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The Biden administration is picking winners and losers in Apple’s antitrust case

Do you trust the Biden administration to pick economic winners and losers?

That is what’s at stake in the Department of Justice’s new antitrust lawsuit against Apple. Instead of looking out for taxpayers, the department wants to let multibillion-dollar corporations freeload off Apple’s business model, to the detriment of devices you use every day. 

Antitrust law has been in force since the end of the 19th century. It gives the federal government broad power to break up or levy fines on companies that bureaucrats view as harming competition. 

Despite these seemingly good intentions, the first half-century of antitrust law was disastrous. Judges and politicians weaponized antitrust to attack companies for political reasons. Antitrust law in those days maximized government power over the economy. In a dissent to the United States v. Vons Grocery case, former Supreme Court Justice Potter Stewart said, “the sole consistency I can find [in antitrust law] is that the government always wins.”

Recognizing that this body of law was completely broken, conservative luminary Robert Bork traced legislative history and concluded that Congress had intended antitrust law to protect consumers. Bork’s “consumer welfare standard,” adopted by the Supreme Court in the late 1970s, is a simple test. If a company’s conduct is not harming consumers through a number of factors — most notably higher prices, reduced quality and slowed innovation — then it is not in violation of antitrust law. 

It is difficult to overstate the consumer welfare standard’s impact. For one, it is a critical constraint on a powerful tool the government can use to bend companies to its will. For another, it fostered the creation and growth of the world’s largest, most dynamic and most innovative companies in the U.S. Unlike other countries, we do not punish our companies for being successful. 

Since day one, President Biden’s mission has been to increase government control over the economy. Biden’s top antitrust enforcers — Department of Justice Antitrust Chief Jonathan Kanter and Federal Trade Commission Chair Lina Khan — have blasted the consumer welfare standard as out of step with the modern economy. They believe that antitrust law should give a leg up to companies that cannot compete on the merits and that the government should pick economic winners and losers. Call it the corporate welfare standard. 

Enter the Apple case, one of several antitrust cases the Biden administration has launched to bring the corporate welfare standard to life. At its core, the case is a rent-seeking exercise by Apple’s competitors. Kanter, the case’s lead attorney, represented Apple’s smaller rivals for years in private practice to the tune of millions of dollars. Now, Kanter is using his government perch to deliver for his former (and likely future) clients. Nice work if you can get it. 

The case alleges that Apple maintains an unassailable monopoly on the “smartphone market,” ignoring that Apple has 20 percent of the global smartphone market. The Justice Department accuses Apple of using its market position to exclude rivals and suppress competition. 

In reality, the case is a thinly veiled attempt by the Biden administration to control and remake Apple’s business model. Apple’s “walled garden” ecosystem emphasizes security for users and interoperability between Apple devices. One of Apple’s selling points is that their devices “just work” out of the box and all work together as part of a coherent ecosystem. Consumers who favor a more open approach than Apple do not need the government’s help to switch to Android.

Arrogant nanny state government paternalism is the thread that runs through the Justice Department’s case. The department bizarrely claims that the only reason iTunes was ever on Windows was because of its intervention, a false rewriting of history designed to make the bureaucrats look like innovators. The case even cites the “social stigma” of an Android user’s message bubbles appearing green on iPhones as a reason for antitrust cops to step in. There’s no word on whether the Justice Department is changing its name to the Department of Social Justice.

If the Justice Department is successful at remaking Apple’s business model, it will allow Kanter’s former clients to freeload on tens of billions of dollars of research and development and intellectual property. Instead of increasing competition between Apple and other smartphone makers, the practical effect of the Justice Department’s case would be to make iPhones look like Androids. This leaves consumers no better off while giving a massive leg up to Apple’s rivals. 

The case is bigger than one company. Will antitrust law promote consumer welfare and competition as it has since the Supreme Court adopted the consumer welfare standard? Or will antitrust law once again become a weapon wielded by companies and special interests against their larger rivals, consumers be damned? 

The courts will decide if the corporate welfare standard replaces the consumer welfare standard. Those who do not believe that the Biden administration should pick economic winners and losers will be pulling for the consumer welfare standard to prevail. 

Tom Hebert is the director of competition and regulatory policy at Americans for Tax Reform and executive director of the Open Competition Center.

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