Tuesday, June 2, 2009

Harm to Competitors or Harm to Competition

The Wall Street Journal has an interesting piece in its opinion section by George Priest, a Yale University Law School professor of antitrust law. He notes that the Justice Department issued a report in 2008 addressing appropriate antitrust approaches, and that Christine Varney, the new Assistant Attorney General for Antitrust has rejected it outright. According to Priest, the report was not a rehash of the Chicago-school antitrust approach (which is an approach I like), but an approach more moderate. Ms. Varney has denounced the report outright.

The issue seems to be an old one in antitrust. Should antitrust focus on harm to competitors or on harm to competition? That is, should the focus be on the fact that some firms lose in the competitive process, and if the winner is large or grows large, antitrust should step in and "correct" the situation? Or, should the focus be on harm to the competitive process? Collusion is an example of something that harms the competitive process. Predatory behavior can also harm the competitive process, but the existence of firms harmed by a competitor is not evidence of predation.

Priest notes that it appears Ms. Varney thinks US policy should emulate European policy. This is strange in a sense, since European policy came to emulate US policy in the post-war period. Even in the 1950s, cartels were legal in a number of European countries. But in recent years, the EU's antitrust focus has been on large firms in the IT area who have been successful. Microsoft and Intel are the two prime examples. (I wonder whether EU regulators would have decided differently if Microsoft and Intel were European firms.)

There was a time when American antitrust focused more on harm to competitors than harm to competition. In the last thirty years, it has been wiser and focused more on harm to competition. The return to harm to competitors does not bode well for the competitiveness of the American economy in coming years. It might pay to recall that in the 1960s there were many who thought General Motors should have been sued by the antitrust authorities because it had monopoly power and could harm its competitors. Does anyone think so today?

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