President Obama’s top antitrust official this week plans to restore an aggressive enforcement policy against corporations that use their market dominance to elbow out competitors or to keep them from gaining market share.
The new enforcement policy would reverse the Bush administration’s approach, which strongly favored defendants against antitrust claims. It would restore a policy that led to the landmark antitrust lawsuits against Microsoft and Intel in the 1990s.
The head of the Justice Department’s antitrust division, Christine A. Varney, is to announce the policy reversal in a speech she will give on Monday before the Center for American Progress, a liberal policy research organization. She will deliver the same speech on Tuesday to the United States Chamber of Commerce.
The speeches were described by people who have consulted with her about the policy shift. The administration is hoping to encourage smaller companies in an array of industries to bring their complaints to the Justice Department about potentially improper business practices by their larger rivals. Some of the biggest antitrust cases were initiated by complaints taken to the Justice Department.
Ms. Varney is expected to say that the administration rejects the impulse to go easy on antitrust enforcement during weak economic times.
She will assert instead that severe recessions can provide dangerous incentives for large and dominating companies to engage in predatory behavior that harms consumers and weakens competition. The announcement is aimed at making sure that no court or party to a lawsuit can cite the Bush administration policy as the government’s official view in any pending cases.
The policy of antitrust intervention is fundamentally flawed in its very essence. I already explained why in Antitrust and Monopolies:
The coercive intervention creates a less competitive environment with less competitive pressure for the new business, since it doesn’t have to fear competition from the previous market monopoly business, and the consumers ultimately suffer.
The intervention sends out the message that as an entrepreneur you shouldn’t strive for perfection when selling to consumers. For if your product becomes too popular your output might be restricted by the government.
Thus the policy doesn’t help the consumer at all and is bound to fail.
Please read the entire post for details.
While this policy is obviously bound to fail, hurt the economy, destroy value for consumers, and rewad misuse of our scarce resources, trial lawyers will jubilate about the inevitable wave of lawsuits that will follow the DOJs encouragements. They are, as always, the beneficiaries of government interventionism, in particular of the enforcement of antitrust and labor legislation. To pursue such a policy during an economic downturn is not just irresponsible, it is downright criminal.