Sunday, November 2, 2008

Another Thumb on the Scales

Another Thumb on the Scales

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The world is in economic turmoil — much of it caused by American financial excesses — but the Bush administration isn’t budging from its anti-regulatory, unfettered-markets-know-best convictions.

The Justice Department’s antitrust division has published a new set of guidelines that narrow the interpretation of abuse that would justify government intervention against monopolies. It is a deregulatory gift aimed at getting pesky antitrust enforcers off of the back of big business.

The new doctrine bends over backward to protect big firms from accusations of anticompetitive behavior. It requires proof that the harm done by a monopolist’s actions — say, bundling new applications into a computer operating system to keep rival software makers out — be “disproportionately” greater than the potential gains to consumers.

If a dominant firm made an exclusive deal with a distributor to lock out a competitor, it would be illegal only if the competitor were denied access to least 30 percent of the market. If a dominant company used discounts as a tactic to smother competition, it could get off the hook if it let its smaller competitor survive, even if only barely. “Rivals’ continued presence in the market casts serious doubt on the existence of anticompetitive effects,” the report says.

The Department of Justice’s antitrust division is supposed to be the agency looking out for the interests of American consumers, not big companies — a role it has clearly forgotten over the last eight years. Throughout the entire Bush administration, it has not brought a single case against a dominant firm for anticompetitive behavior. And it has argued enthusiastically on behalf of monopolists before the Supreme Court.

Over the last decade and a half, the court also has bought into the creed that unregulated markets self-correct, and it has become extremely wary of government intervention against monopolistic firms.

But even the Federal Trade Commission declined to support the Justice Department’s new guidelines. Chairman William Kovacic, a Republican, said he doubted that big companies needed more protection from regulators. The three other commissioners — a Democrat, a Republican and an independent — said the report placed “a thumb on the scales in favor of firms with monopoly or near-monopoly power and against other equally significant stakeholders.”

Fortunately, the next administration can ignore this report. It should. The lesson of the last eight years is that unfettered markets don’t always know best. Government regulation must play a crucial part to ensure that fair competition prevails.

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