The One Minute Case Against Antitrust
Antitrust punishes the best companies
The list of antitrust targets reads like a Who’s Who of American business success stories. Standard Oil Company, Alcoa Aluminum Company, IBM, and Microsoft, are just a few. These companies were pioneers in developing new and beneficial products. Who doesn’t benefit from cheaper gasoline using methods pioneered by Rockefeller, the aluminum foil and light-weight aluminum parts invented by Alcoa, or the computer revolution, first in mainframes by IBM, and then in personal computing by Microsoft? These companies pioneered new industries and offered new products that were widely demanded by customers. The huge demand for their products and their large marketshare was a sign of how successful these companies were in selling products that many people wanted. Yet, that market share became the basis for antitrust lawsuits.
Antitrust is used by unscrupulous companies against their competitors
An honest businessman competes by selling a better product. It is not a coincidence that it is usually second and third-tier companies who use antitrust to hammer a more successful competitor. What does it say about the competitive spirit of a company that must cry to “mother” (i.e., the Federal Trade Commission) when the competition gets too tough? Antitrust is used by less successful businessmen to stifle competition.
Antitrust is arbitrary and non-objective; it is bad law
A good law is easy to understand and apply, so that one clearly knows in advance what is a crime and what is not a crime. Antitrust laws make it impossible to know whether one is committing a crime. Under antitrust, it can be illegal to charge less than your competitor (that is considered “price gouging” or “dumping”), to charge the same price as a competitor (that could be “collusion” or “oligarchy”), or to charge a higher price than your competitor (that could be “monopolistic behavior” or “destroying consumer surplus”). Thousands of lawyers and regulators extract hundreds of millions of dollars out of the economy wrestling with these questions. No one should be subject to such arbitrary law.
Capitalism doesn’t need antitrust
The great successes in business were achieved by companies that began small, and became large through innovation and lower prices. Antitrust did not make those successes happen. On the contrary, antitrust is poised like a guillotine at the throats of every businessman who has the foresight, perseverance and pluck to become successful. His very success, his large market share, puts a target on his back for unscrupulous competitors and eager bureaucrats.
Further reading
- Antitrust and Monopoly: Anatomy of a Policy Failure by Dominick Armentano
- “Antitrust” in Capitalism: The Unknown Ideal by Ayn Rand
- The Abolition of Antitrust, edited by Gary Hull
- Death by Antitrust: Mountain Health Care, R.I.P. by by S.M. Oliva
- Persecution of Microsoft is Immoral by Richard Salsman
I think you’re wrong. In the 80s, IBM was under consent decree, and therefore had to license an OS from Microsoft (MS-DOS/Q-DOS) instead of purchasing them, as monopolies want to do to competitors or those who can break their monopoly.
June 8th, 2007 | #
*by purchasing them, I mean buying the Microsoft company outright, and then raising price to consumers, etc…
June 8th, 2007 | #
I didn’t realize IBM licensed, rather than bought Microsoft’s operating system (or Microsoft itself) because of the antitrust consent decree. That transaction was famous in Microsoft’s history, since by retaining rights to the software, Microsoft established its dominance of personal computing software, an industry that subsequently grew extremely rapidly.
Although Microsoft in hindsight may have gotten an extra boost from the application of antitrust against IBM, that in no way justifies antitrust, which is rule by arbitrary government decree. Microsoft’s “gain” in this case was at IBM’s expense. Microsoft’s gain came by violating the rights of IBM. In fact, both parties rights were violated since since Microsoft was denied the option of selling its software (or the company) to IBM. It could only license the software.
The fact that a particular antitrust-dictated outcome such as this one appears beneficial in hindsight in no way justifies the government’s exercise of this arbitrary, tyrannical power. Clearly, even judging each antitrust action on its own, antitrust is not only violative of the right to property and freedom to contract of companies, but it also in nearly all cases stifles innovation, reduces economies of scale, and destroys wealth. The histories of the impact of antitrust on the great innovators, such as the companies mentioned above, bear this out.
June 9th, 2007 | #