Category Archives: Antitrust

Dominick T. Armentano – Antitrust and Monopoly: Anatomy of a Policy Failure

Dominick T. Armentano – Antitrust and Monopoly: Anatomy of a Policy Failure

There are two main schools of thought on antitrust regulation. The traditional populist school prefers an active antitrust policy. Justice Brandeis famously advocated a “big is bad” rule, where big companies should be broken up due to their size, regardless of how consumers are affected. Other populists reach similar policy conclusions for different reasons, such as a larger vision of the good society.

This is usually contrasted with the Chicago approach, most famously exemplified by Richard Posner and Robert Bork. They advocate the consumer welfare standard, where big is ok unless it harms consumers. This is the general rule of thumb today, when antitrust enforcement is more restrained than in its smokestack-era heyday.

Armentano favors just getting rid of the whole antitrust mess altogether. He bases his approach mostly in economic reasoning, but also uses some logical and legal arguments and empirical evidence. He comes across as shrill and ideological at times, but his arguments are mostly sound.

The first two chapters give an overview of the economic and logical objections to antitrust regulation, and most of the rest of the book applies that theory to nearly a century of case law in various areas, from price fixing and price discrimination to tying and mergers.

Armentano’s book is surprisingly current for a book published in 1982. The post-Chicago antitrust slowdown means that only two major cases are missing—the 1980s AT&T breakup and the 1990s Microsoft case. With a populist president and progressive activists pushing for an antitrust revival against a mostly passionless opposition, this issue could get hot. What was old is new again, and could cause enormous consumer harm.

This book has its shortcomings. It relies too much on blackboard thinking for my taste, and Armentano understates the importance of regulatory capture and rent-seeking throughout, which both would have strengthened his position.

But his general approach needs to be a part of the debate. One side wants a lot of a bad thing. The other side also wants the bad thing, just less of it. Armentano argues that both sides have it wrong. Don’t have less of it, get rid of it.


New CEI Antitrust Video

My CEI colleagues have put together a short video on the recent push to ramp up antitrust enforcement. Click here to watch it on YouTube.


Richard Posner – Antitrust Law, Second Edition

Richard Posner – Antitrust Law, Second Edition

A foundational text in modern antitrust regulation. From the 1890 Sherman Act up until about the late 1960s, antitrust policy was strictly for lawyers and politicians. Posner, though a lawyer, incorporated economic analysis into antitrust questions. This was a controversial departure at the time, and came to be called the Chicago School approach.

Unlike more populist analysts, Posner placed results above aesthetics. Do large market share, mergers, tying, charging high or low prices, and more cause consumer harm? If so, then antitrust enforcement is appropriate. If not, then not. It is an empirical question, not an emotional one.

The consumer welfare standard displaced the previous Brandeisian “big is bad” standard. Posner’s work is vulnerable to criticism on public choice grounds, and his command of economic analysis not perfect. But his influence has been largely positive, and greatly improved policy outcomes in an area badly in need of reform.

The story is not over, though. The Trump administration and progressive activists would both like to revive big is bad; the coming years will see who prevails in this next chapter.

On a personal note, back in college I once had lunch at the same table as Posner. This would have been around the time this book’s second edition came out, though I don’t recall it being discussed. The conversation mostly revolved around prescription drug reimportation regulations, a hot issue at the time. Had I been more knowledgeable about Posner’s place in the law-and-economics movement, I would have loved to pick his brain about improving antitrust policy and other legal areas.

Frank H. Knight – The Economic Organization

Frank H. Knight – The Economic Organization

A short introduction to the economic way of thinking, published in 1933 by the legendary University of Chicago professor. Despite its brevity, it contains deep insights on monopoly and competition, long- and short-term thinking, and the place of economics in a life well lived.

An Antitrust Analogy

From p. 382 of Robert Bork’s 1978 book The Antitrust Paradox: A Policy at War with Itself:

One often hears of the baseball player who, although a weak hitter, was also a poor fielder. Robinson-Patman is a little like that. Although it does not prevent much price discrimination, at least it has stifled a great deal of competition.

Harold Demsetz, 1930-2019

Over at, Iain Murray, Kent Lassman, and I reflect on the great economist Harold Demsetz’s intellectual legacy.

An Antitrust Analogy

One of the biggest problems with antitrust regulation is that the statutes are so vague it can be difficult to tell what is legal and what isn’t. From p. 28 of Robert Bork’s 1978 book The Antitrust Paradox: A Policy at War with Itself:

To put the matter roughly, lawyers forming a partnership could lawfully agree on fields of exclusive specialization (which is market division) and the fees each should charge (price fixing), while the same lawyers, if they were not in a partnership, could not do these things lawfully.

The same logic applies to anything a company does in-house. Hiring an in-house accountant instead of using an outside firm is a form of vertical merger. So is hiring cleaning or cafeteria staff instead of using contractors. More than a century of case law has not settled the matter, at least for companies above a certain size (which also hasn’t been defined). The uncertainty can make companies hesitant to make efficiency-enhancing decisions that might benefit consumers.