The Risks of Radicalism: Exacerbating Harms from Type I Errors

Abstract

Calls to radically change U.S. antitrust law continue to be a focus of law and policy makers. According to proponents of the proposed changes, drastic legislative amendments are necessary to remedy the (perceived) failures of current antitrust standards to prohibit anticompetitive conduct, in particular in high-technology markets. While efforts to address market failures are certainly worthy of discussion, the various legislative proposals risk serious adverse consequences, including higher prices for consumers and reduced innovation and consumer choice.

This article begins with a brief discussion of the economic basis for regulation, followed by a summary of recently proposed legislation from Senator Elizabeth Warren and Representative David Cicilline and from Senator Amy Klobuchar. The main part of this article is an exploration of the risks posed by these draft bills through a retrospective examination of market developments following past interventions by antitrust agencies.

Keywords: antitrust, legislation, mergers, vertical restraints, false positives

JEL Classification: K21, L4, L5