Antitrust Policy As Corporate Welfare

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Political party reformers promised to roll back the regulatory state’s excesses during the 1994 and 1996 election cycles. While broad-based reform targeting counterproductive environmental and risk regulation didn’t occur, a recognition persists that regulations often go too far. However, there has never been a fundamental rethinking of antitrust regulation.

Despite the growing awareness of regulatory failure, antitrust, which purports to protect consumers by policing monopoly power, stands nearly unscathed as a model of public spirited regulation of business, an essential tool for protecting consumers from monopoly exploitation. Indeed, antitrust is usually believed essential to protecting the free enterprise system.

This benign reputation of antitrust is undeserved and harmful. Policymakers of both parties – especially those who believe antitrust promotes consumer welfare – should rethink their allegiance. Many commentators have noted that antitrust’s rhetoric of protecting the public doesn’t fit with its actual tendency to penalize beneficial and efficient practices. Few today defend the actual performance record of antitrust. Defenders of antitrust still tend to think that applying better economics and hiring better judges will improve antitrust policy outcomes.

Antitrust invites the special-interest exploitation of the public and successful businesses by legally facilitating the hobbling of competitors and offering the incentive of treble damage awards. There has never been an official acknowledgment that antitrust is fundamentally flawed and contrary to consumer interests. No part of antitrust law has been repealed. Today, antitrust is enjoying a higher profile in actions such as those against Wal-Mart, Microsoft, and the proposed Staples/Office Depot merger.

Advocates of free markets tend to develop a blind spot when it comes to antitrust, readily and routinely abandoning their otherwise steadfast belief that the unfettered market is the best allocator of resources. Such blindness does not apply only to antitrust, of course; market principles are often abandoned when politically expedient, as evident in the advocacy of wealth-transferring devices such as price supports for agricultural goods, big government science (e.g., the Superconducting Supercollider), the intergenerational windfall benefits of major entitlement programs, and other handouts and variants of corporate welfare.

This paper investigates how antitrust laws hobble dynamic market processes, infringes on individuals, acts as a special-interest regulation, and the role government plays as the root of monopoly. Antitrust appears to be motivated less by a desire to reduce deadweight losses or inefficiencies in the economy than to further private aims. The decades-long history of antitrust enforcement provides ample evidence that antitrust often does not advance consumer well-being, but instead furthers the aims of firms hoping to hobble more successful competitors and the career ambitions of overseers. Regulation and antitrust enforcement alike often increase the price and decrease the quantity of “monopolized” products by destroying misunderstood efficiencies. The faith that antitrust law primarily protects consumers deserves fresh, critical and comprehensive congressional scrutiny prior to the new century.