Antitrust as Corporate Welfare: Imposed Concessions and Conditions on Mergers Are a Fundamental Error
As is now commonplace, American Airlines needed to relent to conditions imposed on the merger with US Airways to secure Department of Justice approval, primarily relinquishing airport slots. Rivals like JetBlue are happy about that. I would be too; can I have slot space?
Regulators should refrain from their habit of using the merger review process to extract a parade of concessions in virtually every business combination. That is not a free market, it is not capitalism. Antitrust policy should allow aggressive competitive responses to every combination.
Investors, consumers, already-poised rivals, newly energized rivals, advertisers, entrants, and the possibility of less-than-cordial takeover prospects collectively can discipline a combined entity more thoroughly than, in this case, the Department of Justice. Of course, the “antitrusters” interfere with the competitive responses too. Antitrust is kind of like an end in itself.
A better full-time emphasis for our so-called enforcers is economic liberalization such that upstream and downstream threats and pressures keep companies in line instead of Washington. Any enterprise that attempts to monopolize faces collective wrath; there’s no necessary governmental policing role otherwise, and no need for “conditions” which merely put a veneer of authority on an anachronistic oversight process that keeps regulators overly engaged and delays real infrastructure and other liberalization.
Concessions generally are offensive because they forbid a company from offering a product or service to customers that would otherwise be available to them — simply in order to protect to protect a competitor.
But why should that competitor get the business rather than you or me? This is one of many ways antitrust serves as corporate pork. Recall that the antitrust laws were to prohibit restraint of trade; concessions directly restrain trade and are inappropriate and harmful. How wonderful it could be if mergers were regarded as opportunities for laying the foundation for numerous broader campaigns separating state and economics more thoroughly.
Conditions institutionalize the idea that government coercion is superior to and can replace competitive market discipline. Price increases or service deterioration, if they happen, make apparent in highly efficient fashion new tiers of economic activity that competitors rush to fill and ultimately re-right customer service, on a higher “plane” so to speak.
Prices and services and reactions to them embody information; they are the very market signals upon which voluntary, free enterprise depends: coercive concessions that impede price signals harm consumers. They can potentially cost decades in lost productivity and market evolution.
Merger opponents and proponents operate from very different, irreconcilable conceptual frameworks in terms of understanding of what consumer benefits depend upon. It’s not particularly helpful to engineer coerced public benefits while simultaneously disrupting a market process that would allow firms to provide that benefit voluntarily.