The Immorality of Antitrust Law

By Armentano, D. T. | Freeman, August 1999 | Go to article overview

The Immorality of Antitrust Law


Armentano, D. T., Freeman


The economic inefficiencies associated with antitrust law enforcement are now generally acknowledged. The regulation of mergers and acquisitions hampers the efficient reallocation of corporate assets. The antitrust regulation of product prices and innovation (as in the recent Microsoft case) protects less-efficient business competitors and harms consumers. A century of antitrust litigation-both public and private-confirms that the laws restrain the competitive process and make economic activity less efficient.

Economic issues aside, the antitrust laws also interfere with commonsense notions of liberty and justice, as Adam Smith remarked in The Wealth of Nations. Pro-antitrust economists never tire of citing Smith's famous condemnation of price fixers: "people of the same trade seldom meet together. . . but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices." But those same economists rarely acknowledge that Smith immediately went on to assert that "it is impossible, indeed, to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice." Smith, a professor of moral philosophy, was opposed to antitrust law on practical and ethical grounds.

How do antitrust laws interfere with liberty? All the important antitrust statutes (Sherman Act, Clayton Act, Federal Trade Commission Act) regulate or prohibit purely voluntary or consensual business activity. For example, free-market monopolization implies that consumers choose freely to support only one supplier of some product or service. Freemarket prices-whether they are described as discriminatory, or predatory, or collusiveare all determined through voluntary agreement and exchange. Mergers involve voluntary acquisitions of stock or assets. Tying contracts or exclusive dealing agreements are voluntary arrangements to purchase one good and forgo the purchase of another. Since liberty (in a business context) implies the natural right to make any agreement to trade legitimately owned property on any terms mutually acceptable, then antitrust law must interfere with liberty.

Microsoft Case

Consider the recent Microsoft antitrust case. The software company clearly has a property right to its software. It has a property right to license (or not license) its software to any PC manufacturers on any terms mutually agreeable. It has a property right to integrate its Web browser, Internet Explorer, into its Windows 98 operating system. And it has a property right to prohibit any licensee's deleting any part of its Windows operating code. The federal government's and the states' attempts to regulate all these peaceful activities (and more) are not only irrational but clearly invasive of liberty and property rights as well.

The antitrust suit against Microsoft is also absurdly unjust. Microsoft is the world's premier software corporation. It earned its market position by innovating a user-friendly operating system at minimal cost to the consumer. And rather than "restrain" trade, it has licensed its operating system to hundreds of PC manufacturers here and abroad.

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