April 16, 2013 -- Suppose you and your colleagues want to be paid more. So you make an agreement not to do any more work unless your pay is increased. If you’re unionized laborers, there’s a federal agency that may look after you. But if you’re lawyers with your own offices, taking court appointments to represent poor criminal defendants, there’s a federal agency that may go after you.
Antitrust transforms entrepreneurs into decentralized planners.
The moral essence of a free market is its commitment to every individual’s right to set the goal and meaning of his own life. This means each person is free to work for his own happiness. But antitrust law rejects this commitment. It implicitly asserts the authority of government to set the purpose of every individual’s work. It transforms entrepreneurs from independent creators pursuing their own goals into decentralized planners whose function is to coordinate resources for social purposes. And it does this in the name of the “free market.”
Antitrust law seeks to promote something it calls “competition.” But what antitrust means by “competition” is neither that every business has competitors nor that new businesses are free to enter every field. Rather, a classic text defines “competition” as any situation where a judge can’t increase consumer welfare by issuing a court order. Thus “competition” can coexist with monopoly—as long as the monopoly retains its status by serving its customers well, not by engaging in “anticompetitive behavior.” And thus “competition” can be absent even while customers have a choice among what would normally be called competing businesses, if the businesses engage together in “anticompetitive behavior,” that is, activity that makes customers worse off than they might otherwise be.
Of course, so long as the business or businesses don’t coerce their customers into buying their products or services, each individual purchase makes that customer better off in his own judgment. An unlawful monopolist may be able to charge more than he could charge in a competitive market, but he can’t charge more than his product is worth to his customers: if he did, the customers would keep their money rather than spend it.
What antitrust law targets, then, is efforts to keep your customer’s business by striving to limit his alternatives, instead of by serving him as well as you can. Sometimes that means antitrust requires you to help your competitors compete with you. For example, the Supreme Court held that Aspen Skiing, which owned three ski slopes in Aspen, Colorado, had no right to refuse to include its slopes in a vacation package with the one slope owned by a competitor. The joint package enabled the competitor to reach customers who wanted to buy tickets in advance and still have a choice of slopes; without such a joint package, the only package offering such a choice would be Aspen Skiing’s three-slope package—that is, the package from the only company that actually had a choice of slopes to offer. But since the company seemed to be trying to discourage customers from doing business with its competitor—even at the cost of the sales it could have made through the joint package—it lost the case and had to pay its competitor $10 million.
A Conflict of Principles
If you accept the popular idea that the function of a business is to create wealth for the benefit of society, you may find nothing objectionable in such a ruling. But if you accept the principle that businesspeople (like the rest of us) are entitled to direct their efforts to their own goals, you can recognize that what the Court was doing in this case was forcing the people of Aspen Skiing to direct their efforts to their competitor’s and their customers’ good in preference to their own. They evidently thought they would be better off if they did not help their competitor—if, perhaps, the competitor went out of business and they bought its ski slope. But antitrust law demanded that they use their resources—the slopes that gave them the ability to offer a multi-slope ticket—to keep their rival in business instead.
The same contrast of principles is visible in one of the most familiar antitrust violations: price-fixing. The classic form of price-fixing—a variety of “conspiracy in restraint of trade” under the antitrust laws—occurs when executives agree with their competitors to keep their prices above a certain point. It’s easy to see why people might think it in their interests to make such an agreement: they can charge more for what they produce and make higher profits, at least until someone breaks the agreement or a new competitor joins the field. And it’s easy to see why customers would rather such agreements not be made: in their absence, businesses tend to compete by lowering their prices (among other ways). Banning price-fixing thus forces businesspeople to forgo an opportunity to advance their interests, in order to guide them to act in a way that seems better for their customers.
Who’s in Charge?
Seems—to whom? one might ask, and that’s an important question. To get a sense of the law’s answer, consider two of the most remarkable exceptions to antitrust law: the exception for state action and the exception for seeking government action. Only governments can actually prohibit people from competing and thereby force customers to get a particular product on a favored company’s terms or not at all, yet such government action is not an antitrust violation. Nor is lobbying the government to pass a law to put your competitor out of business. Under the antitrust laws, I may not try to put my competitor out of business by selling my product below cost at a price he can’t afford to match—but I may put him out of business by convincing the state legislature to prohibit anyone but me from selling the kind of product we both make.
How is this consistent? One possibility, of course, is that it isn’t—that this absurdity is merely the result of different principles existing in the law. To an extent, that’s true: prohibiting the state legislature from making such a law would raise problems of federalism, and prohibiting me from lobbying for it would raise First Amendment issues. But when we consider that Congress also sometimes prioritizes other values over those of antitrust, as in the case of unions, we should look for a principle that renders all this consistent.
This freedom is not theirs in recognition of their right to set the goals of their own efforts.
There is one.
Governments set the goals of production and trade, and maximizing production for the consumer is just one of those goals. Where no other federal or state law gives some other goal a higher priority, antitrust law directs businessmen’s efforts to the welfare of their customers. But governments sometimes overrule that policy in pursuit of another goal. Consumer welfare, at least in terms of the ability to get a lot for one’s money, may thereby be diminished, but the relevant government accepts that cost in pursuit of some other governmentally chosen goal. When businessmen direct their efforts away from consumer welfare without governmental consent, however, they are setting priorities that conflict with those governments have set for them. They are asserting the freedom antitrust rejects.
Antitrust law does not (often) micromanage businesses. Executives may legally set their own prices, provided they steer clear of “anticompetitive” ways of doing so. Executives decide how much of what products to make, again, provided they do not do so “anticompetitively.” But under antitrust law, this freedom is not theirs in recognition of their right to set the goals of their own efforts. Instead, this freedom is granted to them because it is in the consumer’s interest for them to have it. American government has learned that central planning does not work; antitrust law recognizes this and leaves most business decisions to business executives, in the hope that market incentives combined with antitrust law will lead them to make decisions that benefit the consumer. But the goal, as in central planning, is the public welfare as seen by the government; the difference is only that the decision-making is usually decentralized because it usually achieves the goal better that way. When government thinks it can make a better decision centrally, the same principle lets it do so.
And yet there is one interest every individual has that antitrust law denies: the interest in being free to set the goals of his own life and work—to pursue his own happiness by his own lights. The pursuit of happiness does not require that others be forced to organize their life’s work for your benefit. It requires that you be free to live for yourself.