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One reporter's opinionated guide:
An antitrust glossary for the 110th Congress
On January 4th, at noon, you take over. Welcome, Fighting 110th. I --
and many others -- are glad you made it.
One of your oversight responsibilities is national economic policy, as
administered by the nation's federal antitrust enforcement agencies. It
is a numbingly technical field. Reading antitrust policy is a sure cure
for insomnia. Here's an "Antitrust for Dummies" glossary to help you
sort things out.
THE CHICAGO SCHOOL: For all practical purposes, antitrust thinking has
been in the hands of the pro-business Chicago School of economic
thinking since Reagan, under opinion leaders like Robert Bork, Richard
Posner, Alan Greenspan, and Milton Friedman. You know them by their Ayn
Rand mantras to "Free Markets" and "Competition." This Chicago School is
a strange creature, different in many ways from the National Right that
placed it in power. The National Right hates judicial activism. The
Chicago School loves it; to the Chicago-ites, Stare Decisis is just an
obstacle to economic progress. The National Right claims a religious
mandate. Religious piety and ethical concerns are entirely absent from
Chicago School thinking, replaced by an elaborate show of economic
rationalism and scholarship. The National Right is combative and
rhetorically excessive. The Chicago School has a calm and civil tone (in
public). The National Right is -- well, think of beefy wrestling coaches
(Dennis Hastert) and exterminators (Tom DeLay). Chicago School
proponents are, by contrast, sophisticated, cultured, well-read. Strange
bedfellows, indeed.
MONOPOLY, PRICE GOUGING: These practices are perfectly legal in America
antitrust law, as interpreted by the Chicago School. According to a
frequently quoted Scalia opinion, monopoly is considered the reward for
successful competition. It's only illegal when you break other rules.
And you judge giant monopolists by the same rules that you judge the
tiniest small businessmen. In Europe, they have rules against "Abuse of
Dominance," but not here. Price gouging is also perfectly legal in
America. You can charge $1000 for a bottle of water during a disaster.
It's called Free Market Price Discovery.
CONSUMER WELFARE: A number of Chicago School antitrust economists have
adopted a definition of Consumer Welfare that is identical to Economic
Efficiency. They argue that an efficient economy creates lower consumer
prices and more consumer choices, which is good for consumers, right?
Wrong. If a deal raises consumer prices by $1.00 but lowers producer
costs by $1.25, it's good for "Consumer Welfare" according to this
screwball definition. Since Consumer Welfare is the principal goal of
Antitrust, don't let them slip this one by you. If your 19th century
predecessors had wanted to promote economic efficiency instead of
consumer welfare, they would have said so. Unfortunately, you need an
economist to tell the difference between (1) someone who is talking
about Consumer Welfare and (2) someone who is talking about Economic
Efficiency but calling it Consumer Welfare.
ECONOMIC LEARNING: The Chicago School typically justifies policies by
pointing to Recent Economic Learning. They don't mean ALL Economists,
mind you; they mean THEIR economists. The pro-business anti-regulation
slant of the Chicago School has been well-rewarded, enabling them to set
up a network of think tanks, university departments, and journals -- an
echo chamber of ideas. All share the same anti-regulation, free market
assumptions. Whenever anyone in Antitrust starts talking about new
theories that are widely accepted by economists, take the extra step of
consulting with a non-Chicago School economist.
RULE OF REASON: There are two types of antitrust offenses: Rule of
Reason offenses and Per Se offenses. Per Se offenses are like traffic
offenses. All the cop has to do is prove that the defendant did
something, like going over the posted speed limit or parking in a No
Parking zone, and the matter is decided, with appeal possible, of
course. Rule of Reason offenses are much more complicated, requiring
elaborate trials comparing pro-competitive and anti-competitive economic
justifications for business practices. In Rule of Reason cases, the
company has an overwhelming advantage in both information and budget.
The Chicago School has been steadily turning Per Se offenses into Rule
of Reason offenses. The net effect of this is to make antitrust
enforcement more difficult and expensive, a variant, perhaps, of the
National Right's call to "Starve the Beast" of government.
MARKET CONCENTRATION: In pre-Chicago School days, there was a rebuttable
presumption that certain levels of market concentration were grounds for
blocking a merger or acquisition; technically, those rules are still in
effect, but they are routinely ignored. The agencies don't even publish
market concentration measures when they announce that a merger is
allowed. But market concentration is an important measure of economic
health, and a high priority for the new Congress should be to order a
study of market concentration measures for the nation as they have
changed over the past thirty years. I suspect the results will show an
accelerating concentration of economic power. Fewer competitors, each
with a larger share of the market. More monopolies, more oligopolies.
If so, a good second step would be to convene a conference of experts
outside the current antitrust community to assess what this means -- not
just the same old corporate heads, antitrust lawyers, and antitrust
economists, but sociologists, religious leaders, philosophers, teachers,
labor leaders, small businessmen, consumer groups. You may also want to
look at the issue of "Corporate Personhood" -- whether disembodied
soul-less, immortal corporations should have exactly the same legal
rights as living, breathing human beings.
FALSE POSITIVES/FALSE NEGATIVES: The terminology comes from medical
tests. You take an AIDs test. If you don't have AIDS and the test says
you do, that's a False Positive. If you have AIDS and the test says you
don't, that's a False Negative. The application to Antitrust is that
enforcement agencies are like a medical laboratory. They "test"
companies for anticompetitive business practices. A False Positive is
when a company is not doing anything wrong, but the antitrust agency
charges that it is. A False Negative is when a company is breaking the
laws of competition, and the agency says it is not, by allowing a merger
to go through or not prosecuting a business practice. The Chicago
School is way more afraid of False Positives, which inconvenience
corporations, than of False Negatives, which inconvenience consumers.
Consequently we've had thirty years of False Negatives in antitrust
enforcement.
CARTELS: One thing the Chicago School is good at is going after
price-fixing cartels. They are ideologically opposed to the practice.
There are limits to the enforcement agencies' power, however. They
haven't been able to do anything about the Number One cartel, OPEC, and
they haven't been allowed to investigate Vice-President Cheney's
mysterious private meetings with oil companies, which may or may not
have involved price-fixing or resource allocation agreements.
Good luck, newbies. Do you need to be reminded of the gravity of the
duty Americans voted to entrust to you? Probably not. But you may need
to be reminded that almost all the corporate money in the 2006 race went
to your opponents. Small contributions from the grass roots --
consumers -- got you where you are today. Forget that at your peril.
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