capitalism

Antitrust 17
Nor are firms protected from competition by large market
share. For example, Sears, Roebuck was the nation’s largest
retailer in 1987. Less than 10 years later, that distinction
belonged to Wal-Mart Stores. Likewise, Digital Equipment
was the tenth-largest firm in America in 1987, enjoying the
dominant market share in minicomputers. But the advent of
workstations (principally by Sun Microsystems) and the
increasing computing power of personal computers all but
destroyed this market—and, along with it, Digital’s preeminent
market position.
Of course, the precise ways that entrepreneurial creativity
unfolds in light of consumer choices cannot be prophesied
by antitrust officials. Even the best-intentioned
administrators and judges cannot foresee products, industries,
and organizational and contractual forms yet to be
created and tested in the market. Unequipped with this
knowledge—and unavoidably judging innovations by standards
set by existing and familiar practices—antitrust interference
in markets today will too likely derail emerging
competition and distort the competitive process.
The best that regulators can do is to try to improve the
efficiency of existing industrial structures. A classic study
of actual antitrust cases by William Long, Richard
Schramm, and Robert Tollison found, however, that regulators
at the Department of Justice are not guided by a concern
for economic efficiency or competition when pursuing
antitrust actions. A follow-up study by John Siegfried
reached the same conclusion. Similarly, empirical research
on predatory-pricing cases consistently reveals that the vast
majority of such cases are economically unjustified.
Indeed, even antitrust actions against firms accused of colluding
to raise prices appear to be either pointless or often
harmful to consumer welfare.
If economic and consumer welfare considerations do
not motivate actual antitrust investigations, it is plausible to
suspect that political considerations are ultimately the driving
force behind antitrust’s application. This conclusion is
borne out in a study by Faith, Leavens, and Tollison, in
which politics, not economics, was found to drive the decisions
of antitrust authorities. Their data show that the principal
determinant of Federal Trade Commission (FTC)
aggressiveness is determined by the geographic location of
specific firms. Firms located in districts represented by
members of Congress who serve on the FTC oversight
committees or on committees that control the FTC’s budget
are more likely to receive favorable FTC treatment than
are firms whose political representatives are not on such
committees.
Similarly, Malcolm Coate, Richard Higgins, and Fred
McChesney found that much FTC litigation is driven by
staff attorneys’ self-interest in filling their resumes with
litigation experience regardless of the economic merits
of the litigation. (Such experience better ensures that
these attorneys will successfully pursue lucrative careers
in private practice.) These researchers also found that an
FTC decision on whether to challenge any particular
merger is strongly influenced by that merger’s likelihood
of driving resources and votes from the districts of powerful
politicians.
Summarizing these and other findings on antitrust’s
remarkable failure (in the United States and abroad) to be
guided by proconsumer considerations, economist Louis
De Alessi wrote that, “regardless of their ideological orientation,
few economists today would defend the historical
record of antitrust.”
It is apparent that antitrust owes its survival to the same
forces that created it—namely, interest groups using
antitrust to further their own narrow agendas at the expense
of the public welfare. The proven capacity of the market to
protect consumers from monopolistic exploitation, combined
with the proven proclivity of antitrust regulation to be
used against consumers, argues strongly in favor of a repeal
of all antitrust statutes.
See also Capitalism; Interventionism; Posner, Richard A.;
Regulation; Rent Seeking
Further Readings
DJB
Asch, Peter, and Joseph J. Seneca. “Is Collusion Profitable?” Review
of Economics and Statistics 58 (February 1976): 1–12.
Bittlingmayer, George. “Decreasing Average Cost and Competition:
A New Look at the Addyston Pipe Case.” Journal of Law and
Economics 25 (October 1982): 201–230.
Coate, Malcolm B., Richard S. Higgins, and Fred S. McChesney.
“Bureaucracy and Politics in FTC Merger Challenges.” Journal
of Law and Economics 33 (October 1990): 463–482.
Cox, W. Michael, and Richard Alm. Myths of Rich & Poor. New
York: Basic Books, 1999.
De Alessi, Louis. “The Public Choice Model of Antitrust
Enforcement.” The Causes and Consequences of Antitrust. Fred
S. McChesney and William F. Shughart II, eds. Chicago:
University of Chicago Press, 1995. 189–200.
Demsetz, Harold. Efficiency, Competition, and Policy. Cambridge,
MA: Blackwell, 1989.
DiLorenzo, Thomas J. “The Origins of Antitrust: An Interest-Group
Perspective.” International Review of Law and Economics
5 (January 1985): 73–90.
Ely, Richard T. Monopolies and Trusts. New York: Grosset &
Dunlap, 1900.
Faith, Roger L., Donald R. Leavens, and Robert D. Tollison.
“Antitrust Pork Barrel.” Journal of Law and Economics
25 (October 1982): 329–342.
Long, William F., Richard Schramm, and Robert D. Tollison. “The
Economic Determinants of Antitrust Activity.” Journal of Law
and Economics 16 (October 1973): 351–364.
McChesney, Fred S., and William F. Shughart II. The Causes and
Consequences of Antitrust. Chicago: University of Chicago
Press, 1995.
Posner, Richard A. Antitrust Law. Chicago: University of Chicago
Press, 1976.