A must-read on antitrust

June 2, 2009 by Alex Epstein

The provocatively titled column “Munchausen Mommies of Antitrust,” by the Wall Street Journal’s Holman Jenkins, is a must-read. In fact, just about everything by Jenkins, who brings a rare combination of facts and insight to every week’s Business World column, is a must-read.

Jenkins highlights two recent injustices perpetrated by enforcers of the antitrust laws — laws that supposedly protect us from the “anticompetitive” behavior of successful companies.

The first is the utter lack of due process that took place in the recent declaration by a European trustbuster that Intel owes the EU a $1.45 billion fine for antitrust violations. Jenkins observes “Not a whit of due process has yet taken place: Ms. Kroes’s agency acts as prosecutor, judge and jury.”

The second is the crippling uncertainty caused by the Obama administration’s rescinding of the Bush administration antitrust guidelines (for allegedly being too lax). “Christine Varney, antitrust chief at the Obama Justice Department, gave a speech this month conspicuously revoking Bush administration’s guidance on what activities would trigger antitrust inquiry — and replaced it with nothing. The more or less avowed goal was to create uncertainty in business. . . .”

And part of the effect, Jenkins argues, will be to give carte blanche to inferior competitors to complain to the government that their failures prove that the market is not “competitive.” In effect, Jenkins argues, it encourages them to exhibit (something akin to) Munchausen syndrome, in Jenkins’s words, “the term for those who fabricate symptoms or intentionally induce illness in order to make themselves the center of attention.” Munchausen failures can claim that the market is sick — and that the cure is for Doctor Sam to punish successful companies.

All of this is true. It’s important to understand, however, that the injustices perpetrated by antitrust law today in Europe and at home are not new — and they are certainly not mistaken applications of good laws. They are typical applications of laws that should not exist. The government’s sole economic job is to protect property rights and free trade. So long as it does this job, competition is free; no participant in a market has the ability to forcibly prevent competitors from offering a product or customers from buying it. The antitrust laws therefore are a hash of indefinable prohibitions on woozy “crimes” such as “restraint of trade,” “unfair competition,” and the like — which mean whatever an administration or bureaucrat want them to mean. As Ayn Rand explained,

The Antitrust laws—an unenforceable, uncompliable, unjudicable mess of contradictions—have for decades kept American businessmen under a silent, growing reign of terror. Yet these laws were created and, to this day, are upheld by the “conservatives,” as a grim monument to their lack of political philosophy, of economic knowledge and of any concern with principles. Under the Antitrust laws, a man becomes a criminal from the moment he goes into business, no matter what he does. For instance, if he charges prices which some bureaucrats judge as too high, he can be prosecuted for monopoly or for a successful “intent to monopolize”; if he charges prices lower than those of his competitors, he can be prosecuted for “unfair competition” or “restraint of trade”; and if he charges the same prices as his competitors, he can be prosecuted for “collusion” or “conspiracy.” There is only one difference in the legal treatment accorded to a criminal or to a businessman: the criminal’s rights are protected much more securely and objectively than the businessman’s.

For more on antitrust, read Rand’s “Antitrust: The Rule of Unreason” in The Voice of Reason. And for a practical example of the kind of heroic company that these laws persecute as “monopolists,” see my lecture “The Monopoly Myth: The Case of Standard Oil.”