NCPA - National Center for Policy Analysis

Flawed Theories On Antitrust

February 26, 2001

The Clinton administration followed an aggressive, activist antitrust policy -- best illustrated by its attempt to breakup Microsoft. With the new Bush administration in place, legal scholars are calling for a more reasoned approach that would focus on the initial goal of the Sherman Act: combating price-fixing agreements among competitors.

Here are three of the Clinton administration's antitrust policies which experts find most troubling: (1) an emphasis on "unfair competition" as opposed to evidence of harm to consumers; (2) a focus on avoiding "market dominance"; (3) and "market engineering" through the imposition of structural remedies.

These objectives are found wanting for a number of reasons. To summarize briefly:

  • There is very little empirical evidence to support theories of predatory behavior -- a charge which competitors like to hurl against aggressive rivals -- and consumers almost always benefit from aggressive competition, particularly through lower prices.
  • Bigness per se is no offense -- but a presumption against "dominance" of one company in a market penalizes companies for achieving market success through efficiencies and lower prices.
  • Structural antitrust remedies attempt to substitute the judgment of economist expert witnesses and the courts for market-determined outcomes -- such as the potentially disastrous attempt to break up Microsoft into two separate companies.

Source: Gary S. Becker (University of Chicago and the Hoover Institution) and Kevin M. Murphy (University of Chicago), "Rethinking Antitrust," Wall Street Journal, February 26, 2001.

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