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Antitrust in 60 Seconds: Does Size Matter in Competition Policy?

The 60-Second Read:

Recent commentary on competition law and policy might lead one to believe that size is all that matters in the competition policy sphere: big is bad; small is beautiful. However, an assessment of the evolution of modern competition law enforcement shows that size is just one element of a broader and more sophisticated analysis. In the early days, antitrust enforcement penalized successful companies based solely on market share. The ¨retro antitrust¨ approach created disincentives for companies to invest, innovate, and grow. Subsequent refinement in the application of economic analysis led the U.S. Supreme Court to adopt the consumer welfare standard and recognized that: “Congress designed the Sherman Act as a consumer welfare prescription.” This approach established the right balance for companies to compete and agencies to effectively maintain competition in the markets.

Hence, the adoption of a consumer welfare standard has provided for a “wise technocratic equilibrium”, spurring economic growth in the form of new and better products and services at lower prices to the benefit of consumers. Therefore, testimonials worrying about bigness are old-fashioned and mistaken. Well-informed analysis must understand that size is not a proxy for monopoly power.

Does size matter?

Antitrust’s “size” debate has been reignited, but historical experimentation with antitrust enforcement informs us that “bigness” in and of itself is not an antitrust concern.

The so-called modern competition” or hipster” antitrust proposals suggest, among other things, taking antitrust actions against big tech companies for no other reason than because these companies are big ones. This is anything but a modern proposal. In fact, it is a rather vintage suggestion that resembles the old days (notably from the 20s through the 60s) when antitrust enforcement cared simply about the size of corporations and ignored the benefits that these companies brought to consumers.

During this time, antitrust statutes were enforced against big corporations for two reasons. First, when it was believed that the emergence of large enterprises could exercise an undesired control over the government. And, second, when the existence of big trusts threatened to undermine smaller firms’ position as the predominant local form of commerce and, in doing so, shift business decisions away from localities.

During the ¨retro antitrust¨ period the U.S. courts decided cases like the famous Alcoa case, where the ruling argued that the size of the company was sufficient to prove an antitrust violation. During the second administration of Franklin Delano Roosevelt (FDR), that moved away from his preceding “National Recovery Administration”, the Department of Justice antitrust division brought cases against big companies across all U.S. industries. As part of this policy shift, Alcoa, having become the primary aluminum company, and having a poor public image, was brought before the courts. Judge Learned Hand, when deciding the Alcoa case, stressed that:

“[…] Congress did not condone ‘good trusts’ and condemn ‘bad’ ones; it forbade all […]”

In Pabst Brewing & Von’s Grocery, the Supreme Court adopted this line of ¨retro¨ thinking by invoking Congress’ general fear of concentration in the American economy. These cases demonstrate that ¨retro antitrust¨ viewed size as an antitrust concern.

However, it was soon understood that this approach towards antitrust enforcement eliminated incentives for corporations to invest, grow and innovate. In 1966 Alan Greenspan, the former Federal Reserve Chairman, asserted that:

“ALCOA is being condemned for being too successful, too efficient, and too good a competitor. Whatever damage the antitrust laws may have done to our economy, whatever distortions of the structure of the nation’s capital they may have created, these are less disastrous than the fact that the effective purpose, the hidden intent, and the actual practice of the antitrust laws in the United States have led to the condemnation of the productive and efficient members of our society because they are productive and efficient.”

So why did the Supreme Court decide to move on from ¨retro antitrust¨ analysis?

The U.S. Supreme Court recognized that it was in the interest of all citizens to focus on the competitive effects of monopoly firms’ behavior when deciding antitrust cases and exclude other non-consumer considerations in the analysis. This shift took place despite existing public perception that smaller businesses were the victims of big companies. As a result, any other public interest concern would not be embedded in the ‘consumer welfare focused-antitrust analysis,’ even if the concern was a legitimate one. So, we do not, for example, embed occupational safety in antitrust analysis, but rather use occupational safety law for that purpose.

Placing the focus on the competitive effects of firms’ conduct would allow competition policy to strike the right balance between intervention in the markets and preserving its free forces. This balance would spur economic growth to the ultimate benefit of consumers in terms of innovative products and services, better quality and lower prices. To the contrary, taking enforcement actions against companies that had become big would have disincentivized them from investing, growing, or innovating.

By making consumer welfare the end goal of competition policy through a greater application of economic analysis and efficiency considerations, the U.S. Supreme Court began to decide cases that served the best economic interests of all citizens (e.g., Brooke, Sylvania or Leegin). In all these cases, the size of a company was a factor in the analysis, but many others, such as barriers to entry and efficiencies considerations, encompassed the wider legal and economic analysis that informed the rulings.

The U.S. Supreme Court’s focus on consumer welfare generated the right incentives for citizens to invest and produce innovative products and services. Therefore, these rulings have been said to have said to have created a wise technocratic equilibrium that allowed today’s highly competitive U.S. technology exporters to emerge.

Is there international and political consensus on the importance of size?

In the U.S., antitrust experts across the entire political spectrum have come to terms with the fact that companies’ size is not what competition policy deals with. There is also consensus with respect to the importance of striking the right balance so as not to chill the competition antitrust statutes were designed to protect (Brooke).

Moreover, the U.S. Supreme Court’s conclusions have crossed U.S. borders. Analysis of the evolution of the case law in the European Union (e.g. Hoffman-Laroche) and other foreign jurisdictions (e.g. Queensline Wire in Australia) indicate that there is a notable consensus on the fact that the size of companies alone should not trigger antitrust enforcement actions.

In 1987, Pitofsky, an antitrust legend and Democratic FTC appointee, noted that “the mythology on which some 1960’s-style antitrust depended-the notions that big is bad and that small is somehow beautiful-steadily eroded.” Pitofsky made this affirmation in a reflection about the future of antitrust at that time, i.e. today’s antitrust.


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.