Dominick T. Armentano’s arguments against all antitrust laws in his 1999 work Antitrust: The Case for Repeal are influenced by Austrian – and, particularly, Rothbardian – economic ideas. Armentano advocates wholesale abolition of all antitrust laws, contending that a piecemeal reform effort to make antitrust laws more reasonable is insufficient and runs the risk of being too readily reversed.
Armentano notes further than antitrust laws have often been employed against innovative businesses that have expanded output and reduced prices. Given that the 1890 Sherman Act was supposed to advance consumer interests, there seems to be a paradox with regard to its actual effects – which have been shown to reduce consumer welfare by restricting consumer options and raising prices. Innovative businesses are acting in the interest of consumers, and laws that inhibit such organizations are clearly opposed to consumer welfare.
Armentano provides two explanations for this paradox. First, antitrust laws are just a form a regulation and have been captured by the regulated producers to protect their interests to the detriment of consumers and more innovative rivals. This view is a novel application of the Capture Theory of Regulation, whose author, George Stigler, was a strong proponent of antitrust laws and vehemently denied the claim that antitrust was a form of regulation. Prior to the 1990s, most economists shared Stigler’s perspective. However, in the years immediately before and following the publication of Armentano’s book, the view of antitrust as a form of regulation has become increasingly widespread.
A second explanation given by Armentano regarding the antitrust paradox is that there exists a widespread fundamental confusion over the meaning of competition. Antitrust laws and enforcers do not approach competition as a dynamic process of discovery, but rather as a static measure of the market. Because a misunderstanding of competition exists, it leads to a misunderstanding of monopoly and “monopolizing behavior.”
Antitrust laws are not specific on what constitutes behavior that is “monopolizing” or “in restraint of trade.” The enforcers and the courts define these terms, and their definitions are pervaded by a severely flawed idea of what competition is.
Armentano further complements Austrian insights with Public Choice analysis, which concerns the self-interest of those making the rules. The Austrian critique focuses on the ignorance of those in charge – the fact that they do not understand and cannot understand the complex dynamic market forces which they are attempting to regulate, since nobody is capable of acquiring the knowledge to make the kinds of decisions that antitrust laws require to have their intended effects. Further, the Public Choice aspect of Armentano’s critique alleges that it is not necessarily in the self-interest of antitrust regulators to use the law to protect consumers, as was intended.
Armentano’s main thesis in the book is that even though we have seen a more rational approach toward antitrust enforcement over the last thirty years, antitrust laws continue to perpetrate a tremendous amount of damage against the consumers. Thus, a mere reform of the antitrust laws to make them more “reasonable” does not suffice. During the mid-to-late 1970s and 1980s, there came about a wholesale change in the enforcement of antitrust laws. Judges became more willing to give the benefit of the doubt to the market, and antitrust authorities ceased to enforce the law as stringently as was previously the case. However, Armentano fears that many of these gains have already been partially reversed, as the 1998-2001 Microsoft antitrust case illustrates. In order to avoid a reversion to the ultra-strict and often disastrously irrational antitrust enforcement of the 1940s, 1950s, and 1960s, it is necessary to repeal the antitrust laws altogether.
Pongracic, Ivan. Lecture on Horizontal Mergers and Armentano’s Antitrust: The Case for Repeal. Hillsdale College. Hillsdale, MI. November 29, 2007.
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