Google and the limits of Antitrust’s “Consumer Welfare Standard”

NEIL TRACEY: The Department of Justice is reportedly readying itself for another antitrust lawsuit against Google. The potential suit would mark the fifth major antitrust action against the tech magnet in recent years and would focus on Google's role as the top player in the $162.3 billion market for digital advertising. 

While specifics of the DOJ’s case are not available yet, a group of state Attorneys Generals, led by Texas, has already filed suit against Google over its advertising business. A potential DOJ case is likely to utilize many of the same points. The Texas-led suit focuses on Google’s control of all sides of the market for ads: the tools used to place ads, sell advertising space and even the online marketplace itself. Google uses this market power, the suit alleges, to raise prices on ad sellers and buyers. 

In his book The Curse of Bigness, Tim Wu, now a senior advisor to the Biden White House, explains that antitrust law was created in response to the incredible economic and political concentration in the hands of a select few during the gilded age. Lawmakers designed antitrust law to “constrain the accumulation of unchecked private power and preserve liberty.” 

Focusing on the harm to those in the Google advertising market seems off base from antitrust law’s intended purpose and the concerns of contemporary Americans. Should one company have so much control over political discourse? The market? Literature? Fashion? To understand the disconnect between the case against Google and these questions, we must look back to the story of antitrust law and how it changed from protecting democratic citizens to protecting consumers. Wrapped up in this story is a fundamental change in the nature of democracy in America.  

Antitrust law emerged as a reaction to the massive conglomerates of the late 19th century. These conglomerates controlled large swaths of the economy, the two biggest ones being U.S. Steel and Standard Oil.  Through their market power, these “trusts” were able to dictate the price of goods, influence policymakers and ward off potential competition. As a result, antitrust law was vigorously enforced from its conception through the 1960s, with notable exceptions during WWII.  In fact, this regime was so rigorousthat, in 1962 alone, the Supreme Court blocked a merger of two shoe companies that would have controlled 5% two supermarket chains in Los Angeles that would have held only 4.5% of the market.    

Even more critical than the zealousness of antitrust enforcers was the methodology behind their application of the law. During this period, enforcers adhered to the idea of economic structuralism which broadly “rests on the idea that concentrated market structures promote anticompetitive forms of conduct.” This view that monopolies were inherently “bad” was the rationale behind strict enforcement. In addition, it led enforcers to preemptively avoid concentrated markets by blocking mergers between firms that would create undue size and conflict of interests. 

In reaction to perceived “over-enforcement”, a new coalition of neoliberal economists and lawyers began to push back. The Chicago School of Economics and the American Enterprise Institute offered a worldview that markets are naturally self-corrected and that, therefore, the government enforcement of antitrust laws was unnecessary.  The seminal work of this movement was Robert Bork’s 1978 book entitled “The Antitrust Paradox.”  In his book, Bork argued that the original intention of the antitrust laws was to protect consumers, not just competition. Ultimately, the Supreme Court agreed with Bork and, only a year later in 1978, adopted the “Consumer-Welfare Standard.” So began a new regime, defined by the doctrine of the Chicago School that,  “[w]hat exists is ultimately the best guide to what should exist.”  

Under this new standard, prosecutors had to not only prove that companies were exercising anticompetitive power, but that their doing so was hurting consumers. While the consumer welfare standard certainly provided a concrete benchmark for judges when evaluating antitrust lawsuits, it was this standard that caused antitrust to abandon its concern with the undemocratic accumulation of “private power.” It is these questions, so crucial to the real concern over Google’s market power, that are noticeably absent from the recent cases against Google.   

The most recent case against Google is a striking example of this. There are real and pressing concerns about Google’s outsize political influence. In late 2018, whistleblowers at Google alerted the press that Google was designing a new search engine for China that would more effectively enable the Chinese government to regulate information. Reportedly, the project was designed to “censor broad categories of information associated with human rights, democracy, religion and peaceful protest.” On the domestic front, conservatives have long been claiming (somewhat dubiously) that Google engages in political censorship against conservatives. While this likely is not the case, Google certainly has the power to do so. Researchers at Princeton have found that Google has the power to swing election results through search engine manipulation. Such manipulation “can shift a 50/50 split among people who are undecided on an issue to a 90/10 split without people’s awareness and without leaving a paper trail for authorities to follow.” It should be no surprise that, in 2020, 73% of Americans reported that they believed it was likely or very likely that technology companies censor political speech. 

50 years ago, the case against Google would have been a case against the “accumulation of private power.” Certainly, the case would have been much more in line with the concerns over democratic freedom and private power that Americans have today. Instead, enforcers are reigned in by the short leash of the Consumer Welfare Standard and are forced to argue their way around the issue that they genuinely care about: democracy.

Neil is a Junior in the College majoring in Government with minors in Philosophy and Economics. Originally from Arlington, MA, he enjoys running, grilling and considers himself a coffee connoisseur.