Antitrust Paradox

"The Antitrust Paradox was an extremely important book, a real example of how ideas can have a major impact in the world, for better or for worse. It was an important corrective to some of the badly thought-out overreaches in antitrust policy at the time and advocated for concepts that are still relevant today. It was written by Robert Bork, a Yale law professor who had spent the previous several years at the Justice Department. He advanced the notion that a consumer welfare standard should be central to antitrust. That is, competition policy should protect consumers not competitors. While lawyers may debate if this was the actual intent of the original U.S. competition laws, like the Sherman Act, the idea has substantial economic merit. When governments prop up failing businesses, the result is higher prices, worse products, and potentially worse jobs. Looked at this way, some practices that had previously raised concern—like “predatory pricing”—start to look more favorable because they offer lower prices for consumers and their only “victims” are less efficient businesses that cannot match the prices. Moreover, technical economic analysis offers the hope of assessing whether mergers or anti-competitive actions by businesses help or hurt consumer welfare. Bork combined this correct general idea with a specific set of views informed by his reading of economists at the University of Chicago, most notably Aaron Director (thus the name “Chicago School”), to argue for an almost blanket presumption against any concern with many of the practices that previously had bothered the courts, like vertical combinations (e.g., when a supplier and distributor get together), predatory pricing, tying products and price discrimination. (In fairness, Bork was not entirely laissez faire and was concerned with collusion and price fixing.) “When governments prop up failing business, the result is higher prices, worse products, and potentially worse jobs” Bork’s reading of both the law and the economics, together with Richard Posner, a set of professors at Harvard Law School and others, has become the standard understanding of competition for judges in the United States and around the world, as Tim Wu showed in The Curse of Bigness . A generation of judges were raised on these ideas and even though the statute governing antitrust has not changed, the way courts interpret it has. It has become increasingly difficult for the government to block a merger or restrain anti-competitive conduct. Today, American courts are increasingly tolerant of three, two or even one player in a market."