Thursday, August 20, 2009

Reasons to support antitrust laws

As a general rule, I'm critical of antitrust laws. I think they are a blunt instrument and unfair in their application because it's very hard for most people to know when they are in violation of the laws until they have been prosecuted and/or convicted. There are, of course, some arrangements, like price fixing cartels, that have long been held per se in violation, but otherwise it is hard to know what counts as an antitrust violation. Another reason that I oppose antitrust laws is that most of its goals--smaller, more competitive businesses, lower prices for consumers, etc.--often contradict each other (sometimes it's the largest "monopoly" that can outproduce smaller businesses and offer its goods at a cheaper price). Moreover, I believe most of these goals can be realized through other forms of regulation.

Still, I think there are some reasons to support antitrust laws. And while they don't change my belief that these laws are ill-considered, I still find the reasons compelling enough to list;

1. Some corporations can become so powerful that they act almost as states within states, or as imperium in imperio. Antitrust can be a good counterpoint to this power.

2. Some companies, like banks, might become "too big to fail" and thus need to be bailed out when in trouble. Antitrust might alleviate this condition. (I do believe, however, that other forms of regulation might work better than the hail mary shot of an antitrust prosecution that punishes people in many cases for simply being fortunate enough to succeed at business.)

3. Antitrust laws have been around (in the US and elsewhere, but I'm talking especially about the US) for a long time, at least since 1890 at the federal level and even earlier in some states. These laws have become so involved in the way that businesses operate and the way that contracts are formed that simply to repeal the antitrust laws would wreck more havoc than keeping them on the books. (This is an argument I got from reading Donald Dewey's The Antitrust Experiment.)

I find reason #3 to be most compelling. Still, I think the laws can be modified to be fairer and more rational.

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