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Antitrust Policy and Inequality of Wealth

CPI Antitrust Chronicle, October 2017, P. 1.

U of Penn, Inst for Law & Econ Research Paper No. 17-26

8 Pages Posted: 7 Jul 2017 Last revised: 7 Nov 2017

Herbert J. Hovenkamp

Univ. of Pennsylvania Law and Wharton Business

Date Written: October 2017

Abstract

Why would anyone want to use antitrust law as a wealth distribution device when far more explicit statutory tools are available for that purpose? One feature of antitrust is its open-textured, nonspecific statutes that are interpreted by judges. As a result, using antitrust to redistribute wealth may be a way of invoking the judicial process without having to go to Congress or a state legislature that is likely to be unsympathetic. Of course, a corollary is that someone attempting to use antitrust law to redistribute wealth will have to rely on the existing antitrust statutes rather than obtaining a new antitrust provision that is more explicitly distributive.

One possible lever for redistributive antitrust is a link between market competitiveness and wealth equality. Some literature suggests that competitive markets are conducive to the more even distribution of wealth. Of course, the antitrust laws already have an agreed upon goal of making markets more competitive. The most defensible goal for the antitrust laws is prohibition of practices that serve to reduce output anticompetitively, which is simply a statement of the consumer welfare principle. The same thing applies to the call to use the antitrust laws to protect jobs. Increases in employment can come from increases in output or decreases in efficiency. Antitrust protects the first source of job creation but not the second, and with good reason.

The arguments for an antitrust consumer welfare approach are of three general kinds – those derived from legislative history, those derived from principle, and those derived from administrative concerns. The legislative history makes a weak case for consumer welfare, but as between consumer welfare and general welfare the former is a clear winner. Second, arguments from principle do not get us anywhere because they are very sensitive to assumptions. Third, the arguments from administrability strongly favor a consumer welfare approach.

That then leaves one question pertaining to wealth inequality. Suppose we start out with the premise that antitrust harm consists in a market-power-driven output reduction. Accepting that competitive markets are conducive to greater wealth equality, hasn’t antitrust already done all it can do? To ask that question differently, are there any circumstances in which antitrust should favor practices that reduce output simply because these practices also yield a more appealing distribution of wealth?

Keywords: Antitrust, inequality, wealth, redistribution, market competition, consumer welfare, Pareto optimality, Kaldor-Hicks efficiency, reduction of output

JEL Classification: D31, D63, K21, P16

Suggested Citation

Hovenkamp, Herbert J., Antitrust Policy and Inequality of Wealth (October 2017). CPI Antitrust Chronicle, October 2017, P. 1.; U of Penn, Inst for Law & Econ Research Paper No. 17-26. Available at SSRN: https://ssrn.com/abstract=2998220

Herbert Hovenkamp (Contact Author)

Univ. of Pennsylvania Law and Wharton Business ( email )

3501 Sansom Street
Philadelphia, PA 19104
United States
319-512-9579 (Phone)

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