INTRODUCTION: MOVEMENT ANTITRUST
Antitrust in the United States today is caught between its pursuit of technical rules designed to define and implement defensible economic goals, and increasingly political calls for a new antitrust "movement." The goals of this movement have been variously defined as combatting industrial concentration, limiting the economic or political power of large firms, correcting the maldistribution of wealth, controlling high profits, increasing wages, or protecting small business. None of those goals is new. (1) They have appeared and reappeared in the history of United States antitrust policy. Among the articulated goals of movement antitrust, low consumer prices often go unmentioned. (2)
In the 1960s, the policy historian Richard Hofstadter lamented the passing of the antitrust "movement" as one of the "faded passions of American reform." (3) In its early history, he observed, antitrust had a powerful movement quality but very few accomplishments in the courts. Later, it ceased to be a movement just as it was attaining litigation success. Hofstadter's essay appeared in a book entitled The Paranoid Style in American Politics. (4) He later explained that title as invoking "the sense of heated exaggeration, suspiciousness, and conspiratorial fantasy" that characterized movement politics in the United States. (5) Antitrust was no exception.
At about the same time, Robert H. Bork and Ward Bowman published another well-known essay addressing many of the same issues, although from a different perspective. In The Crisis in Antitrust (6) they complained that antitrust was forever "vacillat[ing] between the policy of preserving competition and the policy of preserving competitors from their more energetic and efficient rivals." (7) The result, they argued, was a haphazard mix of intelligent rules governing practices such as naked price fixing, together with senseless overly aggressive rules against imagined exclusionary practices, (8) and even condemning mergers simply because they produced cost savings. (9)
Bork borrowed heavily from this article when he wrote The Antitrust Paradox, which was published a little over a decade later. (10) There he noted anti-trust's very considerable rhetorical popularity, (11) but along with it a lack of fundamental understanding of antitrust law's economic purpose and effects, even among its practitioners. (12) At the same time, he observed that "[t]here has always existed in this country a populist hostility to big business, a hostility that is currently reinforced by the suspicion that major corporations are somehow to blame for hardships that have their origin elsewhere." (13)
Hofstadter's, Bowman's, and Bork's observations capture one of antitrust law's most enduring disconnects. On the one side is its "movement" quality, reflected by politicians and popular media as an appeal for a stronger and broader set of antitrust rules that are better able to serve the American economy's various constituencies. Often movement participants lack a serious understanding of economics and have wildly unrealistic expectations about what competition policy can accomplish, as well as inconsistent and even incoherent goals. Often accompanying this is considerable distrust and paranoia, much of it leveled at big business. (14)
On the other side are antitrust's much duller technical rules, driven by concerns for due process, economic efficiency, administrability, and testability. In contrast to the antitrust movement, Hofstadter observed, "the antitrust enterprise, as an institutional reality, now runs its quiet course without much public attention, and we lose sight of it." (15) He lamented that "[i]n the very years when it lost compelling public interest the antitrust enterprise became a force of real consequence in influencing the behavior of business." (16)
While Hofstadter, Bork, and Bowman might all seem like so much ancient history, their characterization of antitrust's dilemma is particularly relevant today. If anything, it more accurately describes the situation in the twenty-first century than it did when they were writing. Over the last fifty years antitrust has become much more technical, particularly in areas such as merger enforcement and exclusionary behavior, but also in more collateral areas such as assessing causation and measuring damages. As its technical competence has increased, its "movement" quality has faded into the background or become political noise. Simultaneously, technical antitrust has become less interesting to politicians, who cannot win elections by talking about the Herfindahl-Hirschman Index or average variable cost.
As a movement, antitrust often succeeds at capturing political attention and engaging at least some voters, but it fails at making effective or even coherent policy. The result is goals that are unmeasurable and fundamentally inconsistent, although with their contradictions rarely exposed. Among the most problematic contradictions is the one between small business protection and consumer welfare. In a nutshell, consumers benefit from low prices, high output, and high quality and variety of products and services. But when a firm or a technology is able to offer these things they invariably injure rivals, typically those who are smaller or heavily invested in older technologies. Although movement antitrust rhetoric is often opaque about specifics, its general effect is invariably to encourage higher prices or reduced output or innovation, mainly for the protection of small business or those whose technology or other investments have become obsolete. Indeed, that has been a predominant feature of movement antitrust ever since the Sherman Act was passed, and it remains a prominent feature of movement antitrust today. Indeed, some spokespersons for movement antitrust write, as Louis Brandeis did, as if low prices are the evil that antitrust law should be combatting. (17)
Nevertheless, mantras such as "industrial concentration" or "big business" have great political force. These terms provide almost nothing in the way of administrable rules while yet evoking an image of something big, bad, and powerful that government must bring under control. For example, here is the plank of the 2016 Democratic Party's platform on antitrust:
Large corporations have concentrated their control over markets to a greater degree than Americans have seen in decades--further evidence that the deck is stacked for those at the top. Democrats will take steps to stop corporate concentration in any industry where it is unfairly limiting competition. We will make competition policy and antitrust stronger and more responsive to our economy today, enhance the antitrust enforcement arms of the Department of Justice (DOJ) and the Federal Trade Commission (FTC), and encourage other agencies to police anti-competitive practices in their areas of jurisdiction. We support the historic purpose of the antitrust laws to protect competition and prevent excessively consolidated economic and political power, which can be corrosive to a healthy democracy. We support reinvigorating DOJ and FTC enforcement of antitrust laws to prevent abusive behavior by dominant companies, and protecting the public interest against abusive, discriminatory, and unfair methods of commerce. We support President Obama's recent Executive Order, directing all agencies to identify specific actions they can take in their areas of jurisdiction to detect anticompetitive practices--such as tying arrangements, price fixing, and exclusionary conduct--and to refer practices that appear to violate federal antitrust law to the DOJ and FTC. (18) The antitrust plank never references low consumer prices, or anything having to do with product quality. That is not because Democrats are not interested in low consumer prices. (19) Rather, they apparently believe that antitrust has little to do with it. The references to prices occur in other sections of the platform, devoted to such subjects as health and safety and the high price of pharmaceutical drugs. Those sections make no reference to antitrust law. (20) The only references to "consumers" occur in planks pertaining to unionization, affordable housing, Wall Street, banks and Dodd-Frank, and clean energy. (21) So according to the platform, while legal policy generally is concerned with high consumer prices, antitrust policy apparently is not. By contrast, the 2016 Republican platform never references antitrust, although it does contain a plank promoting a "competitive America," but focused entirely on lowering tax rates. (22)
The antitrust plank in the 2016 Democrat platform is actually one of the most detailed to appear in any platform by a major political party. (23) The catchphrases that it uses, however--"corporate concentration," "unfairly limiting competition," or "abusive behavior by dominant companies"--can mean practically anything depending on assumptions. The platform is peppered with references to "fair" or "fairness," including the antitrust plank, but with no reference point indicating how fairness should be assessed. Is it "fair" that consumers be asked to pay high prices in order to accommodate the shortcomings of some businesses; or conversely, is it "fair" that small businesses suffer simply because they are not able to compete with larger firms on price or quality; or is it "fair" that firms heavily invested in old brick-and-mortar distribution lose out to more technologically entrepreneurial firms? "Fairness" as an antitrust concern means nothing without a reference point or set of measurement tools.
As for specific practices, the antitrust plank in the Democrat platform singles out "tying arrangements, price fixing, and exclusionary conduct," saying nothing about mergers, other vertical restraints, or anticompetitive patent practices. In fact, the platform never mentions patents, although it makes frequent references to...