Voluntary industry agreement promotes competition among mobile networks

[Commentary] The recently-released Council of Economic Advisers (CEA) Issues Brief, Benefits of Competition and Indicators of Market Power, provides a useful snapshot of current government thinking on the economic and social benefits of competition, such as economic growth and job creation. Conversely, the report asserted that “[w]hen there is little or no competition, consumers are made worse off if a firm uses its market power to raise prices, lower quality for consumers, or block entry by entrepreneurs.” The CEA also presented three sets of trends that it says are “broadly suggestive” of a decline in competition—increasing industry concentration, increasing profits accruing to a few firms in each industrial sector, and lower levels of firm entry and mobility. With this narrative foundation, the report then presents examples where government intervention has preserved and in some cases expanded competition.

According to the CEA, enforcement of the Sherman Antitrust Act, the Clayton Antitrust Act, and the Federal Trade Commission Act by the Department of Justice (DOJ) and the Federal Trade Commission (FTC) represent “front-line defenses against these abuses.” But in extending its analysis into the realm of regulatory policy, as opposed to the narrower focus of antitrust policy, the CEA seems to venture onto much shakier ground. For example, it gives the Federal Communications Commission (FCC) too much credit for achieving a pro-competitive outcome in the area of cell phone unlocking. By elevating the importance of the FCC’s role in this process, the CEA downplayed the potential that voluntary industry agreements can produce pro-competitive outcomes without assertive regulatory policies. Viable private sector alternatives that achieve competitive results comparable to government intervention deserve further analysis by government policymakers. The CEA itself should research this as it explores the benefits of competition and recommends the best course of action.