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The NCAA has defended its exploitative system under the rationale that viewers’ tastes for amateurism take priority over harms to athletes.
Motivated by the tragic events in Charlottesville and Minneapolis, President Biden campaigned on a pledge for racial justice. Given its centrality to his agenda, all policy levers—from environmental to telecommunications to foreign affairs—should be deployed to help eliminate inequalities across racial lines.
An underutilized tool for promoting a more equitable society is antitrust. The Sherman Antitrust Act of 1890 was meant to disperse economic power, which at the time was concentrated in the hands of massive conglomerates or “trusts” such as American Tobacco and Standard Oil. Although the identities of the trusts have changed, we are still grappling with the same questions over who wields power in America: dominant platforms or the citizens whose economic well-being antitrust laws were meant to protect.
Under this broad mandate, attacking power imbalances that disproportionately harm Black Americans would be a perfectly legitimate use of antitrust, and one consistent with statutory intent. Indeed, the acting chair of the Federal Trade Commission, Rebecca Slaughter, has made “anti-racism” her lodestar.
But ask those most involved with setting antitrust policy in the past decade if antitrust should be used this way, and the answer might surprise you. These types, many of whom served in the Obama administration, say using competition policy to combat inequality represents a “politicization” of antitrust. They claim antitrust, unlike all other policy tools, is somehow off limits for this pursuit.
Such arguments rest on flimsy logic. Would using the EPA to eradicate racial inequities in water quality constitute the “politicization” of environmental policy? Would using the FCC’s Lifeline program or investment subsidies to eliminate racial disparities in broadband connectivity constitute the “politicization” of communications policy? Of course not.
To understand how antitrust has been sequestered, one has to delve into a wonky debate over first principles. There’s a struggle going on in antitrust circles between Obama holdovers and New Brandeisian progressives. A key proxy in this battle is over the so-called “consumer welfare standard”—namely, the idea that consumers are more important than all other economic agents, and that no anti-competitive behavior employed by a monopolist or a cartel can be unwound unless and until it can be shown to harm consumers, typically in the form of higher prices. Obama’s former trustbusters still cling to this consumer welfare lens, whereas progressives view antitrust more broadly.
In recent years, the consumer welfare standard has been used to thwart many attempted interventions. It enabled the Supreme Court in 2018 to overturn a decision against American Express for contractually preventing merchants from steering customers away from using its credit cards, under the rationale that cardholder benefits (a measure of consumer welfare) outweighed harms to merchants from inflated fees. (Never mind that the inflated merchant fees caused by the anti-steering provisions would be passed right back to consumers in the form of higher prices.) In California v. Safeway, which involved supermarket chains coordinating during a worker strike, the Ninth Circuit ruled in 2011 that “evidence of actual anticompetitive impact on pricing” was required to condemn the agreement, effectively elevating consumers over workers.
Depending on how arguments go in late March, the consumer welfare standard could induce the Supreme Court to overturn an already narrow victory for college athletes, the majority of whom are Black in the high revenue–generating sports of football and basketball. NCAA v. Alston concerns the prohibition that the NCAA has levied on direct compensation for athletes. The NCAA has defended this exploitative system under the rationale that viewers’ tastes for amateurism (potentially motivated by anti-Black racism) take priority over harms to athletes. A group of prominent economists, including one Nobel Prize winner, submitted an amicus brief to the Court defending the efficiency of the NCAA’s wage-fixing scheme under the guise of “product design,” as if the students were just inanimate cogs in a machine.
Valuing consumers over other “trading partners” allows many anti-competitive schemes, including those that harm Black athletes, employees, and business owners, to go unchecked. Amazon can squeeze independent merchants, including Black-owned businesses, because consumers like lower prices, however achieved. Similarly, Instacart and Uber can squeeze small restaurants, many of which are Black-owned, because low prices are again paramount.
Under the consumer welfare lens, the only way that antitrust can be leveraged to improve the livelihood of Black Americans is in their role as consumers. But this ignores that consumers can also be producers, whether workers, small-business owners, or entrepreneurs. It is no wonder that certain former Obama enforcers reject any attempt to use antitrust as a tool to combat inequality: If the harm doesn’t manifest as a consumer price increase, they can’t see it!
Just as shareholder primacy led us astray in how we organize our firms, consumer primacy over workers cannot be the principle that guides our decision-making in the realm of competition policy.
Under the consumer welfare lens, the only way that antitrust can be leveraged to improve the livelihood of Black Americans is in their role as consumers.
There is an easy legislative fix here—Congress should nullify the American Express decision, as requested by the Judiciary Antitrust Subcommittee Majority staff report last October, and instruct courts not to consider any purported benefits to consumers as an offset to a clearly demonstrated harm to another trading partner. Applied to the NCAA v. Alston case, the no-offset rule would limit any efficiencies to those that benefit athletes; any purported benefits to consumers who like watching unpaid, exploited athletes play games for their amusement would be ignored.
A new bill from Sen. Amy Klobuchar (D-MN), the Competition and Antitrust Law Enforcement Reform Act, would also deviate from the consumer welfare standard by changing the burden of proof for agencies seeking to block mergers. One of its key findings reads: “[I]n recent years, some court decisions and enforcement policies have limited the vitality of the Clayton Act to prevent harmful consolidation by … focusing inordinately on the effect of an acquisition on price in the short term, to the exclusion of other potential anticompetitive effects.” Although the Obama holdovers were quick to endorse it, their attitude over the past decade has stood in direct opposition to other reasonable deviations from the consumer welfare standard. Passing that bill and ending the tyranny of the consumer in antitrust cases would further end the stigma of using competition policy to attack racial injustice.
“Let’s not politicize antitrust” is code for “Let’s not use antitrust in a way that upsets the current power imbalance or America’s caste system, which serves me and my constituency just fine.” Ignore these folks, and for the sake of the president’s overarching agenda of ending racial inequities, pray they don’t become Biden’s chief trustbusters.
