It is not enough to have consumer benefit as the guiding star of antitrust action. If you grow big enough, you get power to control the market. As a result, you block other competitors, if any show up. This power makes you feel safe and sleepy. The development stops.
The argument that consumer benefit is an insufficient guiding star for antitrust action, because market power and complacency can stifle innovation, aligns with modern criticisms of the "consumer welfare standard".
Proponents of this view argue that solely focusing on lower prices for consumers overlooks other harms caused by monopolies, such as decreased innovation, reduced quality, and a lack of market entry by competitors.
The monopoly "safe and sleepy" argument
The idea that large firms with market power become less innovative is a central theme in antitrust debates. This can manifest in several ways:
Reduced incentive to innovate: When companies face little to no competition, they have less pressure to invest in research and development or develop new products and features. They can simply maintain the status quo and extract higher profits.
"Captured innovation": Monopolists may acquire smaller, innovative startups to either shut down the competing technology or integrate it into their existing products in a diminished way. This prevents disruptive innovation from ever reaching the market.
Innovation bottlenecks: Dominant firms can use their market power to control the "rules of the game" for their entire industry, slowing innovation by smaller players. For example, a company with a near-monopoly in an operating system or app store can set restrictive policies that inhibit independent developers.
Harms overlooked by the consumer welfare standard
Critics of the consumer welfare standard, who are often associated with the New Brandeis movement, argue that it has led to under-enforcement of antitrust law and rising economic concentration. They point to harms that go beyond what is easily captured by the economic models used to determine consumer welfare:
Political and social harms: Large, dominant firms can exert outsized political influence and undermine democratic institutions. The original intent of antitrust legislation in the 1890s was to prevent this accumulation of power.
Harm to labor and suppliers: A focus only on the end consumer ignores the harm that concentrated firms can inflict on their suppliers and employees. Companies can use their dominant position to underpay suppliers and suppress wages.
Non-economic harms: The singular focus on price and output excludes other important factors, such as product quality, privacy, and data security, from antitrust consideration.
Historical examples of innovation after antitrust action
History provides examples of how breaking up large, dominant companies can unleash waves of innovation.
The breakup of AT&T (1982): For decades, AT&T had a near-monopoly on telephone service in the United States. Following its breakup, an explosion of new competitors and innovative products emerged, paving the way for the development of the internet.
The IBM antitrust case (1969–1982): The U.S. government brought a major antitrust suit against IBM for monopolizing the computer market. Though the suit was dropped, the pressure of the case and the subsequent threat of competition is credited with stimulating innovation in the software industry.
The ongoing debate
The debate over whether consumer welfare should be the exclusive focus of antitrust policy is ongoing and often contrasts two different approaches:
The consumer welfare standard: This perspective uses economic models to determine if a company's conduct or a merger harms consumers through higher prices, reduced output, or stifled innovation. If no short-term harm can be proven, the action may be deemed acceptable.
Focus on the competitive process: This alternative view advocates for returning to a stricter enforcement model that prioritizes the health of market competition itself, rather than focusing exclusively on the short-term effects on consumers. From this viewpoint, preventing the accumulation of market power and protecting smaller rivals is a worthwhile goal in and of itself.
So, having monopoly is a weapon, at extreme giving power to one rich person to block competition in the market. This power similarly could be used by one rich market to block competition from showing up in less rich markets. Flip side – the dominant market is getting the monopoly’s freezing development effect as well. Ideas below consider mostly this problem.
“The Trump administration is continuing the antitrust lawsuits of the Biden administration's Justice Department and Federal Trade Commission against Google, Meta, Apple and Amazon. That means the economic benefits the president hopes to secure with tax cuts and deregulation will be constrained in the fastest growing part of the American economy. Further, the administration is giving U.S. trading partners a blueprint and a shield by showing them how to retaliate against President Trump's trade policies in a way that will hurt the U.S. most and be least subject to retaliation.
Starting in the 1890s, Progressive antitrust regulators targeted what Justice Louis Brandeis labeled the "Curse of Bigness." In the ideal Progressive world, only government should be big. Progressive Era regulation rose as improved transportation and the growth of nationwide markets allowed economies of scale in production at levels never before achieved. Such efficiency not only increased wages and delivered a cornucopia of increasingly affordable goods and services, it also unleashed a wave of creative destruction as small, inefficient producers were rendered noncompetitive. By attempting to protect noncompetitive producers, Progressive regulation stifled technological change, raised prices and hurt consumers.
As America's postwar dominance in heavy manufacturing faded in the 1970s, President Jimmy Carter and Sen. Ted Kennedy led a comprehensive effort to promote American competitiveness by lifting the regulatory burden that Progressive Era regulation had imposed on the economy. The Carter deregulation unleashed competition in transportation and communications while focusing antitrust enforcement solely on consumer welfare. Efficiency improved dramatically, prices fell, and the American economy to this day dominates the world in transportation and technology.
The Biden administration rejected the consumer-welfare standard as the test for monopolistic behavior, empowering the FTC and the Justice Department to target tech companies for the crime of being successful. Unconstrained by any need to show that consumers were being harmed as a condition for antitrust intervention, the government was given a license to engage in industrial and social policy under the guise of antitrust enforcement. In addition to opposing bigness, FTC Chairwoman Lina Khan chose labor, environment and social-justice goals as her objectives for regulatory policy.
Since Ms. Khan left, things haven't gotten much better. Chairman Andrew Ferguson's views on antitrust echo hers. He has said: "The antitrust laws do not address censorship or political power directly. But by protecting the welfare of consumers and workers, the antitrust laws address economic power." In a regulatory agency founded to preserve competition in the American economy, Mr. Ferguson used the FTC's power to prevent political bias just as Ms. Kahn used it to promote a labor, environmental and social-justice agenda.
Congress never granted the FTC authority to set the nation's censorship, political, labor, environmental or social-justice policies. Once you abandon consumer benefit as the guiding star of antitrust action, antitrust can be used to harm the consumer and the economy, and any president can use it to implement industrial policy, pick winners and losers, or settle political scores. In the process, unbridled antitrust authority threatens both democracy and economic growth.
Europe's experience with antitrust enforcement and regulation imposed on the tech industry demonstrates the consequences of pursuing antitrust action without focusing on consumer welfare. With around 100 tech laws, enforced by more than 270 regulators, European growth, especially in the tech industries, has lagged. Since 2011 U.S. gross domestic product has grown twice as fast in real terms as the economies of the European Union.
With its international competitiveness declining, the EU's response thus far has been to target American tech companies. According to the U.S. Chamber of Commerce, over the past decade 95% of the EU's "single firm" antitrust investigations have been launched against American companies. In that time, every digital technology and service antitrust fine from the EU has fallen solely on U.S. companies. Sixteen of the 20 highest EU fines under "general data" protection hit U.S. companies for a total 4.37 billion euros. EU laws, such as the Digital Services Act, the Artificial Intelligence Act and the pending Corporate Sustainability Due Diligence Directive -- a proposal that must be enacted by individual states -- target U.S. companies with new fines. No one is hiding the fact that American companies are being targeted.
By continuing the Biden administration's antitrust policy and the prosecution of pending antitrust cases, the Trump administration is handing a weapon to our seething trading partners who feel they have been bullied and extorted into their recent trade concessions. While Mr. Trump's protectionism has given our trading partners every incentive to retaliate, his threat of additional tariffs in response to retaliation has held their wrath in check. But if EU and global antitrust regulators can simply emulate the Trump administration's antitrust policy, such actions can't be easily deemed retaliatory.
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Mr. Gramm, a former chairman of the Senate Banking Committee, is a nonresident senior fellow at the American Enterprise Institute.” [1]
1. Trump's Approach to Antitrust Is as Bad as Biden's. Gramm, Phil. Wall Street Journal, Eastern edition; New York, N.Y.. 22 Aug 2025: A15.
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