Antitrust Policy and Interest-Group Politics

By William F. Shughart II | Go to book overview
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3
Business Enterprise

Private business firms are the demanders of antitrust wealth transfers, but not as a monolithic interest group whose members have the same single-minded purpose. Indeed, it might well be said that private businesses (and consumers) are harmed overall by the existence of an actively enforced antitrust policy. The important point to recognize, however, is that winners and losers are created whenever government intervenes to correct a perceived antitrust problem, and the prospective gains to the benefitting parties provide incentives for using antitrust processes to their own advantage.

As a wealth transfer mechanism, antitrust policy is particularly valuable insofar as it cuts across the economy, applying to a broad spectrum of business practices. It supplies a general legal framework that can be called upon by many firms in a variety of industries to secure advantages over rivals or to obtain protection from competitive market forces. Thus, the law on mergers can be used by the managers and employees of firms targeted for takeover to prevent acquisitions that might cost them their jobs. The same law can be used by rival firms to block a merger that would result in the creation of a more efficient and, hence, more effective competitor. The law on price discrimination can be used by colluding firms to discipline a coconspirator found cheating on their price-fixing agreement; it can be used by an established firm to prevent the entry of an aggressive price cutter; or it can be used by the entrant to prevent established rivals from responding to new competition with lower prices. The law on vertical restraints of trade can be used by independent retailers to forestall the growth of competitors employing more efficient methods of product distribution. There are many more examples in this regard.

The decision to "invest" in antitrust as a method of competition is no different from any other capital-budgeting problem the firm confronts. Faced with a loss of sales to a new or established rival, the firm can respond by cutting price, improving product quality, increasing its advertising expenditures, or taking any of a number of other actions, or combination of actions, that normally characterize the

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