What Do Economists Think about Antitrust?

1. What Do Economists Think about Antitrust? Economists generally agree that “antitrust laws should be enforced vigorously to reduce monopoly power from its current level.” However, economists themselves are often skeptical of survey results. Another way to measure economists’ assessment of antitrust is to examine their writings on particular antitrust cases.

2. There are several possible outcomes to antitrust cases, as viewed by an economic analyst. A case may be “justified” (i.e., the behavior challenged may be anticompetitive) or “unjustified” (the behavior is pro-competitive). Plaintiff (usually the government) may win or lose in each sort of action, justified or unjustified.

3. If the plaintiff wins, still the remedy granted may be effective or ineffective. The only unambiguously desirable outcome is if plaintiff wins a justified case and the remedy is effective; here, anticompetitive behavior is deterred. If the plaintiff loses a justified case, or if the remedy is ineffective, then there are two effects. First, there are costs to being sued, so there is some beneficial deterrent effect even if defendant wins. On the other hand, the victory may entrench the anticompetitive behavior.

4. There are similar effects if the plaintiff loses an unjustified case or if the remedy is ineffective: the defendant firm which is not behaving anti-competitively must nevertheless spend resources on its defense, but the pro-competitive behavior is accepted by the courts, or not effectively constrained. Finally, if plaintiff wins an unjustified case and an effective remedy is imposed, there are unambiguous harmful effects.

5. The view of the economists in the sample is that there are slightly more justified than unjustified cases, although in 40 percent of the cases there is no anticompetitive behavior and the case is unjustified. A higher percentage of unjustified cases than of justified cases are won by plaintiff. In nine instances plaintiffs won a justified case so that anticompetitive behavior was penalized. However, in seven cases plaintiffs won an unjustified case, so that pro-competitive behavior was penalized.

6. Of those cases in which the remedy was actually judged effective there were five in which anti-competitive behavior was penalized and five in which pro-competitive behavior was penalized. Based on this sample, it appears that if antitrust performs a deterrent function, it is as likely to deter efficient as inefficient behavior

7. Results by Case

9. Quality of Case and Outcome, by Case

10. Quality of Case, by Author