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A matter of antitrust: the debate over the role of government as referee of market competition

Authors
Disciplines
  • Economics
  • Law
  • Political Science

Abstract

A Matter of Antitrust: The Debate Over the Role of Government as Referee of Market Competition On May 12, 2009, Christine Varney, the assistantattorney general of the Department of Justice’santitrust division, made a speech to the U.S. Chamber of Commerce. She declared a renewed interest by the federal government in pursuing more aggressive action against companies with substantial market power. “As antitrust enforcers, we cannot sit on the sidelines any longer — both in terms of enforcing the antitrust laws and contributing to sound competition policy as part of our nation’s economic strategy.” Varney, known for her career as a prominent Washington attorney and member of the Federal Trade Commission (FTC) between 1994 and 1997, was referring to what she saw as a neglect of the government’s role in policing some types of corporate business activity. The last time the federal government actively pursued a number of high-profile antitrust cases was in the 1990s. That period, however, was a temporary change from the long-term decline in the number of government-launched antitrust cases — a trend that started as early as the 1970s. The policy debate now hinges on assumptions about whether the modern market economy is especially prone to harming consumers or whether markets are vibrant enough to punish firms that try to engage in anticompetitive behav- ior. In other words, whether the government should play an active role as a referee of competition in the marketplace. Economists and legal scholars have pondered these issues for decades. While there is wide agreement that cartels reduce consumer welfare and should be dismantled, they have proven hard to maintain in a modern developed economy with low barriers to entry. Today, disagreement instead exists over the ability of individual firms to act in a near-monopolistic fashion. Whatever consensus has formed on that issue, however, suggests that government might have only a limited ability to improve on market outcomes. The Evolution o

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