Working Paper No. 04-20:
How History Can Inform Practice in Modern U.S. Competition Policy
Date Posted: 2004
Abstract (below) | Full text (most recent) on SSRN
Some commentators have theorized that modern enforcement has swung back and forth between extremes in response to changes in political leadership in the federal antitrust agencies and that there is little continuity of viewpoints between the extremes of the arc. Using enforcement data from 1961 through 2004, the first section of the paper reveals that the assumptions underlying these theories are faulty. In reality, there was a seismic shift in antitrust theory in the 1960s and early 1970s that courts began to adopt in the mid 1970s. The paper demonstrates that while antitrust agencies lagged in adjusting to these developments, they eventually changed in the 1980s to a new course on which they have basically remained, with relatively minor adjustments. The enforcement that followed has built upon the positive contributions of earlier periods; the cumulative effect has been a bipartisan and widely shared vision of appropriate policy.
The second section of the paper derives lessons about policymaking from antitrust enforcement experience in recent decades. Developments in economic learning and changes in industrial conditions or technology are important guideposts to ensure that competition policy does not veer off into ineffective or harmful backwaters. Despite evolving economic scholarship that undermined the theoretical support for certain types of cases, the Federal Trade Commission (FTC) in the 1970s continued on a misguided course regarding dominant firm misconduct, vertical distribution restraints, and the treatment of merger efficiencies. In addition to these weaknesses in enforcement theories, the paper also identifies administrative errors by the FTC during this period. The agency took on many more complex cases than it could execute well, even if those cases had not also had doctrinal difficulties.
The paper concludes by suggesting practical approaches that government agencies, and, more specifically, the FTC should take to improve the quality of competition policy. It argues that agencies need to reassess their status continually by analyzing the effects of previous actions and making adjustments, if necessary, and by keeping abreast of developments in theory and evidence. Agencies must also engage in what can be called 'competition policy research and development' to increase their intellectual capital and inform the competition policy community about important developments. Finally, they must evaluate the potential long-term institutional impact of their actions and ensure that they are not diminishing their future capabilities.