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Antitrust Policy #NeverNeeded and Dangerous in a Crisis

Antitrust policy, despite its proponents hopes, rarely performs as advertised. Like other regulatory interventions justified on “market failure” grounds, antitrust presumes that government failures are less serious than those experienced in the marketplace; yet they rarely are. Indeed, in practice, antitrust policy has been unpredictable and arbitrary. The government sometimes punishes minor economic activities; at other times, it permits significant flexibility without comment. This capriciousness is one of antitrust’s major problems.

CEI’s founder, Fred L. Smith, Jr., wrote those words in July 1997, but they seem just as appropriate today. In a recent joint statement from antitrust enforcers at the Department of Justice (DOJ) and the Federal Trade Commission (FTC), the agencies acknowledged that this time of crisis will “require unprecedented cooperation … among private businesses to protect Americans’ health and safety.”

The DOJ and FTC will now allow some types of collaboration between companies to address needs caused by the corona virus health threat and there will be an expedited review process at the agencies for these measures. They also warned a doubtless frazzled business community that sharing too much sensitive information, fixing prices, rigging bids, dividing up markets or customers, or restricting output in coordination with competitors turned collaborators would still land them in antitrust hot water.

If all this sounds a bit subjective and uncertain, that’s because it is. Antirust lawyers will glean some degree of certainty from the statement, but the content of the letter highlights the arbitrary nature of entrusting bureaucrats to discern what business practices will create value and efficiencies to the benefit of consumers and which will run afoul of established (but now partially and temporarily suspended?) antitrust regulations.

Even if a regulator’s ability to see into the future proves correct a certain amount of the time, the risk to innovators will prevent some ideas from being tried and deny citizens the benefits of what could have been. And then there’s always the possibility that agencies will alter the rules of the road in the future because of a change of administration, staffing, or mood.

The looming threat of antitrust action introduces uncertainty into the marketplace and potentially thwarts innovations and improvements. By not eliminating this regulatory threat completely, the DOJ and FTC have left this less than ideal situation in place.

 Similarly, merely expediting a review process is not enough in a time of unprecedented health threats and economic shutdown. CEI maintains that antitrust laws were #neverneeded, but they certainly aren’t when Americans’ lives and livelihoods are at stake.