5 - Antitrust violations and rights

Summary

Much of our discussion to this point has been fairly abstract—especially for a book about antitrust and competition law, which would usually be consumed with the fine minutiae of legislative politics, corporate history, and judicial opinions. So it might be helpful at this point to look at how the philosophical conception of rights that we outlined in Chapter 4 apply to the most significant violations of antitrust or competition law, allowing us to see how a rights-focused approach differs from the standard economic one (and the Neo-Brandeisian one when appropriate).

Collusion and price-fixing

Let's start with what is probably the most obvious antitrust violation: collusive price-fixing. Firms cannot, by law, conspire to maintain prices above where they would if the firms set them independently and competitively. Even in industries that are less competitive to begin with, in which firms earn significant profits, they can increase their total profits by collectively agreeing to raise their prices. In effect, they would be acting as if they were a monopoly, splitting its higher profit among different divisions or departments. If successful, the higher prices lower output and consumer surplus, and despite the higher profits, total welfare falls, as we saw in Chapter 2. There is nothing special or unique about price-fixing: any instance of collusion between firms competing in the same industry is considered anticompetitive and therefore potentially illegal. But price-fixing is most clearly and directly related to consumer surplus and overall welfare, given the role that prices play in the market analysis.

If we look at price-fixing from the perspective of rights, however, the matter becomes much less clear and hardly obvious. The rights of disposal included in most common-sense conceptions of property rights would include the right to set the terms at which a seller offers a good or service. Firms are free to lower or raise their price as they choose, and consumers are free to respond by buying more or less as they choose. Consumers have the right to use their resources to make the purchases they want, and can accept or reject the offers made by sellers, but they have no right to a particular price (absent a previous guarantee or contract from the seller, such as a raincheck).