Restoring the Original Intent of Antitrust Law

Innovation, not regulation, drives a thriving economy. As the Supreme Court proclaimed during the height of what many consider the golden era of antitrust enforcement, “[t]he Sherman Act was designed to be a comprehensive charter of economic liberty aimed at preserving free and unfettered competition as the rule of trade,” as “the unrestrained interaction of competitive forces will yield the best allocation of our economic resources, the lowest prices, the highest quality and the greatest material progress.”¹ Northern Pacific Railway v. United States, 356 U.S. 1, 4 (1958). That of course does not mean that competition enforcers do not play an important role, or that they should not vigorously combat anticompetitive behavior.  But they should remember the mantra of the former head of the Department Justice Antitrust Division that antitrust “remedies should not crush a tiger’s spirit; they should train, not tame” and “should not interfere with . . . innovation incentives going forward.”² Thomas O. Barnett, Section 2 Remedies: What to Do After Catching the Tiger by the Tail, 76 Antitrust L.J. 31, 35 (2009)

With the change in Administrations bringing leadership changes to the antitrust enforcement agencies, affirming these foundational principles should be the new leaders’ top priority. The new leaders would be wise to remember the “core assumptions” that undergirded the passage of the Federal Trade Commission Act in 1914: “antitrust violations could and should be defined clearly; responsible individuals should be harshly punished for corporate transgressions; and authority should be kept away from ‘experts.’”³ Marc Winerman, Origins of the FTC, 71 Antitrust L. J. 1, 39 (2003)

The stakes are high for businesses and consumers.  Today’s aggressive antitrust enforcement by the DOJ and FTC risks erring on the side of quashing business—especially upstarts in nascent fields that, if left alone, may increase competition and consumer choice. Agencies that instead focus on promoting free and fair competition advance the original purpose of antitrust enforcement and foster a stronger economy and more technological innovation. 

Advances in AI, innovations in cryptocurrencies, and other emerging technologies have the potential to unleash a wave of widespread economic gains. It would be a shame if those gains go unrealized if the agencies overzealously police innovation rather than help promote it. Overzealous enforcement can impact big and small businesses alike.   

Take, for example, the lawsuit filed by the Justice Department against Visa this past September. DOJ claims that because more than 60% of debit transactions in the United States run on Visa’s debit network, it charges over $7 billion in fees each year for processing those transactions and imposes exclusionary agreements on merchants and banks.  But is Visa violating the law, or is it executing an efficient business strategy that benefits consumers? An agency oriented towards innovation incentives might would be more inclined to conclude the latter. Especially because, over the last decade-plus, Visa has faced stiff competition from not only other debit card issuers but also new entrants into payment processing, such as Cash App, Google Pay, and Apple Pay. Moreover, Visa continues reaching partnerships with these new tech platforms to facilitate streamlined transactions and facilitate greater ease in making purchases on the go. These are clearly pro-consumer actions.

As another example, the FTC’s investigation of Rytr, an AI “writing assistant” intended to generate user reviews for products and services, similarly raises concerns about whether the FTC is overstepping over the original intent of the Federal Trade Commission Act and other antitrust laws.

Like a car, phone, or any other consumer product, Rytr can be misused by bad actors. The public should receive robust protection from those individuals and entities that choose to employ Rytr toward bad ends.  An agency oriented towards protecting fair competition might prioritize actions against those bad actors. However, a majority of the Commission accused Rytr of violating Section 5 of the FTC Act by providing users with the “means and instrumentalities” to deceive consumers. This expansive reading of Section 5, coupled with still evolving understandings of how generative AI tools operate, risks casting a cloud of illegality over any new tool that bad actors may employ to achieve fraudulent ends. This “means-and-instrumentality” theory of liability, if carried forward, may stifle creation of new and necessary AI tools before they even get off the ground. Bad actors will find other tools to misuse all while good consumers may never enjoy the full benefits of these technologies.

These novel and expansive theories risk undermining public trust in traditional enforcement actions aligned with the FTC and DOJ’s mandate. 

On the other side of the coin, the FTC recently settled with DoNotPay, a company that purported to operate “the world’s first robot lawyer.” The FTC’s complaint explained why this robot lawyer was no replacement for a human one, noting that DoNotPay employees did not quality test their product and failed to assess the accuracy of the legal documents generated by the robot lawyer. According to Commissioner Andrew Ferguson, “consumers who relied on DoNotPay’s wholly inadequate legal advice not only wasted their money but were also likely induced into reliance on the inadequate legal contracts and ineffective legal filings” created by the service. 

Appropriately acting against DoNotPay exemplifies that the nation’s antitrust enforcers possess the capacity to identify specific bad actors and shield both the public as well as competitors from bad business practices, while not undermining innovation.

Moving forward, antitrust enforcers must — in the words of former Commissioner Christine Wilson, herself echoing the words of George Rublee, the author of the FTC Act — recommit to distinguishing between “fair competition” and “competition which is successful through superior efficiency,” and unfair competition that results from “methods which shut out competitors who, by reason of their efficiency, might otherwise be able to continue in business and prosper.”⁴ Dissenting Statement of Commissioner Christine S. Wilson Regarding the “Policy Statement Regarding the Scope of Unfair Methods of Competition Under Section 5 of the Federal Trade Commission Act,” Commission File No. P221202 at p. 19 (Nov. 10, 2022) (quoting George Rublee, Memorandum Concerning Section 5 of the Bill to Create a Federal Trade Commission (July 10, 1914) (unpublished memorandum), available at https://www.wlf.org/wp-content/uploads/2021/07/Rublee-1914-Memo-toLobby-for-the-Passage-of-Section-5.pdf).   When the FTC Act and Sherman Act were enacted, antitrust enforcers were intended to draw lines on case-by-case bases, making guiding principles important. Indeed, Rublee wanted to end the era in which antitrust statutes were too broadly interpreted, resulting in competitive behavior being improperly labeled as unfair and unlawful.   

Nuanced antitrust enforcement is hard. Deep dives into the specific business conditions behind a certain action or tactic requires extensive expertise and deliberate fact-finding. This work cannot be rushed. While quality antitrust enforcement might not generate nearly as much political attention as a hasty and punitive approach, such nuance is what Rublee and the pioneers of antitrust law expected. Indeed, many early FTC commissioners were experienced businessmen—not lawyers—and they leaned on their own expertise to assess if the behavior in question needed to be stopped or instead evidenced business ingenuity. 

That is not to say that the DOJ and FTC should turn a blind eye to all business practices simply when consumers financially benefit.  Americans expect an economy that allows for challengers and fosters ingenuity — so inspiring innovators to take risks and to empowering small businesses to develop and thrive.  Sometimes the costs of a few dominant businesses are not worth the consumer gains made possible by that scale. In other cases, however, upending a successful business practice to look like a successful antitrust cop will not only hinder consumer welfare but also economic vibrancy. The next set of antitrust enforcers need to keep that difference in mind. 

Brian Pandya is a partner at the law firm Duane Morris LLP in Washington, DC, and previously served at the US Department of Justice as Deputy Associate Attorney General. Any opinions in this essay do not necessarily reflect the views of Duane Morris LLP or its clients, are based on the author’s current understanding of the case law and issues, and are not intended to be legal advice.