Excerpts from Judge Alex Kozinski's speech at CEI's June 27, 1997 conference on antitrust regulation
Printed in the July 1997 issue of CEI Update
It is a sobering thought that in almost 12 years as a federal court of appeals judge, I have written or participated in only 19 antitrust cases — about a case-and-a-half a year. That tells you two things: First, antitrust litigation in the federal courts is not as big a deal as it once used to be. And second, you picked the wrong guy to give the luncheon speech today. But ignorance has never stopped a federal judge from rendering an opinion.
Sure, I know that price fixing is bad; although I can never remember exactly why. And I also know that some economic arrangements can be either good or bad depending on what you had for breakfast that day. But sometimes I have a hard time remembering why we bother conducting a trial, and discovery, and paying expert witnesses, just to prove that producers are out to make money while consumers are out to save money.
Take my most famous antitrust opinion, United States vs. Syufy. Syufy was a guy who bought up movie theaters in Las Vegas, Nevada. And what did he do with those theaters once he bought them? Why, he maliciously renovated them! He made them larger and put more screens in them. Now Syufy tried to pretend to us that he was doing this to serve the public, so that people would be able to see more movies in greater comfort. But he did not fool us a bit. We knew that he subjected Las Vegas to the multiplex for greed, pure greed. No wonder Washington suspected Syufy was creating a monopoly in order to gouge captive consumers. Because, as we know, there is no other form of public entertainment available in those parts.
As it turned out, the public in Las Vegas was paying about the same for a night out at the movies as consumers everywhere else. But those are merely facts, not something that would stand in the way of a good theory.
So the Justice Department studied the situation even more closely, and wised up to Syufy’s trick. He wasn’t using his monopoly to gouge consumers, he was oppressing movie producers — MGM, Universal, Disney, Fox, etc. Surely if you’re an auto-mechanic in Des Moines, or a maybe a waitress in a diner in Lincoln, Nebraska, you’re happy to pay more taxes to make sure Syufy doesn’t take advantage of these weaklings. To quell that public outrage, the antitrust division brought a lawsuit.
Amazingly, the movie producers pointed their finger at Syufy and said, "Leave him alone. This is the best thing that ever happened in Las Vegas." Justice, of course, was not hoodwinked. Sure, movie producers were saying they were not being oppressed, but what do they know? After all, the worst kind of oppression is the kind you’re not even aware of. Yet the judge concluded that Syufy had no monopoly power because there were no barriers to entry.
Well, the case came to me on appeal, and I had to scratch my head. What is a movie theater anyway? It’s a big room with a bunch of chairs all facing in one direction with a bed sheet at the end. How many degrees in economics does it take to tell you that if Syufy overcharges, some other guy is going to rent a big room, get some chairs, and get his mother to give him a sheet?
Now all of this got me thinking, why are we doing all this? The answer of course is that there are laws on the books, laws which say vague things like "Thou shall not monopolize or make contracts in restraint of trade." Many cases were dominated by populist notions such as mistrust of "bigness" and fear of predatory behavior.
Everyone’s heard the tale of Safeway coming to a small town and Whammo! the mom-and-pop groceries are out of business. Notice how they’re always "moms-and-pops," never "inefficient, price gouging, cockroach-infested, holes-in-the-wall that carry off-brands." My mom and pop ran a grocery store, so I know whereof I speak. No one forces the townspeople to shop at Safeway, so it must be that they offer better prices or service.
Research has shown that many things we used to worry about are often efficient and pretty good for consumers. Back in the 1980s, there was much hand-wringing about IBM’s dominance in the computer industry. Today, this sounds sort of quaint. Now the target is Bill Gates and Microsoft, and my guess is that 15 years from now, we’ll see that as quaint.
In antitrust, we need to use a little common sense, and think about the needless harm that antitrust enforcement is doing to the economy. Restraints on trade are inherently unstable, except where the government helps to limit competition. Common sense will tell you that competitors will try desperately to capture the levers of governmental power in order to avoid the slings and arrows of competition. It is at such government-bolstered monopoly that our antitrust enforcement efforts should be directed, rather than worrying over whether manufacturers of mascara and fish sticks ought to be allowed to merge.