Congressional Republicans to Defund the Antitrust Division?

There's a hold-up on the Antitrust Division's budget. Will the DOJ be able to bring an antitrust suit against Apple? Or Ticketmaster? That depends.

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At the beginning of the year, the New York Times reported the Antitrust Division is getting ready to file a complaint against Apple, a three trillion dollar corporation. This story came on the heels of Apple attempting to kill a small messaging firm called Beeper, which produces an “iMessage-compatible Android app,” a move so brazen that multiple Senators demanded an investigation of the electronics giant.

The potential suit against Apple is one of many Antitrust Division investigations that are slowly reordering our economy away from the consolidated mess we’re living through. There are possible suits against rent-fixing software firm RealPage, Visa, UnitedHealth Group, Ticketmaster and hospital giant University of Pittsburgh Medical Center. And of course, there are the existing suits, most notably the multiple cases against Google that are being litigated this year. (The FTC has its own portfolio of big cases against Meta, Amazon, and likely Kroger-Albertsons.)

Enforcers are trying to end systemic coercive behavior in our economy, the kind that raises prices, suppresses wages, or redirects revenue from people who do work, into a monopolist’s pocket. Generally speaking antitrust is popular, because while people appreciate big firms that do useful things, they also dislike extractive bad behavior.

So how do political opponents take on a popular agenda? Well, instead of taking it on directly, you do it by being super-boring. Just cut the budget of the entity you don’t like. And indeed, since the turn against antitrust in the 1980s, Congress has been cutting the funding of the Antitrust Division, such that it has 230 fewer employees today than it did in 1979, despite a much larger economy. Few pro-consolidation politicians said “I like monopolies,” instead they just defunded the cops.

From 2010-2020, the Division’s budget was held constant in absolute terms, which means inflation-adjusted it kept going down under both Obama and Trump. This budgetary constraint led to the Division having to choose between taking on the monopoly of Google or Apple, even though it found evidence of monopolization for both. Here’s Politico in 2021:

The situation is actually laughable, the Antitrust Division has fewer people enforcing anti-monopoly laws in a $24 trillion economy than the Smithsonian Museum has security guards. Apple spent a billion dollars in legal costs in 2017, five times the amount the entire Antitrust Division spent on everything.

In the first few years of the Biden administration, this Antitrust Division budget changed slightly but meaningfully, going from $185 million in 2021 to $225 million in 2023, an increase of about 15% in two years, without adjusting for inflation. In one sense, that hike isn’t much; Apple’s legal budget is now only four and a half times as big. But the increase of budgeting opened the door for the work we’re seeing unfold in the courts. Let’s go back to that New York Times story on Apple:

When the Justice Department started its tech investigations in 2019, it prioritized its antitrust review of Google over Apple because it lacked the financial resources and personnel to fully evaluate both companies, according to two people with knowledge of the matter. That changed in 2022 after the department’s budget increased.

The Times is correct; Congress passed important bipartisan antitrust reform legislation, which included a boost to division resources so it could bring cases like that against Apple, as well as others, like one against Ticketmaster. So far, so good. Only, now there are a few problems.

The first and most important is House Republican Jim Jordan, who is using the old tried and true method of attacking a popular policy without doing it directly. He’s trying to cut funding to the Antitrust Division. Here’s what the Republican House Appropriations Subcommittee put forward for the Antitrust Division budget.

That’s a cut of 14%, which inflation-adjusted would bring it back to below what it was the first year that Biden took office. So that’s problem one.

Now, the House isn’t the only chamber with a say. There’s also the Senate, and the White House. The Senate asked for $278 million a year for the Antitrust Division, which would be a bump up, and allow for more cases. It wouldn’t restore it to its 1979 level, but hey, let’s not get ahead of ourselves. The White House asked for an increase of $100 million in its budget for the Antitrust Division. So there’s that as well.

The second problem is more of a miscommunication or error than anything else. Back in July, someone put a provision in the Senate budget bill for the Department of Justice which would move $50 million from the Antitrust Division to a fund called the ‘Justice Operations, Management, and Accountability’ account. Here’s the specific provision.

Senators Chuck Grassley and Amy Klobuchar immediately understood these changes as possibly thwarting the antitrust law passed in 2022. In September, Attorney General Merrick Garland himself asked for the changes to be reversed when testifying to Congress. It’s not clear what’s happening, but in a sense the discussions over what look like a drafting problem are less important than what the House of Representatives put forward, which is a real policy decision to gut enforcement. And that’s because the House and Senate have to combine their bills in a negotiated settlement, which means that Jim Jordan and the Speaker of the House, Mike Johnson, will be sitting down with Senate leaders and White House negotiators and fighting over thousands of different budget priorities across the whole of government, only one of which is to raise or cut the budget for the Antitrust Division.

And while there are many partisan questions in D.C., this actually isn’t one of them. There are members on both sides of the aisle who want the money restored, and others who want it cut. After all, big tech is very unpopular in lots of different corners of politics, including on the right.

But if this money isn’t restored, then the Department of Justice Antitrust Division will once again have to make ugly choices about which antitrust cases to pick. And then Apple, as well as Ticketmaster, rent-fixing software firm RealPage, airlines, and many other industries might once again find themselves free of enforcement. It’s been fairly obvious for years that dominant firms are using this political moment to play a wait-and-see game, reducing acquisition activity to avoid scrutiny but not changing their fundamentally extractive behavior. They don’t like the new anti-monopoly movement, and haven’t been able to quash it yet, but they aren’t afraid enough to stop engaging in rampant monopolization.

Apple, for instance, has long been thwarting rivals from accessing the Apple ecosystem, limiting non-Apple phones from connecting with the Apple Watch, stopping rival financial firms from accessing Apple’s payments system, and exerting iron control over its app store. The Wall Street Journal reported an Apple antitrust investigation in 2021, and the House Antitrust Subcommittee, in its landmark big tech report in 2020, made almost the same points. It is a common dynamic with Apple, so routine that even the big guys lose out. Facebook bitterly complained about Apple blocking its ad system on the iPhone while launching an Apple ad platform, and Spotify is trying to get the EU involved over being disadvantaged on the iPhone over Apple Music.

It’s pretty obvious what Apple is doing. It makes great products, it doesn’t need to block rivals to make money, but it does so anyway. Why? Well, it doesn’t fear the government. And that’s been a smart calculation. So far, Apple alone among big tech firms has escaped legal action by the government. Google is in the midst of multiple suits, Microsoft had its Activision merger challenged, Facebook has an antitrust trial coming later this year, and Amazon has state and Federal charges pending. But Apple, despite its massive market power both on the consumer side and as a semiconductor buyer, has not. It’s ‘the good guy’ of big tech, or so its executives think internally.

Apple’s attitude is pervasive in every sector of the economy, from big tech to pharmaceutical firms to Ticketmaster to meatpackers to dialysis. These firms’ executives aren’t just trying to protect what they have, they are offended that anyone might see their behavior as unlawful. The key reason is that for forty years, several generations in fact, there have been virtually no antitrust cops on the beat. And right now, behind closed doors, Congress is making the decision of whether to keep it that way.

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cheers,

Matt Stoller