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Giants among us: do we need a new antitrust paradigm?

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Michael C. Munger
Michael C. Munger
Michael C. Munger
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Abstract

Traditional antitrust policy was formulated to control pricing and output decisions that were not disciplined by competitive forces, either because of monopoly power or agreements in restraint of trade. Because there is no single criterion for evaluating political policy outcomes, antitrust regulators eventually settled on the “consumer welfare standard,” correctly recognizing that any other standard was incoherent. Recently “platforms” (defined here as firms or apps that solve the key transaction costs problems of triangulation, transfer, and trust) have tended toward giantism. This had led to calls for a new approach to antitrust, restoring the old multiple set of goals. But every platform by definition defines an industry, and is a monopoly within that industry. Such network economies or advantages in managing trust are the reasons platforms exist in the first place. This paper reviews the history of antitrust, defines platforms and the problems of “giantism,” and suggests some policies that certainly won't work and should be abandoned. The problem is power, not monopoly. So power is what the “new paradigm” needs to address.
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Vol.:(0123456789)
Constitutional Political Economy (2022) 33:445–460
https://doi.org/10.1007/s10602-021-09350-w
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Giants amongus: dowe need anew antitrust paradigm?
MichaelC.Munger1
Accepted: 9 September 2021 / Published online: 29 November 2021
© The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature
2021
Abstract
Traditional antitrust policy was formulated to control pricing and output decisions
that were not disciplined by competitive forces, either because of monopoly power
or agreements in restraint of trade. Because there is no single criterion for evaluating
political policy outcomes, antitrust regulators eventually settled on the “consumer
welfare standard,” correctly recognizing that any other standard was incoherent.
Recently “platforms” (defined here as firms or apps that solve the key transaction
costs problems of triangulation, transfer, and trust) have tended toward giantism.
This had led to calls for a new approach to antitrust, restoring the old multiple set
of goals. But every platform by definition defines an industry, and is a monopoly
within that industry. Such network economies or advantages in managing trust are
the reasons platforms exist in the first place. This paper reviews the history of anti-
trust, defines platforms and the problems of “giantism,” and suggests some poli-
cies that certainly won’t work and should be abandoned. The problem is power, not
monopoly. So power is what the “new paradigm” needs to address.
Keywords Antitrust· Rules versus discretion· Consumer welfare standard·
Platform economy
The paper is adapted from the “Plenary Presentation” at the annual meetings of the Public Choice
Society March 11-13, 2021, Savannah Georgia. The author thanks, but in no way blames, Thomas
Hazlett, Edward Lopez, Richard Salsman, William Shugart II, Georg Vanberg, and two very helpful
anonymous reviewers for helpful comments and critiques. Roger Congleton, editor of CPE, offered
substantial and important suggestions for improvement, at several stages. The flaws that remain are
largely the result of my inability to incorporate all the useful comments.
* Michael C. Munger
munger@duke.edu
1 Department Political Science, Department ofEconomics, Duke University, Durham, USA
ORIGINAL PAPER
Content courtesy of Springer Nature, terms of use apply. Rights reserved.
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... Political and popular interest in antitrust law enforcement has waxed and waned since the Sherman Act was passed in 1890. Antitrust is back in the headlines nowadays because of worries expressed in some quarters about the rise of tech giants-Amazon, Google, Facebook-thought to wield excessive power in digital markets, power defined not necessarily in the traditional antitrust sense of elevating prices above costs, but rather dominance of speech and access to public-opinion-relevant information (see, e.g., Munger, 2021). Proposals are being considered to rein such power in legislatively or by bold antitrust and regulatory action, especially so at the FTC. ...
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