Back Into Busting Trust-Busters
CEI’s work on antitrust reform may surprise some readers. Antitrust, after all, has been heraled as the "touchstone of a free market." Antitrust regulations, so we are told, are different from other economic regulation. Unlike other regulatory policies, these rules advance and protect the competitive process, and thus consumer welfare.
CEI challenges this benign view of antitrust laws. 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.
My first public policy article in Regulation dealt with antitrust; I’d been working in the transportation deregulation field and was seeking to better understand the case (then widely accepted) that as one deregulated a sector of the economy, one should expose that sector to the antitrust regulatory laws. I had read Robert Bork’s The Antitrust Paradox, along with the work of Yale Brozen, Murray Rothbard, R. H. Coase and Dominick Armentano. None of these authors had much good to say about antitrust, and I sought to relate their findings to the transportation debate.
The resulting article, Why Not Abolish Antitrust?, made five points: 1) Antitrust regulations would be used by businesses to cripple their competition; 2) Price coordination might well improve the efficiency of the economy (reducing price variability might reduce search costs, for example); 3) Any unusual monopoly-related profit situation would erode away (in the absence of government assistance); 4) The very practices most threatened by antitrust – discounting, packaging, vertical and horizontal integration, contracting – are the core elements of the competitive process; and 5) Any rule which forces an individual or group to price their output to meet some social efficiency criteria is inherently immoral.
That initial article led to considerable interest in the topic and CEI throughout the mid-to-late 1980s worked the issue, publishing the Washington Antitrust Report and seeking to inform the debate. We discontinued that work in the 1990s because it seemed as if the lessons had been learned, that the regulatory authorities would not further cripple the competitive process with needless antitrust infringements.
Yet, none of these changes were legislative. Gradually a new group of more sophisticated regulators gained control. Their new theories of competition were complex, but seemed to suggest that efficient intervention in the marketplace could increase the efficiency of the U.S. economy. Today, antitrust enforcement is back. The aggressive competitive policies of Microsoft and others are subject to continual second-guessing, and the courts (urged on by the FTC) recently rejected a rationalizing merger in the office supply field.
Antitrust policy illustrates that changes in public policy cannot depend upon mere changes in personnel. People matter, but the incentives of politics encourage bureaucratic growth – in conservative, no less than liberal administrations. A pruned weed is too often a healthy weed, that swiftly begins to grow. Only longer term changes in the basic laws of antitrust will create lasting change. CEI’s Antitrust Reform Project is intended to design a package of such substantive reforms – and to ensure that these ideas advance in the policy battlefields.