What Is Antitrust Laws in Economics

The case for antitrust law does not strengthen when economists look at the type of cartel cases brought by the government. As George Stigler (1982, p. 7), often a strong advocate of antitrust law, summarized, “economists have their fame, but I don`t think antitrust law is one of them.” In a series of studies conducted in the early 1970s, economists assumed that there were significant losses to consumers due to restrictions of competition and built models to identify markets where these losses would be greatest. Next, they compared markets where the government enforced antitrust laws with markets where governments were supposed to enforce the laws when consumer welfare was the government`s primary concern. The studies unanimously concluded that the magnitude of consumption losses due to monopolies played little or no role in government enforcement. Economists also looked at certain types of government-initiated cartel cases to determine whether anti-competitive acts were likely in these cases. The empirical answer is usually no. This is true even in pricing cases where evidence suggests that companies targeted by the government did not set prices or did so without success. Similar findings emerge from studies of merger cases and various antitrust remedies obtained by the Government; In both cases, the results contradict the alleged objective of antitrust law, the welfare of consumers. However, the law has ancient roots, and over time it has changed a lot in its details. Moreover, politics and its objectives remain controversial, even in their modern form.

In a sense, most modern controversies stem from or are a reaction to the great intellectual reconceptualization of the law and its objectives that began in the 1960s. In particular, academic critics in the United States have pushed for a revision of the law`s objectives so that it serves only a narrowly defined microeconomic objective of allocation efficiency, while it has also traditionally sought to prevent the accumulation of political power and protect small businesses, entrepreneurs, and individual freedom. Although these criticisms have had significant success in the United States and, to a lesser extent, in Europe and elsewhere, the conclusions remain controversial. Specific disputes remain as to the general purpose of the law, namely whether it brings net benefits, how a set of specific doctrines should be designed, how it should be applied and whether it is really suitable for developing countries and small market economies. To answer these questions, judges have sometimes turned to economists for advice. In the early years of the antitrust law, however, economists were of little help. They had not comprehensively analysed agreements such as tied selling, exchange of information, resale pricing and other business practices challenged in antitrust proceedings. But when business revealed areas of economic ignorance or confusion about various trade deals, economists turned to solving the various conundrums. Antitrust laws are designed to promote and protect competition or, if you prefer, competitive processes in various “trades” or “relevant markets.” That alone is their own goal. They are not intended to punish large companies simply because of their size or economic success. Most importantly, the underlying design or implementation of antitrust laws has never been anti-market or anti-business.

On the contrary, antitrust laws are designed to promote a market economy and healthy competition in each market, while curbing the abuses that sometimes occur in different markets. Trade restrictions. Under antitrust laws, it is also illegal for two or more independent unaffiliated companies to jointly engage in business practices that interfere with competitive processes in a properly defined relevant market. There are three categories of restrictions on illicit trade: (1) restrictions that are in themselves illegal; (2) Restrictions imposed under the so-called “rule of reason; and (3) restrictions condemned under the “quick search” doctrine. The author of this article would argue that the “competition authority” in Europe is too inclined to regulate and restrict the market economy, but it seems to be improving over time, and it has certainly played a useful role in cracking down on national discrimination by one EU country against companies from other EU countries. Mexico, on the other hand, suffers from a lack of competition law: it looks too much like a “corporatist” society in which key industries are dominated by a group of interconnected companies. The United States seems to be doing very well compared to Mexico or the European Union, but our antitrust laws rely too much on law enforcement, which should only be reserved for punishing overt fraud such as auctions, extortion and blatant price fixing by cartels. Canada`s antitrust laws are similar to ours, but place less emphasis on criminal sanctions.

Canadian competition authorities treat competition issues as the most appropriate for private litigation and civil orders, not for the application of criminal law, which makes sense. On the other hand, Canadians largely copied our antitrust innovations and then cleverly modified them. They learned from us, and we could bear to learn from them. One of the most disturbing statistics in antitrust law is that for every case filed by the government, private plaintiffs file ten. Most cases are filed to hinder competition, not to help. According to Steven Salop, a former cartel official in the Carter administration, and Lawrence J. White, an economist at New York University, most private antitrust lawsuits are filed by members of one of the two groups. The most numerous private actions are brought by parties who are in a vertical agreement with the defendant (e.B. dealers or franchisees) and who are therefore unlikely to have suffered a truly anti-competitive infringement.

Typically, these cases are attempts to convert simple contractual disputes (which can be offset by ordinary damages) into three damages under the Clayton Act. If public interest reasons do not explain antitrust law, then what happens? A final round of studies has empirically shown that antitrust enforcement models are motivated, at least in part, by political pressures that have nothing to do with overall economic well-being. For example, antitrust law is useful for politicians to stop mergers that would result in plant closures or job relocations to their home districts. As Paul Rubin has documented, economists do not consider cartel cases to be motivated by the pursuit of economic improvement. Rubin reviewed all the articles written by economists cited in a textbook of large industrial companies (Scherer and Ross 1990), which is generally conducive to antitrust law. According to economists` assessments, more bad than good cases have been highlighted. “In other words,” Rubin wrote, “it is highly unlikely that the net effect of actual antitrust policy is to deter ineffective behavior. Factors other than the search for effectiveness must determine antitrust policy” (Rubin 1995, p. 61). What could be these factors? William Shughart continued a point proposed by Nobel laureate Ronald Coase (1972, 1988), arguing that economists` support for antitrust law derives significantly from their ability to benefit from it personally, in the form of full-time jobs and lucrative part-time work as antitrust experts: “Far from contributing to improving antitrust enforcement, economists have, for reasons of self-interest, had the public actively support and assist law enforcement agencies and private plaintiffs in the use of the Sherman.

Clayton and FTC Acts to subverti competitive market forces” (Shughart 1998, p. 151). Most cartel practitioners once believed that vertical mergers (i.e., a company that acquires another that is either a supplier or a customer) reduce competition. Today, most antitrust experts believe that vertical integration is generally not anti-competitive. Congress passed the Interstate Commerce Act in 1887. Designed to deregulate railways, it said railways must charge passengers fair fees and publicly disclose those fees, among other things. It was the first example of antitrust law, but it was less influential than the Sherman Act, passed in 1890. The Sherman Act prohibited contracts and conspiracies that restricted trade and/or monopolized industries. For example, the Sherman Act states that competing individuals or companies cannot set prices, divide markets, or attempt to manipulate bids. The Sherman Act established specific penalties and fines for violating the conditions.

Since the old theories of monopolization died, new ones have been developed. In the 1980s, economists began to design new models of monopolization based on strategic behavior, often relying on theoretical constructions of the game. They postulated that companies could monopolize markets by increasing competitors` costs (sometimes referred to as “cost theft”). For example, if Firm A competes with Firm B and provides both inputs itself and B, A could increase the cost of B by charging B a higher price. It remains to be seen whether economists will eventually accept the thesis that increasing a rival`s costs may be a viable monopolization strategy, or how the practice is treated in court. But courts have sometimes imposed antitrust liability on companies that are supposed to own “essential facilities” when they deny their competitors access to those facilities. Antitrust law is competition law. Why, then, is it called “antitrust law”? The answer is that these laws were originally established to control abuses threatened or imposed by the huge “trusts” that emerged in the late 19th century.

These trusts controlled or threatened to control entire national markets for rail, steel, oil, banking and related trades. Antitrust laws have been put in place to ensure that these trusts do not permanently undermine competition in these or other markets. .