Antitrust Regulation Attacks Non-problems

Commentary by Pete du Pont

Not very long ago, we lived in an era of deregulation. In telecommunications, trucking, airlines, oil and gas, and advertising, the dead hand of government regulation was lifted. Price and service competition revived in newly freed industries, much to the benefit of consumers.

One form of regulation, however, is enjoying a boom: antitrust. Janet Reno's chief trustbuster, Joel Klein, has had a bang-up year with his round-one decision against Microsoft, attacks on Visa and MasterCard and scuttled mergers all over the place, like the Sprint-WorldCom deal. Throwing his weight around must be fun for Klein, but is all this activity harmful or helpful to consumers and the economy? Klein claims it's good for consumers and now he even wants to create a global organization to oversee proposed mergers.

Global antitrust would allow the European socialists to govern and slow the U.S. economy. Internationalization is an effort to accomplish globally what the federal government cannot get done nationally.

First, is competition desirable? Sure, without a doubt. As U.S. Olympics coach Bela Karolyi says, "No competition, no progress." The open market clearly gives consumers more choices, higher quality, and lower prices.

Second, how can government "protect" competition from monopoly abuse and anti-competitive practices? No need. It's a bogus problem because "competition is a tough weed and monopoly is a fragile flower," in the words of the late Nobel economist George Stigler.

History is clear that monopolies are rare and ephemeral unless protected by governmental action like the government schools or the labor unions.

Big businesses exist, all right, but they pose no danger to the public except in cahoots with big-government politicians and bureaucrats. How did General Electric, Sears, and Microsoft get so big? They did it the old-fashioned way by pleasing their customers without artificial barriers to protect them from competition. Superior efficiency wins out in the marketplace while politicians and bureaucrats intervene on behalf of losers through antitrust persecution, oops, prosecution. Big corporations remain big only if they offer better value in the marketplace, which sooner or later ceases to be true.

Government's natural hostility toward private property and strong companies, not valid threats to consumer welfare, drives antitrust. All the while antitrust has made the economy less, not more, competitive to boot.

Take big oil for example, a bogeyman this election year. History shows that tycoon John D. Rockefeller and Standard Oil were not guilty, as alleged by Republican Teddy Roosevelt's administration, of using so-called fighting companies to bankrupt rivals. Standard Oil was guilty of supernormal efficiency, and during the years of its domination its output of refined oil products soared and their prices went down, down, and down. Approaching the famous 1911 break-up case, Standard's advantage was already eroded because of the rise of new companies and new fields in Louisiana, Texas and California, as well as the fact that Standard Oil's efficiencies were waning. Its dominant days were numbered with or without an antitrust case.

Antitrust regulation began when Congress passed the Sherman Act in 1890. It was a sop to prairie populists, supposedly intended to lift the little fella by smiting the big "trusts," now called corporations. The Act was good politics but bad economic policy and even worse law.

That left it to the eye of the beholder to see "restraint of trade." For example, the government's chief expert in the Microsoft case, economist Franklin Fisher, said that Microsoft had harmed competitors but had not harmed consumers "up to this point." Microsoft is prohibited from entering new product markets and is scheduled to be split in two because of conjectures about what "might" happen. A nation that so ties the hands of its major companies is not destined for economic leadership.

Public interest rationales do not explain antitrust, so what does? Special interests do. The Clinton administration paid off its technology campaign contributors in Silicon Valley, California, by doing to Microsoft in court what they could not manage in the marketplace. For every antitrust suit brought by government, private companies bring another ten to twenty to hobble their competitors and win triple damages. What's this destructive game got to do with advancing the interests of consumers or those of a free people living under the rule of law? Not a dog-gone thing.

 

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