DOJ Consults Nvidia’s Critics In Its Shameful Attack

Rent-seeking is the process by which market actors pursue economic advantage through political means. It is the competition that occurs on Capitol Hill and in stuffy administrative buildings, far from the marketplace. Steel manufacturers lobby for steel tariffs, large corporations for red tape that will hinder competitive startups, and unions for occupational licensing — just to name a few examples. The tradition of rent-seeking is old and inglorious, and it presumably will persist so long as there are governments to regulate and markets to be regulated.

As the nature of regulation morphs, so too will rent-seekers’ schemes.

Since Joe Biden took office and installed his new leadership to spearhead antitrust enforcement, economic regulation has turned towards a new format — investigation and lawsuit, not legislation or rulemaking. The Federal Trade Commission (FTC) and Department of Justice (DOJ) Antitrust Division have, in this time, become far energetic participants in American markets. Having decoupled themselves from such constraints as the consumer-welfare standard and rigorous economic analysis, these agencies have tortured the law again and again to sue companies disfavored for the pro-consumer crimes of achieving scale and success.

As armies of antitrust officials march towards regulation-by-enforcement-action, the rent-seekers — like camp followers — scamper along behind. Consider the recent case of the DOJ’s investigation of chipmaker Nvidia, in the escalation of which government lawyers recently dispatched subpoenas.

Leave aside for a moment the sheer contradictions of Washington’s antitrusters harassing a monumentally successful American firm while the rest of the federal government leverages every possible policy mechanism to bulk up the domestic semiconductor industry. The DOJ has, according to reports, contacted Nvidia’s competition as it pursues the chip giant. Of course, when consulted as to whether Nvidia’s staggering successes foreclose their own, these competitors almost surely answered in the affirmative.

This occurs regularly in tech antitrust. App developers that compete with Apple press courts to disregard the choices of privacy-minded consumers and to break open the company’s “walled garden;” Google’s rivals yelp that its search results leave too little opportunity for sub-par digital services to compete; and disgruntled third-parties grouse about the quite sensible constraints on the very tools without which many Amazon sellers could not curate large online customer bases.

Congress thus far has declined to mollify the rent-seekers with regulation — passing legislation invariably requires much time and political capital. But the recent proliferation of legally dubious antitrust lawsuits provides another chance to rig the regulatory apparatus against successful incumbents.

While the new guard of antitrusters — so-called “neo-Brandeisians,” after Progressive-era trustbuster Louis Brandeis — has very often failed to convince judges of its legally creative theories of statutory interpretation and application, market actors have responded to its aggression. As early as 2022, the year after Biden’s antitrust appointees ascended, Reuters reported that “companies have changed their behavior, structuring deals to avoid accusations that they break antitrust law.” Many — faced with nebulous and protracted inquiries — have simply dropped otherwise profitable mergers altogether. As Politico put it, “attorneys advising companies on antitrust risk also acknowledge the current stance at both the FTC and DOJ is scuttling deals before they make it out of the boardroom.” Put differently, the grubby alliance of self-important regulators and self-interested lobbyists has — largely without the assent of courts or Congress — managed sizeable successes (for the moment, at least).

The FTC encapsulated its thinking in a recent court filing. The agency made clear its intent not to guard consumer welfare, not to safeguard the competitive process per se, but to aid B-tier companies in an effort to fracture the incumbent market shares of the A-tier. “In particular, a remedy [in antitrust cases] may need to ensure that potential competitors can overcome the lock-in advantages of network effects and data incumbency,” the agency argues. Ensuring competitors “overcome” the benefits incumbents find in economies of scale oversteps the remit of antitrust. It amounts to central planning, cheered on by second-class competitors who failed to keep pace in the free market.

So long as men, and not angels, run government and industry, business interests will prevail to shape policy to their own benefit — at least somewhat. No perfect system can be expected to materialize. However, a regime of regulation-by-lawsuit allows far more opportunities to unscrupulous and opportunistic market actors. In a free society, which ought to be governed by general, predictable, fair, and prudent laws, this cannot stand.

This op-ed was originally published in Real Clear Markets.