Antitrust Punishes Success

Devlin Barrett of the Associated Press performs a useful service in reporting the Obama administration’s plans to expand antitrust enforcement. It would have been pleasant had Barrett bothered to quote a single critic.

The antitrust laws are a fraud. The premise behind them is that on a free market companies can reach unjust or unfair or economically damaging levels of economic success. But this is simply not the case. On a free market, customers can choose whether to buy a company’s product, and others can choose to enter competition.

Instead, it is political power that creates harmful monopolies — though such monopolies generally are exempt from antitrust enforcement.

Throughout the history of the laws, antitrust actions have been brought by less-successful competitors and governmental agents with an axe to grind to punish successful companies at the expense of consumers and economic health.

Companies targeted by antitrust action are characterized by skillful and efficient management and operations, economies of scale, and wildly successful products at competitive prices. Typical results of antitrust action are higher prices and less-useful products. (This is merely a summary; for details see The Abolition of Antitrust and The Causes and Consequences of Antitrust.)

As Barrett summarizes, the Obama administration claims “lax enforcement by the Bush administration contributed to the current economic troubles.” But nowhere in the article is any support offered for that view. The fact is that lax antitrust enforcement had absolutely nothing to do with the modern economic crisis, which was instead caused by federal encouragement of risky loans and investments. Increased antitrust enforcement will only dampen economic recovery.

Barrett suggests that two companies at high risk of antitrust action are Intel and Google — two companies that have been enormously successful because they provide enormously valuable goods and services. The idea that these companies should be politically punished because they are successful is grotesque. (I personally benefit enormously from both companies; for instance, I am using Intel processors and Google software to publish this blog post.)

Here is Barrett’s most chilling line: “[Assistant Attorney General Christine] Varney said the Obama administration would try to follow the historic lessons of The Great Depression in pursuing antitrust cases even in a troubled economy.”

The historic lessons of the Great Depression are that politicians hampered economic recovery by going on witch hunts against businesses and business leaders. The fact that the Obama administration sees the Great Depression as some sort of model is truly frightening.

Here is a telling passage from Amity Shlaes’s The Forgotten Man (page 344):

[Robert] Jackson… had collected a set of specific instructions from Roosevelt… to define and prosecute antitrust violations, and, especially, to go after individuals. Sometimes — when he knew the targets, or liked them — Roosevelt suggested that Jackson soften. And always, Roosevelt took care not to harm those with special power to harm him. Learning from Jackson of a possible action against motion picture combines, Roosevelt said, “Do you really need to sue these men?” and asked that they be brought in for a talk. But other times he egged Jackson on.

This typifies what antitrust actions are all about — arbitrary political power brought against the successful for the “crime” of success.

2 thoughts on “Antitrust Punishes Success”

  1. I don’t believe antitrust law is as unnecessary as you claim.

    If customers were smart and avoided short-term thinking, antitrust wouldn’t be necessary. But, people just aren’t like that. If they can buy a product at a better price today, they don’t worry about where the higher priced competitors will be in five years.

    Take the microprocessor industry and Intel vs. AMD for example. Intel has a lot more money than AMD. If Intel undersold AMD long enough to drive AMD out of business, Intel would stand unchallenged and their prices would then go up a lot.Investment in modern chip fabrication plants requires billions of dollars. A new replacement AMD would have a very hard time getting investment to compete with Intel, when investors all know Intel would simply begin the price war again.

    In the microprocessor business, a big enough company could keep competitors out of the market indefinitely without any government interference either for or against.

    It is almost the same in telecommunications. It costs so much to run fiber and wire to individual homes and cross country that without open access requirements the bigger companies with control of the infrastructure could block smaller competitors.

    Microsoft has been getting some of its biggest competition from open source software which can only compete because its being given away for free. MS has used their market position to undercut competition, used control of their OS APIs to break competitors application software, used control of their Office software to break competitors compatible operating systems, and other dirty deeds.

    Just think how much worse they’d be in the absence of any government control.

    Maybe, just maybe, after experiencing years of abuse from large companies, customers would begin to take care to avoid buying from potential monopolies even when the price is attractive. Many large companies do implement “two source” policies themselves when buying critical supplies. It’d be a lot more difficult for consumer groups to implement. And in a way, representative government is a consumer group.

  2. Your claims are complete nonsense. With respect to microprocessors, you’re just spinning idiotic theory out of thin air that has no theoretical or historical support. If you don’t like Microsoft, then buy Apple, as I do, or some other competitor.

    The government’s role is to prevent force and fraud and protect contracts. Microsoft does not have any proper legal requirement to make its software amendable to the products of others. Of course, as you note, if a company does not address compatibility issues to the satisfaction of customers, the company is setting itself up for long-term problems.

    Your entire premise is that people are just too stupid to live their lives without the “help” of federal politicians. Any self-respecting person rejects your premise, utterly.

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