Federalism in Antitrust

By Hahn, Robert W.; Layne-Farrar, Anne | Harvard Journal of Law & Public Policy, Summer 2003 | Go to article overview

Federalism in Antitrust


Hahn, Robert W., Layne-Farrar, Anne, Harvard Journal of Law & Public Policy


I.   INTRODUCTION                                                   878
II.  THE PROBLEMS WITH FEDERALISM IN
     ANTITRUST ENFORCEMENT                                          884

A.   The Legal Process as a Political Tool                          884

B.   A Free Ride for States                                         887

C.   Conflicting Competition Policies                               891

III. A CASE STUDY OF FEDERALISM IN ANTITRUST
     ENFORCEMENT: UNITED STA TES V. MICROSOFT                       892

A.   Rent Seeking                                                   892

1.   Lobbying--Politics as Usual                                    892

2.   The Litigating States' Proposed

     Remedy--A Voice For Competitors                                896

     a. Raising a Rival's Costs                                     897

     b. Intellectual Property Giveaways                             900

B.   Free Riding                                                    903

C.   The Arguments For and Against
     State Involvement                                              905

IV.  THE GLOBAL IMPLICATIONS OF FEDERALISM IN
     ANTITRUST: IS THE WORLD READY FOR A GLOBAL
     ANTITRUST AUTHORITY                                            907

A.   National Antitrust Resources                                   908

B.   National Rent Seeking                                          910

C.   Conflicting Jurisdictional Approaches                          912

D.   Toward A Global Antitrust Authority                            915

V.   CONCLUSIONS                                                    919

Several scholars have suggested that states should playa much more limited role in antitrust enforcement, especially in matters that are national or global in scope. In this paper, we analyze the states' part in the Microsoft case--a case that illustrates the costs of state intervention in antitrust matters that extend beyond state borders. Here, the states' involvement lengthened the lawsuit, complicated the settlement process, and increased both legal uncertainty and litigation costs. These results followed from the states' focus on parochial interests rather than broader concerns for efficiency and equity. We conclude that a state's antitrust enforcement authority should be restricted in matters that extend beyond its borders.

After analyzing the motivations for state behavior in federal antitrust, we consider whether restrictions should apply to federal antitrust authorities in cases with international implications. Though a global competition authority could, in principle, be designed to maximize economic well-being, practical and political obstacles appear to rule this option out, at least in the short term.

I. INTRODUCTION

Antitrust regulation is an important government tool for curbing excesses in a market economy. (1) These excesses can result from a variety of behaviors, such as illegal acts to maintain a monopoly or collusion with the goal of raising prices. (2) In reducing the incentive for firms to engage in certain types of anti-competitive behavior, antitrust regulation is intended to promote consumer welfare. (3) Remedies used in antitrust regulation range from breaking up a company to imposing financial penalties on a firm for inappropriate conduct. (4)

The United States was one of the first countries to enact antitrust laws and has traditionally been one of the most active enforcers of them. (5) The U.S. government is the primary enforcer. (6) But the individual states have enacted their own antitrust laws and, at various times, have been quite active in their enforcement. (7)

In recent years, more states within the United States, as well as many countries, have taken an active role in antitrust policy. (8) With a larger number of players in the antitrust regulation arena, there are likely to be increased conflicts as different nations and states pursue different policies.

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