Antitrust, Economics and Innovation in the Obama Administration

Competition Policy and Antitrust

Article Snapshot


Joshua Wright


GCP: The Antitrust Chronicle, November 2009


The author warns that aggressive antitrust policy will lead to harmful errors in assessing novel business practices.

Policy Relevance

Antitrust enforcement strategies and economic understanding of innovative business practices and methods have often lagged behind innovation causing a reliance on monopolistic explanations. This results in false positive findings of monopolies.

Main Points

  • When economics does not fully understand innovative business practices, the tendency is to gravitate toward monopolistic explanations, which leads to false positive explanations in innovative industries.
  • The reliance on monopolistic explanations has been seen in the past. The result is periods of economic knowledge building up to understand the true underlying economic reasons and then a shift in the law when the economic thinking has been updated.
  • Innovative industries provide the most economic growth and development. Therefore, truly understanding new business innovations and practices is very important because it is most important for economic expansion.
  • Unfortunately, innovative industries are the most difficult to understand and that is why the reflexive tendency to explain new business practices often tends toward monopoly.
  • The Obama Administration has specifically targeted successful innovative companies as it enforces antitrust law. This approach raises concerns for consumers, who may receive reduced benefits from those companies.
  • Fortunately, for two reasons there is hope that a moderate approach to enforcement will prevail.

    • First, the Supreme Court has been sympathetic to the need for leniency in enforcement.
    • Secondly, the Nobel Prize awarded recently may indicate that economics is shifting its focus in a direction more understanding of non-monopolistic explanations of innovative business methods.

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