Category Archives: Antitrust

Ron Chernow – Titan: The Life of John D. Rockefeller, Sr.

Ron Chernow – Titan: The Life of John D. Rockefeller, Sr.

I read this as part of my recent research on antitrust regulation; Rockefeller’s Standard Oil remains a touchstone case in the field. Chernow does a good job of portraying Rockefeller as neither devil nor saint. Just as people today get hyper-emotional about billionaires such as Bill Gates or Jeff Bezos, Rockefeller was a hotly divisive figure in his day. His detractors bordered on the obsessive, especially Ida Tarbell, who comes across as apoplectic as Koch and Soros obsessives do today.

Rockefeller’s father was a quack doctor selling natural remedies who left his family for months at a time, and turned out to be a bigamist. Rockefeller was his father’s opposite in almost every way, except for their shared insistence on always paying their debts on time. He also had his credulous side, believing in homeopathy and other quack remedies. He retained a strict Baptist faith for his entire life, which left him with a rather narrow mind—though this didn’t stop him from having a case of wandering hands in his old age that was creepy even by the standards of the time.

On the other hand, Rockefeller always tithed, both before and after he made his fortune, and had great concern for charity and the poor. Despite his wealth, he does not come off as a greedy man. He didn’t seem to enjoy money so much as putting in the required work to make money, and succeeding at it. He also played a large role in the founding of the University of Chicago, whose famous economics department would likely have appalled Rockefeller, who was a trade protectionist and favored a managed cartel economic system that was in vogue during the Progressive Era.

Chernow’s focus is more on the man than the company, but Standard Oil is entwined enough with Rockefeller that the reader sees just how quickly the company grew, and how it became a popular lightning rod. The ongoing controversy over Standard Oil’s discounted rail shipping rates comes off as just plain dumb, just as the controversy over tying web browsers into operating systems was in the Microsoft antitrust case a century later. Chernow is no free-market ideologue, but the fact that Standard Oil continued to reduce prices and expand output reveal how tenuous its dominant market share—as is the fact that it nearly collapsed as electric lights displaced kerosene lamps. If the automobile hadn’t emerged around this time, and Standard hadn’t been clever enough to pivot to gasoline and lubricants and away from kerosene, the big 1911 antitrust suit would likely never have happened. Monopolies cannot last without government help—though Rockefeller is not entirely blameless on this front.

Rockefeller’s long life also allows Chernow to treat the Rockefeller children and grandchildren in some detail, and as with any family, they were a varied lot. Some shared his business acumen. Some tried but weren’t quite up to the task. Grandson Nelson became New York governor and Gerald Ford’s vice president. Daughter Edith took to a bohemian lifestyle, and even fell in the psychoanalyst Carl Jung’s circle, which ended up being quite expensive, and more than a little scandalous.


Interview on the Case against Antitrust Law

Here is an interview I recently did on Wayne Crews’ and my paper on antitrust law. My segment starts at about the 57-minute mark.

The paper is here.

Antitrust Regulation Is Turning into a Campaign Issue

Both parties are making antitrust regulation a 2020 campaign issue. Neither President Trump nor most of the Democratic candidates are proposing improvements. Over at the Washington Examiner I take a closer look:

After a two-decade lull following the Microsoft case, big antitrust enforcement cases are back in vogue. Both political parties are making antitrust regulation a 2020 campaign issue. Regulators, politicians, and voters have reasonable concerns about concentrated corporate power. But few policies are easier for big companies to game than antitrust regulation. Reformers should favor having fewer regulations for special interests to capture, not more.

Read the whole piece here. See also Wayne Crews’ and my new paper, “The Case against Antitrust Law: Ten Areas Where Antitrust Policy Can Move on from the Smokestack Era.”

Blocking the T-Mobile-Sprint Merger: Competition, Rent-Seeking, and Uncertainty

Nationwide 5G networks are coming. They will expand possibilities for everything from smartphone applications to GPS to streaming video, and will enable new technologies that have not yet been invented. President Trump wants the U.S. to be a world leader in 5G adoption. But his Justice Department’s antitrust division might hinder that goal by blocking the proposed merger between Sprint and T-Mobile.

The antitrust division’s rationale is that the deal would decrease the number of major wireless carriers from four to three. But my colleague Jessica Melugin argues that without the merger, the number of carriers might actually be two: “T-Mobile and Sprint will [need to] be able to combine their resources [in order to] stay competitive with Verizon and AT&T, and hopefully help the mobile communications industry in the United States win the race to build the first 5G network.” Together, they might survive. Apart, both might go under.

On the other hand, the rule of thumb is that 90 percent of mergers are failures, remember. This could well be the next AOL-Time Warner. Nobody knows how Sprint-T-Mobile would turn out, including the Justice Department, as well as the companies themselves. But unlike antitrust regulators, Sprint and T-Mobile have skin in the game, and thus a stronger incentive to make the right decision.

Then there is the rent-seeking angle. As my colleague Wayne Crews notes: “It’s also important to note that invoking antitrust laws in this case is de facto corporate welfare for Verizon and AT&T. It means they can stand pat rather than reacting to dynamic changes to the marketplace.”

Third, there is the uncertainty angle. There are no set criteria for what makes a merger legal or illegal. Regulators decide at their own discretion—and politics are often involved, as with President Trump’s recent unsuccessful attempt to block the AT&T-Time Warner merger (Time Warner owns CNN, which is often critical of Trump).

There are ways to measure market concentration, such as the Herfindahl-Hirschman Index. But its numbers are easy to manipulate to reach any conclusion—just define the relevant market however narrowly or broadly you want, and you can generate a number showing any desired degree of market concentration. The Federal Trade Commission has a set of merger guidelines, but they are not binding and can easily be ignored if politics or other merit-unrelated factors are more important at the moment.

This regulatory uncertainty has costs far beyond whatever happens with the Sprint-T-Mobile deal. Even if the merger goes through, and a merged T-Mobile-Sprint proves a viable 5G-era competitor, the fact that mergers are approved or denied at a whim will continue to have its chilling effect on companies far outside of technology or communications. For some companies, the upside is not worth the cost in legal fees, political engagement, and potential bad publicity. This is consumers’ loss, not just entrepreneurs’ and investors’.

For more reasons to be skeptical not just of the move to stop the Sprint-T-Mobile merger, but of antitrust regulation in general, see Wayne Crews’ and my just-released paper, “The Case against Antitrust Law: Ten Areas Where Antitrust Policy Can Move on from the Smokestack Era.”

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

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.

Read more:

New Study: The Case against Antitrust Law

Antitrust regulation is a complex, multifaceted issue. It brings together insights from law, economics, political science, history, philosophy, and other disciplines. Right now both political parties are ramping up their antitrust rhetoric, and it will likely be a live issue throughout the 2020 election cycle. A working understanding of how antitrust regulation works is important for understanding why it works so poorly, and should ultimately be abolished. To that end, Wayne Crews and I have a new study out, “The Case against Antitrust Law: Ten Areas Where Antitrust Policy Can Move on from the Smokestack Era.”

If you prefer the short version, here is a press release. We will also be running a series of blog posts hitting the main arguments. Often, a frequent drips-and-drabs approach to learning an issue is as effective as one intensive sitting. The initial posts will sketch out broader themes of antitrust regulation and the main sides of the debate. After that, we will go through the items on our “Terrible Ten” list of failed antitrust policies that should be abolished.

For additional CEI antitrust resources, we also have a dedicated landing page at Wayne’s and my full study is here.

Robert H. Bork – The Antitrust Paradox: A Policy at War with Itself

Robert H. Bork – The Antitrust Paradox: A Policy at War with Itself

Probably the most influential book ever written on antitrust policy, though it has its flaws. I analyze several of its arguments in an upcoming paper; I’ll try to remember to update this post with a link when the paper is out.

From its Progressive Era beginnings, antitrust law was dominated by lawyers who disdained economics, and it showed in the quality of their policies and court decisions. During the Depression and the New Deal, President Roosevelt mostly abandoned antitrust law in favor of government-approved, or even government-managed cartels, in a similar disregard of economics. This model was mostly abandoned after World War II, when regulators resumed antitrust enforcement. Prosecutions reached record levels by the late 1950s and early 1960s.

Around that time, a new law and economics movement was underway, especially at the University of Chicago. Bork was one of many scholars who were part of it, along with Aaron Director, George Stigler, Ronald Coase, Richard Posner, and many others. They proposed, instead of attacking the Brandeisian “Curse of Bigness,” moving to a consumer welfare standard. Under this thinking, big isn’t automatically bad. Antitrust measures should only be taken if it can be proven that a company is causing consumer harm. Bork wasn’t the first to make this argument, but he was the most influential, and The Antitrust Paradox remains the most widely cited book on the subject, by friend and foe alike (this writer is somewhere in between).

Bork and other consumer welfare standard advocates, while an improvement over Brandeisian populism, don’t get everything right, at least in my view. Better to get rid of bad policies altogether than simply use them less frequently, as Bork favors. But his compendium of case law, economic reasoning, and legal history is immensely useful regardless of one’s priors. While not the breeziest of reads, Bork does occasionally show some flashes of wit, such as when he compares the Robinson-Patman Act’s attempt to control prices to a baseball player who might be a lousy hitter, but balances it out by also being a poor defender.