The Antitrust Religion

Published by EH.NET (September 2009)

Edwin S. Rockefeller, The Antitrust Religion. Washington, DC: Cato Institute, 2007. vii + 123 pp. $10 (hardcover), ISBN: 978-1-933955-09-0.

Reviewed for EH.NET by Claire Hammond, Department of Economics, Wake Forest University.

Since 1890, interested parties have asked, ?What exactly is antitrust?? Various critics of antitrust have replied that antitrust is a paradox (Bork 1978), a myth (Armentano 1972), folklore (Arnold 1937), and a national religion (Schonfeld 1965, p. 329). Edwin Rockefeller expands on this last idea in his short polemic, The Antitrust Religion. In this book he seeks to show how antitrust can be explained as a religious faith with its own cult of priests (economists, lawyers, and bureaucrats) who were formed by the ?legend of Standard Oil,? and who are bent on using government power to protect consumers from the mostly phantom evils of corporate consolidation and market power. For Rockefeller, antitrust as a quasi-religious faith is a bad thing because faith in antitrust is a faith without reason. Its practitioners are deluded at best or, more likely, in it for their own self-aggrandizement. Antitrust sins are vaguely defined and arbitrarily punished leaving businesses and corporations operating with the knowledge that the antitrust lightning bolt could hit them either out of the blue, or worse, as they become successful.

Edwin Rockefeller brings a wealth of knowledge and experience to his case against antitrust. He is a lawyer and author with decades of experience in antitrust litigation, a former head of the antitrust law section of the American Bar Association, and past chairman of the advisory board of the Bureau of National Affair?s Antitrust and Trade Regulation Report.

In chapter 1, Rockefeller argues that antitrust is a term that everyone thinks they understand but that no one can actually define. It is spoken of as if it has an existence outside of the antitrust statutes and antitrust law. Rockefeller points out how the antitrust community is wont to use phrases like ?antitrust looks to perfect competition for guidance? or ?antitrust suffered a defeat? or ?antitrust defines the rule of the game.? But he claims that statements like these are fundamentally meaningless and dangerously porous. ?Antitrust can?t be amended, reformed, or repealed. It is an intuitive mix of law, economics, and politics; a mystical collection of aspirations, beliefs, suspicions, presumptions, and prediction. Antitrust is … independent of the provisions of the antitrust statutes? (p. 5).

In chapter 2 Rockefeller focuses his criticism specifically on the antitrust community, describing it as a self-righteous club which seeks to preserve the antitrust status quo from which it currently benefits. Law professors, the American Bar Association?s antitrust law section, government officials, and economics experts are accused of promoting a self-serving antitrust program through the use of ambiguous and sinister-sounding terms like market power, predatory pricing, cutthroat competition, and entry barriers. The main goal, according to Rockefeller, is ?spreading the antitrust gospel? in order to provide full and expanding employment to antitrust professionals (p. 25).

Chapter 3 gives an overview of development of antitrust enforcement practice and highlights the inconsistencies that have developed in antitrust enforcement since the Sherman Act was passed. He argues that while economic theory appears to give antitrust a rational basis it fails to dampen unreasoned fear of market power and corporate consolidation. To Rockefeller economics has been used in service to the current tendency of antitrust practitioners to define antitrust any way they wish. The result is that there is no predictable or consistent enforcement of statues by judges. Instead, antitrust decisions are not applications of law but policy decisions with the Department of Justice and the Federal Trade Commission determining the rules of the game.

Chapter 4 hones in on the phrase ?market power.? Using definitions from the American Bar Association and from economics he argues that ?determinations of the market and market power are made through a self-hypnotic process of circular reasoning? (p. 43). Here, Rockefeller buttresses his argument with extensive references to Frederick Rowe (1984) who made a similar claim that the term market ?has no objective content outside itself. Without empirical referents, identification of the market is perforce arbitrary, a fa?ade for decisions elsewhere derived? (quoted by Rockefeller, p. 43).

Chapter 5 tries to upend ?belief in the Standard Oil Legend? which Rockefeller claims supports the almost visceral reaction people have to monopolization. Rockefeller reviews John McGee?s (1958) and others? histories of the case which debunk the notion that Standard Oil was a predatory monopoly. Rockefeller acknowledges the attempts by antitrust experts to clarify what it means to be found to be a monopoly in violation of the Sherman Act but concludes that cases from Alcoa to IBM to Microsoft show that lacking a clear definition of monopoly the antitrust statutes are used to penalize the successful. Antimonopoly cases are determined not by the facts but by the skill of the antitrust practitioner.

Chapter 6 is about anti-merger law and practice and the ?pseudo-science? used in the DOJ/FTC Horizontal Merger Guidelines. Rockefeller gives examples of several cases which illustrate that merger enforcement is unpredictable and borders on government harassment. For Rockefeller it is clear that the law and its enforcement have led to a situation where ?all mergers are illegal ? some may be allowed? (p. 65). Anti-merger practice is not law enforcement but ?whimsical government regulation of mergers? (p. 72). Chapter 7 on price fixing follows in a similar vein with the blanket condemnation of price fixing used as another example of unreasoned and unreasonable antitrust practice.

Chapter 8 is the conclusion. In it Rockefeller pleads for more education of judges, government officials, and law professors about the ambiguity, inconsistency, and partiality inherent in antitrust enforcement. For Rockefeller this education is not to improve antitrust enforcement but to speed its demise. His conclusion, ?although today?s antitrust community is alive and well, antitrust is atrophying. It is becoming a relic, an anachronism, the irrelevant debris of past political demagoguery. Education in the antitrust facts of life could accelerate the process? (p. 103).

This book is an interesting read. At a minimum Rockefeller asks questions that should give any antitrust practitioner pause. How could any observer tell if an antitrust lawyer were incompetent? What precisely is antitrust anti? Using ascertainable facts, is there any way to distinguish legitimate from illegitimate competitive efforts by a single firm? Is there any good reason that professional baseball enjoys some antitrust exemption while professional football and basketball do not? Why does the antitrust community ignore the 1933 Appalachian Coals decision in which the Court declined to condemn a combination of coal producers set on fixing the price of coal? Are there any non-ideological grounds on which we can argue that price fixing is always wrong while merger to accomplish the same result is not? If we think deeply about these questions the ideological and political tendencies in antitrust enforcement might be reduced.

References:

ABA Section of Antitrust Law. 2005. Market Power Handbook. Chicago: ABA Publishing.

Armentano, D.T. 1972. The Myths of Antitrust. New Rochelle: Arlington House.

Arnold, T.W. 1937. The Folklore of Capitalism. New Haven: Yale University Press.

Bork, Robert H. 1978. The Antitrust Paradox: A Policy at War with Itself. New York: The Free Press.

McGee, John. 1958. ?Predatory Price Cutting: The Standard Oil (N.J.) Case.? Journal of Law and Economics I (October): 137-169.

Rowe, Frederick M. 1984. ?The Decline of Antitrust and the Delusion of Models: The Faustian Pact of Law and Economics.? Georgetown Law Journal 72: 1511-1570. Schonfeld, Andrew. Modern Capitalism. New York: Oxford University Press, 1965, p. 329.

U.S. Department of Justice and Federal Trade Commission, Horizontal Merger Guidelines. Issued 1992, revised 1997.

Claire Hammond is Professor of Economics at Wake Forest University. She regularly teaches antitrust economics to undergraduates. She is the co-author, with J. Daniel Hammond, of Making Chicago Price Theory: Friedman-Stigler Correspondence 1945-1957 (Routledge, 2006). She is currently working on a history of the treatment of abortion by economists.