This Note argues that the current framework in antitrust—specifically its pegging competition to “consumer welfare,” defined as short-term price effects—is unequipped to capture the architecture of market power in the modern economy
Ever since the disastrous law and economics movement took over in the 1970s, anti-trust has been about low consumer prices. Basically, and simplifying quite a bit, it didn’t matter how big a corporation got, whether they were part of an oligarchical or monopolistic market structure, as long as they could prove their prices weren’t extorting consumers, it was all good.
In Amazon’s Antitrust Paradox, she basically criticizes that economic perspective as permitting anti-competitive practices, consolidation of market power, and harm to consumers as a consequence.
Amazon, after all, rose to prominence by legitimately offering consumers lower prices on books, basically by reducing distribution costs and not owning any physical stores. It passed the savings onto consumers. So, there’s nothing inherently wrong with offering lower prices on stuff.
The problem, according to Khan, is that Amazon has continued to offer lower prices to consumers as it grew larger and larger and into the massive platform it is today…most of the time. Some of those lower prices may have been legitimately obtained…but the FTC is suing Amazon because it has employed its monopoly to price competitors and then shift to charging consumers more.
Under the old anti-trust paradigm, low consumer prices were all that mattered. Under Lina Khan, market structure and consumer prices matter. A monopoly that maintains low prices is as anti-competitive as any monopoly, and negatively impacts our economy.
So, it’s not so much that anti trust has been given teeth, but that, under Khan’s leadership, the FTC is much more likely to attempt the bite. And she started with Amazon, which is a bold move.
Our anti trust is currently not far from asking nicely to not abuse your market position. Has there been a change to give it some teeth?
With that said, it could be even worse!
Khan is must more active in examining proposed mergers of large corporations than previous FTC administrators.
I’m gonna fanboy out a bit here…
She came to prominence when she was still in law school and wrote Amazon’s Antitrust Paradox.
Ever since the disastrous law and economics movement took over in the 1970s, anti-trust has been about low consumer prices. Basically, and simplifying quite a bit, it didn’t matter how big a corporation got, whether they were part of an oligarchical or monopolistic market structure, as long as they could prove their prices weren’t extorting consumers, it was all good.
In Amazon’s Antitrust Paradox, she basically criticizes that economic perspective as permitting anti-competitive practices, consolidation of market power, and harm to consumers as a consequence.
Amazon, after all, rose to prominence by legitimately offering consumers lower prices on books, basically by reducing distribution costs and not owning any physical stores. It passed the savings onto consumers. So, there’s nothing inherently wrong with offering lower prices on stuff.
The problem, according to Khan, is that Amazon has continued to offer lower prices to consumers as it grew larger and larger and into the massive platform it is today…most of the time. Some of those lower prices may have been legitimately obtained…but the FTC is suing Amazon because it has employed its monopoly to price competitors and then shift to charging consumers more.
Under the old anti-trust paradigm, low consumer prices were all that mattered. Under Lina Khan, market structure and consumer prices matter. A monopoly that maintains low prices is as anti-competitive as any monopoly, and negatively impacts our economy.
So, it’s not so much that anti trust has been given teeth, but that, under Khan’s leadership, the FTC is much more likely to attempt the bite. And she started with Amazon, which is a bold move.
Here’s a short podcast about her: Planet Money
The podcast pretty much just sums up what you already said, but this is for people who don’t like reading.