Booms, Busts, and Bork -
The Cyclical History of Antitrust

An economist, lawyer, and politician walk into a bar. The economist says, "This round's on me!" The lawyer says, "I'll take the round after that." And the politician says, "I'll take the credit for both rounds!"

In all seriousness, the ebbs and flows in antitrust enforcement offer key insights. Lax policies in the 80s and 90s allowed Big Tech's rise. But scrutiny is now surging amid concerns over stifled competition and consumer harm. As we'll explore, this back-and-forth cycle has repeated throughout history as views on corporate power shifted. But are critics now overcorrecting with drastic measures that ignore the economy's needs?

Let's dive in and see what lessons we can draw from antitrust's past for its future.

The Beginnings

Believe it or not, federal antitrust law in America started way back in 1890 with the Sherman Antitrust Act. What was going on over a hundred years ago that got Congress so worried about monopolies and competition? Well, this landmark legislation was passed in response to the rise of powerful monopolies and business combinations called "trusts" in the late 19th century, especially in industries like oil and railroads. It prohibited anticompetitive agreements and monopolisation and gave the government power to bring civil and criminal cases against violators.

The Sherman Act was used early on to break up Standard Oil and American Tobacco. However, it was initially weakly enforced by the courts, leading Congress to pass supplementing antitrust laws like the Clayton and Federal Trade Commission Acts in 1914 to strengthen further the government's ability to promote competition. It set the DNA for federal efforts to keep markets open and competitive, even if those efforts have gone through boom-and-bust cycles. But 1890 makes clear that concerns about excessive corporate power are far from just a recent phenomenon. The seeds of antitrust were planted long ago.

The 1940s - 1970s

Fast forward to the post-war period, and antitrust got its groove back. In the 1940s - 1970s, antitrust was seen as a key pillar of economic freedom and competition, forming a “golden era” of robust antitrust action. After years of letting big business do its thing, political leaders and the public woke up to the dangers of highly concentrated economic power. With fresh memories of fascist regimes controlling European economies, antitrust was seen as necessary for dispersing power and promoting freedom. This was antitrust's golden era - it was time to promote competition and economic opportunity aggressively. Led by reforms that gave regulators more teeth, antitrust suits busted up monopolies and questionable mergers galore. The goal was to prevent any one company or small group from dominating an industry. By protecting open competition, antitrust policy was seen as protecting democracy itself.

Bork and The Post Bork Era

The publication of Robert Bork's book The Antitrust Paradox in 1978 marked a pivotal shift in antitrust doctrine and enforcement. A conservative judge on the D.C. Circuit Court of Appeals, Bork argued that the sole focus of antitrust enforcement should be promoting economic efficiency and the interests of consumers, not pursuing broad social or political goals. He criticized the existing antitrust doctrine as paradoxically harming consumer welfare. Bork's ideas aligned with and accelerated the rise of the Chicago School of economic thought, which advocated strict adherence to neoclassical price theory, constraints on government intervention, and more technical economic analysis focussing on metrics such as price and output.

Under the sway of Chicago School theorists, antitrust enforcement from the late 1970s through the early 2000s saw major cutbacks in scope and intensity. Chicago School adherents believed that markets were fundamentally competitive and "self-correcting" through the forces of supply and demand. This led to more lenient treatment of horizontal mergers, vertical restraints, and monopolistic conduct, as regulators increasingly saw government intervention as unnecessary market distortion. Plaintiffs faced a high burden of complex economic proof to demonstrate consumer harm. With this stricter standard, antitrust investigations and cases declined significantly compared to previous decades. The Chicago School paradigm, building on Bork's antitrust paradox thesis, fundamentally transformed antitrust in a more hands-off, deregulatory direction that shaped policy for over 30 years.

Recent Developments

Bork said antitrust should care about economic efficiency, not political goals. But now, there's growing concern that this approach has allowed corporations to get too powerful. He was responding to what he saw as overreach and "judicial activism" by the Supreme Court of the United States in the 1960s that he felt was threatening free enterprise. A new generation of thinkers argues it has led to less competition, innovation, and economic opportunity. More people want a return to stronger antitrust rules as a way to spread power and ensure open markets.

With leadership changes at the FTC and DOJ, President Biden's executive order on competition, and proposed legislation, the stage is set for a new era emphasising tougher scrutiny and enforcement of anticompetitive conduct. The Chicago School's antitrust monopoly has markedly declined. Lina Khan, the current chair of the Federal Trade Commission and others now argue that the consumer welfare standard has failed to capture the full effects of monopoly power on democracy, inequality, small businesses, etc. Khan sees parallels to the Gilded Age monopolies like railroads that spurred the original antitrust laws.

The Bottom Line

The Chicago School's antitrust monopoly has markedly declined. The debate continues between those who want antitrust to take a light touch and those arguing it needs more muscle to restrain corporate power. We need to rethink what antitrust is really for in the 21st century. But momentum is shifting back towards tougher oversight after many years of lax enforcement. The cycle appears to be shifting again.

Food for [Bttr] Thought

• How can we balance efficiency with preventing excessive consolidation across industries critical to public infrastructure and democracy?

• What does an "open markets" policy mean today?

• What's the right balance between free market forces and government oversight of mergers and monopolistic conduct? Where is the line?