The 1998 antitrust suit brought by the Department of Justice and twenty state attorneys general against the Microsoft Corporation1 captures everything that is still wrong with antitrust policy and demonstrates why the laws must be repealed.

The uptick in antitrust enforcement and the irrational attack on Microsoft should not distract us from the larger and longer picture: the intellectual case against antitrust regulation has been building for decades.

Much of the support for antitrust policy depends upon the correctness of the standard theories of competition and monopoly. These can be briefly summarized as follows.

Rothbardian Monopoly Theory

Economist Murray N. Rothbard (1926–1995) made several important contributions to monopoly theory that have been ignored by mainstream industrial organization theorists. His views on monopoly and on the impossibility of “competitive prices” and “monopoly prices” (in a free market) challenge the mainstream neoclassical position and are at variance with those of his fellow Austrian economists as well.

The logic of free-market monopoly theory is said to be enhanced by a discussion of non-legal barriers to entry. Although open markets contain no legal barriers by definition, certain non-legal obstacles are alleged to exist that may hamper the competitive process and allow leading firms to misallocate resources. Presumably, the application of antitrust policy against these barriers increases economic efficiency and consumer welfare.

The antitrust laws still forbid price discrimination and vertical business agreements (merger, resale price maintenance) that may tend to reduce competition substantially. Price discrimination can be illegal under section 2 of the Clayton Act (1914) as amended by the Robinson-Patman Act (1936). Mergers can be illegal under section 7 of the Clayton Act. Tying contracts and other restrictive agreements can be illegal under section 3 of the Clayton Act or under section 5 of the Federal Trade Commission Act (1914).

The last remaining intellectual stronghold of strict antitrust enforcement is the continuing regulation of horizontal agreements such as joint ventures, price agreements, and horizontal mergers, that have the probability of reducing market output and raising market prices. The general antitrust thinking on horizontal agreements is that most mergers and joint agreements should be judged by an economic rule of reason, while price collusion and division-of-market agreements should remain illegal per se.

The argument against antitrust policy presented here has, to this point, been entirely economic. There are, however, some non-economic considerations that must be brought to bear on any critical analysis of antitrust regulation. Antitrust laws stand in direct violation of civil liberties, individual rights, and due process of law, and these considerations can have important implications for the economic, or efficiency, arguments for antitrust regulation.

Addyston Pipe and Steel Company, 95–97

Advertising, 57–60

Airline industry, 20

Aluminum Company of America (Alcoa), 60–63

American Telephone and Telegraph Company (AT&T), 26

American Tobacco Company, 67

Antitrust cases

Addyston Pipe and Steel Company, et al., United States v. (1897), 95n

Addyston Pipe and Steel Company et al. v. United States (1899), 95n