How Antitrust Intervention Backfires

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In Brent Kendall’s January 15 Wall Street Journal article “U.S. Targets Drug Pricing, No-Poach Deals for Antitrust Action in 2020,” Assistant Attorney General Makan Delrahim discusses four potential antitrust interventions intended to achieve various policy objectives. None would work as intended.

The Department of Justice (DOJ) believes startup travel booking service Farelogix Inc. has “newer, better flight-booking technology” than Sabre Corp., which is interested in acquiring it, and therefore the DOJ may block a merger on those grounds. Time Warner once had similar thoughts about America Online. If the companies involved can’t guess if a merger will succeed, regulators with no stake in the deal—and politics on the brain—are unlikely to be better forecasters.

Price-fixing cases, such as are being pursued against generic drug makers, are redundant. Such arrangements collapse on their own. Defecting is too lucrative to pass up. Moreover, prices become more uniform as markets approach perfect competition. Similar prices can be evidence of healthy competition just as much as price-fixing. Admitting responsibility and paying a fine can be less damaging than a trial.

Going after employers for no-poaching agreements relies on a monopsony argument that 130 years of antitrust cases have yet to find.

Finally, concert tickets and broadcast music licensing are not monopolies. Delrahim’s argument is a classic example of the relevant market fallacy. Music competes in a broad entertainment market against movies, television, streaming video, books, theater, social media, and more.