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'Level Playing Field' at Justice?
A former Justice Department attorney has taken issue, in a private
post to me, with my earlier observation that its lawyers are generally
"bureaucrats with no real commitment to the antitrust goal of a level
playing field in the economic world." My case for this assessment is of
course their (non)enforcement RECORD over the past 2 decades, one which is
summarized in my Antitrust Overview in my antitrust Web site (below). The
particulars of my longstanding complaint against that persistent, official
neglect are spelled out in the following excerpt from that Overview. (Anne
Bingaman was of course Joel Klein's predecessor; there've been no policy
I need not point out that, if Justice's Antitrust Division had been
doing its job during those past 20 years--assuring a level playing field--we
wouldn't have the Microsoft problem in 1997.
Charles Mueller, Editor
ANTITRUST LAW & ECONOMICS REVIEW
The Bingaman/Pitofsky Follies
The lion's share of the blame for the current headlong monopolization of
the U.S. economy, however, has to be laid squarely at the feet of two people,
Anne Bingaman (President Clinton's head of the Antitrust Division,
Department of Justice) and Robert Pitofsky, the Clinton administration's
FTC (Federal Trade Commission) chairman. The Reagan/Bush holders of
these offices were, as noted, true devotees of the laissez-faire ideology and
instinctive defenders of society's rich and powerful. Nothing could
reasonably be expected of them other than exactly what they delivered, a
pro-monopoly antitrust policy. On the basis of the past historical cycles
here, however--and on the basis of President Clinton's own eloquently
expressed concerns for the poor and the weak--there was every reason to
believe that he would appoint people of a similar persuasion as heads of
these two antitrust agencies. Bingaman and Pitofsky have, however, not
only failed to undo the damage caused by their laissez-faire predecessors in
those agencies but have, indeed, retained their staff ideologues and
extended their policies en masse.
The Review's 11 Antitrust Reforms
In a series of articles preceding Clinton's November '92 election
and for a
couple of years thereafter, this journal itemized and spelled out in some
detail the antitrust reforms that were (and are) desperately needed by the
country. We offered 11 such suggestions (see especially Mueller, Vols. 24:1
and 24:2, below):
1.Restore the Private Antitrust Cases.
2.Demote Economic 'Theory' In Antitrust.
3.Abolish the FTC's Bureau of Economics and Its Counter- part at
4.Seek the Reversal of Anticompetitive Court Precedents.
5.Investigate the LEC 'Economics' Training Program for the U.S.
6.Weigh Carefully the Antitrust Records of Candidates for the Federal
7.Develop a Series of New Antitrust 'Guidelines.'
8.Take President Clinton's Antitrust Program to the Public.
9.File Cases to Illustrate the Key Principles of the New Antitrust
10.Inaugurate a New 'Intervention' Program In the Private Cases.
11.Monitor the Economic Effects of Justice/FTC Antitrust Cases.
Retained 'Staff Ideologues'
None of these needed reforms has been undertaken by Bingaman and
Pitofsky. Indeed, they are scrupulously following the "consolidationist"
policies of the Reagan/Bush ideologues they succeeded, further widening
and deepening the country's monopoly problem and sorely worsening its
growing inequalities of income and wealth. They have:
Given no speeches before either consumer or small-business groups
(the traditional constituencies of antitrust), confining themselves
exclusively to corporate and defense-bar groups;
Given no speeches or made any other public statements in opposition
to the laissez-faire "educational" programs for the federal judges;
Made no effort to replace the laissez-faire ideologues on their staffs
(each has nearly 100 professional economists and some 300 antitrust
lawyers) with professionals who are sympathetic to effective
competition and thus to vigorous antitrust enforcement;
No Antitrust 'Rights'
Expressed no criticism of the scores of post-'75 court decisions that
closed down the 1,500 private antitrust cases that had previously been
brought each year;
Brought no monopolization cases of any kind, i.e., those aimed at
eliminating or reducing existing market power and its inflated prices;
Brought no cases challenging exclusionary/predatory practices of larger
Brought no cases aimed at reversing any of the patently erroneous
antitrust doctrines announced by the courts in the post-'75 years;
Intervened in no private antitrust cases on the side of the injured
Articulated no rights of the country's 20 million small-business firms
under the antitrust laws they administer;
60% 'Safe Harbor'
Challenged no mergers between competing firms whose (combined)
market share is less than around 60%, offering no explanation as to
why they are ignoring their own Merger Guidelines--which condemn
mergers yielding shares of less than 1/4th that figure (see Rill, Vols.
23:2 and 23:3 for the text of those Guidelines);
Made no mention of the longstanding empirical findings of
mainstream economists that market power begins with 4-firm shares
of around 40% (and single-firm shares of about 12%);
Made no mention of the similarly longstanding research findings that
no significant industry in America requires a market share of more
than 10% to realize all available economies of scale;
Litigated virtually no cases of any kind, relying almost exclusively on
"consent" settlements while systematically setting aside injunctions
and cease-and-desist orders won by their (pre-'75) predecessors in
hard-fought cases against large corporate recidivists;
Ignoring Over 100 Industry Complaints
Eviscerated the law against anticompetitive mergers by employing a
device called "fix-it-first," a policy under which corporate giants in
direct competition with each other are allowed to go ahead and
combine so long as they "consent" to dispose of tiny parts of the total
assets involved ("overlapping" product lines or facilities that, if
retained, would together account for at least 60% (more typically, 80%
or more) of some minuscule "market" of little importance to the
merging titans)--a doctrine that allows any firm to acquire 90% or
more of any competitor it likes (e.g., Mattel's currently pending
acquisition of fellow toy giant Hasbro, to be accompanied by the
"divestiture" of a couple of baubles owned by one or the other);
Ignored all pleas by small enterprises to enforce the laws against
anticompetitive practices by dominant firms (e.g., mergers that created
a firm with 90% of the U.S. board-game market, Review, Vol. 25:4,
below, and exclusive dealing by a firm with 70% of the country's
heavyweight motorcycle industry--the latter approved despite the
complaints to the FTC by more than 100 of the giant's dealers and
scores of other industry members, Review, Vol. 26:1 and 26:2, below);
Abandoned Honest Science
Adopted an "efficiencies defense" for mergers yielding obvious
monopoly power, notwithstanding at least two centuries of clear
evidence that efficiency is itself a product solely of effective
competition and that monopoly is the mother of inefficiency;
Withheld virtually all useful information on their actual case
standards by writing no opinions and revealing in their "consent"
settlements only the shares of the units involved in their
mini-divestitures (not the shares held by the merging units they
Made no effort to determine the views of the country's mainstream
(majority) economists who specialize in antitrust economics on the
number and size distribution of firms required to produce effective
price competition--and thus competitive prices for consumers--nor on
the minimum-efficient scales of operation in any significant U.S.
Made no effort to determine the economic effects of their own cases
over the years (and thus to determine which of their actions have in
fact been followed by higher or lower prices for the public).
'Political and Corporate Shills'
None of this means that antitrust itself is either misguided or
It simply means that, for the past two decades, it has been overwhelmed by
politics. Presidents who owe their elections in significant part to
monopolists--or presidents who are sufficiently weak that they feel the need
to curry favor with them--are of course more likely to put political and
corporate shills in charge of the country's antitrust agencies than serious,
competent enforcers, e.g., FDR's Thurman Arnold of the late 1930s.
'Put Better People In Charge'
And, as the above recital of what Mrs. Bingaman (wife of Senator Jeff
Bingaman, D-New Mexico) and Mr. Pitofsky (formerly with Arnold &
Porter, a Washington law firm that represents monopolies) have not done
should make clear, the remedy for the problem is quite straightforward: Put
better people in charge of those two key agencies. With good leadership
there, U.S. antitrust could be revived in a matter of weeks. (See Mueller on
Arnold, Vol. 23:4.) In the meantime, the leaders of the world's other 200
countries would be well advised to view with keen skepticism any antitrust
counsel offered by these U.S. officials and their staffs. Their real clients,
alas, are not--on the evidence to date--the American people and their agenda
is not competition or efficiency but "consolidation," with its inevitable
(regressive) redistribution of income and wealth and lowered vitality of U.S.
Charles Mueller, Editor
ANTITRUST LAW & ECONOMICS REVIEW