Antitrust Enforcement Punishes Consumers, Protects Business

Antitrust Enforcement Punishes Consumers, Protects Business

July 16, 1997

Two new publications from the Competitive Enterprise Institute’s Antitrust Reform Project unmask antitrust law as a bad deal for consumers. Though purported to regulate "anti-competitive" business practices such as predatory pricing and monopolization, antitrust law is often exploited by politically connected businesses to protect their profits from more efficient rivals. Antitrust enforcement protects competitors rather than competition.

Antitrust Policy as Corporate Welfare by CEI Fellow Clyde Wayne Crews Jr. explores the misuse of antitrust law as protectionist legislation. While "antitrust stands nearly unscathed as a model of public spirited regulation of business," according to the paper, this benign reputation is undeserved. The history of antitrust reveals that, rather than enhancing consumer well-being, antitrust often furthers the aims of firms intent on competing in the courtroom rather than the marketplace.

The paper explains how prohibition of certain voluntary yet "reviled" business practices (such as mergers) routinely harms consumers by "destroying misunderstood efficiencies." Seen in that light, "A real antitrust law worthy of the name would be one that eliminated genuine government-granted monopoly power" such as the franchises enjoyed by electric power companies and the Postal Service. Genuine monopolies like these actually outlaw competition.

The study concludes that, while antitrust is too entrenched for immediate repeal, intermediate steps can set the stage for a fundamental rethinking of this anti-consumer body of law. Such steps include: holding congressional hearings designed to lay bare antitrust’s protectionist and anti-consumer nature; abolishing government-created monopoly; prohibiting predatory-pricing lawsuits by direct competitors of "offending" firms; and maximizing Congress’s accountability for agency enforcement behavior.

The CEI Antitrust Reader is a collection of key academic and policy journal article reprints that explores antitrust regulation from a skeptical viewpoint. The volume encompasses calls for reform ranging from outright abolition of antitrust to more moderate steps of the type that unfortunately have yet to turn antitrust into a rational body of law independent of enforcers’ personalities. Entries include empirical studies and historical overviews that reveal antitrust to be a private interest measure having little to do with consumer welfare.