Papers

A recent chart-topping country western song praised "the little man" and cursed the day the "big money" merchants took over and "shut him down." Many Americans, because of our small town and agricultural past, share this idealized view. We harbor a special devotion to the neighborhood business and the family farm, institutions widely considered to be the backbone of our country. At the same time we sing the praises of the little man, however, Americans shop at mega-stores with parking lots the size of whole downtowns. We have turned the benefits of mass production into a culture of mass consumption. Shoppers flock to the big retail outlets — which have killed small stores by offering lower prices and greater selection — but experience heartfelt guilt about the fate of the "little man."

The same divergence between theory and practice colors the government’s application of the nation’s antitrust laws. Since Congress enacted the Sherman Antitrust Act in 1890, government officials have always claimed to be working on behalf of the people when attacking business interests that Theodore Roosevelt derided as "great malefactors of wealth." Consumer welfare has thus been the favored rallying point of the antitrust enforcers. Senator John Sherman claimed that the reason he authored the law that bears his name was to outlaw arrangements "designed, or which tend to advance the cost to the consumer."¹ Accordingly, the current antitrust regime continuously reiterates its dedication to "what is best for consumers."² Yet the true basis of antitrust law is not, and has never been, consumer welfare. In reality antitrust is built on a shaky foundation of ideology, politics, and ambition.

Self-interest motivates almost all antitrust activity undertaken by government. Companies that are losing market share to a dynamic competitor lobby for refuge in the courts. Politicians seeking to protect industries in their home state and generate campaign contributions, along with antitrust officials looking to further their careers, oblige by subjectively applying antitrust laws. Because antitrust law is purposely vague, the potential for legal action against a company is virtually limitless. The "evidence" in many cases consists of little more than appeals to populist resentment of large firms that dominate the market by offering the best combination of price and quality, often at the expense of the fabled little man. While self-serving corporations and government regulators would have us believe the antitrust laws are consumers’ lone defense against price-gouging monopolies, the time has come to recognize America’s antitrust laws for what they are: affirmative action for uncompetitive businesses.

Antitrust as Affirmative Action

At first glance, antitrust and affirmative action do not appear to be related. Yet the best way to understand the economic issue of antitrust is to compare it with the social issue of affirmative action. Both policies essentially offer the same promise — fairness for businesses or groups that have suffered as a result of unfair competition. In fact, the two policies share several important characteristics, including a focus on forced equality, oversight by government agencies, and proponents among powerful special interest groups.

In his influential 1978 book, The Antitrust Paradox, Robert Bork asserts that egalitarianism, in the desire for equal outcomes rather than equal opportunities, is the governing philosophy of our time.³ The official language of antitrust and affirmative action, with its focus on "fairness" and "level playing fields," reflects Bork’s contention. In both cases, extensions of regulatory power are cloaked in the robes of justice. The appeal of these policies to the popular and largely misunderstood notion of equality allows them to remain viable. However, neither individuals nor corporations are entitled to protection from government lawyers if they cannot make the grade or produce a superior product. Simply put, equality means equal treatment, not privilege.⁴ Contrary to the popular conception peddled by many of our leaders, when there is truly fair competition there must be losers as well as winners.

The justification for antitrust’s attacks on private property and affirmative action’s assault on the merit process is based largely on statistics. Just as government agencies claim that underrepresentation is a de facto sign of discrimination, the antitrust authorities often cite a company’s large market share to warrant enforcement activity. In both instances, it is assumed that the individuals or the companies that succeed have done so through the use of unfair tactics that hobble their competitors. To justify affirmative action, it is said that the favored group "entered the race late." Comparably, antitrust is validated on the grounds that certain companies face insurmountable "barriers to entry." In both cases, rationality is sacrificed on the altar of emotion. Instinctively, we know that a truly free market should reward the top performer, yet still feel an obligation to help the underdog.

Politicians promised the public that the 1890 Sherman Antitrust Act would not harm enterprising businesses and that the 1964 Civil Rights Act would not lead to racial and ethnic preferences. When Senator George Hoar explained the antitrust bill, he stressed that a man "who got the whole business because nobody could do it as well as he could" would not be in violation of the Sherman Act.⁵ Yet the courts held that "the [Sherman Antitrust] Act has wider purposes," which included reining in companies that practiced "exclusion" by using "a great organization, having the advantage of experience, trade connections, and elite of personnel."⁶ And while the Sherman Act was supposedly intended to combat conspiracies in restraint of trade, many antitrust actions taken by the Federal Trade Commission (FTC) and Justice Department target companies that are expanding production. Similarly, while arguing for the 1964 Civil Rights Act, Senator Hubert Humphrey challenged opponents to find "any language which provides that an employer will have to hire on the basis of percentage or quota related to color . . . I will start eating the pages one after another, because it is not in there."⁷ While such language was not in the bill, it nonetheless did serve as a catalyst for the current racial spoils system. Just one year after passage of the Civil Rights Act, Lyndon Johnson used it as a basis to outline official policy "not just [for] equality as a right and theory but equality as a fact and equality as a result."⁸

The problem with forced equality as a governing philosophy is that government allocation of resources is a zero-sum game. Because government produces nothing of added value, it only redistributes wealth. In order for government to give to some citizens, it must take from other citizens.⁹ Thus, a program that benefits one individual or group, whether it is antitrust policy, racial preferences, or crop subsidies, comes at the expense of other taxpayers forced to fund it. In antitrust policy, this translates into enforcement actions such as requiring Microsoft to share the application programming interfaces to its software, which the company spent billions of dollars to create. In the case of affirmative action, such transfers occur in the college admissions process when a qualified student is passed over for a less qualified but politically favored student. Antitrust law and affirmative action do not banish unfair competition and discrimination; the policies simply codify its acceptable use by government.

Because antitrust and affirmative action have been largely a preserve of the courts, they are subject to the whims of the judiciary. As a result, there have been few clear signals to businesses concerning what constitutes unfair practices or unfair discrimination. Federal Reserve Chairman Alan Greenspan described antitrust as

a world in which competition is lauded as the basic axiom and guiding principle, yet "too much" competition is condemned as "cutthroat.". . . It is a world in which the law is so vague that businessmen have no way of knowing whether specific actions will be declared illegal until they hear the judge’s verdict — after the fact.¹⁰

Businesses face similar obstacles in the area of hiring. For example, in Griggs v. Duke Power, a court held that administering tests to prospective employees constitutes illegal discrimination if certain groups tend to fail the test at a higher-than-average rate.¹¹ The judiciary has exhibited a fondness for making policy, a trend that has been exacerbated by the failure of the legislative branch to confront activist judges or to take responsibility for deciding controversial issues. Many judges relish this expanded power. As former Supreme Court Justice William Brennan wrote in a 1979 decision, judges "are not mere umpires, but in their own sphere, lawmakers."¹²

While many believe that "the range of error so far has been acceptable,"¹³ the costs of antitrust and affirmative action to our society continue to pile up. These massive expenses include lost productivity and innovation, compliance costs, legal fees, punitive damages, and salaries for unneeded employees.

• Professor George Bittlingmayer examined antitrust activity in 21 major industries from 1947-1991 and determined that each antitrust case lowered overall investment by $34 million to $110 million.¹⁴ Using the low estimate, one may conclude that the 293 antitrust investigations launched by the Department of Justice Antitrust Division in 1999 served as a taxpayer-funded $10 billion drag on our economy.¹⁵
• Bittlingmayer and fellow University of California at Davis economist Thomas W. Hazlett argue that the Nasdaq stock market lost $450 billion in market capitalization — the listing’s worst one-day performance ever — as a direct result of the antitrust decision against Microsoft.¹⁶

The tab for affirmative action is similarly burdensome:

• Experts estimate the costs of regulation by the Equal Employment Opportunity Commission, the Office of Federal Contract Compliance, the Department of Education, and several other state and local agencies to be $545 million per year.¹⁷
• When the annual costs of complying with affirmative action regulations, such as forgoing the lowest bid on public works projects, biased college admissions, lost productivity, and unwarranted promotions are factored in, the total reaches an astounding $28 billion.¹⁸

Because the economic stakes are so high with antitrust and affirmative action, the groups that benefit from these policies actively and assertively protect their interests. Companies spend billions of dollars on political donations and direct lobbying of government, often to initiate review of the business practices of their competitors. Researchers have also demonstrated that Members of Congress often use their control of the Federal Trade Commission’s budget to force the agency to investigate the competitors of companies located in their districts.¹⁹ Diversity consultants, university officials, labor activists, human resources managers, and cultural communications specialists — to name a few — have turned affirmative action into a growth industry. These well-organized groups have staked out the moral high ground and have successfully branded proponents of free markets as beholden to "corporate interests" and condemned supporters of a truly colorblind society as "racist."

Affirmative action and antitrust essentially operate in the same way. Antitrust is simply affirmative action applied to the business world. Both policies have endured, at least in part, because of Americans’ strong support for the ideal of free and fair competition. As Robert Bork pointed out, the mystique and legends of antitrust affect our view of ourselves and of our own government.²⁰ Yet in the cases of antitrust and affirmative action, support for these policies is based on a fundamental misunderstanding of the way in which the programs really function. Rather than promote competition, the policies create a situation in which the government goes to bat on behalf of favored groups at the direct expense of other parties. Even if we accept the arguable premise that both policies are motivated by good intentions, there is no doubt that they lead to a bad result. Antitrust and affirmative action are two of our society’s most glaring contradictions. America proudly claims to be a country that is dedicated to equality of opportunity, yet wastes billions of dollars annually attempting to guarantee equality of outcomes. Antitrust, like affirmative action, creates special rules for those who cannot succeed and passes on the costs to consumers and taxpayers.

Populist Foment and the Birth of Antitrust Law

When Congress enacted the first antitrust law in 1890, America was in the midst of a period of rapid economic and social change. Steady westward expansion meant that the frontier, long a symbol of American life, was "closed." Although 40 percent of the labor force still worked the soil, rapid urbanization occurred as immigrants from the countryside and Europe crowded into the cities. Most of these new arrivals took low-paying factory jobs in the burgeoning industrial sector. Railroads, telegraphs, telephones, and steamships linked the entire country and made possible the emergence of the first truly national markets for goods and services. A country of yeoman farmers had become a country of big industry. As a result, large firms that enjoyed economies of scale began selling an ever-increasing share of products. Many regional companies began to merge, creating large-scale enterprises with names like American Tobacco, American Sugar, and Standard Oil.

A prolonged period of hard economic times for many average Americans accompanied these rapid changes. Reliance on the gold standard meant that as the economy grew, the money supply did not always keep pace, leading to painful cyclical declines in prices and real income.²¹ This post-Civil War deflation meant that many debtors – farmers in particular – found it increasingly difficult to service their mortgages and other loans at the same time they received lower prices for their crops or labor. The situation was exacerbated by mass production and consolidation, which further deflated prices. While farmers received less and less for their crops each season and many workers saw their wages fall, "big business," which mainly consisted of firms that had merged to stay alive in a deadly era of price-cutting, appeared to be prospering.

The public strongly resented the big railroads, banks, and other large, impersonal economic forces that seemed to be taking an increasing influence over their lives. The new class of industrialists and financiers became infamous for its perceived indifference to average Americans, summed up by William Henry Vanderbilt’s quip that "the public be damned."²² People across the country believed they were losing their economic independence to increasingly visible, and increasingly concentrated, big business. The captains of these industries, dubbed "robber barons," took center stage as objects of public revulsion. The seeds of the populist movement, which held the promise of reining in the shifting economic forces that were changing American life, were sown in this volatile environment.²³ Into this scene stepped the politicians, who thundered against "concentration of wealth" and vowed to deliver the public from the exploitative trusts.

Congress enacted the Sherman Antitrust Act of 1890 to address both political and economic concerns. Politically, the legislation acted as a response to the widely-held fear that large concentrations of corporate power might undermine democracy. By 1890 campaigns for elective office were becoming increasingly sophisticated, and thus more expensive. As money began to play a growing role in elections, and politicians became more reliant on a handful of major donors, many Americans worried that an oligarchy of wealthy special interests would obtain a monopoly on political representation. Reformers, newspaper editors, labor leaders, and others clamored for action to rein in the "Money Trust."

The economic argument for antitrust legislation rested on the widespread belief that big business posed a deadly threat to small businesses and family farms. John Sherman, whose name graces the 1890 act, reflected the thinking behind his legislation, saying, "If we will not endure a king as a political power we should not endure a king over the production, transportation, and sale of any of the necessaries of life."²⁴ The impulse behind the antitrust law was also protectionist. Sherman claimed that the price-cutting trusts "subverted the tariff system" and used the antitrust legislation as a smokescreen to sponsor a bill to raise the tariff on imported goods three months later. A high tariff allowed politically influential domestic businesses to raise their prices, causing The New York Times to denounce the Sherman Act as the "Campaign Contributors’ Tariff Bill." The Times concluded:

That so-called Anti-Trust law was passed to deceive the people and to clear the way for the enactment
of this . . . law relating to the tariff. It was projected in order that the party organs might say to the
opponents of tariff extortion and protected combinations, ‘Behold, we have attacked the Trusts. The Republican party is the enemy of all such rings.’²⁵

The Sherman Act did not address the real causes of populist discontent, which were deflation and the dislocation wrought by the transformation to a modern industrial economy. The act itself is purposely brief, vague, and malleable, outlawing "every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce." The law is so cloudy that technically businesses that agreed to close on the same day or at the same time could be indicted for a conspiracy in the restraint of trade. As NYU Law School professor Eleanor Fox stated, "The Sherman Act has always been an elastic piece of social legislation, used to attack perceived exploitation and the aggregation of power."²⁶ Rep. William Mason, an antitrust advocate of the late 1800s, admitted that "trusts have made products cheaper," but argued that they "have destroyed legitimate companies and driven honest businessmen from legitimate business enterprises." In other words, the main problem with the trusts was not that they harmed consumers, but that small, inefficient firms could not compete.²⁷

Antitrust was born for political and economic reasons that had little to do with consumer welfare. The Sherman Act’s legal offspring reflect the same characteristics as the parent. Each represents an attempt by the government to increase its control over the production and distribution of goods and services. Completely opposite of giving consumers more choices, these acts involved the government in every aspect of commerce, allowing government to make arbitrary choices without consumer input by dictating terms of participation in the marketplace. Somehow government was supposed to protect the free market by placing competitors in chains.

The Clayton Act of 1914 was passed to address specific practices not covered by the Sherman Act. The law prohibited tying agreements, price discrimination, interlocking boards of directors and stock mergers that would lessen competition.

This 1914 act of Congress set up the Federal Trade Commission, which was charged with investigating "unfair methods of competition." The commission is made up of five full-time commissioners appointed by the president for seven-year terms as well as a professional staff. Aside from its focus on anticompetitive practices, the FTC also investigates claims of deceptive advertising.

The Robinson-Patman Act of 1936 prohibits firms from selling products at "unreasonably low prices" in order to damage a competitor. Sometimes called the Anti-Chain-Store Act, Robinson-Patman outlaws charging different prices to different buyers with the effect or intent of creating a monopoly. Meant to protect independent retailers, the law also enjoyed support from wholesalers who feared large chain stores would buy directly from the manufacturers for lower prices.

The Celler-Kefauver Antimerger Act of 1950 prevents one firm from purchasing the assets of another if the result is to reduce competition. The statute prohibits both horizontal and vertical mergers that give market power to a firm in a particular industry.

Our antitrust laws reflect the political impulses of the time in which each was passed. For example, Congress approved the Clayton Act and created the Federal Trade Commission at the zenith of the activist Progressive era, and the Robinson-Patman Act was enacted at the height of the Great Depression in order to shield small businesses. Unfortunately, these laws have far more to do with protecting competitors and increasing the power of government than with defending consumers. The intellectual basis for antitrust law depends upon a number of flawed theories about the manner in which markets operate and how consumers and businesses actually behave.

Flawed Theories of Antitrust

Modern economists have always debated the merits of antitrust law. From about 1880-1920 most experts saw little need for antitrust laws, viewing mergers as a natural consequence of the competitive struggle and seeing no need for legislation that interfered with the market.²⁸ Beginning around 1920, however, economists started developing mathematical models that stressed the importance of markets characterized by competition among many small firms. Over time the "perfect competition" model arose from this ideological blueprint and flourished in the 1940s through the 1960s, as government pursued a vigorous antitrust policy.²⁹ In the 1970s, Chicago School scholars such as Robert Bork and Public Choice School scholars led by James M. Buchanan raised serious doubts about the efficiency of antitrust policy and inspired the relaxation of antitrust regulation during the Reagan and Bush Administrations. The latest wave of antitrust thought, the "post-Chicago School," argues that the emergence of a new technology and information-based economy necessitates heightened antitrust enforcement.³⁰

Antitrust law is built upon a number of widely accepted, but flawed, economic theories. The most commonly held notion, as stated by outgoing Antitrust Division head Joel Klein, is that antitrust is necessary because "the natural state of markets is not to move towards increasing competition."³¹ Proponents of antitrust believe the only way to prevent monopolistic abuses is to empower a strong regulatory state. They favor "creative regulation" to keep the government one step ahead of scheming monopolists. Since they do not believe in the market, they are scared to let it work. As one antitrust enthusiast writes without a hint of irony, "more free competition often requires the counterweight of more regulation."³² As the country continues the transformation from an industrial economy to an economy characterized by technology, information, and globalization, the antitrust enforcers are stepping up their activity and claiming newfound relevance. While their arguments have evolved from populist attacks on wealth to technical bluster about "network effects" and "positive feedback loops," the political and economic motivations behind antitrust remain the same. Antitrust is a collection of myths.

Myth — Mergers are Anticompetitive

While there is certainly an ongoing movement toward consolidation, the "corporate giantism" derided by some critics has not killed competition.³³ In fact, mergers are the result of competitive pressures to produce lower costs for consumers. The Department of Justice and Federal Trade Commission acknowledged in April 1997 that "the primary benefit of mergers to the economy" is their ability to generate cost savings.³⁴ Unfortunately, the threat of antitrust action prevents many potential mergers. Others are caught up in regulatory review, causing time and money to be wasted on meeting the demands of the antitrust authorities through compliance costs, lobbying, public relations, etc. Robert Ekelund and Mark Thornton determined the cost of merger delay to equal $12 billion in 1996 alone. In regulated industries, the average merger delay was 186 days — more than half a year — and twice as long as in non-regulated industries, which are not as susceptible to capture by special interest groups and manipulation by politicians.³⁵

Myth — Predatory Pricing

Predatory pricing is a classical tenet of antitrust. In theory, companies seeking a monopoly use unprofitably low prices to undercut and destroy a competitor, thereby permitting the surviving predator to raise prices above a level that would have existed under competition. While this concept appears reasonable, predatory price theory neglects the crucial fact that the so-called predator risks not recouping his investment, as Chicago School critics of traditional antitrust policy have stressed.³⁶ In fact, economic research over the past two decades has shown that predatory pricing is unlikely to result in a monopoly because rivals of predators have both incentive and ability to withstand the predatory onslaught, which does great harm to the price-cutter’s bottom line.³⁷ The predator also has no guarantee of maintaining market share if it raises prices back to a profitable level, and no way to bar new entrants from the marketplace even if a competitor does close its doors.

Table 2. Government-Sponsored Monopolies

U.S. Postal Service

Cable television

Public education

Provision of services such as municipal garbage collection

State liquor stores

Labor unions

Amtrak

Retirement investment (Social Security)

Source: National Taxpayers Union Foundation

Predatory price rules also invite firms to compete in the courts rather than in the marketplace. The fact that airlines have been prosecuted for charging lower prices than their rivals shows that antitrust law is about protecting the competitor who cannot offer a similarly low price.³⁸ After all, how is a price war bad for consumers? Prosecuting a company for predatory pricing is ultimately the civil equivalent of preventive detention in criminal cases, punishment based on the presumption of future anticompetitive behavior. Unfortunately, as economist Thomas Sowell writes, "Too often, it seems, if you have hurt competitors, then you have hurt competition in the eyes of the judges."³⁹

Myth — Consumer Harm

Antitrust officials are currently focusing on the harm that "network effects" may have upon consumers. A network effect occurs when the more a business sells of a particular product, the more valuable it becomes. The classic example is the telephone, and a more recent — and relevant — example is the Windows operating system. Antitrust officials fear that consumers will stick with bad or outdated technology because of their desire to remain a part of the "network," thereby stifling innovation. The other major concern is that network effects act as a barrier to entry that prevents competition or hurts competitors who do not have access to the network technology, a view shared by retiring DOJ chief Joel Klein and FTC Chairman Robert Pitofsky.⁴⁰ This concept fails to take into account the fact that if big companies are indeed slowing down innovation, the door is thrown open to more competition for the customers of the dominant, but overly complacent, producer.⁴¹ Consumers, who are more savvy, and more able to react to changes in the market than are government regulators, will reward the company that best meets their needs. As D.T. Armentano writes, "Consumers don’t need or want level playing fields. They simply want the best product at the lowest price."⁴²

Even if a company with a large share of the market did raise its prices, it is far more efficient to let new entrants to the market take care of them than for government to become involved. Antitrust is fundamentally about the harm done to inefficient competitors, not helpless consumers. In the ten years before the 1890 Sherman law, the industries accused of being monopolized by trusts all lowered their prices faster than the general price level was falling and expanded output faster than GNP was growing, some as much as ten times faster. Most of the industries supposedly monopolized by the trusts — bituminous coal, lead, leather, linseed oil, liquor, petroleum, salt, sugar, and steel — had falling prices and rising output in the decade before the Sherman Act.⁴³ The late nineteenth century trusts were the first to successfully respond to the changing dynamics of the market, which made them the political target of uncompetitive businesses and crusading — or simply self-interested — politicians.

Myth — Collusion

Strategic partnerships are essential to modern industrial enterprises. Such consolidation can deliver consumer benefits by avoiding needless duplication, reducing costs, and coordinating research and development. Put simply, the old saying that two heads are better than one applies perfectly to the business world. Unfortunately, American firms often find it more difficult to enter into agreements with other companies than do their foreign rivals, giving the foreign firms a decided edge. Antitrust laws encourage companies to sue their competitors who enter into such agreements, and the threat of lawsuits often prevents such partnerships.⁴⁴ When true "collusion" occurs, it is destined to backfire. Arrangements that fail to provide consumer benefits, such as price-fixing schemes, motivate members of the cooperative to cheat, discourage consumption, and are always subject to competition from new rivals.⁴⁵ Ultimately, the market polices itself more efficiently than government.

Myth — Tying

Tying, sometimes referred to as bundling, occurs when two distinct items are sold together as part of the same product. Tying is quite common and often makes products more efficient. For example, consumers purchase left shoes and right shoes in a pair, thereby lowering their transaction cost and increasing utility. The antitrust authorities view tying as an unfair trade practice because the company engaging in tying generally takes market share away from a company that does not offer tied-in products, and may sell the bundled goods at a higher total price. Additionally, antitrust enforcers accuse companies of using dominant products (e.g., Microsoft Windows) as leverage for tying weaker products (Microsoft Internet Explorer) and thereby harming competitors (Netscape). Yet users of Windows would almost surely find it easier to use an Internet Explorer that looks similar to and operates like Windows, particularly an integrated browser like that present in Windows 98. Determining what constitutes a bundled good is a very subjective process. As former Justice Department chief economist Lawrence White notes, "no one would challenge the right of manufacturers to tie erasers to the tip of pencils, tires to an automobile or buttons to shirts."⁴⁶ There is no need for antitrust officials to concern themselves with tying; if a company attempted to get a price for two products that exceeded their combined value to consumers, they would purchase the products elsewhere.

Myth — The Threat of Monopoly

Several dominant firms that attempted to charge monopoly prices have failed to extract long-term monopoly profits from consumers. For example:

• In 1901 American Can merged 90 percent of all capacity in the can business. It raised prices by one-quarter — and promptly lost one-third of its market share, despite additional buying-up of competitors and their output. Prices returned to the pre-merger level in a very short time.⁴⁷
• In the 1890s, American Sugar gained 98 percent of sugar refining capacity east of the Rockies. The concern then cut back production and enjoyed a brief period of increased income until competitors increased output and sent sugar prices lower than they had been a few years before American Sugar’s attempted monopolization.⁴⁸
• In the late 1880s and early 1890s, the National Cordage Association bought out competitors at premium prices, who then turned around and undercut the trust’s prices, forcing it into bankruptcy in 1893.⁴⁹ The lesson is simple: a company may enjoy a dominant market share, but it can only maintain its position by charging a competitive price and performing more efficiently than other firms in its industry.

Policymakers often confuse the mere existence of economic concentration (generally measured by market share) as proof that a long-term threat to market competition exists.

Yet a review of several once-prevalent products shows how market forces work against strategies to dominate a market. Apple (computers), IBM (punchcard technology), and Sony (Betamax VCR) constructed what trustbusters would call "closed networks" that made their products compatible only with products of their own brand. After these firms attained positions of market dominance and high profitability, new entrants such as Microsoft, clone PC makers, and the VHS videocassette recorder gained ascendance by lowering prices and making their products compatible with diverse systems.⁵⁰ These examples demonstrate the process that Harvard economist Joseph Schumpeter called "creative destruction," in which dominant firms lose to innovative competitors and thereby strengthen the overall market.

Reality — The Only True Monopolies are Created and Fostered by Government

Government is the only social or economic organization with the power to create and sustain a true monopoly. The best example is the notoriously inefficient U.S. Postal Service, which does not allow competitors to deliver letters to mailboxes or packages to post office boxes. Other examples proliferate: state-run liquor stores, taxi monopolies created by city and state officials who limit the number of cabs, public education, public transportation, and local garbage collection. The most pervasive government-nurtured monopolies are labor unions, which are the sole bargaining agents for employees, are exempt from antitrust law, and are legally allowed to force workers to pay dues as a condition of employment.

If government really wanted to "level the playing field" among businesses, it would not sponsor enterprises like Fannie Mae and Freddie Mac, which compete against private sector banks for mortgage lending and can raise debt cheaply because investors perceive their securities as enjoying the backing of the U.S. government.⁵¹ Other monopolistic abuses by government include setting minimum prices for milk, utility rates, and an array of agricultural products. Such interference with the market has only one effect — to raise prices for consumers. It is the result of special interest groups clamoring for protection, whether farmers who want higher prices, union workers who want higher wages, or taxi owners who want fewer competitors.

The Failure of Antitrust Policy

America’s antitrust laws reflect the prevailing social and economic mood of the times in which they were passed. The landmark 1890 Sherman Antitrust Act, as discussed earlier, arose out of a deep-seated fear and resentment of large-scale enterprises. The Clayton Antitrust Act of 1914 and creation in the same year of the Federal Trade Commission, which both investigates and enforces antitrust violations, occurred at the zenith of the reform-minded Progressive Era. The 1936 Robinson-Patman Act, legislated in the wake of a deflationary period in the middle of the Great Depression, reflected widespread concern that with so many small businesses weakened and competition severe, a few big firms would be able to dominate the market through their ability to purchase goods at a volume discount. Because antitrust law confuses the interests of competitors with the ideal of competition, it has consistently punished successful businesses and failed to provide consumer benefits.

Standard Oil

John D. Rockefeller’s Standard Oil Company, which was broken up by court order in 1911, is often cited as the archetypical monopoly. Prominent muckraker Ida Tarbell demonized the company in her 1904 book, The History of the Standard Oil Company, which portrays Rockefeller ruthlessly buying out rivals, crushing the spirits of Standard employees, and even persecuting the residents of oil-rich regions around the country.⁵² Generations of schoolchildren have learned that the benevolent government prevented this evil robber baron from cornering the petroleum market, accruing massive profits, and practically proclaiming himself king. Like the other myths of antitrust, this popular conception is little more than a fairy tale.

Standard did not cut back production or raise prices. Economies of scale pioneered by the company caused prices of refined petroleum to fall from over 30 cents a gallon in 1869 to 10 cents by 1874 and 5.9 cents by 1897. [See figure 1.]⁵³ Standard enjoyed reduced transportation costs because of the volume of its business, which the company passed on to consumers in the form of lower prices throughout the late nineteenth century. In fact, the costs and prices for refined oil reached their lowest levels in the history of the petroleum industry at the very time Standard Oil was being accused of monopolistic practices.⁵⁴ Reflecting on this achievement, Standard Oil Founder John D. Rockefeller wrote, "I ascribe the success of the Standard Oil Company to its consistent policy of making the volume of its business large through the merit and cheapness of its products."⁵⁵ One prominent critic of Rockefeller admitted in the debate over the Sherman Act that, "the oil trust certainly has reduced the price of oil immensely," but voted for the antitrust law anyway.⁵⁶

According to popular mythology, the government sued Standard Oil to address the lack of competition in the petroleum industry. Yet Standard faced plenty of competition — by the time the company was broken up in 1911, there were 147 independent oil refineries. Standard Oil’s market share dropped from 88 percent in 1890 to 64 percent in 1911. The company’s oil production as a percentage of total market supply dropped from 34 percent in 1898 to 11 percent in 1911. Clearly, even what Tarbell labeled "the pre-eminent trust of the world" was susceptible to competition in the open market.⁵⁷ Although many commentators view the case as a justification for antitrust, Standard should rightly be seen as a victim of the politicking of its competitors and the anti-big business spirit of the times. Medium-sized refiners that lost cozy local monopolies to Standard’s rationalizing and price-cutting attacked the company, joined by laid-off employees and suppliers that formerly enjoyed robust business with the local monopolies.⁵⁸ Ida Tarbell, whose writings appealed to many Americans suspicious of the trusts, had a personal ax to grind: her brother served on the board of the Pure Oil Company, which went under owing to competition from what contemporaries dubbed "the Standard." Although the Supreme Court found Standard Oil guilty, the company really lost its case years earlier in the court of public opinion.

IBM

In 1969 the Justice Department accused IBM of violating antitrust principles. At the time "Big Blue" enjoyed a comfortable 65% share of the computer market.⁵⁹ After thirteen years of taxpayer-financed litigation, the government finally dropped its case in 1982, as IBM’s mainframe market declined in the face of competition from new companies like Intel, Apple, and (ironically) Microsoft. A Justice Department internal review concluded that the 13-year "case against IBM was without merit and should be dismissed."⁶⁰ By the late 1980s, "monopolist" IBM would lay off thousands of workers as its competitors chipped away what was thought to be an unassailable customer base. Outgoing antitrust czar Joel Klein now admits that when the case against IBM was brought, "the Division sometimes disregarded sound, market-based antitrust analysis in favor of a big-is-per se-bad philosophy."⁶¹ Adherence to this philosophy cost taxpayers millions in a needless case that spanned four presidential administrations.

Alcoa

In 1937 The government filed a massive antitrust case against the Aluminum Company of America (Alcoa) that encompassed four years, 155 witnesses, 1,803 exhibits, and 58,000 pages of evidence and testimony. There was no doubt that Alcoa dominated the aluminum market.⁶² However, it attained its position through efficiency and the continuous innovation of new technologies, such as recovery of alumina from low-grade ores and methods to increase the strength and anti-corrosiveness of aluminum. In 1941, a federal judge cleared Alcoa of all the government’s 140 charges of monopolization and conspiracy. Despite the company’s strong record of achievement, in 1945 a federal appeals court overruled the original decision and declared that Alcoa

insists that it never excluded competitors; but we can think of no more effective exclusion than progressively to embrace each new opportunity as it opened and to face every newcomer with new capacity already geared into a great organization, having the advantage of experience, trade connections and elite personnel.⁶³

While Judge Learned Hand praised the company for its efficiency, he punished it for the same reason. As he stated in his opinion, Alcoa’s superior business practices served as a barrier to entry for competitors, making Alcoa a target for the trustbusters. The decision clearly shows antitrust law’s bias toward protecting competitors at the expense of consumers.

Brown Shoe

The 1962 antitrust case against the Brown Shoe Company reflects the extreme scrutiny placed on mergers during the so-called golden age of antitrust enforcement. Brown Shoe Company, a manufacturer of shoes, bought the Kinney chain of retail outlets in order to vertically integrate its operation and make itself more competitive in the shoe market. While a federal court admitted that this change would allow the merged company to pass on efficiencies to consumers in the form of faster style changes and lower prices, the court nonetheless found that this merger harmed competition. Brown Shoe controlled just 4 percent of shoe making capacity and Kinney operated only 845 retail outlets out of a total of over 70,000 nationwide — a little more than one percent.⁶⁴

Staples/Office Depot

In 1997 the Federal Trade Commission successfully blocked a proposed merger between Staples and Office Depot, companies that operated chains of office-supply superstores. These retailers had pioneered the concept of mass-retail office stores and allowed individuals and small business owners to enjoy the economies of scale formerly enjoyed only by larger purchasers. Although Staples and Office Depot accounted for only $10.7 billion in sales out of an office supply market that totaled $185 billion per year (about 6 percent)⁶⁵ of the total office-supply market, the Federal Trade Commission complaint alleged that the merged company would control 75 percent of sales made by office-supply superstores.⁶⁶ U.S. District Judge Thomas F. Hogan accepted the FTC’s argument that this would thwart competition, and his decision reflected antitrust’s penchant for helping competitors at the expense of consumers: "the fact that prices might be lower than current prices after the merger does not mean that the merger will not have an anticompetitive effect," he wrote.⁶⁷ Although Judge Hogan felt obligated to block the merger, he concluded his decision by stressing that "the defendants are being punished for their own successes and for the benefits that they have brought to consumers."⁶⁸

A litany of companies has faced similarly counterproductive antitrust prosecutions. The government won an antitrust suit against Schwinn Bicycle Company in 1967, yet market competition forced the company into bankruptcy by 1992. RCA Corporation once dominated radio and television production. The Justice Department slapped the company with a consent decree mandating that it license products and cease charging royalties in domestic markets. As Alfred Chandler of Harvard University has pointed out, this caused RCA to license to Japan and formed the basis of the now dominant Japanese consumer electronics industry. Pan Am Airlines also fell victim to the trustbusters, who did not allow the company to acquire domestic routes. Pan Am lost ground to foreign competitors and closed down for good in 1990.⁶⁹

In 110 years of antitrust law, proponents of a strong regulatory regime have not achieved any solid victories for consumers. Antitrust enthusiasts often cite the breakup of AT&T — which has benefited consumers — as one of their greatest victories, but fail to recognize that government fostered the AT&T monopoly in the first place. In spite of antitrust’s dismal record, many economists continue to insist that "America’s gift to the world of political economy is the federal antitrust policy."⁷⁰ Perhaps the most popular myth is that, while antitrust law may be imperfect, it "saved" capitalism from the market failures that would have made full-blown socialism inevitable.⁷¹ In fact, the opposite is true: antitrust leads to Soviet-style regulation of the economy. As D.T. Armentano writes in The Myths of Antitrust,

There was no ‘golden age’ when monopolistic abuse was running rampant in the free market and when, accordingly, antitrust was magnificently relevant. Antitrust law has always been ambiguous, the theoretical foundations of antitrust theory have always been faulty, and the empirical ‘evidence’ has always been nonexistent.⁷²

In light of the failure of antitrust law to protect consumers, why do policymakers continue to travel along a destructive regulatory path? The answer, as the next section will show, lies with politics, greed, and personal ambition.

Self Interest: the Public Choice Critique of Antitrust

Established by Professor James M. Buchanan,⁷³ public choice theory applies the methods of analysis used in economics to the study of politics.⁷⁴ Public choice theorists hold that exercises of government power are driven by the self interest of those in public office and by private parties that stand to gain from government action. Public choice scholars explore the personal ambitions, business interests, and political interests behind antitrust and believe that the antitrust laws are self-serving. For example, politicians often threaten industries with regulation and taxation in order to generate contributions to their campaigns, a process known as "rent seeking."⁷⁵ Businesses, for their part, often decide to "invest" in pursuing antitrust complaints against their competitors just like any other business decision.⁷⁶ Because such a strategy involves marshaling public resources for private gain, public choice scholars call it "free riding." Companies must pay rent to politicians whether they want a free ride or simply want to avoid being run over by the antitrust gravy train.

While proponents of antitrust frame their support for strict regulation in terms of market failure, antitrust should properly be seen as a political failure of the system to ensure equal treatment for all competitors. In fact, when government takes action to correct perceived failures in private markets, an important effect of the intervention is to redistribute wealth to organized interests from the less well-organized.⁷⁷ Markets operate based on competition, but government does not. Thus, as public choice theorists John G. Cullis and Philip R. Jones point out, while in office politicians and bureaucrats enjoy a monopoly that allows them to promote activist government. Cullis and Jones divide the effect of the monopoly into three parts:⁷⁸

• Tax-price illusion
  Antitrust officials encourage the tax-price illusion by claiming that enforcement of antitrust actually generates money for government. For example, in 1999 House Judiciary Committee Chairman Henry Hyde (R-IL) scolded colleagues who were trying to cut back Department of Justice funding by noting that the Department’s Antitrust Division brought in $1.4 billion in fines in 1998.⁷⁹ Deputy Assistant Attorney General John M. Nannes speaks proudly of the division’s "record-shattering criminal fines in FY 1999."⁸⁰ Left unsaid is the fact that the process of extracting these fines adds a multibillion-dollar deadweight to our economy.

• Potential benefit illusion
  Antitrust enforcers employ the potential benefit illusion to claim that they will make consumers better off. Yet because antitrust serves as affirmative action for less efficient competitors, prices often rise after antitrust action is taken, particularly on enforcement of predatory pricing.⁸¹ Consumers do not want government’s help: an April 2000 poll showed 67% of Americans thought Microsoft had been good for consumers; only 8 percent thought it had been bad.⁸²

• Deceptive "advertising"
  Deceptive advertising occurs when politicians insist, as Al Gore did on a recent campaign stop, that the antitrust laws "embody a fundamental American value" and are thus vital to the maintenance of competitive markets and even democracy itself.⁸³

This model applies well to antitrust, as its enforcers claim a) they are "severely constrained" by limited resources;⁸⁴ b) their work will help consumers;⁸⁵ and c) that they are not motivated by self-interest or political calculations — or as antitrust honcho Joel Klein has said, "politicians have no place in the enforcement of antitrust laws."⁸⁶

Source: DOJ Antitrust Division, "10-Year Workload Statistics Report, FY 1990-1999."

The reality that the public choice theorists have exposed is that antitrust law is essentially special interest — as opposed to public interest — legislation. The intense jockeying of competitors for political and business advantages represents what respected University of Chicago professor and U.S. Appeals Court Judge Richard Posner termed the Antitrust Pork Barrel.⁸⁷ For example:

• Thomas J. DiLorenzo has demonstrated that the Sherman Act was passed to protect politically influential small farmers and select businesses from more efficient competition.⁸⁸

• DiLorenzo, Donald Boudreaux, and Steven Parker have shown that groups which lobbied for a Missouri antitrust law in the 1880s that served as a precursor to the Sherman Act were rural cattlemen and butchers seeking to thwart competition from newly centralized meat processing plants in Chicago.⁸⁹

• Government regulators need a steady caseload to justify increasing budgets. If they are not taking on more cases each year, they will face calls to slash their budget.⁹⁰

• Lawyers within the DOJ and FTC seek to advance their careers by gaining experience in antitrust litigation that would be valuable in the private sector. "This is the smartest thing I ever did," intoned former New York State Assistant Attorney General Gail Cleary, who worked on the Microsoft case and subsequently jumped ship to a lucrative intellectual property law firm.⁹¹

• Losing competitors want antitrust to restrict entry to new rivals, limit price or non-price competition, and impose costs on their opponents while they get free legal help.⁹²

• Politicians often use antitrust regulations to protect businesses in their district from more efficient competitors.⁹³ They also imply the threat of regulation to generate campaign contributions.

• Studies show that judges who are up for promotions impose harsher antitrust remedies, and that when court dockets are full, companies face stiffer penalties for going to trial.⁹⁴

Public choice analysis is not radical and "anarchistic," as some critics charge.⁹⁵ It simply strives to define regulatory and political processes as they are, not as they should be. Despite antitrust’s unmasking over the past three decades, there is still a widespread belief in the righteousness of trustbusting. It is not surprising that politicians, government lawyers, needy corporations, and other self-interested parties attempt to use the antitrust laws to their own advantage. What is surprising is that antitrust continues to be viewed as public interest legislation when it is clearly special interest legislation.

Politics As Usual: The Microsoft and Visa/MasterCard Cases

"These are exciting times at the Antitrust Division," says recently departed antitrust czar Joel Klein.⁹⁶ Deputy Assistant Attorney General John Nannes proudly echoes, "no one presently in the Antitrust Division can remember a time when there was more ongoing high-profile antitrust litigation." The antitrust wheel of fortune has indeed spun in the direction of the regulators, who are using an evolving set of legal theories to attack some of America’s most successful companies.⁹⁷ The Justice Department’s lawsuits against Microsoft and Visa/MasterCard are the most important of these cases. Sold to the public as a crusade for consumer welfare, the litigation against Microsoft and Visa/MasterCard ultimately fails any objective consumer welfare test for utility. Both cases have been characterized by a) few, if any, consumer complaints, b) scheming by competitors, and c) political gamesmanship.

United States v. Microsoft

The Microsoft case demonstrates everything that is wrong with antitrust policy. The public — computer users in particular — did not want the lawsuit.⁹⁸ However, Microsoft’s competitors, influential politicians, and DOJ bureaucrats did. The suit followed a predictable pattern for antitrust cases: competitors sought antitrust relief to hobble their rival, politicians used the case to generate campaign contributions, and government lawyers sought valuable trial experience. Microsoft was simply punished for its neglect of the political process. As one congressional aide remarked,

[Microsoft] doesn’t want to play the D.C. game, that’s clear, and they’ve gotten away with it so far. The problem is, in the long run they won’t be able to.⁹⁹

Predictably, government officials dismiss arguments that political considerations played a role in the decision to sue Microsoft. "Politicians have no place in enforcement of antitrust laws," says Klein.¹⁰⁰ Yet politics contaminated the government’s case against Microsoft from the beginning. Since disgruntled consumers chafing at supposed monopoly abuses were in short supply, a handful of powerful computer industry executives pushed the DOJ to take action instead. "Government has to come in and discipline [Microsoft] until the rest of the world catches up," urged Scott McNealy of Sun Microsystems, which spent $3 million to assemble a panel of experts who successfully lobbied DOJ to sue Microsoft.¹⁰¹ Then-Netscape CEO James Barksdale — who met with Klein in his home to discuss the case — even admitted in court that it would have been "too expensive" for his company to hire its own lawyers to settle its score with Microsoft. The nineteen state Attorneys General (AGs) who ultimately joined the federal case also appeared to have been motivated by political considerations.¹⁰² As Iowa AG Tom Miller said of the suit, "Everyone knew it was high profile. This one was a no- brainer."¹⁰³ And Miller unmasked the government’s real agenda when he reminded his fellow AGs that they originally "wanted to move quickly in this case . . . to protect Netscape."¹⁰⁴

The economic theory underpinning the Microsoft case is even more suspect than the political calculations that motivated it. The government essentially prosecuted Microsoft for adding a free web browser (Internet Explorer) to the Windows operating system and requiring computer manufacturers to sell this enhanced version as a single product. While this posed an obvious threat to Netscape, how is a free, integrated web browser bad for consumers? The government rested its case on speculation about what Microsoft might do to harm consumers (raise prices after driving Netscape out of business) rather than what the company had done to harm consumers.¹⁰⁵ Even economist Franklin Fisher, the government’s lead witness, admitted in court that Microsoft had not hurt consumers "up to this point."¹⁰⁶ It is ironic that Microsoft was prosecuted for pricing its browser at zero, considering that Netscape had earlier employed this very same tactic in order to build its own market share.¹⁰⁷ Although Microsoft was accused of blocking Netscape’s access to the market, it was revealed during the trial that Netscape distributed 160 million copies of Navigator in 1998 alone, and that almost a quarter of all computers distributed that year had Netscape on them.¹⁰⁸ In the middle of the trial America Online purchased Netscape in a multi-billion dollar deal. The antitrust authorities who were prosecuting Microsoft for "tying" its products failed to block this merger, which wedded the nation’s largest Internet service provider to the nation’s largest Internet browser company.

While the case failed to provide any tangible benefits for consumers, it clearly served as a detriment to investors. On April 1, 2000, before news of the breakdown of settlement talks filtered out, Microsoft was worth $106 per share, or $551 billion. On April 24, after the government indicated it planned to break the company up, the shares were worth $66, for a net loss to investors of $208 billion — $768 for every person in the United States.¹⁰⁹ It was not just Wall Street heavy hitters that lost money: as of April 2000, more than 2,000 mutual funds held Microsoft shares.¹¹⁰ Public-employee pension funds in just eight of the nineteen states that sued Microsoft lost a combined $38.6 billion following the ruling, led by declines in the value of their high-tech holdings.¹¹¹ The overall losses were far greater, as the impact of U.S. District Court Judge Thomas Penfield Jackson’s April 3, 2000 "finding of fact" against Microsoft spooked the entire market and caused the Nasdaq to experience its worst one-day loss ever. Experts will continue to debate the merits of antitrust enforcement, but one thing is certain — the Microsoft case has had a negative impact on the economy.

Judge Jackson ultimately found Microsoft guilty of violating the Sherman Act and ruled that the firm should be broken up into two companies, as proposed by Microsoft’s competitors and the Justice Department. In a clear assault on Microsoft’s private property rights, Jackson decreed that Microsoft would have to share its application programming interfaces (APIs) — which it has spent billions to develop — with its rivals.¹¹² While the Supreme Court’s refusal to fast-track the case gives Microsoft a good chance of winning on appeal, the government’s lawsuit created what U.S. Court of Appeals Judge Richard Posner calls the "cluster-bomb effect." Nineteen states piggybacked the federal litigation, and the European Union and several foreign countries are planning to sue Microsoft.¹¹³ The government’s lawsuit also opened the door to trial lawyers, who have filed over 130 class-action antitrust suits against Microsoft. The government’s pursuit of Microsoft is not a consumer crusade. It has helped a handful of politicians, DOJ bureaucrats, and software companies at the expense of millions of American consumers, investors, and taxpayers.

United States v. Visa Intl. Corp. and MasterCard Intl. Inc.

The DOJ filed antitrust charges against Visa and MasterCard — brands that are owned by an association of 6,000 member banks — in October 1998; as of October 2000 the case was still at trial. The government objects to Visa and MasterCard rules that prevent member banks from issuing other cards, namely American Express and Discover. The DOJ claims that Visa and MasterCard, which control about 75% of the credit card market, practice "duality" and do not compete with each other, stifling innovation in the credit card industry.¹¹⁴ The charges are groundless. Over 8,000 member banks compete to issue Visa and MasterCard, flooding mailboxes, web pages, and phone lines with new offers.¹¹⁵ Visa alone offers 20,000 different types of cards.¹¹⁶ The credit card industry actually helped spur scores of innovations, including ATM machines, debit cards, and cards that feature photo ID. The government’s case is not about promoting innovation — it is basically an attempt to force Visa and MasterCard member banks to distribute the cards of its politically influential competitors.

While interventionist post-Chicago thinking has become ascendant at the Antitrust Division, the real force behind the litigation against Visa and MasterCard is their top rival, American Express (AmEx). Under the leadership of CEO Harvey Golub, AmEx has waged an aggressive lobbying campaign to bring antitrust charges against its competitor.¹¹⁷ AmEx has cultivated its political ties, making donations to key members of the U.S. Senate Banking Committee before a recent hearing on the credit card industry.¹¹⁸ Vernon Jordan, a close friend of President Clinton, sits on AmEx’s Board of Directors. AmEx bought heavy advertising for President Clinton’s 1993 inaugural committee, won the White House Travel Office account, and has replaced Diner's Club as the government-issued credit card for federal workers. AmEx appears to be using its political connections and the antitrust laws to subvert competition while the company irons out the wrinkles created by the failure of its early 1990s business strategies, which cost the company billions of dollars.119 Golub has himself admitted, "We should have seen what was happening, but we let success blind us. We were inflexible. We were arrogant. We were dreaming."¹²⁰

The DOJ says that Visa and MasterCard are engaged in a "restraint of trade" in violation of the Sherman Act. Consumers, however, are having no trouble getting AmEx credit cards. AmEx currently has 47.9 million cards in circulation, the highest amount in company history. It is accepted in 2.1 million locations, in spite of charging merchants almost double the Visa and MasterCard fee, and it enjoys 65% of the corporate credit card market.¹²¹ AmEx has achieved this market penetration in spite of the fact that it charges holders fees of between $55 and $300 per year for its cards. Profit for 1999 was $2.5 billion, up over 15% from 1998.¹²² At the close of September 2000, AmEx stock traded at around $60 per share and had a market capitalization of $80 billion.¹²³ Standard & Poor’s gives AmEx shares a positive "accumulate" rating, citing rapid innovation in the credit card industry as a primary reason.¹²⁴ Thus, after taking several missteps, AmEx appears to be back on track. Even if protecting competitors was a valid justification for antitrust, AmEx does not need government protection.

Justice Department spokeswoman Gina Talamora has said, "our aim is to protect consumers and not competitors." Yet the evidence behind the DOJ’s case against Visa and MasterCard indicates otherwise. Golub has urged banks to switch to AmEx’s network precisely because their transaction fees are higher than Visa and MasterCard. This would directly translate into higher costs for consumers.¹²⁵ As a Detroit News editorial complained, "only by government logic would costlier credit benefit consumers."¹²⁶ Other critics have suggested that the only way a company can keep the antitrust monkey off its back is to either run an incompetent business or stay small — or both.¹²⁷ Sadly, this observation is accurate, although not entirely correct. The other way to keep the regulators at arms’ length is to focus on winning in the political arena rather than the marketplace.

Antitrust Policy: End It, Don’t Mend It

Antitrust law enjoys a quasi-religious reverence reserved for few government policies. For example, Marshall Howard has called the Sherman Act "the Magna Carta of free enterprise." Even many of the harshest critics of antitrust policy, such as Robert Bork and William F. Shughart, support a limited antitrust regime.¹²⁹ Proponents of antitrust assert that abolishing government’s antitrust authority is risky because we do not know how business will evolve. Although it may have seemed logical that trusts and cartels would corner markets and harm consumers, we have the benefit of over 110 years of antitrust policy to see that the market humbles even the most aggressive would-be monopolist. The only monopolies that have endured are run by or blessed by government. While no one knows exactly what the future holds, the experiences of the past century demonstrate that the tentacles of antitrust law periodically threaten to strangle our economy. Abolishing antitrust will save billions of dollars lost to our economy each year — including legal expenses, reduced productivity, lost innovation, and compliance costs.¹³⁰

Antitrust has always been special interest legislation. The antitrust constituency used to be led by small business, but is now led in many instances by large second-tier companies seeking antitrust help in their fight against a dominant player. These companies are not always forthright with the antitrust authorities, as the Justice Department’s John Nannes complained:

We are troubled by the number of instances in which the Antitrust Division has been provided with information that turns out not to be true . . . these misrepresentations have frequently involved important matters going not only to facts relevant to the potential violation being investigated but even to the nature of relief proposed by private parties to resolve our antitrust concerns.¹³¹

This clamoring for antitrust protection, as well as other firms’ strong desire to avoid costly antitrust litigation, forces companies into a political bidding war that has greatly expanded the problems of rent seeking and free riding. It is no coincidence that the most heavily regulated industries — such as telecommunications, tobacco, and automobiles — are the industries that make the most political contributions. Unfortunately, the government’s focus on regulating the new economy has forced information-era companies to greatly increase their giving. For example, Internet giant Cisco Systems, clearly scared by the prospect of facing Microsoft-like litigation, upped its corporate campaign contributions from $61,000 in all of 1996 to $681,000 as of September 2000. [See Figure 3.]¹³² Repeal of antitrust law would go a long way toward ending this political extortion. An equally clear solution for reducing rent extraction and free riding is to reduce the size of government itself, and thereby lessen its power to threaten, expropriate, and transfer.¹³³

All antitrust law, including the Sherman Act and the Clayton Act, should be repealed. Congress should abolish the Federal Trade Commission and de-fund the Department of Justice Antitrust Division. This would constitute a serious break with past policy, but it is a break that nonetheless must be made. Cries of protest will be heard from the groups that have the most to lose — antitrust officials and anti-business academics, politicians, antitrust lawyers, and companies that use antitrust to subvert competition. They will claim that "surgical intervention" in markets is necessary to protect consumers. Yet it is dangerous to allow surgery on an unwilling and healthy patient, especially when the goal is only to share its brain or remove some muscle.¹³⁴ Proponents of antitrust regulations will also continue to insist that antitrust saves capitalism from excesses that would make full-blown socialism inevitable, in spite of the fact that antitrust has not saved capitalism, only harmed it.¹³⁵ Government antitrust policy, with its arbitrary attacks and state-created privileges, is the true enemy of competition and consumer welfare.¹³⁶ Antitrust is so flawed that it cannot be reformed — it must be repealed.

Conclusion: Does Antitrust Have a Future?

The emergence of high-tech industries and multinational corporations has allowed many firms to evade the choking grasp of government regulation. But antitrust officials in the U.S., the European Union, and several foreign countries are beginning to work together to slam the brakes on the fast-moving global economy.¹³⁷ Former Antitrust Division chief Joel Klein has called for establishment of a new international agency devoted solely to coordinating global antitrust policies. In the 2000 presidential election campaign, both candidates appeared to be wedded to the antitrust status quo. Vice President Al Gore campaigned by making populist attacks against "Big Oil" and "greedy" pharmaceutical companies.¹³⁸ While George W. Bush avoided such pronounced anti-business rhetoric, Bush economic advisor Tim Muris has said, "the core of antitrust enjoys wide, bipartisan consensus."¹³⁹ Unfortunately, the politicians fail to recognize that the prosperity of the last decade occurred largely because the Joel Kleins of the world had not caught up with the Bill Gateses and other entrepreneurs. As Holman Jenkins, Jr. writes, "Joel Kleinism" is the force that could stifle innovation, decrease consumer demand, and ultimately trigger a recession in the not-too-distant future.¹⁴⁰

The greatest threat to free competition comes not from aggressive businesses, but from government intrusions into the marketplace. By undermining competition through antitrust enforcement or subsidies for failing industries, government uses tax dollars to make consumers pay higher prices. For example, the federal government recently spent $50 million to prop up the fishing industry and the Agriculture Department plans to force cranberry farmers to cut production or dump 15% of their crop in order to keep prices high.¹⁴¹ State governments, for their part, are blocking the direct sale of items such as autos, auto parts, and wine over the Internet in order to protect politically powerful car dealers and wine wholesalers.¹⁴² If any party is guilty of engaging in "conspiracies in restraint of trade" that keep costs high for consumers, it is government. Unfortunately, government activity to protect favored industries shows no signs of abating.

Popular support for antitrust is built upon widely held and deep-seated notions of fair play. Occasionally these ideals bubble to the surface in campaigns against large companies such as Wal-Mart. However, with over half of all American families across all income ranges now owning stock, the emergence of a new "investor class" could lead to broader backing for free-market policies.¹⁴³ The investor class is savvy enough to understand that the private sector, not government, creates wealth. This expanding group of Americans cares about increasing the value of their portfolios — not the politics of protecting uncompetitive businesses — and sees the negative effect that antitrust crusades, such as the Microsoft debacle, can have on their net worth. If progress is to be made on the antitrust front, the growing ranks of investors must work with traditional defenders of free enterprise toward repeal of the antitrust laws. The long-standing cultural bias against big business will make this task difficult, albeit worthwhile. The "little man" will be thankful in the long run.

About the Author

Mark Schmidt is Director of Programs for NTUF.

Notes

1 Quoted in Yale Brozen, "The Attack on Concentration," The Freeman, January 1998.

2 See, for example, "Attorney General Reno, Assistant Attorney General Klein Statements Regarding Proposed Remedy in Microsoft Case," Department of Justice Press Release, April 28, 2000.

3 Robert Bork, The Antitrust Paradox: A Policy at War With Itself (New York: Basic Books, 1978), 423.

4 Wendy McElroy, Sexual Correctness: The Gender-Feminist Attack on Women (Jefferson, NC: McFarland & Company, 1996).

5 Brozen, "The Attack on Concentration."

6United States v. Aluminum Company of America , 148 F. 2d 416 (1945), 427.

7 Quoted in Nelson Lund, "Reforming Affirmative Action in Employment: How to Restore the Law of Equal Treatment," Heritage Foundation Committee Brief No. 17, August 2, 1995.

8 Quoted in Charles Murray, Losing Ground: American Social Policy, 1950-1980 (New York: Basic Books, 1984), 43.

9 Walter E. Williams, "Affirmative Action Can't be Mended," Cato Journal, Vol. 17, No. 1 (Spring/Summer 1997).

10 Thomas J. DiLorenzo, Cato Handbook for Congress, #39 Antitrust, (105th Congress).

11 Murray, Losing Ground, 94.

12 In a 1985 speech at Georgetown Law School, Brennan also said that the "majoritarian process has appeal under some circumstances, but I think ultimately it will not do," adding that the Supreme Court's role is "to declare certain values transcendent, beyond the reach of temporary political majorities." Patrick J. Buchanan, "Ending Judicial Dictatorship," Heritage Lecture No. 553, January 29, 1996.

13 Sarah S. Vance, "Judicial Review of Competition Cases," www.oecd.org/daf/clp/Roundtables/jug27.HTM

14 George Bittlingmayer, "Industry Investment and Regulation," CES Working Paper Series 81 (Munich: Center for Economic Studies, 1995).

15 U.S. Department of Justice Antitrust Division 10-Year Workload Statistics Report, FY 1990-1999, 2.

16 Thomas W. Hazlett and George Bittlingmayer, "Why Nasdaq Loses When the Government Wins," The Wall Street Journal, April 4, 2000.

17 Rachel Jafta, "The High Cost of Affirmative Action," www.hsf.org.za/focus_10/f10-aa.html. See also, Peter Brimelow and Leslie Spencer, "When Quotas Replace Merit, Everybody Suffers," Forbes, February 15, 1993.

18 "Cost of Government," Americans for Tax Reform, www.atr.org/cogd/2000/addenda1.htm

19 See Roger Faith, Donald Leavens, and Robert Tollison, "Antitrust Pork Barrel," and Malcolm Coate, Richard Higgins, and Fred S. McChesney, "Bureaucracy and Politics in FTC Merger Challenges," in Fred S. McChesney and William F. Shughart II, The Causes and Consequences of Antitrust: The Public Choice Perspective (Chicago: University of Chicago Press, 1995).

20 Bork, The Antitrust Paradox, 10.

21 Barry W. Poulson, Economic History of the United States (New York: Macmillan Publishing Co., Inc, 1981), 362-363.

22 Comment of William Henry Vanderbilt, reported in Chicago Daily News, October 8, 1882, in Leonard Roy Frank, ed., Random House Webster's Quotationary (New York: Random House, 1999) 152.

23 See Lawrence Goodwyn, The Populist Moment (New York: Oxford University Press, 1978).

24 Ibid.

25 Thomas J. DiLorenzo, "The Truth About Sherman," Austrian Economics Newsletter, Summer 1991.

26 Steve Lohr, "Mr. Sherman's 1890 Nod to Populism Has Often Been Broadly Interpreted," The New York Times, October 19, 1998, C9.

27 David R. Henderson, "The Case Against Antitrust," Fortune, April 27, 1998.

28 DiLorenzo, "The Truth About Sherman."

29 D.T. Armentano, "The Failure of Antitrust Policy," The Freeman, Vol. 44, No. 6, June 1994.

30 Albert A. Foer and Robert H. Lande, "New Antitrust Institute Envisions a Post-Chicago Future," Legal Times of Washington, November 2, 1998.

31 Quoted in Pete du Pont, "Antitrust Regulators to the Rescue," National Center for Policy Analysis Opinion Editorial, September 15, 1999.

32 Robert Kuttner, "The Answer to Deregulation? Creative Regulation," The American Prospect, October 31, 1999.

33 Robert B. Reich, "Should We Worry About the New Corporate Giants?" The American Prospect, May 1998.

34 Christine Chambers Wilson, "Markets in the Balance: Efficiencies Analysis of Mergers Should Consider Multiple Markets," Legal Times, November 6, 1999.

35 Robert Ekelund, Jr. and Mark Thornton, "The Cost of Merger Delay in Restructuring Industries," Heartland Policy Study #90, June 23, 1999.

36 See Bork, The Antitrust Paradox.

37 Donald J. Boudreaux and Andrew N. Kleit, "How the Market Self-Polices Against Predatory Pricing," Competitive Enterprise Institute, June 1, 1996.

38 "Predatory Pricing Simply Won't Fly," National Center for Policy Analysis, www.ncpa.org/pd/regulat/ regapr98c.html

39 Thomas Sowell, "Predatory Prosecution," Forbes, May 3, 1999.

40 Robert Pitofsky, "Challenges of the New Economy: Issues at the Intersection of Antitrust and Intellectual Property," speech to American Antitrust Institute Conference: "An Agenda for Antitrust in the 21st Century," at National Press Club, June 15, 2000; Joel I. Klein, "Rethinking Antitrust Policies for the New Economy," Haas/Berkeley New Economy Forum at UC Berkeley, May 9, 2000.

41 James V. DeLong, "The New Trustbusters," Reason, March 1999; see also Bork, The Antitrust Paradox.

42 D.T. Armentano, "It's Time to Reexamine Antitrust Legislation," Cato Institute, This Just In, November 13, 1997, www.cato.org/dailys/11-13- 97.htm

43 Henderson, "Antitrust Busters," Reason, August/September 1995.

44 Bryan T. Johnson, "Increasing American Competitiveness Through Strategic Alliances," Heritage Foundation Backgrounder #857, September 26, 1991.

45 Clyde Wayne Crews, Jr., "Antitrust Policy as Corporate Welfare," Competitive Enterprise Institute, July 1997.

46 Michael M. Weinstein, "Previous Antitrust Cases Leave Room for Both Sides to Cite Them Now," New York Times, October 19, 1998, C10.

47 Brozen, "The Attack on Concentration."

48 Ibid.

49 DeLong, "The New Trustbusters."

50 Domingo F. Cavallo, "Untrustworthy Antitrust," Forbes, May 31, 1999.

51 Sathnam Sanghera, "Consumers Back Tough Regulations," Financial Times, June 16, 2000.

52 Ida M. Tarbell, The History of the Standard Oil Company, posted online by the University of Rochester at http://www.history.rochester.edu/fuels/tarbell/ MAIN.HTM

53 Thomas J. DiLorenzo, "The Ghost of John D. Rockefeller," The Freeman, June 1998.

54 D.T. Armentano, The Myths of Antitrust: Economic Theory and Legal Cases (New Rochelle: Arlington House, 1972), 77.

55 John D. Rockefeller, Random Reminisces of Men and Events, quoted in Stephen Ambrose and Douglas Brinkley, editors, Witness to America (New York: HarperCollins Publishers, 1999), 310-311.

56 DiLorenzo ascribes this comment to Sen. Edwards in "The Truth About Sherman."

57 Tarbell, History of the Standard Oil Company, vii.

58 DeLong, "The New Trustbusters."

59 John Steele Gordon, "Read Your History, Janet," Forbes, February 23, 1998.

60 Richard McKenzie and William F. Shughart II, "Is Microsoft a Monopolist?," The Independent Review, Vol. 3, No. 2 (Fall 1998), 169.

61 Joel I. Klein, "Rethinking Antitrust Policies for the New Economy," speech given at the Haas/Berkeley New Economy Forum, Haas School of Business, University of California at Berkeley, May 9, 2000.

62 Armentano, The Myths of Antitrust, 107-122.

63 Quoted in Johnson, "Increasing American Competitiveness."

64 D.T. Armentano, Antitrust Policy: The Case for Repeal (Washington, DC: Cato Institute, 1991), 52.

65 "FTC vs. Staples, Office Depot Ð and Reality," Investor's Business Daily, March 12, 1997.

66 William Niskanen, "Antitrust and the Staples-Office Depot Merger," Cato Institute, This Just In, June 26, 1997.

67 Federal Trade Commission vs. Staples Inc .and Office Depot Inc ., Civ. No. 97-701(TFH), 1997 U.S. Dist. Lexis 9322; 1997-2 Trade Cas. (CCH) P71,867. In upholding the FTC's claim that the relevant issue was that the merged companies would control 75 percent of office-supply superstore sales capacity Ð and not the fact that combined they only accounted for 5 percent of total office-supply sales Ð Hogan wrote, "the mere fact that a firm may be termed a competitor in the overall marketplace does not necessarily require that it be included in the relevant product market for antitrust purposes."

68 Ibid. Gordon,

69 "Read Your History, Janet."

70 Hans B. Thurelli and James M. Patterson, "Longer Live the Sherman Act!" in Theodore P. Kovaleff, ed., The Antitrust Impulse, Vol. II (Armonk, NY: M.E. Sharpe, 1994), 967-1003.

71 DiLorenzo, "The Ghost of John D. Rockefeller."

72 Armentano, The Myths of Antitrust, 277.

73 See, for example, James M. Buchanan and Robert D. Tollison, eds., Theory of Public Choice (Ann Arbor: University of Michigan Press, 1972).

74 Dennis C. Mueller, Public Choice (New York: Cambridge University Press, 1979), 1.

75 Fred S. McChesney, Money for Nothing: Politicians, Rent Extraction and Political Extortion (Cambridge, Mass.: Harvard University Press, 1997), 2.

76 William F. Shughart II, Antitrust Policy and Interest Group Politics (New York, Quorum Books, 1990), 53.

77 Ibid.

78 John G. Cullis and Philip R. Jones, "Public Choice: Outrageous Theory and Engaging Tests," in K. Alec Chrystal and Rupert Pennat Rea, eds., Public Choice Analysis of Economic Policy (New York: St. Martin's Press, 2000), 59-90.

79 Mark Schmidt, "Department of Injustice," Elko Daily Free Press, November 20, 1999.

80 Nannes, "Last Year and This Year: The View from the Antitrust Trenches," address before the New York State Bar Association Antitrust Law Section Annual Meeting, January 27, 2000.

81 James L. Gattuso, "Don't Outlaw Cheap Airfares," The Wall Street Journal, April 8, 1998.

82 Robert J. Samuelson, "The Mystifying Microsoft Case," The Washington Post, April 12, 2000, A27.

83 Albert A. Foer, "Two Approaches to Antitrust: Where Would Gore and Bush Take Antitrust Law?" American Lawyer Media, April 7, 2000.

84 Nannes, "Last Year and This Year."

85 See, for example, "Statement by Joel I. Klein on the Abandonment of the WorldCom/Sprint Transaction," Department of Justice press release, July 13, 2000.

86 "Washington Wire," The Wall Street Journal, April 7, 2000, A1.

87 Richard Posner, "The Federal Trade Commission," University of Chicago Law Review, Vol. 39, No. 47 (1969).

88 DiLorenzo, "The Truth About Sherman."

89 Donald Boudreaux, Thomas DiLorenzo, and Steven Parker, "Antitrust Before the Sherman Act," in Fred S. McChesney and William F. Shughart II, eds., The Causes and Consequences of Antitrust: The Public Choice Perspective (Chicago: University of Chicago Press, 1995).

90 Shughart, Antitrust Policy and Interest Group Politics, 106

91 James V. Grimaldi, "Hearsay," The Washington Post, July 24, 2000, F31. In Antitrust Policy and Interest Group Politics, Shughart cites a study by Suzanne Weaver showing that lawyers in the Department of Justice Antitrust Division often base their decision to prosecute on their prospects for gaining trial experience that will be valuable when they move on to the private sector.

92 Ibid., 48.

93 For example, U.S. Senate Judiciary Committee Chairman Orrin Hatch (R-UT) was lobbied by Utah-headquartered Novell Corporation, a competitor of Microsoft, to use his position to instigate antitrust action against Microsoft. Hatch fired off a controversial letter to Bill Gates in which he warned Microsoft not to become involved in a "public relations campaign" that enlisted the support of computer executives, with the veiled threat that he would use his position as Chairman of the powerful Judiciary Committee to thwart the company. Quoted in Robert A. Levy, "Hatch vs. Gates: Just Who is Abusing Power?" Cato Institute, This Just In, June 23,1998.

94 Shughart, Antitrust Policy and Interest Group Politics, 133.

95 Albert A. Foer, book review of "Money for Nothing: Politicians, Rent Extraction and Political Extortion," White House Weekly, February 3, 1998, posted at www.antitrustinstitute.org/recent//.cfm

96 Klein, "The Importance of Antitrust in the New Economy."

97 Fred S. McChesney, "Antitrust and Regulation: Chicago's Contradictory Views," Cato Journal, Vol. 10, No. 3 (Winter 1991), 775-798.

98 Frank Newport, "Justice Department Not Doing as Well in Court of Public Opinion," The Gallup Organization, June 13, 2000, www.gallup.com/poll/fromtheed/ed0006.asp

99 David Boaz, "Prisoner Held for Ransom," The Washington Times, June 11, 2000.

100 "Washington Wire," The Wall Street Journal, April 7, 2000, A1.

101 "Bureau of Browser Controls," The Washington Times, April 4, 2000; Report on Sun Microsystems from Bloomberg News, October 8, 2000.

102 See, for example, David Plotz, "Richard Blumenthal: He was Supposed to be President; So Why is He Only Connecticut's Attorney General?," Slate, September 15, 2000.

103 Mark Schmidt, "Lawyers Playing Lawmakers: The Microsoft Antitrust Suit," National Taxpayers Union Foundation Policy Paper #119, September 1999.

104 Transcript of state Attorneys General conference call, November 5, 1999 held in possession of author.

105 Former Deputy Assistant Attorney General Robert Litan explained this double standard, writing that "Microsoft effectively had the burden of showing that the package of the browser and the operating system provided very real and compelling benefits to consumers, not just some ïplausible benefits.'" "Fair Use of Antitrust Law," The Washington Post, September 13, 2000, A35.

106 Steve Chapman, "The Real Cost of the Microsoft Verdict," Chicago Tribune, April 6, 2000.

107 T.J. Rodgers, "What's Good for Microsoft . . .," The New York Times, October 20, 1998.

108 Comments of David Evans at "The Economics of United States v. Microsoft" conference at the American Enterprise Institute, February 11, 2000, http://www.brook.edu/comm/transcripts/20000211.htm

109 Alex Tabarrok, "The Anti-Entrepreneurs," The Independent Institute, May 1, 2000.

110 Rebecca McReynolds, "Don't Get Stuck with Extra Pieces," Individual Investor, April 2000. An article by Aaron Lucchetti in the July 10, 2000 Wall Street Journal said, "Like it or not, you'll probably find big slugs of Microsoft somewhere in your funds, making every twist and turn in the company's fortunes your business."

111 "Attorneys' General Pursuit of Microsoft Leaves Their State Pension Funds $38.6 Billion Poorer, Study Finds," National Taxpayers Union, April 28, 2000, http://www.ntu.org/issues/taxes/tech/ P0004Microsoftpension.html

112 Finding of Law in U.S. v. Microsoft posted at http://www.microsoft.com/presspass/trial/col/col.asp

113 Richard A. Posner, "Antitrust in the New Economy," paper given at the American Law Institute-American Bar Association antitrust conference, September 14, 2000.

114 "Justice Department Files Antitrust Suit Against Visa and MasterCard for Limiting Competition in Credit Card Network Market," Department of Justice press release, October 7, 1998.

115 Testimony of Paul Allen, Executive Vice President and General Counsel, Visa U.S.A., before the U.S. Senate Banking Committee Subcommittee on Financial Institutions, May 25, 2000.

116 "A Statement from Visa," http://www.visa.com/cgi-bin/vee/av/doj/ statement/main.html?2+0

117 John Hanchette, "Anti-Trust Trial Set for Visa, MasterCard," The Salt Lake Tribune, June 9, 2000. See also, "Harvey Golub's Testimony to the U.S. Senate Banking Committee," www.americanexpress.com, May 25, 2000.

118 Paul Bedard, "The Next Microsoft," U.S. News & World Report, May 15, 2000. AmEx's 1999 annual report optimistically states that antitrust action against Visa and MasterCard could "open competition."

119 For example, AmEx's former CEO attempted to create a financial supermarket which failed miserably and lost $2.3 billion over three years on the Optima card, the first AmEx card to allow a month-to-month balance.

120 Linda Grant, "Why Warren Buffet's Betting Big on American Express," Fortune, October 30, 1995.

121 Michael W. Lynch, "Credit Where It's Due," Reason, January 1999.

122 "Fortune Global 500 General Information 2000," www.fortune.com.

123 Stockmaster report for American Express, http://www.stockmaster.com/exe/sm/ chart?Symbol=AXP&m =12&ci=I%3ASPX&ma=n&UPT=8266

124 Standard & Poor's Stock Reports Ð American Express Company, August 15, 2000. The report states, "The Justice Department's ongoing lawsuit against Visa and MasterCard could positively affect American Express."

125 "Myths vs. Facts in the Department of Justice's Case Against MasterCard and Visa," http://www.mastercard.com/about/update/ myths.html

126 "The Real Monopoly," Detroit News, October 18, 1998.

127 "Antitrust Hit List: Who's Next?" Investor's Business Daily, October 13, 1998.

128 Thomas J. DiLorenzo, "The Origins of Antitrust: An Interest Group Perspective," International Review of Law and Economics (1985), 5 (73-90).

129 Although Bork's book The Antitrust Paradox strongly criticized antitrust law, Bork has supported the government's prosecution of Microsoft and American Express. In Antitrust Policy and Interest Group Politics, Shughart calls for repeal of the Clayton Act and abolishment of the Federal Trade Commission, but favors Department of Justice review of price-fixing and large mergers.

130 D.T. Armentano and Yale Brozen, Antitrust and Monopoly: Anatomy of a Policy Failure, 2nd edition (Independent Studies in Political Economy, 1999).

131 Nannes, "Last Year and This Year."

132 Greg Hitt, "Cisco's Chambers Revs Up Political-Contribution Engine," The Wall Street Journal, June 8, 2000, A26. Cisco CEO John Chambers upped his personal giving from $13,400 in 1996 to $270,000 as of June 2000. "Computer Equipment and Services: Top Contributors," Center for Responsive Politics, www.opensecrets.org/ industries/contrib.asp?Ind=B12

133 McChesney, Money for Nothing, 170.

134 "Federal Surgeons, Healthy Patients," The Tampa Tribune, October 16, 1998.

135 Michael Hirsh, "The Feds' Case Against Bill Gates," Newsweek, March 9, 1998.

136 Fred L. Smith, Jr., "Why Not Abolish Antitrust?" Regulation, Vol. 7, No.1, January/February 1983.

137 See, for example, Anita Raghavan and Brandon Mitchener, "EU's Antitrust Czar Isn't Afraid to Just Say No; Just Ask Time Warner," The Wall Street Journal, October 2, 2000, A1.

138 Andrew Cain, "Gore Emulates Nader's Criticism of Big Oil Companies, Drug Firms," The Washington Times, July 5, 2000, A4.

139 Jim McTague, "Antitrust's Future: It Would Be Alive and Well Under Either Candidate," Barron's, September 25, 2000, 46.

140 Holman Jenkins, Jr., "How a Telecom Meltdown Will Cause the Next Recession," The Wall Street Journal, September 27, 2000, A27.

141 "Declining Fishing Industry Seeks to Net More Federal Aid," Associated Press, August 14, 2000; "USDA Moves to Reduce Cranberry Crop Surplus," Associated Press, August 7, 2000.

142 Jacob Sullum, "Costly Car Trouble," The Washington Times, August 11, 2000, A16; "Wine War Update," The Wall Street Journal, September 18, 2000, A18.

143 James K. Glassman, "The Investor Class: The Next Political Power," IntellectualCapital.com, April 22, 1999, http://www.intellectualcapital.com/issues/issue223/item4172.asp; since the mid-1960s, the number of American families that own stock rose from about 10 percent to over 50 percent, a number that continues to grow. From 1989-1999, stock ownership increased 46 percent among households with incomes between $25,000 and $50,000 and by an incredible 78 percent among households earning between $10,000 and $25,000. According to data from the Federal Reserve Board, stocks comprise 28 percent of household wealth in America, more than even the 27 percent tied up in real estate.