For Senator Warren the antidote is clear: “It is time to do what Teddy Roosevelt did: pick up the antitrust stick again.”

And she is not alone. Abetted by a growing chorus of advocates and scholars on both the left and right, proponents of activist antitrust are now calling for invasive, “public‐​utility‐​style” regulation or even the dissolution of the world’s most innovative companies essentially because they seem “too big.” Unconstrained by a sufficient number of competitors, the argument goes, these firms impose all manner of alleged harms — from fake news to the demise of local retail to low wages to the veritable destruction of “democracy.” What is needed, they say, is industrial policy that shackles large companies or that mandates more, smaller firms.

This view contradicts the past century’s worth of experience and learning. It would require jettisoning the crown jewel of modern antitrust law — the consumer welfare standard — and returning antitrust to an earlier era in which inefficient firms were protected from the burdens of competition at the expense of consumers. And doing so would put industrial regulation in the hands of would‐​be central planners, shielded from any politically accountable oversight.

WILSON, BRANDEIS, AND THE IGNORANT CONSUMER

American antitrust law began with the Sherman Antitrust Act of 1890. The Sherman Act, named for Ohio Senator John Sherman, prohibited agreements “in restraint of trade” (that is, collusion) and “monopoliz[ation], or attempt[s] to monopolize.” Importantly, and contrary to common understandings on both the left and right, the purpose of the Sherman Antitrust Act was never particularly clear.

There is ample evidence that it was intended both to proscribe business practices that harmed consumers and to allow politically preferred businesses to maintain high prices in the face of competition from politically disfavored businesses — never mind that modern economics roundly tells us that these two goals are incompatible. This ambiguity isn’t entirely surprising, both because Senator Sherman was fickle and petty in his own purposes for introducing the legislation and because the regnant economic theory of the day was relatively unsophisticated and would remain so for at least another several decades.

The years surrounding the adoption of the Sherman Act were characterized by dramatic growth in the high‐​tech industries of the day — most notably manufacturing/​refining, railroads, and telecommunications — as well as corporate and conglomerate consolidation. For many, the purpose of the Sherman Act was to stem this growth — to prevent low prices and large firms from “driving out of business the small dealers and worthy men whose lives have been spent therein,” in the words of one of the early Supreme Court decisions applying the act. It failed to do so, however, and by the time of the presidential election of 1912, concern about large firms had developed as a divisive, populist issue. Woodrow Wilson was elected president largely on a big‐​is‐​bad antitrust platform.

The key architect of that platform was Louis Brandeis. Brandeis played an important role in reshaping antitrust and industrial policy in the United States, helping to design the Clayton Antitrust Act and the Federal Trade Commission in 1914, both of which dramatically expanded federal antitrust law. Brandeis’s views were informed by a strong belief that large firms could become large only by illegitimate means and could not be trusted. Large firms, unlike their Main Street, mom‐​and‐​pop counterparts, operated primarily by deceiving consumers into buying unnecessary and lower‐​quality products. Stated bluntly, Brandeis’s views were informed by a belief that consumers were (in his own words) “servile, self‐​indulgent, indolent, ignorant.”

THE RISE AND FALL OF MID-CENTURY ANTITRUST

As the 20th century progressed, antitrust economics and the study of industrial organization grew increasingly sophisticated. The most prominent early advance in antitrust economics was the development of the Structure‐​Conduct‐​Performance (SCP) paradigm, associated with University of California, Berkeley, economist Joe Bain. SCP held that the conduct of firms in an industry, and ultimately their performance, was a function of the overall structure of the industry. One of the predictions of the SCP model is that more‐​concentrated industries are inherently less competitive, allowing firms to employ anticompetitive conduct (like collusion) to raise prices. Profitability and market performance, in this view, are a function of market structure, not the relative efficiency of competing firms. SCP therefore generally prescribed reducing concentration — for instance, by breaking up firms or challenging mergers — as a way of making industries more competitive. Ultimately, the SCP model proved to be overly simplistic and fell out of favor relatively not long after it was popularized.

Both SCP and the Brandeisian view of antitrust espouse a preference for smaller firms, though they diverge on the harm of “bigness.” The Brandeisian view holds that big is bad per se, whereas SCP suggests that a market comprising multiple competing smaller firms is comparatively better than a highly concentrated one (which implies larger firms). Neither approach readily admits the possibility that big could be better under appropriate conditions, however.

Yet the weight of subsequent economic research holds that large firms are frequently ideal economic actors for maximizing consumer welfare. Since the Industrial Revolution, and especially in the Information Age, it’s not unusual for efficient, competitive markets to comprise only a few big, innovative firms. Unlike the textbook models of monopoly markets, these markets tend to exhibit extremely high levels of research and development, continual product evolution, frequent entry, almost as frequent exit — and economies of scope and scale (i.e., “bigness”). Size simply does not correlate with anything recognizable as “consumer harm.”

While perhaps counterintuitive, this observation means that, in many cases, modern antitrust law actually condones bigness — or, put differently, without additional factors to substantiate potential concern, antitrust law is fundamentally agnostic about the size of firms or the extent of market concentration.

The classic example of the problem with the Brandeisian and SCP approaches to antitrust analysis is the 1966 Von’s Grocery case. In Von’s Grocery, the Supreme Court addressed the government’s challenge of the 1960 merger of Von’s Grocery and Shopping Bag Food Stores, two grocery chains in southern California that were succeeding in a rapidly changing and increasingly concentrated market for grocery stores. Together, these chains controlled less than 8 percent of a grocery market that was increasingly dominated by a smaller number of big‐​box supermarkets that were coming into existence as a result of business model innovation, changing demographics, affordable automobiles, and economies of scale enabled in part by new technology.

The market share of the merged chains was insufficient to have any meaningful effect on prices, but it might have been sufficient to give the resulting retail chain the scale it needed to compete. Yet despite the lack of evidence of any anticompetitive effect from the merger, the Supreme Court affirmed the government’s challenge, adopting the SCP presumption against increased concentration even where there was no anticompetitive harm.

In Von’s Grocery, this decision meant breaking up a merger that did not harm consumers, on the one hand, while preventing firms from remaining competitive in an evolving market by achieving efficient scale, on the other. As Justice Stewart noted in dissent: