The Antitrust Modernization Commission

But that acceptance deserves reconsideration. For more than two decades, the willingness of policymakers to rethink the presumption that regulation benefits consumers has driven the deregulation of the transportation, communications, banking, and electricity sectors. Since economic regulations transfer wealth, they inevitably attract political entrepreneurs seeking entry or price regulation to hobble—or even preempt—competition. Antitrust regulation is similarly vulnerable to exploitation, and this vulnerability infects antitrust at every level.

Thus, a skeptical interpretation of antitrust policy—including recent challenges against Microsoft, Intel, Orbitz, the Oracle-PeopleSoft merger, the AOL Time-Warner merger, and the rejected EchoStar-DirecTV and Staples-Office Depot mergers—is that antitrust benefits political entrepreneurs rather than consumers. Antitrust enforcement, like any economic regulation, often increases price and decreases output by undermining misunderstood or disregarded efficiencies.

Antitrust advocates often compare real-world markets with what economists call “perfect competition,” in which large numbers of buyers and sellers for each product exist, and no seller can raises price since consumers would merely switch to a competitor. Compared to this ideal, strategic rivalry, size, and a commitment to winning through voluntary activities such as “collusion” and “tying”—the hallmarks of ordinary competition, properly understood—can become unlawful. As the saying goes, if a firm’s prices are higher than everyone else’s, that implies monopoly power; if everyone’s prices are the same, collusion is apparent; prices “too low” can signify cutthroat competition and predatory pricing. No one is innocent.

In defiance of basic notions of property rights and wealth creation, antitrust regards the economic pie as largely fixed and imagines that one firm can grab too much of the “social output” or otherwise unfairly restrain competition.

However, if the business practices routinely targeted by antitrust actually have efficiency justifications, that implies that enforcement itself creates inefficiencies and harm.