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Measures of Success at the Antitrust Agencies

· February 20, 2019

In 1996, then-Director of the FTC’s Bureau of Competition Bill Baer gave a speech defending the FTC’s budget titled “The Dollar and Sense of Antitrust Enforcement.” The speech highlighted the real savings its actions have provided consumers. This year, FTC Commissioner Rebecca Kelly Slaughter tweeted “Proud to serve at a govt agency that takes money from lawbreakers and returns it to their victims—more than $2.3B last fiscal year, almost 8x our annual budget. Congrats & thx to our amazing consumer-protection staff.”

There are two agencies that enforce antitrust law: the Antitrust Division of the DOJ, and the FTC. The FTC also has, in addition to antitrust, a consumer protection mandate, which is what Commissioner Slaughter was referencing above. Both agencies are overseen by Congress and both agencies have need to champion their successes, for reasons both practical and political. At times they need to justify their budgets, or demonstrate that bigger budgets are a good investment. At other times they need to communicate to the public and Congress the importance of their work. All of this requires some metric on which to gauge their success.

What is interesting is that these agencies frequently turn to raw numbers, and especially dollar figures, to demonstrate their worth. These dollar figures are amounts saved by or returned to consumers as a result of enforcement actions, or amounts collected in fines. The FTC releases an annual report that includes measures of success like amount of consumer savings and recoupments compared to enforcement costs. The Antitrust Division keeps a report on violations that yielded fines of $10 million or more. These numbers show a tremendous return to Americans compared to amount invested in the agencies’ budgets (often measured in over 1,000%).

These types of numbers may not be the best way to measure success. The agencies have many functions that are not easily captured in numbers. The FTC engages in important work such as consumer education, research, and policy work. Both the FTC and the Antitrust Division organize roundtables, give speeches, and work with foreign counterparts to increase coordination of antitrust enforcement internationally. But attempts at holistic scoring have mixed success. The publication Global Competition Review (“GCR”) compiles its own scoring based on internal assessment coupled with feedback from practitioners and members of each agency. However, as professor (and former FTC Chairman) William Kovacic notes, commentators – including Barack Obama – called antitrust enforcement under George W. Bush weak during times when GCR rated the agencies highly. These types of measures can have a wild variance in interpretation.

Professor Kovacic’s article “Rating the Competition Agencies: What Constitutes Good Performance?” shows how difficult it is to create a common framework to measure agencies’ performance. Yet having a measure is important, as professor Kovacic states:

Current perceptions of agency quality influence legislative decisions about budgets and additions to the agency’s statutory authority, judicial decisions about whether to defer to an agency’s positions, judgments by company officials about whether to comply with mandates subject to the agency’s supervision, the level of morale of existing agency employees, and the agency’s success in recruiting new staff. A broadly held view that an agency is fulfilling its duties capably also contributes to citizen confidence in public governance and thereby strengthens the legitimacy of public administration.

Baer’s “Dollars and Sense” speech, given during the Clinton administration, laid out the case that antitrust enforcement should prove its worth by making a real difference to average taxpayers, without unduly burdening businesses, while being flexible and forward-looking. This formula has been loosely followed by agency heads when they present their work to Congress. Testimony to Oversight or Appropriations Committees tend to follow a formula: dollar figures representing what agency actions have saved or returned to consumers, fines collected for government coffers, recent cases the agency is proud of, and information on forward-looking programs the agency is currently undertaking.

This administration is no different. In his testimony to the Senate Committee on Appropriations, FTC Chairman Noah Phillips immediately followed his budget request with money returned to consumers and deposited in the Treasury, and savings generated through competition and consumer protection enforcement actions. He highlighted work on popular programs as well as forward-looking programs such as the FTC’s ongoing series of policy workshops and hearings. Antitrust Division head Makan Delrahim structured his Oversight hearing testimony similarly. After an introduction, Delrahim led with the $3.243 billion in criminal fines the agency imposed in Fiscal Year 2016-2017. He highlighted important recent cases, along with value the agency won for consumers. Finally, he discussed the agency’s forward-looking policy programs, such as the roundtables he held in 2018 and his consent decree review program.

Journalism has a saying: “don’t bury the lede.” It’s understandable that agency heads often start with a dollar figure. It’s a metric that works well regardless of audience, and the agencies consistently prove themselves to be worthy investments based purely on the savings, recoupments, and fines they generate. Individual cases, however, can sometimes be politically hazardous, as seen in 1980 when both the Carter administration and then-candidate Ronald Reagan came out against the FTC’s case against cereal manufacturers. The staff had recommended divestitures to create five companies out of the three, but the case became unpopular due to the belief that these divestitures would cost jobs. It was dismissed in 1982.

Being able to present the taxpayer benefits of antitrust enforcement as a dollar figure is a feature of the consumer welfare standard, which measures harm from anticompetitive practices based on the harm it causes to consumers (whether those harms are to price, quality, or innovation – although quality and innovation harms are often harder to quantify). Thanks to this standard, enforcement agencies can defend their funding, and ask for more, by showing how much their work has saved or returned to consumers. They can display these hard numbers while also presenting the merits of their harder to measure or more subjective accomplishments. This ability of agencies to show their work should not be discounted. The antitrust enforcement agencies are overseen by Congress, which controls their purse strings. They need metrics to be able to show that they are providing a return on the investment Congress makes in them. And they need to be able to articulate their results regardless of whether the members of the Oversight or Appropriations Committees are supportive or skeptical of the agencies.

This aspect of competition enforcement should be considered as we debate whether to replace the consumer welfare standard. The question must be asked, if the agencies’ mission is to change then what do you measure and how? What measures of success can be used just as easily in 2020 as 2030? What measures will be similarly effective in a Congress that wants more vigorous antitrust enforcement as one that is skeptical of the agencies’ value?

Reducing the work of the agencies to only the easily quantifiable aspects of the consumer welfare standard may be imperfect, but it’s an effective way to prove the value of an agency and the need to continue to invest in it. Especially when coupled with an explanation of the agencies’ harder to quantify accomplishments.

Competition

Some, if not all of society’s most useful innovations are the byproduct of competition. In fact, although it may sound counterintuitive, innovation often flourishes when an incumbent is threatened by a new entrant because the threat of losing users to the competition drives product improvement. The Internet and the products and companies it has enabled are no exception; companies need to constantly stay on their toes, as the next startup is ready to knock them down with a better product.