Antitrust : The Case for Repeal - Ludwig von Mises Institute

130 Pages·2010·6.7 MB·English

by  Dominick T. Armentano

ANTITRUST
THE CASE FOR REPEAL
DOMINICK T. ARMENTANO
REVISED 2ND EDITION
Ludwig von Mises Institute
Auburn, Alabama
All rights reserved. Writtenpermissionmustbe secured
from the publisherto use orreproduce anypartofthisbook,
exceptforbriefquotations incriticalreviews orarticles.
The publisherhas attempted throughoutthisbook to distin
guishproprietarytrademarksfrom descriptivetermsbyfol
lowingthe capitalizationstylesusedbythemanufacturers.
Firstedition,titledAntitrustPolicy: The Casefor Repeal, origi
nallypublishedbythe CatoInstitute,1000Massachusetts
Avenue,Washington,D.C. 2001.
Copyright© 1999bythe LudwigvonMises Institute
Reprinted in2007bythe LudwigvonMises Institute
LudwigvonMises Institute,518WestMagnolia Avenue,
Auburn, Ala. 36832;www.mises.org
ISBN: 978-0-945466-25-3.
Contents
Preface vii
Introduction: An Antitrust Overview xi
1. The Antitrust Assault on Microsoft. l
2. The Case Against Antitrust Policy 13
3. Competition and Monopoly: Theory and
Evidence 31
4. Barriers to Entry 51
5. Price Discrimination and Vertical Agreements 69
6. Horizontal Agreements: Mergers and Price
Fixing 81
7. Antitrust Policy in a Free Society 99
Index 107
iii

People ofthe same trade seldom meettogether,
even for merriment and diversion, but the con
versation ends in aconspiracy against the public,
or in some contrivance to raise prices. It is impos
sible, indeed, to prevent such meetings, by any
law which either could be executed/ or would be
consistent with liberty and justice. But though the
law cannot hinder people of the same trade from
sometimes assembling together, it ought to do
nothing to facilitate such assemblies; much less
render them necessary.
-Adam Smith
The Wealth ofNations
v

Preface
The flurry offederal and state antitrust activity againstfirms
such asToys "R" Us, Staples, Intel, and Microsoft may signal
the beginning of an unfortunate new era in enforcement.
Antitrust regulation, like a relentless Terminator, is back in
business and the economic havoc it threatens is consider
able.
My position on antitrust has never been ambiguous:All
of the antitrust laws and all of the enforcement agency
authority should be summarily repealed. The antitrust appa
ratus cannot be reformed; it must be abolished.
Itis said that much is risked in calling for repeal. Any call
for repeal is likely to galvanize those interests committed to
areturn to the old-style, traditional enforcementpolicies. In
addition, the antitrust "establishment"-attorneys, consult
ants, antitrust agency bureaucrats-would probably step up
its attack on those who intend, from its perspective, to fur
ther "weaken" antitrust policy. Abolitionists would again
be portrayed as pro-business and anti-consumer, devoid of
any concern for consumer welfare or economic fairness.
The mostserious danger, presumably, would be that aprin
cipled opposition to all antitrust could delay important
antitrust reforms or even reverse some of the slight admin
istrative reforms already achieved.
Similarly, any serious movement to repeal is said to run
the risk of alienating the support of those critics of tradi
tional policymostresponsible forthe modestantitrustreforms
thatwe have seen to date.The majorityofimportantantitrust
vii
Antitrust:The CaseforRepeal
critics do not support the repeal of antitrust laws; in their
view, there is an appropriate role for antitrust policy in a
free-market economy, although one that is reduced in
scope from the traditional understanding. They would
argue that antitrust is still necessary for combating cartels,
very large horizontal mergers, and bona fide predatory
practices.
Iemphatically disagree.There certainly are risks in work
ing for repeal, but there are even greater risks in not push
ing the intellectual argument against antitrust to its logical
conclusion. I will argue that the case against antitrust reg
ulation-any antitrust regulation-is far stronger than even
its most important critics are willing to acknowledge. I will
argue that the employment of antitrust, even against private
horizontalagreements, cannotbejustified byanyrespectable
general theory or empirical evidence. But even more practi
cally, I will argue that the very modestadministrative reforms
that we have seen can only be temporary. They were, after
all, only administrative reforms, and we have already fallen
back into the quagmire of more traditional enforcement
policies. The greater risk would be to remain content with
some modest "reform" agenda while leaving the entire
antitrust institutional structure of private litigation, agency
enforcement, and courtreview essentially in place. Itwould
be far better in an entirely practical sense to abolish all of
these institutional arrangements and simply be done with
the greater risk.
Many of the arguments Idevelop and cases , discuss in
this book will be familiar to readers of my Antitrust and
Monopoly.1 New readers who find these ideas stimulat
ing-or infuriating-may wish to pursue some of them in
greater depth elsewhere.2 I intend, with this revised edition
1DominickT. Armentano, AntitrustandMonopoly:AnatomyofaPolicyFailure,
2nded.(Oakland,Calif.:IndependentInstitute, 1990).
2Robert H. Bork, TheAntitrustParadox:A PolicyatWarwith Itself(NewYork:
Basic Books, 1978);·Yale Brozen, Concentration, Mergers, and Public Policy (New
viii
Preface
ofAntitrust:The Case for Repeal, to reach awider audience
and to promote agreater public understandingofthe case
against antitrust regulation. Such an understanding still
appears necessary.
York:Macmillan, 1982); Fred L. Smith, Jr., "Why Not Abolish Antitrust?" Regulation 7
(january/February 1983):23-28; Frank H. Easterbrook, "The Limits ofAntitrust," Texas
LawReview63(August1984):1-40;FredS.McChesney,"law'sHonorLost:ThePlight
ofAntitrust,"AntitrustBulletin31 (1986):359-82;WilliamShughartII,TheOrganization
ofIndustry (Homewood, III.:Richard D. Irwin, 1990); and Fred S. McChesney and
William F.ShughartII,TheCausesandConsequencesofAntitrust(Chicago:University
ofChicagoPress, 1995).
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