pageok
pageok
pageok
Antitrust research bleg:

One of the reasons for the enactment of the antitrust laws was to safeguard political freedom by preventing the formation of large corporations powerful enough to control the government. Taft, in his book The Anti-Trust Act and the Supreme Court (written in 1914, after his presidency but before he joined the Supreme Court), said the Sherman Act had attacked methods of "suppressing competition and controlling prices" which "had resulted in the building of great and powerful corporations which had, many of them, intervened in politics and through use of corrupt machines and bosses threatened us with a plutocracy" (p. 4).

Does anyone know of an economicsy, perhaps public-choicey, treatment of the same point, where antitrust emerges as a second-best optimum to prevent corruption or excessive corporate political influence?

EricRasmusen (mail) (www):
Someone said that "the Tariff is the mother of the Trust,", and the reverse no doubt has some truth to it too.

It's actually not clear that a trust is the best way to increase an industry's political influence. An industry with 1000 small firms often has more power than one with 1 big firm. A large part oft his has to do with geographic dispersion.
9.16.2006 6:57pm
fishbane (mail):
This isn't what you asked, but it might be interesting. Vernor Vinge, most recently in his Collected Stories book, imagined an anarchy based on (or at least reliant upon) antitrust rules.I can't recall the story name at the moment, and don't have the book at hand. I think the story was titled something like "Rule By Default".

NB: I had to delete a link to Amazon to post this.
9.17.2006 12:42am
Lev:

Does anyone know of an economicsy, perhaps public-choicey, treatment of the same point, where antitrust emerges as a second-best optimum to prevent corruption or excessive corporate political influence?


Well, with respect to corruption, how about the criminal laws against bribery, influence peddling etc., and prosecutions conducted using those laws.

And with respect to "excessive corporate political influence", we have MeCain Feingold.
9.17.2006 12:56am
M (mail):
A long time ago I used to take part in some email list-serves relating to various field in philosophy. Sometimes student would join the lists and ask for research help from those on the list. They were consistently told to please go do their own homework. I thought at the time that this was at least sometimes too harsh, but it's funny for me to see that this sort of thing is now common not among students but among the grown-ups on the internet.
9.17.2006 1:09am
Sasha Volokh (mail) (www):
Lev: In the first place, I'm looking for people who have made particular arguments in the literature, not the existence of laws. For one thing, laws may be rationalizable by many different theories, and I'm trying to focus on one particular justification. And not just any old formulation of that justification ('cause I've got Taft already for the casual version of the point), but one advanced by social scientists in a formal theoretical or empirical model.

In the second place, criminal laws against bribery, or McCain-Feingold, have nothing to do with antitrust -- they're designed to prevent influence-peddling by anyone, even if they're vigorously competing, have a small market share, and are acting fully consistently with the antitrust laws. I was looking for an argument that antitrust is a good idea, in part because the large corporations that it would break up are an especially great threat to democracy.

But, as it happens, I've found such a source myself: Lester M. Salamon &John J. Siegfried, Economic Power and Political Influence: The Impact of Industry Structure on Public Policy, 71 Am. Pol. Sci. Rev. 1026, 1039 (1977) (suggesting "an empirical base for the argument that antitrust policy is necessary to avoid not just undue concentrations of economic power but also threatening concentrations of political power").
9.17.2006 1:13am
Mary Katherine Day-Petrano (mail):
What is a "bleg?" Is it a blog or a blawg?

In any event, I am not really directly answering your question, but I did see a very wrongly decided antitrust case recently out of the 11th Circuit, Aug. 2, 2006 decision JES Properties (Cypress Trails Farm) v. United States Equestrian Federation. The 11th Cir. held the Amateur Sports Act (ASA) created an immunity from enforcing the Sherman Act against the USEF (and several other Florida horse show managers) as a monopoly, the reason being implied repeal by the sports act upon the Sherman Act (one federal statute repealing the other=the implied immunity from antitust liability).

Really however, this was a factually and legally wrong decision, because there are numerous disabled competitors and many whom are not amateurs but rather professionals who are harmed by the challened mileage rule (explained below). The disabled crowd are protected from "lesser" recreational, transportation, and work opportunities by the Americans With Disabilities Act and/or Rehabilitiation Act of 1973, Sec. 504. I am a disabled person who has ridden at Cypress Trails, and train and show horses as a professional (when I am not law clerking or pursing my legendary assistive technology disability bar admission civil rights struggle), and I know my rights as a participant at Cypress Trails horse shows were not considered by the 11th Cir. in this lawsuit. The amateurs who show at all of the horse shows incolved in the lawsuit are only appx. 1/20th of the competitors affected by the mileage rule.

The United States Olympic Committee selected the USEF as the National Governing Body for the equestrian sport. The USEF had this 250 mile rule, called the mileage rule, that prohibited there being A-rated horse shows closer than 250 miles apart on the same weekend. The problem for Tampa was show managers in Wellington and Ocala got (and hogged up) certain A-rated show dates during the nice weather winter months (11 consecutive weeks, early Jan.-end of Mar.) when the profitable Winter Equestrian Festival comes to Florida. Once dates are given, these show managers can keep the same dates practically forever, shutting any other newcomer competitor show managers less than 250 miles from Wellington and Ocala (e.g., the entire Tampa area). The Wellington and Ocala show managers got the coveted winter months dates decades ago, before the Tampa area became a major population center in Florida.

The effect of this has been to keep all the AA- &A-rated horse shows in Florida during the nice weather winter months down in Wellington or up in Ocala, and the entire Tampa Bay area is completely shut out of having any of these shows that count the highest levels of points toward qualifying for National awards, thereby causing a lot of harm to the equestrian industry in the Tampa area by limiting the number of show stables, number of horse sales, etc. and shifting all economic activity to Wellington and Ocala, forcing disabled people living in Tampa area to have to travel 6-8 hours to Wellington or 4-6 hours to Ocala every weekend that they would want to show at an A-rated show. This is extremely expensive, considering shipping horses, people, buying horse show stalls, hotels for the people, and eating out vs. simply trailering and driving around the Tampa area and eating and staying at home.

The 11th Cir wrongly decided the case as a matter of law by failing to apply the ADA and RA in the 'what federal statutes repeal the other' equation, and factually by failing to consider that not every person harmed by the mileage rule is an amateur. The ADA contains an express "preemption" provision (42 U.S.C. Sec. 12201(b), that, as the 11th Cir. characterized it in Shotz v. City of Plantation, Fla (2003), is a "vertical and horizontal" preemption provision, "preempting" conflicting State laws and "other federal laws." The ADA incorporates the rights, remedies, and procedures of Sec. 504 of the RA. Professional and junior (under 18 years of age)disabled riders were considered by the 11th Cir. to be subject to the ASA, even though they do not meet the dfinition of amateur, yet participated in these Florida shows and were harmed by the anticompetive monopolistic mileage rule.

It would seem, in this situation, the ADA containing as it does an express repeal provision vs. the amateur sports act only "impliedly" repealing (and only applying to the 1/20th show participants who are amateurs), that by excluding or burdening the disabled professional and junior riders who go to horse shows by the mileage rule, the ADA and Sherman Act should have been read in harmony and the ADA should have expressly repealed the Amateur Sports Act; thus no immunity from enforcing a Sherman Act monopoly upon the USEF.

But, then again, this is not the first time the 11th Cir. (deep South) has been unfriendly toward the ADA. (e.g., Goodman v. Georgia).

I don't know if this case helps with respect to the excessive corporate political influence issue.
9.17.2006 1:14am
Sasha Volokh (mail) (www):
M: Good research is, in large part, knowing whom to ask!

Eric Rasmusen: Incidentally, the Salamon &Siegfried article I cite above mentions the geographic dispersion point you allude to.

All: Even though I've found a source, feel free to chime in with more if you know of any!
9.17.2006 1:15am
Sasha Volokh (mail) (www):
Mary Katherine Day-Petrano: (1) A "bleg" is begging (in this case, for research help) that takes place in a blog post.

(2) You are correct. You are not really directly answering my question.
9.17.2006 1:17am
Tito:
You should consider hiring an RA...
9.17.2006 1:29am
Lev:
Sasha Volokh

You said:


antitrust emerges as a second-best optimum to prevent corruption or excessive corporate political influence?


not


In the second place, criminal laws against bribery, or McCain-Feingold, have nothing to do with antitrust -- they're designed to prevent influence-peddling by anyone, even if they're vigorously competing, have a small market share, and are acting fully consistently with the antitrust laws. I was looking for an argument that antitrust is a good idea, in part because the large corporations that it would break up are an especially great threat to democracy.


I might observe that antitrust laws relate to commercial enterprise and economic concertration, otherwise known as interstate commerce, and have nothing in particular to do with bribery and public corruption. The criminal and campaign finance laws, on the other hand, do have something to do in particular with bribery and corruption. In fact, that is their primary purpose. As their primary purpose is to have something to do with bribery and corruption, and the antitrust laws only affect those things, if at all, secondarily or incidentally,


antitrust emerges as a second-best optimum to prevent corruption or excessive corporate political influence


Judging from your summary:


"an empirical base for the argument that antitrust policy is necessary to avoid not just undue concentrations of economic power but also threatening concentrations of political power")


it appears you did not state very well what you were actually looking for.

It appears that what you were actually looking for was an empirical study of some sort that shows that antitrust law has an important yet secondary if not incidental effect on bribery and public corruption.
9.17.2006 1:48am
Mary Katherine Day-Petrano (mail):
SV, I did not take antitrust, but I think my husband could give you some suggestions. He got the book award in antitrust, and is very good at it. If you don't find what you are looking for, you might email him, dpetrano@yahoo.com. He loves to discuss antitrust.
9.17.2006 2:00am
Sasha Volokh (mail) (www):
Lev: Perhaps we have different ideas of what "second-best" means. When I say "antitrust is a second-best solution to the problem of corruption," I mean: Suppose our available means of fighting corruption are ineffective; antitrust is an example of a law that might be undesirable on its own merits but might be justified as a good available way to fight corruption.

The existence of laws that are actually aimed at corruption isn't relevant to that question. When you said "the antitrust laws only affect those things, if at all, secondarily or incidentally," you exactly sidestepped my central question with your "if at all": It's not clear that antitrust has this effect at all, so I wanted someone who affirmatively argued that it would have that effect.

I wasn't looking for any study showing that antitrust law actually has an effect on bribery or public corruption. All I was looking for is an article where someone makes the argument that it might have such an effect. The paper I found does indeed make that argument. It would be just as good, for my purposes, if the empirics were totally wrong, or even if it totally lacked any empirics but just made the claim. But what's key is that it makes the claim.
9.17.2006 3:08am
Sasha Volokh (mail) (www):
Tito: Yes, RAs are great. But blog commenters are cheaper than RAs!
9.17.2006 3:09am
Lev:
Sasha Volokh


It's not clear that antitrust has this effect at all, so I wanted someone who affirmatively argued that it would have that effect. All I was looking for is an article where someone makes the argument that it might have such an effect. ...It would be just as good, for my purposes, if the empirics were totally wrong, or even if it totally lacked any empirics but just made the claim. But what's key is that it makes the claim.


?

Somebody making an argument is just somebody making an argument. Lawyers can make arguments to rationalize just about anything, and if empirical evidence doesn't matter to you just that the argument was made---if you don't mind my saying so, this seems kind of silly.

What exactly are you trying to achieve? Win a beer bet with someone?
9.17.2006 3:48am
liberty (mail) (www):
What is really fascinating about antitrust is how it has evolved, being pushed generally by business for business, as a way of struggling against other business and keeping competition at bay. It has not been primarily labor interests or "the common folk" but big business which has created and guided antitrust law.
9.17.2006 11:46am
David W. Hess (mail):
I am reminded of the quote, "The largest threat to capitalism is successful capitalists."

This isn't what you asked, but it might be interesting. Vernor Vinge, most recently in his Collected Stories book, imagined an anarchy based on (or at least reliant upon) antitrust rules.I can't recall the story name at the moment, and don't have the book at hand. I think the story was titled something like "Rule By Default".

Vernor Vinge's antitrust story "Conquest By Default" is also in his collection "Threats and Other Promises". From his forward:

. . .

I had enjoyed Chad Oliver's stories and I thought it would be fun to imagine what social science might look like coming out of an entirely different milieu. Modern anthropologists seem full of cultural relativism and self-conscious tolerance. Would it be possible to have a story in some wider context, with an anthropology based on alien motives? I wanted a culture that was technologically superior to ours, workable, and yet so painfully different that accepting it would be hard even for open-minded people with our outlook.

So what would be sufficiently alien? Ever since high school, I've been fascinated with the notion of anarchy. Every anarchical scheme has some set of assumptions for why the participants will cooperate. (You can usually spot the assumption in the names: anarcho-communism, anarcho-capitalism . . .) There's a fundamental problem all such plans must face: how to prevent the formation of power groups large enough to in fact be the government. In the next story, "Conquest by Default," I attempted a frontal assault on this question.

. . .
9.17.2006 12:53pm
Brett McDonnell (mail):
Sasha: Good question. I've been thinking of writing an article making that point for several years, though I've never gotten close enough to do a literature search on it. The reference above that you caught is something I am looking forward to reading. I hope someone writes it up someday. I think the political argument for antitrust was one of the main early arguments for the laws, and the argument does have a quite natural public choice/second best flavor. I have made a very short, several-sentence-long version of the argument in three pieces. Two of those were co-authored with Dan Farber. See Why (and How) Fairness Matters at the IP/Antitrust Interface, 87 Minn. L. Rev. 1817, 1829 (2003), and Are Efficient Antitrust Rules Always Optimal?, 48 Antitrust Bull. (I can't find it on West, and don't have a re-print at home, so can't give you a pincite). The third article is a book review, The Economists' New Arguments, 88 Minn. L. Rev. 86, 111 (2003).
9.17.2006 1:20pm
Mary Katherine Day-Petrano (mail):
"I wasn't looking for any study showing that antitrust law actually has an effect on bribery or public corruption. All I was looking for is an article where someone makes the argument that it might have such an effect."

SA, if this is what you're after, why are you limiting it to antitrust? Title II of he ADA can be used in this way, e.g., again, read facts at issue in Shotz v. City of Plantation, Fla, (11th Cir. 2003). There have been several occasions where my husband has rewritten other lawyers' unsuccessful motions in which they previously alleged corruption, recasting them in one form of discrimination or another successfully.

But if you are limited to antitrust, well, there are lots of exemptions and immunities, e.g., no antitrust action against Bar associations. Title II of hte ADA has no such exemptions. Just my observation.
9.17.2006 2:07pm
Sasha Volokh (mail) (www):
Lev: Because I'm writing a paper in which making an argument that has the same structure as the antitrust argument (though it's not identical); and I want to drop a footnote noting people who have made that argument. That's why the correctness of the antitrust argument is irrelevant to me, only the fact that the argument was made.

My paper relates to how fragmenting an industry (in this case, dividing it into different sectors by opening it up to privatization, and dividing the sector among different firms) can reduce the amount of lobbying for policy changes that would increase industry profits. Because my argument specifically relates to fragmenting an industry, it has obvious parallels with arguments that antitrust enforcement reduces the lobbying of the broken-up industry, i.e. antitrust reduces the political influence of the industry. (That's why, by the way, in response to Mary Katherine Day-Petrano, the ADA isn't quite right for my purposes.)

Now there are various reasons why the antitrust version of the argument might not be right -- for instance, antitrust enforcement increases lobbying to control the antitrust enforcement mechanisms, including to use them against one's competitors, etc. But, like I said, my argument only has the same flavor as the antitrust argument, so I just want to drop a footnote to that effect.
9.17.2006 10:27pm
Sasha Volokh (mail) (www):
Brett: Thanks for the citations.
9.17.2006 10:28pm
Lev:
Sasha Volokh

]My paper relates to how fragmenting an industry (in this case, dividing it into different sectors by opening it up to privatization, and dividing the sector among different firms) can reduce the amount of lobbying for policy changes that would increase industry profits.

As I said, lawyers can rationalize anything.

You might wish to look at the actual antitrust law relating to trade associations and their permitted activities in terms of lobbying to get favorable legal, tax, and regulatory treatment. And to the effects of trade associations in DC.

If you do that empirical thing, you might find that fragmenting a particular industry into many businesses, none of which have significant HHIs does not lessen their capability of collective lobbying for their common good, both individually and collectively through the trade association.
9.18.2006 1:13am
Sasha Volokh (mail) (www):
The empirical literature is mixed on whether concentration increases lobbying. See Grier et al., 57 S. Econ. J. 727 (1991) (positive effect of concentration on industry contributions); Grier et al., 88 Am. Pol. Sci. Rev. 911 (1994) (inverted U-shaped relationship). Theoretically, this is because there are two effects at work: (1) a more concentrated industry has less free-rider problems, but (2) a more concentrated industry has less need of lobbying for certain kinds of reforms because it can already achieve much of what it wants through direct anticompetitive means rather than political means.

In any event, though lawyers can rationalize anything, that doesn't mean they've gotten around to it yet. I was looking for cases where they had in fact gotten around to making that argument, whether correctly or not. Thanks!
9.18.2006 10:48am
dweeb:
Does anyone know of an economicsy, perhaps public-choicey, treatment of the same point, where antitrust emerges as a second-best optimum to prevent corruption or excessive corporate political influence?

Lev's mention of McCain-Feingold actually may point in a productive direction. The libertarian arguments against campaign finance regulation point to limited government as the solution to influence peddling and corruption, rather than regulation, since people (or corporations) are only motivated to 'buy' elected officials if those officials are sufficiently empowered to interfere to their patrons' benefit. If the government can't interfere in commerce enough to benefit a corporation, then there is no reason for that corporation to attempt influencing government. It seems similar reasoning would hold limiting government as superior to fragmenting industries as a means of avoiding their 'buying' government by removing the motive, rather than the means. Thus, perhaps someone, in the course of opposing campaign finance reform from a libertarian standpoint, has presented the arguments you seek.
9.18.2006 7:15pm
Sasha Volokh (mail) (www):
Those would be arguments for using something instead of antitrust (i.e., limiting government) to limit corporate political power. Chances are the libertarians who would write that wouldn't go out of their way to argue that antitrust would also achieve the goals.
9.18.2006 9:37pm