CEI Makes the Case against the Use of Antitrust Law

This is a CEI press release for Wayne Crews’ and my new paper on antitrust reform, cross-posted from CEI.org

The Competitive Enterprise Institute today released a report making the case that government use of antitrust law to break up big companies has a chilling effect on long-term investment and innovation and harms competition and consumers.

In “The Case against Antitrust Law: Ten Areas Where Antitrust Policy Can Move on from the Smokestack Era,” co-authors Ryan Young and Wayne Crews argue that the renewed call for use of antitrust law by policymakers on both sides of the aisle is dangerous for both consumers and producers. Young and Crews make the case that antitrust provisions of law should be repealed.

“While advocates of antitrust enforcement believe its use will bolster competition, the facts show the mere threat of antitrust penalties have a chilling effect on entrepreneurs and their ability to innovate,” warned Ryan Young, CEI senior fellow and report co-author. “Repealing antitrust laws in favor of a market-based approach to competition would reduce regulatory uncertainties for businesses and foster an environment where companies and entrepreneurs can innovate, which only benefits consumers.”

The antitrust issue has taken on greater urgency as politicians – both Republicans and Democrats – push for more aggressive antitrust enforcement. Policymakers in both the United States and the European Union have expressed an interest in using antitrust law to break up big technology companies like Facebook, Apple, Amazon, Netflix, and Google.

“Despite the calls for more antitrust regulation from Washington, the best outcome for consumers and a competitive marketplace would be to repeal antitrust laws and regulations entirely,” said Wayne Crews, CEI Vice President for Policy and report co-author. “Subjecting our dynamic economy to the policies of the smokestack era would be devastating for the many types of innovation we are seeing in the modern, diverse marketplace. Consumers benefit from competition and innovation, not heavy-handed government intervention and regulation.”

The report makes several key recommendations, including:

  • Repeal the Sherman Act of 1890. If a company is making extraordinary monopoly profits, the only way it can keep competitors at bay is to use government to protect its position from competitors. The solution is taking away the government’s power to protect such companies from competition.
  • Stop equating mergers with monopoly. Horizontal mergers – between companies competing in the same market – reduce the number of competitors in a given market while increasing their average size and are a red flag for antitrust regulators. But size or market concentration of an entity or industry should not be an antitrust offense, far from it. In an era in which it is readily apparent and agreed-upon that we need larger-scale infrastructure, and further expect novel ventures like commercial space travel, some firms and industries of the future need to be far larger than what we see today. Laws and regulators should not be concerned with size but whether the company attains its size through competition or from government favors.
  • Stop worrying about “predatory pricing.” Antitrust regulators can punish a company if it charges lower prices than its competitor, under the guise of predatory pricing. The idea is that a company can sell its wares at a loss in order to gain market share, perhaps even causing competitors to go bankrupt. But the only way for a “predator” undercutting its “prey” to keep a permanent monopoly is to permanently sell at a loss. That results in bankruptcy, not monopoly.
  • Repeal the Robinson-Patman Act. Price discrimination is selling goods to different people at different prices and is regulated by the Robinson-Patman Act. Common examples of price discrimination include putting products temporarily on sale, giving bulk discounts for large quantity orders, or membership programs. There is much uncertainty around what is permissible and what is illegal price discrimination, making the Robinson-Patman Act unworkable and unenforced. Repealing it would take away needless uncertainty and give consumers and businesses peace of mind.

View the report and the rest of its recommendations, The Case against Antitrust Law: Ten Areas Where Antitrust Policy Can Move on from the Smokestack Era by Ryan Young and Wayne Crews.

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