Inconsistency in Antitrust

Posted by Social Science Research Network

Inconsistency in Antitrust – Ramsi Woodcock (Georgia State University – Risk Management & Insurance Department)

ABSTRACT: Antitrust prohibits cartels from charging monopoly prices but does not prohibit monopolies from charging monopoly prices. Antitrust does not ban monopoly pricing by monopolies because it thinks that unless a monopoly takes affirmative action to exclude competitors, competitors will enter the market to drive prices back down to competitive levels. Curiously, antitrust does not explain why the same effect should not drive cartel prices to competitive levels. This article argues that this inconsistency in antitrust arises because antitrust has failed to realize that mere ownership of essential inputs is itself enough to exclude competitors. This is what permits both cartels and monopolies to maintain high prices and exclude competitors without taking affirmative steps to exclude. This article argues that one response to this inconsistency would be to extend the ban on monopoly pricing to include monopolies.