Wasteful lawsuits are nothing new for the federal government. And since most of these lawsuits fly under the radar, we usually don’t notice. But a recent lawsuit against Google is so misguided that I feel obliged to speak up.
Like other large technology companies, Google has become a target due to its size. The Biden administration’s Department of Justice head Jonathan Kanter has shifted its focus from the long-established consumer welfare standard to a more speculative slant. Specifically, the DOJ is deeming companies bad simply because they’re big, and its lawsuits against tech companies reflect this change.
But the DOG still has to present evidence of wrongdoing, which is sorely lacking. While it’s true that companies like Google are large, these legal blunders miss a very important dimension of the issue: whether companies are actually causing harm to consumers.
A recent report by the Pelican Institute examining antitrust highlights how the consumer welfare standard was a significant innovation. This standard allowed courts to clearly delineate between theoretical risks and ongoing malfeasance. Intervention was only warranted in unhealthy markets where dominant firms actively abused their power to quell competition and treated their customers as a powerless captive market.
Size wasn’t a problem so long as the biggest players continued to actively innovate and compete, and the market would punish those who failed to do so. Because this landscape is constantly shifting and market mechanisms naturally reinforce competitive behavior, intervention was reserved as the option of last resort. Just waiting was enough in most cases for problems to solve themselves.
This distinction was also key because of what it signaled to companies. Firms were allowed to keep growing as long as they stayed competitive by their own merits. Antitrust existed to protect consumers, and as long as consumers weren’t being harmed, the market was healthy. In other words, intervention was seen as a tool for addressing bad corporate behavior, and firms could be as big as desired so long as they still played by the rules.
The DOJ’s decision to dismantle this standard destroys a half-century-long tacit agreement. It also sets the stage for a hostile environment wherein all actors always expect the worst from each other.
Before, companies could be confident that they wouldn’t suffer unwarranted legal attacks provided they made a good-faith effort to stay competitive even as they grew. And Google has done precisely that, retaining its top spot in the online search market by continually innovating and improving its products.
The problem lies in what this signals to other players in the industry. If big firms will always be a target regardless of their behavior, and small companies will go unnoticed all the same, then what reason is there to make a good-faith effort to behave as they should? Outcomes become predetermined, and regulators select winners and losers before looking at the facts. It’s a recipe for stagnant markets, faltering innovation, and unchecked corporate malfeasance.
Regulation is always supposed to be an ongoing process, with outcomes never set in stone. Officials respond to a changing market as needed, and actively work to guide firms in the right direction so that punishing them outright is never necessary. Needing to file a lawsuit means you’ve already failed at your job; resorting to legal means at the first sign of trouble is to give up on solving the problem entirely.
For any regulatory framework to function without overreach, it must be a partnership. Firms will self-regulate when the rewards and consequences are clear and sufficiently enforced. Enforcement should be left for those who knowingly engage in acts of malfeasance and need to be swift to signal to all others that violators will be held accountable.
The act of bringing enforcement should signal that a company has committed wrongdoing, and any case brought to trial should have a mountain of evidence to support its claims. What Jonathan Kanter and the DOJ are doing is contrary to this spirit and threatens to destroy a delicate balance that’s made America the greatest innovator in the world.
