Abolish Antitrust Law

Antitrust law has a storied place in modern American history, where it allegedly allowed authorities to thwart big bad monopolies out to bilk and milk consumers. But many of these past victories are more hollow than historic lore lets on.

Take the iconic Standard Oil case, launched in 1906. The company would eventually be found guilty of abusing monopoly power in the petroleum industry. But while some of Standard Oil’s practices may have harmed its competitors, they led to lower prices for consumers and a more efficient distribution process.

Or take the case where charges were filed in 1937 against the Aluminum Company of America, which had cornered most of the virgin aluminum ingot market. A federal appeals court found the company had not become a monopoly through some nefarious scheme or used its dominant position to charge excessive prices. Nonetheless, it unfairly excluded competition by “progressively [embracing] each new opportunity as it opened, and [facing] every newcomer with new capacity already geared into a great organization, thanks to having the advantage of experience, trade connection and the elite of personnel.”

More recent cases—from the IBM and Microsoft suits launched in the latter half of the 20th century to the Trump- and Biden-era efforts against Amazon, Google, and Meta—tend to be based on similarly flimsy premises.

For instance, the IBM case dragged on for 13 years before Assistant Attorney General William Baxter decided it was “without merit” and gave up. (Baxter suggested those who brought it may have been “trying to push the boundaries of antitrust prosecution beyond what the law provides.”) Meanwhile, the case “had the unintended consequence of raising prices,” according to the economists David Levy and Steve Welzer.

In a recent ruling against Google, a judge acknowledged that the company had earned its dominant position by offering “the industry’s highest quality search engine.” But by doing things like making deals to be the (easily changed) default on mobile devices, it allegedly engaged in illegally anticompetitive behavior.

Under U.S. antitrust laws, a business may earn its top spot in a given market through commendable actions—innovation, efficiency improvements, shrewd investments, novel business models, making a superior product, or some combination of these things—and the end result may be a product or service that consumers like and can afford. But because the company’s competitors (or some nebulous concept of competition) are harmed, the commendable conduct suddenly becomes criminal. That’s not only bad for consumers; it’s absurd.

The problem with antitrust enforcement starts with the statutes themselves. The Sherman Antitrust Act of 1890 bans activities “in restraint of trade or commerce.” Even the neutral Legal Information Institute at Cornell University describes the law as “broad and sweeping in scope” and notes that “the penalties for violating the Sherman Act can be severe.” Yet it’s also vague, allowing ample room for bureaucrats and government lawyers to use it against any company that becomes big and successful.

The Clayton Antitrust Act of 1914, while less vague, isn’t much better. It outlaws various activities—including mergers and acquisitions and certain business deals—insofar as they reduce competition. But since the bulk of business activities are built on a desire to outperform (and thus reduce) competition, all sorts of normal business activities can fit the bill if a bureaucrat gets a bug up his you-know-what about it.

The problem extends to the fact that no one can seem to agree on the purpose of antitrust law. Is it to protect American people from unscrupulous or predatory business practices? Or is it to ensure no company gets too big or too successful? Is the goal consumer welfare, or a federal guarantee that entrepreneurs have an even playing field?

Then there’s the way antitrust cases ignore dynamism and technological change. Time and again, we see authorities rushing to topple a product or service—the bundling of the Internet Explorer browser and Microsoft Windows 95 software, for instance—that is dethroned or diminished by market forces before an antitrust case against it even ends.

All of these problems are magnified by the way antitrust enforcers past and present see themselves as having a mission to shape “the distribution of power and opportunity across our economy,” as Federal Trade Commission Chair Lina Khan put it when she took over the agency in 2021. Leaders like Khan don’t just see picking winners and losers as an unfortunate side effect of enforcing antitrust law. They view it as their main mandate.

The result is uneven enforcement, with successful businesses attacked for practices considered fine when smaller companies use them; “solutions” that benefit a targeted firm’s rivals but not its consumers; and a business environment that discourages innovation and efficiency while interfering with the signals that guide a healthy marketplace.

Having a large market share may just mean that a company is really good at what it does. In a free market, nothing stops someone from stepping in, doing it better, and stealing away market share. Harmful monopolies are propped up by government policies that grant special privileges to certain firms—as was the case with AT&T’s phone service monopoly in the 20th century. But this isn’t an argument for antitrust law. It’s an argument for ending government–granted monopolies.

It’s time we abolish antitrust law and let businesses actually succeed (or fail) on the merits rather than because the government has blessed or targeted them. To the extent that large businesses engage in specific objectionable behavior, such as fraud, we can use other criminal laws to address it. We don’t need overly broad and easily abused prohibitions on restraint of trade and competition.

The post Abolish Antitrust Law appeared first on Reason.com.

Source: https://reason.com/2024/11/14/abolish-antitrust/