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Antitrust: The Case for Repealcritics do not support the repeal of antitrust laws; in their view, there is an appropriate role for antitrust policy in afree-market economy, although one

THE CASE FOR REPEAL

REVISED 2ND EDITION

Ludwig von Mises InstituteAuburn, Alabama

All rights reserved Written permission must be securedfrom the publisher to use or reproduce any part of this book,except for brief quotations in critical reviews or articles.The publisher has attempted throughout this book to distin-guish proprietary trademarks from descriptive terms by fol-lowing the capitalization styles used by the manufacturers.First edition, titledAntitrust Policy: The Case for Repeal,origi-nally published by the Cato Institute, 1000 MassachusettsAvenue, Washington, D.C 2001.

Copyright©1999 by the Ludwig von Mises Institute

Reprinted in 2007 by the Ludwig von Mises Institute

Ludwig von Mises Institute, 518 West Magnolia Avenue,Auburn, Ala 36832; www.mises.org

ISBN: 978-0-945466-25-3

Preface vii

3 Competition and Monopoly: Theory and

5 Price Discrimination and Vertical Agreements 69

6 Horizontal Agreements: Mergers and Price

even for merriment and diversion, but the versation ends in a conspiracy against the public,

con-or in some contrivance to raise prices It is sible, indeed, to prevent such meetings, by any law which either could be executed/ or would be consistent with liberty and justice. But though thelaw cannot hinder people of the same trade fromsometimes assembling together, it ought to donothing to facilitate such assemblies; much lessrender them necessary

impos Adam Smith

The Wealth of Nations

The flurry of federal and state antitrust activity against firmssuch as Toys"R" Us, Staples, Intel, and Microsoft may signalthe beginning of an unfortunate new era in enforcement.Antitrust regulation, like a relentless Terminator, is back inbusiness and the economic havoc it threatens is consider-able.

My position on antitrust has never been ambiguous:All

of the antitrust laws and all of the enforcement agencyauthority should be summarily repealed The antitrust appa-ratus cannot be reformed; it must be abolished

It is said that much is risked in calling for repeal Any callfor repeal is likely to galvanize those interests committed to

a return to the old-style, traditional enforcement policies Inaddition, the antitrust "establishment"-attorneys, consult-ants, antitrust agency bureaucrats-would probably step upits attack on those who intend, from its perspective, to fur-ther "weaken" antitrust policy Abolitionists would again

be portrayed as pro-business and anti-consumer, devoid ofany concern for consumer welfare or economic fairness.The most serious danger, presumably, would be that a prin-cipled opposition to all antitrust could delay importantantitrust reforms or even reverse some of the slightadmin-

istrative reforms already achieved

Similarly, any serious movement to repeal is said to runthe risk of alienating the support of those critics of tradi-tional policy most responsible for the modest antitrust reformsthat we have seen to date The majority of important antitrust

Antitrust: The Case for Repeal

critics do not support the repeal of antitrust laws; in their

view, there is an appropriate role for antitrust policy in afree-market economy, although one that is reduced inscope from the traditional understanding They wouldargue that antitrust is still necessary for combating cartels,very large horizontal mergers, and bona fide predatorypractices

I emphatically disagree There certainly are risks in ing for repeal, but there are even greater risks in not push-ing the intellectual argument against antitrust to its logicalconclusion I will argue that the case against antitrust reg-ulation-any antitrust regulation-is far stronger than evenits most important critics are willing to acknowledge I willargue that the employment of antitrust, even against privatehorizontal agreements, cannot be justified by any respectablegeneral theory or empirical evidence But even more practi-cally, I will argue that the very modest administrative reformsthat we have seen can only be temporary They were, afterall, only administrative reforms, and we have already fallen

work-back into the quagmire of more traditional enforcementpolicies The greater risk would be to remain content withsome modest "reform" agenda while leaving the entireantitrust institutional structure of private litigation, agencyenforcement, and court review essentially in place It would

be far better in an entirely practical sense to abolish all ofthese institutional arrangements and simply be done withthe greater risk

Many of the arguments I develop and cases , discuss inthis book will be familiar to readers of my Antitrust andMonopoly.1 New readers who find these ideas stimulat-ing-or infuriating-may wish to pursue some of them ingreater depth elsewhere.2 I intend, with this revised edition

1Dominick T Armentano, Antitrust and Monopoly: Anatomy of a Policy Failure,

2nd ed (Oakland, Calif.: Independent Institute, 1990).

2Robert H Bork, The Antitrust Paradox: A Policy at War with Itself (New York: Basic Books, 1978);· Yale Brozen, Concentration, Mergers, and Public Policy (New

ofAntitrust: The Case for Repeal, to reach a wider audience

and to promote a greater public understanding of the caseagainst antitrust regulation Such an understanding stillappears necessary

York: Macmillan, 1982); Fred L Smith, Jr., "Why Not Abolish Antitrust?"Regulation 7

(january/February 1983): 23-28; Frank H Easterbrook, "The Limits of Antitrust," Texas Law Review63 (August 1984): 1-40; Fred S McChesney, "law's Honor Lost: The Plight

of Antitrust,"Antitrust Bulletin31 (1986): 359-82; William Shughart II,The Organization

ofIndustry (Homewood, III.: Richard D Irwin, 1990); and Fred S McChesney and William F Shughart II,TheCausesand ConsequencesofAntitrust(Chicago: University

of Chicago Press, 1995).

1

Although it is difficult to summarize more than a century ofantitrust enforcement in one observation, it is undeniablytrue that the antitrust laws have often been employedagainst innovative business organizations that have expand-

ed output and lowered prices That is most obvious in vate antitrust cases (90 percent of all antitrust litigation),but it is also evident in the classic government cases aswell Since antitrust regulation (at least the Sherman Act)was allegedly designed to prohibit business activity harm-ful to consumers' interests, much of antitrust policy as prac-ticed, appears terribly misguided and might be termed a

pri-"paradox.'"

The alleged paradox can be explained in several ways Oneapproach is to challenge the "public interest" origins of antitrustpolicy.2 If the laws were originally meant to protect less efficientbusiness organizations from competition rather than to pro-mote the interests of consumers, then there is no paradox.From that perspective, antitrust regulation is just another histor-ical example of protectionist rent-seeking legislation, the overalleffect of which is to lessen economic efficiency.3

1 For examples of the view that antitrust laws were created to serve consumers, see Hans Thorelli, The Federal Antitrust Policy (Baltimore, Maryland: The Johns Hopkins Press, 1955); and Robert H Bork,The Antitrust Paradox:APolicy at War with Itself(New York: Basic Books, 1978).

2rhomas J Dilorenzo, "The Origins of Antitrust: An Interest-Group Perspective,"

International ReviewofLaw and Economics5 (1985): 73-90.

3See, for example, Bruce L Benson, M.L Greenhut, and Randall G Holcombe,

"Interest Groups and the Antitrust Paradox,"Cato Journa/6 (Winter1987): 801-18; or

Antitrust: The Case for Repeal

It can also be argued that there has traditionally existedserious theoretical confusion over the meaning of "compe-tition." That confusion may have misled the courts and theadministrators of antitrust law.4 For example, when a firmlowers its price, is that competition or an attempt to monopo-lize? When a firm gains market share, is that evidence ofefficiency or a threat to competition? When business merg-ers are restricted by law, is competition enhanced orrestrained? When a firm engages in expensive research andinnovation that competitors cannot easily duplicate, is thatmonopolization? Faulty theorizing on these issues couldexplain a public policy attack on economic efficiency in thename of preserving competition

Economic Theory and Antitrust Policy

The theoretical foundations of antitrust policy oped generally from neoclassical microeconomics andwere refined by scholars specializing in industrial organiza-tion And although industrial organization (10) theoryremained deeply rooted in pure competitioW and puremonopoly models, 10 economists in the late 1940s and1950s increasingly focused their analyses on those indus-tries that lay between pure competition and absolutemonopoly Their goal: to understand the relationshipsbetween market structure, business· behavior, and overalleconomic performance

devel-Early 10 economists generally came to accept a ministic relationship between market structure and econom-

deter-ic performance If markets were competitively structured(small firms, homogeneous products, and ease of entry),then the market process led automatically to an allocation

William Baumol and Janusz Ordover, "Use of Antitrust to Subvert Competition,"

Journal of Law and Economics28 (May 1985): 247-65.

4See, for example, Thomas J Dilorenzo and Jack C High, "Antitrust and Competition, Historically Considered,"Economic Inquiry26 (July 1988): 423-35.

of resources whereby price, marginal cost, and ~inimum

average cost were all equal Alternatively, high market centration, collusion among firms, economies of scale, orproduct differentiation could create barriers to entry andmarket power that would misallocate economic resources.Early empirical data on market concentration and firm profit-ability appeared to support the general 10 hypothesis thatcompetitively structured markets performed better thanconcentrated markets

con-Itwas a short step from microeconomic theory, regressionanalysis, and some engineering studies on optimum plant size

to recommendations concerning appropriate public policy Ifpoor market structure led to economic inefficiency, then gov-ernment antitrust regulation might correct such "market fail-ures." For example, antitrust regulation could reduce orrestrain industrial concentration (anti-merger policy), restrictpredatory practices, prohibit horizontal price and outputagreements (anti-collusion· rules), and discourage other agree-ments within and among firms (prohibitions against tyingagreements and resale price maintenance) that might restraintrade and competition Barriers to entry that appeared to shel-ter so-called dominant firms (product differentiation, for ex-ample) could be attacked under the antitrust laws to makethe marketplace more efficient

The structure-conduct-performance perspective becamethe primary intellectual justification for traditional antitrustpolicy in the 1950s and 1960s.5 Within that framework,several classic antitrust cases were brought to curb pricediscrimination,6 tying agreements/ increasing industrial

5See, for example, Phillip Are~da,Antitrust Analysis: Problems, TextCases,2nd ed (Boston: little, Brown, 1974); or EM Scherer,Industrial Market Structure and Economic Performance,2nd ed (Boston: Houghton Mifflin, 1980).

6 1n the Matter of the Borden Company,381 FTC 130 (1958);Borden Company v FTC,381 E 2nd 175 (1967).

7 Fortner Enterprises, Inc v United States Steel Corporation and United States Homes Credit Corporation,394 U.S 495 (1969).

Antitrust: TheCasefor Repeal

concentration,8 and the "exclusionary" practices and highmarket share of United Shoe Machinery9 and InternationalBusiness Machines.10

Theory Revisionism and Policy Reform

Criticism of the structure-conduct-performance work and of traditional antitrust regulation increasedsharply in the 1970s The so-called "new learning" chal-lenged some of the theoretical assumptions of the older 10paradigm (economic uncertainty 'generally replaced per-fect information in the newer economic analyses, for exam-ple) and questioned many of its important empirical pre-dictions.11 New learning theorists such as Harold Demsetzand Yale Brozen argued that increasing market concentra-tion was not necessarily associated' with inefficiency ormonopoly profits and that increased concentration couldlead to an increase in market efficiency that benefited con-sumers.12 In addition, careful reexaminations of earlierantitrust cases demonstrated that much of the historicalenforcement effort had been entirely misplaced By the early1980s, each part of the traditional justification for vigorousantitrust enforcement had come under severe criticism byeconomists and law professors That intellectual criticismhelped pave the way for some modest changes in antitrustenforcement

frame-8Brown Shoe Company v United States,370 U.S 294 (1962);FTC v Procter & Gamble Company,386 U.S 568 (1967).

9United States v United Shoe Machinery Corporation,110 F Supp 295 (1953).

10United States v International Business Machines Corporation, Docket no 69,

Civ (ONE) Southern District of New York (1969).

11 For an early collection of critiques of antitrust policy, see Harvey Goldschmid,

H Michael Mann, and J Fred Weston, eds.,Industrial Concentration: The New Learning

(Boston: Little, Brown, 1974).

12See,for example, Harold Demsetz, "Industry Structure, Market Rivalry, and Public Policy,"JournalofLaw and Economics16 (April 1973): 1-10; and Yale Brozen,

"Concentration and Profits: Does Concentration Matter?"Antitrust Bulletin19 (1974): 381-99.

The so-called antitrust revolution of the late 1970s andearly 1980s was evidenced by several important factors.First, there was a decided shift in the mix of antitrust casesinitiated by the Department of Justice and by the FederalTrade Commission (FTC) Fewer mergers were challenged(under revised merger guidelines) than previously a,ndmore price fixing cases were initiated Second, there was amodest decline in both private and public antitrust activity.Finally, the courts, includtng the Supreme Court, becameincreasingly skeptical of traditional antitrust theories ofmonopoly power.

The last factor was probably the most significant In sions such as those in Sylvania,13 Brunswick,14 Illinois Brick,lS Broadcast Music,16 Monsanto,17 Zenith Radio,18and

deci-Sharp19 the Supreme Court broadened the rule-of-reasonperspective in antitrust law These decisions were basedprimarily on orthodox microeconomic analysis, and theywere by no means entirely consistent or complete But theclear trend in court decisions during the period definitelyrepresented a shift away from the traditional analyses anddecisions of the 1950s, 1960s, and early 1970s

The New Antitrust Activism

The enforcement revolution was short-lived Newadministrators at the Department of Justice and at the FTCduring the Bush and Clinton administrations expanded

13ContinentalT \1:,Inc v GTE Sylvania, Inc.,433 U.S 36 (1977).

14Brunswick Corp v Pueblo Bowl-crMat, Inc.,429 U.S 477 (1977).

lSlIIinois BrickCo.v Illinois,431 U.S 720 (1977).

16Broadcast Music, Inc., v CBS, Inc.,441 U.A 1 (1979).

17MonsantoCo.v Spray-Rite Service Corp.,465 U.S 752 (1984).

18Matsushita Electric Indus.Co.v Zenith Radio Corp., 1067 S Ct 1348 (1986).

19 Business Electronics Corp v Sharp Electronics Corp.108 S Ct 1115 (1988).

Antitrust: The Case for Repeal

antitrust enforcement.2o For example, Bush appointeesjames F. Rill (Justice) and janet Steiger (FTC) both made itclear that they favored a wider and more vigorous enforce-ment effort than did their Reagan administration predeces-sors Investigations and enforcement efforts were alsoexpanded during the Clinton administration under AssistantAttorney General Anne K Bingaman and her successor atjustice, joel Klein Besides the sharp increase in corporatecriminal fines collected for alleged price-fixing, the Clintontrust-busters (including the FTC) dramatically expanded thenumber of merger investigations, initiated questionablecases addressing vertical integration issues, supported theinternationalization of antitrust enforcement, and filed highprofile cases against firms such as Staples, Intel, and, ofcourse, Microsoft Antitrust regulation, despite decades ofintellectual criticism, was back in business

20Janusz A Ordover, "Bingaman's Antitrust Era," Regulation 20, no 2 (1997):

21-26.

The 1998 antitrust suit brought by the Department ofJustice and twenty state attorneys general against theMicrosoft Corporation1 captures everything that is stillwrong with antitrust policy and demonstrates why the lawsmust be repealed.

A brief historical review of Microsoft's antitrust ties is in order The Federal Trade Commission startedinvestigating Microsoft's software licensing practices in

difficul-1990 but closed its investigation in 1992 without filingcharges (This was significant since the FTC is expresslycharged with policing so-called "unfair methods of compe-tition.") But in an unusual development, the Clinton admin-istration's Justice Department, under Assistant AttorneyGeneral Anne K Bingaman, picked up the aborted FTC

probe of Microsoft and sharply expanded its scope.2

After an additional two-year study, the Justice ment concluded that Microsoft's "per processor" licensing-fee system discouraged PC manufacturers from installingcompetitive software and that Microsoft's standard two-year lease unfairly foreclosed software rivals from the mar-ket To avoid long litigation, Microsoft signed a consentdecree with the Department in 1994 and agreed to end its

Depart-1United States v Microsoft Corp Civ Action No.98-1232 (1998).

2Under pressure from Microsoft's competitors, Senator Howard Metzenbaum (Democrat, Ohio) and Senator Orrin Hatch (Republican, Utah), both urged Ms Bingaman to reexamine the Microsoft case SeeWall Street Journal, August2, 1993,

p B8.

Antitrust: The Case for Repeal

per processor licenses and shorten its standard two-yearlease period to one year u.s. District Judge Stanley Sporkinrefused to certify the agreement because it did not provide

an "effective antitrust remedy" and was not in the publicinterest, but he was overruled by a Court of Appeals Theconsent decree became fully effective in 1995

With one set of alleged restrictive practices resolved, thefederal antitrust authorities immediately focused on a newset associated with so-called "Internet access." The newconcerns stemmed from Microsoft's decision to integrate(or tie) various software applications into' its increasinglypopular Windows operating system

First, in an unprecedented move, the Justice ment threatened to delay the introduction of Windows 95

Depart-because Microsoft bundled its own on-line Internet service(Microsoft Network) with Windows Then Justice andMicrosoft disagreed bitterly over Microsoft's decision to tieits Internet browser, Explorer, to its operating system Thegovernment claimed that the bundled browser violated the

1995 consent decree; Microsoft claimed that the decreeexplicitly allowed "integration" of the browser as well asother applications An appellate court ruled definitively inMicrosoft's favor in June of 19983 but, in the interim, theDepartment of Justice and twenty states filed an antitrustsuit against Microsoft

The suit claimed that Microsoft had a monopoly in ating systems for personal computers, that it attempted ille-gally to leverage its monopoly power in operating systems

oper-to other products or services, that it engaged in restrictiveagreements with PC manufacturers and Internet serviceproviders, and that its monopolization injured competitorsand consumers A trial began in October 1998

3UnitedStatesv MicrosoftCorp., 147 F 3d 935 D.C Cir (1998).

Microsoft's Monopoly

Whether Microsoft had a monopoly in operating tems depends, of course, on a precise definition of monop-oly A perfect monopoly, presumably, would control allofthe available supply of a product in some well-defined rele-vant market with strong legal barriers to entry SinceMicrosoft was said to license 90 percent of the operatingsystem software sold in new personal computers and sincethere were no legal barriers to entry in software, Microsoftdid not have a perfect monopoly There were other operat-ing systems for personal computers available (Mac as,

sys-Unix, OS/2, Linux) and consumers could turn to them if theMicrosoft system were unavailable; in addition, new sup-pliers could always enter the market Yet, legal scholars cit-ing precedent would argue that any market share above 70

percent (with or without legal barriers) can constitutemonopoly under antitrust law.4

As we will elaborate in the following pages, the share theory of monopoly is confusing and ultimately mis-leading Much depends on how the relevant market for theproduct is defined More importantly, a firm could produce

market-a superior product market-at low cost market-and consumers could estmarket-ab-lish that firm as the dominant supplier; the law, presumably,was not meant to restrict such beneficial behavior.5 Indeedmonopoly, however defined, isn't illegal under theSherman Act; "monopolization" is What the law reallyrequires (after a threshold market position has been estab-lished) is a showing that the defendant engaged in so-calledmonopolistic practices The important questions are: Howdid the firm come to obtain its market share? Did the firmunfairly exclude competitors from the market? Did it unfair-

estab-ly restrain the competitive process?

4United States v E./ duPont de Nemours&Co.,351 U.S 377 (1956).

SUnited States v Grinnell Corp.,384 U.S 563 (1966).

Antitrust: The Case for Repeal

In our view, Microsoft's dominant market share in operatingsystems evolved legitimately from a free-market competitiveprocess The PC software industry was legally open andcontained many talented players (Sun, Netscape, Novell,Oracle, Apple, IBM), some larger than Microsoft, somesmaller The market process in this industry has alwaysbeen characterized by intense innovation, rapid growth,sharply falling prices, and bitter rivalry (and occasionalcooperation) between rivals The industry exemplifiesAustrian economist Joseph Schumpeter's vision of compe-tition as a process of creative destruction

Microsoft achieved its market position by aggressivelyinnovating and promoting an open, standardized operatingsystem platform that integrated various applications (filesharing, fax utilities, network support) that had been avail-able separately Hundreds of PC manufacturers, thousands

of software applications developers, and eventually lions of consumers came to appreciate the advantages ofthe Microsoft Windows approach A standardized and inte-grated operating system was less expensive to produce anddistribute, easier to use, and ultimately more beneficial forconsumers As a consequence, some early market leadersstumbled and fell by the wayside while Microsoft emergedout of the competitive process with a legitimately-earnedmarket share

mil-Network Effects and Path Dependence

Some critics hold that market dominance in software isenhanced unfairly by so-called network effects.6 Successfulfirms like Microsoft are said to have unfair advantages oversmaller firms because a larger number of product users-larger networks-leads to expanded consumer benefits6For an extensive discussion of the issues, see John E lopatka and William H Page, "Microsoft, Monopolization, and Network Externalities: Some Uses and Abu- ses of Economic Theory in Antitrust Decision Making,"Antitrust Bulletin40 (Summer

1995): 317-70.

which leads, in turn, to even larger networks and profits fordominant firms.

It can be admitted that network effects can createdemand-side advantages for larger firms and increasing ben-efits for consumers that use their systems Even further,economies of scale can also generate cost-side advantagesfor market leaders, making it even more difficult for smallerfirms to be competitive But there is nothing economicallyunfair or regrettable about these developments

In the first place, increasing returns and low marginalcosts are no iron-clad guarantee of long-run success; busi-ness history is filled with "first mover" firms that experi-enced dramatic losses in market share because of changes

in consumer tastes and technology Second, low costs andincreasing advantages for a large pool of network users arethe economic benefits of the free competitive process;they are never to be regretted The competitive process issupposed to generate low costs and increasing benefits forconsumers and is supposed to punish low value, high costrivals Competition is supposed to reward firms that inno-vate first, that build integrated systems, and that expandbefore their rivals do Thus, to make such firms primeantitrust targets is a screaming contradiction to the allegedintent of antitrust law and reveals, instead, its true protec-tionist purpose

Another consideration is the notion of path dependencewhereby an increasing returns monopolist is said to be able

to lock in some inferior technology while locking out rivalswith superior innovations Presumably this has occurredrepeatedly in business history (the QWERTY keyboard isoften cited) and it is alleged to be a serious inefficiencyassociated with monopoly

Myths die hard in the antitrust area With costs correctlytaken into account, there is simply no empirical support forthe notion that inferior technology can exclude superior

Antitrust: The Case for Repeal

technology-a kind of Gresham's law in innovation? TheQWERTY keyboard myth has been effectively debunked ashave other alleged examples such as the BetajVHS videorecorder format controversy.8 The lack of empirical support

is not surprising since path-dependent theorists have theinnovation story backwards Market share, after all, is th~

direct result of consumers rewarding firms that have tinuously rewarded consumers with superior innovations.Again, the antitrust assault on market leaders is an attack

con-on demcon-onstrable efficiency and con-on revealed ccon-onsumerpreferences

Restrictive Practices

The trustbusters had a very different perspective Theyheld that Microsoft engaged in certain restrictive practiceswith original equipment manufacturers and Internet con-tent providers that had the effect of foreclosing the market

to important Microsoft rivals Take, for example, the issue

of the Internet browser Since Microsoft bundled its ownbrowser, Explorer, with Windows, and offered Explorer free

of charge to PC manufacturers, rival browser makers-such

as market leader Netscape Communications-argued thatthey were increasingly foreclosed from the browser market.But the antitrust issue is whether Netscape and otherswere unfairly foreclosed When Microsoft licensed its soft-ware, it did not generally restrict PC manufacturers frominstalling competitive software.9 Microsoft did not have

75.J•Liebowitz and S.E Margolis, "Path Dependence, Lock-in, and History,"

JournalofLaw, Economics, and Organization11 (1995): 205-26.

,8 S J• Liebowitz and S.E Margolis, "Fable of the Keys," Journal of Law and Economics33 (1990): 1-25.

9Microsoft did not restrict PC manufacturers from adding on "competitive" ware beyond the start-up screen Microsoft did restrict licensees from writing out Microsoft code, a not uncommon· feature in the software market; many of Microsoft's rivals also integrate functions and impose similar restrictions on deleting code.

soft-explicit exclusive dealing agreements with PC manufacturers.Prominent computer makers such as Dell, Compaq, Gateway,and thousands of so-called resellers that package almostone half of all new PC systems, were free to install Netscape'sbrowser Navigator (or any other browser) if they so desired.Thus, Microsoft's product integration in and of itself did notcreate any physical foreclosure of rivals.10

Microsoft's successful product integration may well havelowered Netscape's market share, but that is another matterentirely If consumers preferred the integrated browser fromMicrosoft, they may have lowered their demand for alterna-tive browsers; Microsoft would do more business and itsrivals would do less But, as we will argue in the followingpages, this sort of consumer choice does not restrain trade

or reduce competition Indeed, the competitive process isenhanced when firms take business away from other firmsand overall trade is expanded when, say, a fully integratedbrowser works more effectively for consumers

The antitrust authorities also held that Microsoft was able

to leverage its monopoly power in operating systems intothe browser market and harm consumers This argument isunconvincing First, if Microsoft's operating system wasalready leased at a price which maximized profit, there was

no additional leverage to exploit browser users In addition,

it made no economic sense to dilute the value of a

superi-or product (operating system) with an alleged inferisuperi-or

add-on product (browser) Finally, Microsoft gave away itsbrowser for free, poor evidence, indeed, of any leverage orconsumer injury Clearly, an operating system with a freebrowser is better for consumers than one without a browser

or one with a browser at some additional cost

lOpe users can download browsers, including Navigator, directly from the web Netscape reportedly distributed over 100 million copies of its own browser in 1998.

Wall Street Journal, November 6, 1998, p A3.

Antitrust: The Case for Repeal

As usual, the government has the economic logic ward.Tying or product integration is not necessarily an ele-ment of monopolization; indeed, it can be an importantcomponent of vigorous rivalry Microsoft's decision to inte-grate the,prowser into the operating system was intended

back-to be a more effective way of competing with other firmsthat already had included Web browsing technology intheir operating systems (Apple Computer) and with newerrivals, like Netscape, that established a dominant positionwith an improved independent browser Thus, when theantitrust authorities and Microsoft's rivals complainedabout integration or predatory pricing, they were actuallycomplaining about the rigors of the competitive process,not about any monopolization

The same sort of argument applies to Microsoft's ments with Internet service providers which were said to

agree-be restrictive of competitors The fact remains thatallness contracts are restrictive All contractual agreementsforeclose options and exclude some alternatives And con-tracts that last a year are more exclusionary than those thatlast a week But this approach to restrictive practices can-not be the focus of antitrust analysis-unless we want pub-lic policy to micro-manage all business contracts The focus

busi-of antitrust analysis, assuming we have the laws, ought tobe: do private agreements effectively restrict market outputand raise market prices? Clearly, the evidence in the PCindustry is that free-market contractual agreements haveled to massive increases in output and sharp reductions inprices to consumers That, frankly, should be the end of thematter

Ironically, if Microsoft had restricted its licensing ofWindows to a few select firms only, it would have beenaccused of monopolizing in restraint of trade If Microsofthad chargedexorbit~ntprices for its intellectual property, it

would have been accused of exploiting its monopolypower Or if it had refused to integrate applications soft-ware packages, it would have been accused of repressinginnovation and shelving developments in order to enjoythe quiet life of a monopolist.

Instead, Microsoft engaged in' precisely the oppositebusiness behavior It licensed its software to any and alllegitimate PC manufacturers (throughout the world) whilelicensing fees for its operating systems had averaged lessthan 3 percent of the cost of the personal computers in

1996.11 It progressively integrated various applications ware at minimal cost to the consumer And all of this wasaccomplished without any government subsidy, legal barri-ers to entry, or regulation Yet the critics, misled by market-share statistics and the anguished sobs of competitors, stillspied some evil monopolization And in their regulatoryfrenzy, they threatened to smash one of America's mostsuccessful business organizations

soft-The Lorain Journal Case

Robert H Bork, a supporter of the government antitrustsuit against Microsoft, has argued that Lorain Journal/ 12

anobscure 1951 antitrust case, can serve as an exact parallelwith the case against Microsoft.13InLorain, the town's onlynewspaper engaged in strict exclusive-dealing advertisingagreements with local merchants in order to prevent themfrom supporting a rival radio station The government suedsuccessfully to end the exclusive dealing contracts

The facts and argument inLorainhave nothing to do withthe Microsoft situation.14 Microsoft's general licensing

11Wall Street Journal, December2, 1998, p B6.

12 342 U.S 143 (1951) The lower court decision is 92 F Supp 794 (Ohio 1950).

13Robert H Bork, Letter to the Editor,Wall Street Journal, May15, 1998.

1400minick T Armentan9, "Why Robert Bark is Wrong: Microsoft and theLorain Journal Case," On Point, Competitive Enterprise Institute, August19, 1998.

Antitrust: The Case for Repeal

agreements with PC manufacturers did not require that theyboycott the products of Microsoft's rivals Manufacturerswere generally free to load competitive software and werefree to promote their own content on the Windows open-ing screen In addition, consumers were free to add or elimi-nate any product from Windows and free to replace theentire opening screen (if they wished) with a few mouseclicks Moreover, Microsoft was not the only operating sys-tem (newspaper) in town, nor did it face one lonely gov-ernment-licensed competitor (radio station) Finally,Microsoft could make strong efficiency arguments for inte-grating its browser and operating system,15 arguments thatcould not be made conclusively for the strict exclusive-dealing contracts in the newspaper case In short, Lorain Journal and the case against Microsoft have nothing of sub-

stance in common

Through the Looking Glass

The Microsoft case highlights the intellectual bankruptcy

of antitrust policy The industry was legally open; therewere numerous competitors of various sizes; technologicalchange was rapid and continuous; outputs expanded andprices had fallen dramatically; the leading software firmlicensed its operating system widely and at reasonableprices; and competitors constantly complained about therigors of the competitive process Ironically, the govern-ment's trial case against Microsoft was heavily predicated

on explicit evidence of vigorous competition: internalmemos and e-mail correspondence that speak clearly toMicrosoft's intent to bury its rivals and emerge victorious inthe software and browser·wars.16 In professional sports, such

15Robert A Levy, "Microsoft and the Browser Wars: Fit to be Tied,"Cato Institute

Policy Analysis,no 296, February 19, 1998.

16rhe government commandeered over 3 million pages of internal Microsoft respondence Much of the actual trial was taken up with debate over the meaning

cor-locker room bravado would clearly be seen as evidence ofcompetitive rivalry Only in the Alice in Wonderland world

of antitrust regulation could competitive free speech andrivalrous performance in the marketplace be transformedmagically into some sinister monopolization scenario.Economics aside, the government prosecution ofMicrosoft was also a travesty of common-sense justice.Microsoft had a property right to the software that itowned and innovated profitably; it had a property right towrite any new code that improved computer applications;

it had a property right to insist that licensees not write outany part of its operating system program; it had a propertyright to determine the length of its software lease and whatprice to charge for its property; and it had a property right

to freely compete or cooperate with any rival Yet, antitrustsought to emasculate these basic rights and impose selec-tive restrictions on Microsoft's freedom while leaving itsenvious rivals conspicuously unrestricted.17

Finally, the government's attempt at industrial planning

in the computer industry was hopelessly naive; the logical framework and consumer preferences change fartoo rapidly Regulation here will create additional incen-tives to litigate outcomes rather than have them market-determined It will also create strong disincentives for dom-inant firms to innovate and compete aggressively for mar-ket share In short, antitrust will have achieved theopposite

techno-of the results intended: it will have punished success,restrained efficient competition and hampered economicgrowth

Microsoft is simply the latest in a long line of firms thathas been punished for its virtues, for the simple fact that its

and intent of executive e~mail See, for example,Wall Street Journal, November 17,

1998, p 86.

17The Department of Justice had sought a preliminary injunction to require that Microsoft offer Netscape's browser with Windows or, alternately, sell its own browser separately.Wall Street Journal, May 19, 1998, p A3.

overall efficiency resulted in a substantial market share.Antitrust's dirty little secret is that the laws have beenemployed consistently to hamper successful businessorganizations and protect their less efficient rivals.18 Onewould be hard-pressed to discover a more immoral or irra-tional public policy toward business, or one more worthy

of repeal

18 As an example, United Shoe Machinery Corporation had held its dominant ket position for decades with superior innovation and competitive pricing Nonetheless,

mar-a lower court determined thmar-at United's overmar-all efficiency hmar-ad illegmar-ally "excluded"

rivals and eventually the Supreme Court divested the company See United States v United Shoe Machinery Corporation, 110 F Supp 295 (1953) and United States v United Shoe Machinery Corporation, 391 U.S 244 (1968).

The uptick in antitrust enforcement and the irrational attack

on Microsoft should not distract us from the larger andlonger picture: the intellectual case against antitrust regula-tion has been building for decades

The most important theoretical development has beenthe increasing professional disenchantment with the so-called barriers-to-entry doctrine.1

This doctrine held thatcertain economic obstacles prevented smaller firms fromcompeting with so-called dominant firms, that barriersenhanced the market power of these leading companies,and that they served to harm consumer welfare Yet, most

of these alleged barriers have proven to be economies andefficiencies that leading firms have earned in the market-place Efficiency and successful product differentiation cancertainly limit rivalry with firms unable to match or surpasssuch innovation; superior economic performance canmake it difficult for new firms to enter markets or for oldfirms to expand their market shares But none of this isunfair or unfortunate from any consumer perspective, andnone of it can rationalize an antitrust attack on the firmswith the superior performance

A reexamination of the antitrust case evidence alsotended to support administrative reforms in antitrust policy

1For an excellent criticism of the traditional barriers-to-entry doctrine, see Robert H Bork, The Antitrust Paradox:APolicy at War with Itself, (New York: Basic Books, 1978), chap 16 See also Harold Demsetz, "Barriers to Entry,"American Economic Review72 (March 1982): 47-57.

Antitrust: The Case for Repeal

By at least the mid 1970s it was becoming clear that much

of the antitrust case history did not confirm the resourcemisallocations suggested by orthodox monopoly theory.Indeed, economic analysis of the leading antitrust casestended to demonstrate that the indicted corporations hadincreased their outputs and lowered their prices and hadbehaved generally as competitive firms would be expected

to behave in open markets facing direct or potential alry.2 The thrust of antitrust policy in these cases was, if any-thing, to restrain the competitive performance of the lead-ing firm and thus protect the existing market structure ofgenerally smaller, less efficient business organizations

riv-The IBM Case

These findings were perhaps best exemplified in u.s. v

IBM, 3 the disastrous government antitrust case against theInternational Business Machines Corporation (IBM) thatcontributed significantly to the movement away from tradi-tional antitrust policy IBM was indicted bythe Department

of Justice in 1969 and charged with illegal monopolization

of the general-purpose digital-computer-systems market.The suit held that IBM had systematically engaged in cer-tain exclusionary business practices that tended to restraintrade and create a monopoly in violation of the ShermanAntitrust Act (1890) The case finally went to trial in 1975.After more than six years in court and a trial transcript ofmore than 104,000 pages, the case was abandoned by thegovernment in 1982

It was clear from the start that this government antitrustcase and the many private antitrust cases against IBM4

2Dominick T Armentano, Antitrust and Monopoly: Anatomy of a Policy Failure,

2nd ed (Oakland, Calif.: Independent Institute, 1990).

3United States v International Business Machines Corporation,Docket no 69, Civ (ONE) Southern District of New York (1969).

4 Many companies, including Greyhound, Telex, Cal Comp., and Memorex, sued IBM under the antitrust laws Most of these cases were resolved in IBM's favor See

were all fundamentally misguided They were, in brief,attacks on entrepreneurial success and efficiency Clearly,IBM had not restricted production to raise prices and prof-its; nor had it repressed invention and innovation On thecontrary, IBM had achieved its considerable success andmarket share by taking unprecedented research-and-devel-opment risks, innovating superior products, and developing

an unsurpassed, long-term corporate commitment to tomer-support services.5 Most of the alleged unfair prac-tices, such as educational discounts and bundled hardwareand software, were only "exclusionary" of less efficient sell-ers-some larger than IBM, some smaller-that could notmatch IBM's overall market performance

cus-In addition, and contrary to the assertions of the ernment and the private plaintiffs, IBM's considerable busi-ness success had not hurt the overall growth of non-I BMcompanies and the data-processing industry generally IBMhad grown rapidly, but the industry had grown far morerapidly; IBM's share of domestic electronic data-processingrevenues declined from 78 percent in 1952 to 33 percent

gov-in 1972, hardly persuasive evidence of any tion.6 Assistant Attorney General William Baxter under-stood the true state of affairs when, in 1982,his office with-drew its absurd legal action, terming it "without merit."7The collapse of the concentration doctrine also stronglyinfluenced a new direction in antitrust policy.8 Early empirical

monopoliza-Franklin M Fisher, James W McKie, and Richard B Mancke, IBM and the Data Processing Industry: An Economic History (New York: Praeger Publishers, 1983), pp.448-49.,

5Franklin M Fisher, John J McGowan, and John E Greenwood, Folded, Spindled, and Mutilated: Economic Analyses and U.s v IBM (Cambridge, Mass.: MIT Press,

1983).

6Ibid" p 111.

7 Wall Street Journal, January11, 1982, p 3.

8Harold Demsetz, The Market Concentration Doctrine, American Enterprise

Institute-Hoover Institution Policy Studies (August 1973); idem, "Industry Structure,

Market Rivalry, and Public Policy," Journal of Law and Economics 16 (April1973): 1-9.

Antitrust: TheCasefor Repeal

work in industrial organization had appeared to discover aslight positive correlation between market concentration (thepercentage of the market sales or assets controlled by asmall group of firms, usually 'four) and the average profitsearned by firms in such markets Most of these studiesassumed that the so-called barriers to entry mentionedabove limited competition in the concentrated industriesand allowed firms monopoly profits.9

later research argued, however, that the higher profits

in the concentrated markets were more logically explained

by the fact that the leading firms had lower costs and thatthese efficient firms had grown more quickly than the lessefficient firms In addition, over the long run, profit ratestended to decline in the high-concentration markets and toincrease in the low-concentration markets, indicating thatthe competitive-market process of resource reallocationwas alive and well In short, evidence from the so-callednew learning undercut much of the rationale for the tradi-tional antitrust regulation of market concentration andhigh-market share.10A new direction in antitrust policy wasinevitable and emerged in the 1980s

But not all traditional antitrust policies were doned Antitrust was still very much concerned with price-fixing and market-division agreements between competi-tors (horizontal agreements), and neither the antitrustauthorities nor the courts relaxed their position that sucharrangements were normally illegalper see In addition, certain

aban-9See, for instance, Joseph S Bain, "Relation of profit Rates to Industry tion: American Manufacturing, 1936-1940,"Quarterly Journal of Economics 65

Concentra-(August 1951): 293; and H Michael Mann, "Seller Concentration, Barriers to Entry, and Rates of Return in Thirty Industries: 1950-1960,"Review of Economics and Statistics48 (August 1966): 296-307.

10Ya1e Brozen, "Concentration and Profits: Does Concentration Matter?" Antitrust Bulletin 19 (1974): 381-99; John R Carter, "Collusion, Efficiency, and Antitrust,"

Journal of Law and Economics 21, no 2 (October 1978): 434-44 An excellent cussion of the concentration and profit controversy appears in Harvey Goldschmid,

dis-H Michael Mann, and J. Fred Weston, eds., Industrial Concentration: The New Learning(Boston: Little, Brown, 1974).

interfirm cooperative joint ventures were still subject to ulation by the appropriate antitrust authorities Resale pricemaintenance and so-called predatory practices remainedillegal under the antitrust laws The Department of Justiceand the Federal Traqe Commission still regulated horizon-tal mergers through revised merger guidelines Andalthough the merger attitudes and guidelines were some-what more relaxed than they had been in previous years,the antitrust authorities continued to intervene in certainbeer, office supply, and telecommunications industry con-solidations In short, although the focus of antitrust enforce-ment changed somewhat in the 1980s and early 1990s, theantitrust authorities still remained active in the areas of pricefixing, mergers, and restrictive practices, where it was allegedthat firms were able to harm social welfare.

reg-There has been some progress made in moving awayfrom the gross irrationalities of old-style traditional enforce-ment And some critics of traditional enforcement might betempted to be content with these modest administrativechanges, or even more tempted to call for additional reform,such as the general adoption of a rule of reason withrespect to certain "restrictive" practices, such as tying agree-ments or resale price-maintenance contracts But the resur-gence of antitrust enforcement in the 19905 indicates thatthis reform approach is naive Thus, it will be argued belowthat even additional reforms will not be sufficient and thatthe case against antitrust regulation is strong enough to jus-tify the complete repeal ofallthe laws

'The Case for Repeal

The case for the repeal of the antitrust laws can besummarized as foHows:

First, the laws misconstrue the fundamental nature of bothcompetition and monopoly Competition is an open marketprocess of discovery and adjustment, under conditions of

Antitrust: The Case for Repeal

uncertainty, that can include interfirm rivalry as well asinterfirm cooperation Within this competitive process, afirm's market share is not its market power, but a reflection

of its overall efficiency Monopoly power, on the otherhand, is always associated with legal, third-party restraints

on either business rivalry or cooperation, not with strictlyfree-market activity

Second, the history of antitrust regulation reveals thatthe laws have often served to shelter high-cost, inefficientfirms from the lower prices and innovations of competitors.This protectionism is most obvious in private antitrust cases(in which one firm sues another) which constitute morethan 90 percent of all antitrust litigation

Third, some of the antitrust laws, such as section 2 ofthe Clayton Act (1914) and the Robinson-Patman Act

(1936), explicitly intend to restrict price rivalry in the name

of preserving competition Government antitrust suitsagainst firms that price discriminate almost always result inthe defendant firmraisingsome of its prices to comply withthe law

Fourth, section 7 of the Clayton Act, which restrictsmergers that may tend to lessen competition, is itselfdestructive of the competitive process Restricting mergersand takeovers may i"nhibit the flow of production into thehands of more efficient managers The anti-competitiveeffect of section 7 is especially evident in vertical integra-tion antitrust cases and in cases in which poorly perform-ing domestic firms may require merger or other forms ofcooperation in order to compete more successfully withforeign firms Even with somewhat relaxed attitudes towardsome mergers and with revised merger guidelines, the FTCand the Antitrust Division of the Justice Department havecontinued to regulate, delay, and oppose many importantbusiness consolidations

Fifth, the antitrust laws are a form of government lation, and, like all government regulation, they tend to

regu-make the economy less efficient In the name of preservingcompetition, the efficient competitive process has itselfbeen impeded by antitrust intervention Firms that intend

to lower their prices may be restricted from doing so byantitrust law Even more important and pernicious, firmsthat would innovate some new process or product mustconsider whether the innovation will give them an "unfair"competitive advantage or be termed "predatory" by theantitrust regulators or some competitor

Sixth, the enforcement of the antitrust laws is predicated

on the mistaken assumption that regulators and the courtscan have access to information concerning social benefits,social costs, and efficiency that is simply unavailable in theabsence of a spontaneous market process Antitrust regu-lation is often a subtle form of industrial planning and isfully subject to the "pretense-of-knowledge" criticism fre-quently advanced against government planning

Seventh, the antitrust laws have been enforced ily, violate traditional notions of due process of law, andalways interfere with the rights of property owners or theirtrustees to make, or not make, voluntary agreements AsAdam Smith observed more than two hundred years ago,

arbitrar-a larbitrar-aw tharbitrar-at interferes with privarbitrar-ate arbitrar-and voluntarbitrar-ary arbitrar-agreementscannot be "consistent with liberty and justice."ll

Finally, the modest progress made to date in antitrustreform has been only administrative Administrativechanges and reforms are helpful and should not be under-estimated But they should not be overestimated, either.The antitrust statutes-even the blatantly anticonsumerRobinson-Patman Act-remain firmly in place, and much ofthe current enforcement effort is still traditional in natureand, therefore, thoroughly misguided

11 Adam Smith, AnInquiry Into The Nature andCauses ofThe WealthofNations

(New York: Modern Library, [1776J 1937), p 128.

Regulatory changes in the air-carrier industry illustratethe wisdom of total repeal as opposed to reform By themid-1970s it had become clear that government regula-tion of this industry, under the Civil Aeronautics Act of

1938, had worked to restrict entry, encourage wastefulpractices, and raise costs and prices generally to air-trans-portation consumers.12Theoretical criticism of airline regu-lation by economists accelerated The empirical evidencethat air-carrier regulation was inefficient and that a freemarket would work more efficiently became overwhelm-ing Theory and evidence were then cogently crafted into asolid political case for massive deregulation of the air-carrierindustry

It is important to note that the argument was not thatthe Civil Aeronautics Board (CAB) should do less in theway of regulation or that it should do something else Theargument was that the CAB itself-the entire regulatorystructure-should be abolished and an open-market process

be allowed to operate in its place The necessary and cient reform here was the total repeal of the economic reg-ulatory structure, which occurred when Congress terminatedthe CAB on January 1, 1985.13

suffi-Air-carrier deregulation would not have worked as wellhad the existing regulatory structure been maintained.Deregulation often requires a painful reallocation ofresources that is sure to hurt special interests, and in the air-carrier industry this process was especially painful Strongsentiment quickly developed for reregulation, lest Americalose its"national transportation system." But in the absence

12George Douglas and James Miller, Economic Regulation of Domestic Air Transport (Washington, D.C.: Brookings Institution, 1974) For an account of the results of airline deregulation, see John E Robson, "Airline Deregulation: Twenty

Years of Success and Counting," Regulation21 (1998): 17-22.

13Some of the CAB's regulatory powers, including the authority to regulate airline computer-reservations systems, were shifted to the Department of Transportation

(DOT) See Regulation9 (January/February 1985): 8 For the antitrust implications of

DOT regulation of computer-reservations systems, see Antitrust and Trade Regulation Reporter48, no 1207 (March 21, 1985): 505.

of any continuing regulatory structure, the general faire momentum that had been set in motion could not bereversed As in all such cases, the results of air-carrier de(eg-ulation have been enormously beneficial to consumers.There is an important lesson for critics of traditionalantitrust policy here The administrative changes in antitrusthave been transitory Since the entire regulatory antitruststructure still exists-the laws, the courts, the agencies-thestructure has been activated and employed more strictly bydifferent administrators holding different theories If thecase against antitrust regulation is overwhelming, the entireantitrust framework must be abolished.

laissez-Theories of Antitrust Policy

It will not be easy to repeal the antitrust system Antitrustregulation is a firmly entrenched institution in America andhas been since 1890.This section explores some of the rea-sons for the persistent faith in antitrust regulation-despiteits record-and speculates on the more subtle meaning ofantitrust

Antitrustas Public Interest

The primary reason for the widespread support forantitrust enforcement is a belief that the laws still serve,however imperfectly, to protect the economy (consumers)from the economic abuses commonly associated with pri-vate monopoly and private monopoly power This per-spective can be termed the "public interest" theory ofantitrust policy

The notion of competition is enormously popular inAmerican society We expect and enjoy competition insports and in business In business, competition is said tokeep organizations alert and efficient Business competitiongives consumers quality products at low prices, providesbuyers with alternative suppliers, forces poorly managed

Antitrust: The Case for Repeal

firms out of the market, and limits and restricts so-calledeconomic power

Monopoly appears antithetical to all of this Businessmonopoly is said to deaden initiative and efficiency, restrictproduction, raise prices, exclude competitors from the mar-ket, and misallocate economic resources It can be eco-nomically and even politically dangerous It is a short stepfrom these impressions to supporting a law that encouragescompetition and prohibits business monopoly-that is, anantitrust 'law

Academic economists have crafted these impressionsconcerning competition and monopoly into an elaboratetheoretical paradigm that serves to legitimize someantitrust regulation Put briefly, this theory holds that freemarkets can occasionally fail to work in the best interests ofsociety generally This market failure can occur wheneverprivate business organizations gain monopoly power, thepower to restrict production and raise market price Suchfirms can produce less and charge more, and they general-

ly have higher costs than comparably competitive businessorganizations A law that prohibits free-market monopo-lization would appear to promote increased outputs, lowercosts, and lower prices for consumers Antitrust law, there-fore, exists to protect the public interest from the power offree-market monopoly

There are at least two ways to analyze this est perspective on antitrust policy One way is to challengethe theoretical models of competition and monopoly uponwhich it is so heavily dependent If the models are funda-mentally deficient, then the scientific case for antitrust isweakened substantially The other way to challenge thepublic interest perspective is to study the actual conductand performance of business organizations that have beenconvicted under the antitrust laws If such firms were foundnot to be restricting production and raising prices-if,indeed, they have been increasing outputs and lowering

public-inter-prices-then the public-interest theory of antitrust tion would be all but demolished.

regula-Antitrust as Regulation

An entirely different perspective on antitrust policy is tosee it as an example of special-interest regulation Govern-ment regulation in America has often been associated withspecial-interest groups, usually business groups, that haveattempted to use legislation to gain and hold economicadvantages (or rents) not obtainable in a free market.14

These advantages are often secured by legal barriers toentry and competition that serve to restrict production andincrease prices Import quotas in the textile industry, forexample, have had the effect of protecting domestic textilecompanies from foreign competition while inflicting mas-sive economic losses on consumers.15

Antitrust, despite disclaimers, is government regulation.Whether antitrust was originally intended to promote andprotect special business interests can never be known withabsolute certainty, although there is some evidence this mayhave been the case.16 But, as will be demonstrated below,there is adequate evidence that antitrust has often beenemployed as special-interest legislation In practice, antitrust

14GeorgeJ.Stigler, "The Theory of Economic Regulation,"Bell JournalofEconomics and Management Science 2 (Spring 1971): 3-21; Sam Peltzman, "Toward a More General Theory of Regulation,"Journal of Law and Economics 19 (August 1976):

211-40 For a review of the rent-seeking literature, see Robert D Tollison, "Rent Seeking: A Survey,"Kyklos35 (1982): 575-602.

15See "Economic Effects of Significant U.S Import Restraints," Publication 2935 (Washington, D.C.: International Trade Commission, December 1995) The eco- nomic losses were estimated at roughly $1 0 billion annually.

16Thomas J Dilorenzo has shown that outputs in the "trust" industries-far from being restricted-expanded rapidly in the decade prior to the Sherman Act of 1890.

He has also argued that Sen John Sherman's motives in sponsoring the act may have been ambiguous See Thomas J Dilorenzo, "The Origins of Antitrust,"International Review of Law and Economics5 (1985): 73-90 See also Thomas W Hazlett, "The legislative History of the Sherman Act Reexamined,"Economic Inquiry30 (1992): 263-76.