Dominick T. Armentano's Arguments for the Repeal of All Antitrust Laws: Part IV

Objections to Antitrust Policy Regarding Horizontal Mergers

Note: Read the prior installments of this essay series here: Part I; Part II; Part III.

Horizontal Agreements

In Chapter 6 of Antitrust: The Case for Repeal, Dominick T. Armentano discusses antitrust policy's approach toward horizontal agreements, such as mergers, price collusion, cartel attempts, and market division agreements - most of which are still prosecuted to the fullest extent. For some of these agreements, the rule of reason is intended to weight the costs against the benefits of the particular practice and thus to give discretion to the courts to decide whether the particular action is acceptable. But other practices, such as price collusion and division of market agreements, remain per se illegal. The advocates of this per se illegality defend it via the claim that the costs of such practices always outweigh their benefits.

Problems With the Rule of Reason

There exists a fundamental flaw with the rule of reason approach. Namely, evaluation of costs and benefits of a particular practice is subject to the Hayekian Knowledge Problem. How can a judge or any particular individual know fully what the costs and benefits of an action are? Economists generally recognize that the costs and benefits are subjective to the economic agent, and yet even many of them frequently ignore the implications of this idea.