Antitrust Policy: A Century of Economic and Legal Thinking

Competition Policy and Antitrust

Article Snapshot

Author(s)

William E. Kovacic and Carl Shapiro

Source

University of California - Berkeley, Center for Competition Policy Working Paper No. CPC99-09, 1999

Summary

This paper describes the history of competition policy in the United States.

Policy Relevance

Over time, courts have adjusted competition policy to changes in economic and legal theory. Presently, the law has become very uncertain, as a business practice that is helpful in one context might be considered harmful in another.

Main Points

  • The Sherman Act, passed in 1890, is not specific about what actions it makes illegal, leaving it to the courts to interpret the law.
 
  • Economists have had great influence, leading antitrust cases to recognize competition as a superior mechanism for governing the economy.
 
  • Rules that assume that types of conduct are bad (per se illegal) give the business community certainty, but often prohibit beneficial practices.
 
  • Today courts often try to assess if consumers are helped or hurt on a case by case basis (the rule of reason), but this gives businesses less certainty.
 
  • Courts should require proof that a theoretical harm is possible. For example, predatory pricing will not harm consumers unless a firm can raise prices after driving its competitor out of business.
 
  • Intellectual property licensing is currently often at issue.

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