveraging” – i.e., using lawfully obtained monopoly power in one market to confer a competitive leg up to gain market share in another market – as a basis to establish liability under Section 2 of the Sherman Act, which prohibits unlawful monopolization and attempts to monopolize. The U.S. Supreme Court effectively foreclosed that theory in Verizon Communications v. Trinko, and although there is respected economic scholarship to support the court’s reasoning, not everyone agrees. Congress theoretically could pass legislation to resurrect the monopoly leveraging theory. This may conceivably prevent a large tech company with a monopoly in one market (say online retail sales or social messaging or mobile phones or online search engines) to obtain significant market power in another market (say consumer data). We could also see legislation aimed at political censorship on social media platforms such as Facebook. These are just a couple of examples that Congress could target with specific legislation.

Alternatively, proposed legislation could be vague and generalized, such as providing that courts should consider other indicia of economic power and market dominance besides the ability and willingness to raise consumer prices. In other words, Congress could mandate that courts reject the Bork view and adopt the Brandeis/“hipster” view. This would effectively require courts to start over and figure things out on their own, much as they have done historically based on the rather spare language of the Sherman Act and developments in economic scholarship.

Rather than new legislation, there could simply be heightened pressure to enforce existing law to punish perceived violations. Certain alleged practices, such as pricing below cost to drive out a competitor or force it to merge, are covered by existing antitrust law, and the Department of Justice already has the tools to bring legal action to prevent those practices.

In sum, it remains to be seen whether anything meaningful comes from the hearing. But it did at least demonstrate the bipartisan support for the so-called “hipster antitrust” concerns that certain tech companies have gotten too big and too powerful, and that existing antitrust law may not be sufficiently equipped to address those concerns.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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