New York Should Punish Companies That Hurt Consumers, Not Protect Friendly’s From Carvel
All of us want the government to penalize companies for hurting people. But imagine if New York State could sue Apple because the iPhone made the Blackberry obsolete. Or sue Ford for the Model T putting horse and buggy companies out of business.
It sounds ridiculous, because American and New York State laws have long incentivized businesses to build better products that delight consumers — even at the expense of incumbent companies’ sales. But if some state legislators have their way, Albany may soon follow Europe’s tradition of protecting organizations from the competition.
The main principle underipping U.S. antitrust law is the idea that companies should compete fairly in the marketplace to win consumers’ business. What follows is a related principle: if a business has a monopoly position in a given market, regulators should stop it from hurting folks, whether that happens through raising prices, reducing product quality or preventing switches to competitors.
Put differently, New York laws encourage Burger King and Five Guys to tweak their recipes, menus and prices in order to win sales. But if Five Guys suddenly became the only burger place in Westchester and then arbitrarily doubled the price of a burger, the government would rightly intervene.
Europe takes a broader approach, going beyond simply policing anti-consumer behavior. Its expansive “abuse of dominance” antitrust standard allows governments to protect companies from competitors, even when consumers benefit. It’s therefore no surprise that European officials have aggressively brought suits against companies for merely competing.
Unfortunately, the state legislature is currently considering a proposal that would make New York the only state to embrace the European model. We could soon be in a situation where the New York Attorney General can sue Five Guys on Burger King’s behalf, simply for hurting BK’s sales by charging less for better fries.
Under the bill, the Attorney General would be able to deem any company with at least 40 percent of its market “dominant.” To use a different food analogy, officials could sue Carvel for “dominating” the arbitrary “Westchester ice cream market” because of their popular two for one sundaes on Wednesdays — which directly compete with Cold Stone.
Some will say we need new laws to curb Big Tech’s power. But just last year the Attorney General’s office filed two major antitrust lawsuits against Facebook and Google, using its authority under existing competition laws. D.C.’s Attorney General also just used his existing authority to bring a case against Amazon. The examples go on but the conclusion is clear: law enforcement already has ample tools in its toolbox.
Everyone agrees we need strong enforcement of antitrust laws to protect consumers and competition. But a federal reform approach makes far more sense than diverging state policies, which could disadvantage New York in competing against other states. Senator Amy Klobuchar has introduced an antitrust reform bill with many ideas worth debating.
New York faces big challenges, starting with pandemic recovery, rebuilding our economy, investing in infrastructure and taking real action to mitigate climate change.
And while government officials must always hold companies accountable, the antitrust proposal in Albany is a solution in search of a problem. The Attorney General has brought dozens of important lawsuits against companies for wage theft, predatory lending and pollution. All New Yorkers benefit from the state using its power to police antitrust violations — not a better french fry.
Adam Kovacevich is CEO of the Chamber of Progress, a new center-left tech industry policy coalition promoting technology’s progressive future.
