Antitrust Laws Harmful
April 27, 1998
A number of economists have long contended that U.S. antitrust policy is based on misunderstanding of how markets work and the dynamics of business competition. The laws often hurt competition and prevent mergers that would reduce costs and prices.
Legal experts say that Congress' intent in passing the Sherman Antitrust Act of 1890 wasn't to protect consumers -- but protect small business.
- University of Chicago economist Lester Telser points out that between 1880 and 1890, when John D. Rockefeller was producing 90 percent of the oil industry's yield, refining output rose 393 percent and prices fell by 61 percent.
- Thomas DiLorenzo, an economist at Loyola University, found that during the same period real U.S. gross domestic product rose by 24 percent -- but in allegedly monopolized industries it rose an average of 175 percent.
- George Bittlingmayer of the University of California at Davis contends that many major market declines were preceded by announcement of stepped up antitrust enforcement such as occurred on Friday, October 25, 1929, when the Justice Department decided it would deal "vigorously with every violation of the antitrust law."
- By the closing bell on October 29, 1929, the Dow had fallen 23 percent.
One antitrust advocate of the late 1980s, Rep. William Mason, admitted that "trusts have made products cheaper," but argued that they "have destroyed legitimate companies and driven honest businessmen from legitimate business enterprises." In other words, small inefficient firms could not compete.
Source: David R. Henderson (Hoover Institution), "The Case against Antitrust," Fortune, April 27, 1998.
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