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Competition and innovation are allowing the American economy to reach unprecedented heights.
Despite this success, many activists and interested parties from across the philosophical spectrum are arguing for more government intervention in the market. That’s troubling when you consider the economic progress this level of intrusion would unravel.
However, there’s reason to be optimistic about where many of our leaders stand on this issue. A portion of the White House’s recently released annual report from the Council of Economic Advisors (CEA) shows that the administration is committed to keeping our economy strong through a free, open market that allows individuals to pursue opportunity. The report contains three promising observations.
Big isn’t necessarily bad. The report correctly pushes back against demands for government to break up companies because of their size rather than their actions.
The CEA found that contrary to what many politicians are claiming, larger companies are actually driving innovation and more affordable costs for ordinary Americans. Why? Because when large companies compete, they are forced to improve efficiency and keep prices low to attract customers.
As the report notes:
”The Trump Administration understands the vital role that competition plays in the economy, promoting new businesses and serving consumers. Timely antitrust enforcement is an empowerment tool for protecting the competitive process. By contrast, confusion surrounding the effects of rising concentration appears to be driven by questionable evidence and an overly simply narrative that “Big Is Bad.” When companies achieve scale and large market share by innovating and providing their consumers with value, this is a welcome result of healthy competition.”
Expanding the goals and tools of antitrust isn’t wise – or necessary. The report rejects calls to use antitrust to address other policy aims. As the report notes,
“Using antitrust law to regulate markets in the absence of competition problems will exact costs on the economy by preventing efficient market organization. If society wants to pursue goals such as rising income inequality or the political power of large firms, there are better policy tools to deal with these issues.”
Antitrust enforcement is one of the most powerful, blunt tools at the government’s disposal. Government power is at a high point when used to break apart a private enterprise. With that in mind, antitrust should be applied judiciously and only in cases of anti-competitive behavior and real consumer harm.
But when companies do engage in anticompetitive behavior and harm their customers, the government should act – and it has. The report notes that the Justice Department (DoJ) and Federal Trade Commission (FTC) have a strong track record of holding companies accountable:
“Federal enforcement agencies, which are already empowered with a flexible legal framework, have the tools they need to promote economic dynamism; as ongoing investigations and resolved cases show, they are well equipped to handle the competition challenges posed by the changing U.S. economy.”
Government regulation can be the most impenetrable barrier to competition. The report notes that competition is often harmed by government-created barriers to entry. It notes that “[E]ven if a regulatory action addresses a private market failure, a deregulatory action is still warranted if the costs of the regulation outweigh the regulatory benefits” and summarizes agency efforts to “call attention to regulations that harm consumers by creating entry barriers that limit competition.” When trying to ensure a competitive economy, one of the best places for government to focus is on the barriers it has created.
The CEA is right to argue that major policy initiatives to completely rewrite antitrust rules and to create a new regulator for the digital economy are premature. We stand behind the administration’s effort to prevent abusive antitrust enforcement. It’s about keeping our economy on the right track for every American family.