Yesterday's Antitrust Laws Can't Solve Today's Problems

Clinton says monopoly power is growing. That may be true. But she's wrong about how to stop it.

They didn't really stop Rockefeller, either.

Source: Keystone/Hulton Archive/Getty Images

One of the central premises of the “new liberal economics,” as described by the Hillary Clinton campaign, is the notion that monopoly power is growing and must be stopped by applying more antitrust law. While it is true that many indicators of market concentration are up, it’s less clear that antitrust law is an effective remedy.

Reading through old cases does not induce great faith in the contemporary usefulness of 19th- and 20th-century antitrust laws. In most areas of manufacturing there is far more foreign competition, if only potentially, than through most of the history of those laws.

For instance, the famous suits against Standard Oil, Kodak and Alcoa wouldn’t make sense in today’s globalized economy. There has recently been a glut of aluminum, and most of the supply comes from Russia, Asia and Australia. Apple and Android smartphones disrupted, and vastly improved, the camera market some time ago. Previously high oil prices were caused more by emerging-economy demand than by domestic monopolization.

Or consider the body of law assessing resale-price maintenance in the book trade. Today you can buy used books online. That constrains the prices of both used and new books, no matter how judges might rule. In 1998, the U.S. Justice Department initiated an antitrust suit against Microsoft, partly on the grounds that the company sought to extend its market power to browsers. Few people today think the company’s Internet Explorer browser failed because the government restored competitiveness; Firefox and Google  built better software. Yet prosecutors spent years distracting the talent of one of America’s most successful companies, as they had with IBM earlier in a 13-year case dropped in 1982.

Policy should instead focus on the real problems that depress living standards for the middle class and the poor. Rates of inflation have been high for housing, medical care and higher education, major budget items for many people. As for housing, there are harmful restrictions on cheaper building, but in the expensive areas there is no monopolistic landlord who owns all the housing stock. So that is not an antitrust issue, nor is university tuition for the most part.

On the other hand, there is a strong case that growing concentration in the hospital market has raised health-care costs. Some major metropolitan areas have only a small number of hospital chains. Part of the problem is that highly regulated environments encourage consolidation and larger firms to deal with compliance costs, so antitrust law won’t provide an easy fix. Nonetheless, hospitals probably should be the biggest area of concern for antitrust enforcers, as competition does not now operate freely.

Cable television is another area where anti-monopoly remedies might be appropriate, but keep in mind that cable is typically a government-created local monopoly. Antitrust law shouldn’t be the first lever to be applied, at least not until some kind of deregulation is further along.

More and more wealth is held in the form of intellectual property, and that trend is likely to continue. There are legitimate concerns about whether patents and copyright give many creators and corporations too long and too strong a period of exclusive use, and arguably that can be considered undue monopoly power. But the government, which created these monopolies, could weaken them without using antitrust law.

The major internet companies are a new target of antitrust attention, yet most of them give their main product away for free. Contrary to charges that they were going to stifle innovation, Google and its parent company, Alphabet, have led or subsidized innovation in driverless vehicles, artificial intelligence and wearable devices. Most major tech companies also are seeking to expand their innovative presence outside their main businesses, with artificial intelligence being a major new field of competition. Complainers about Amazon are more likely to be suppliers than consumers, the presumed beneficiaries of antitrust enforcement.

A lot of the good done by antitrust law is simply that it is there. In its absence, it is possible that the U.S. economy would have too much collusion and too many mergers.

We should not assume, however, that the antitrust cases that are brought are effective, or that there should be more of them. One study has demonstrated that prices were more likely to go up than down after an antitrust indictment. Antitrust seems more useful as a general deterrent, used sparingly, than as a specific problem-fixing device.

There’s a lot wrong with the contemporary American economy, but the case remains to be made that antitrust law will prove much of a useful response.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.