United States Antitrust Law - Criticism

Criticism

There are two main kinds of monopolies: de jure monopolies, which are those that are protected from competition by government actions, and de facto monopolies, which are not protected by law from competition and are simply the only supplier of a good or service. Advocates of laissez-faire capitalism advocate that the only type of monopoly that should be broken up is what they call a coercive monopoly, that is the persistent, exclusive control of a vitally needed resource, good, or service such that the community is at the mercy of the controller, and where there are no suppliers of the same or substitute goods to which the consumer can turn. In such a monopoly, the monopolist is able to make pricing and production decisions without an eye on competitive market forces and is able to curtail production to price-gouge consumers. Laissez-faire advocates argue that such a monopoly can only come about through the use of physical coercion or fraudulent means by the corporation or by government intervention and that there is no case of a coercive monopoly ever existing that was not the result of government policies.

Free market economist Milton Friedman states that he initially agreed with the underlying principles of antitrust laws (breaking up monopolies and oligopolies and promoting more competition), but that he came to the conclusion that they do more harm than good.

Critics also argue that the empirical evidence shows that "predatory pricing" does not work in practice and is better defeated by a truly free market than by anti-trust laws (see Criticism of the theory of predatory pricing).

Thomas Sowell argues that, even if a superior business drives out a competitor, it does not follow that competition has ended:

In short, the financial demise of a competitor is not the same as getting rid of competition. The courts have long paid lip service to the distinction that economists make between competition—a set of economic conditions—and existing competitors, though it is hard to see how much difference that has made in judicial decisions. Too often, it seems, if you have hurt competitors, then you have hurt competition, as far as the judges are concerned.

Alan Greenspan argues that the very existence of antitrust laws discourages businessmen from some activities that might be socially useful out of fear that their business actions will be determined illegal and dismantled by government. In his essay entitled Antitrust, he says: "No one will ever know what new products, processes, machines, and cost-saving mergers failed to come into existence, killed by the Sherman Act before they were born. No one can ever compute the price that all of us have paid for that Act which, by inducing less effective use of capital, has kept our standard of living lower than would otherwise have been possible." Those, like Greenspan, who oppose antitrust tend not to support competition as an end in itself but for its results—low prices. As long as a monopoly is not a coercive monopoly where a firm is securely insulated from potential competition, it is argued that the firm must keep prices low in order to discourage competition from arising. Hence, legal action is uncalled for and wrongly harms the firm and consumers.

Thomas DiLorenzo, an adherent of the Austrian school of economics, found that the "trusts" of the late 19th century were dropping their prices faster than the rest of the economy, and he holds that they were not monopolists at all.

Ayn Rand, the American writer, provides a moral argument against antitrust laws. She holds that these laws in principle criminalize any person engaged in making a business successful, and, thus, are gross violations of their individual expectations.