The Great Recession has provoked calls for more vigorous regulation in all sectors, including antitrust enforcement. After President Obama took office, the Antitrust Division of the Department of Justice abandoned the Bush Administration’s standard of liability under section 2 of the Sherman Act, which forbids unlawful monopolization, as insufficiently interventionist. Based on the premise that similarly lax antitrust enforcement caused and deepened the Great Depression, the Obama Administration outlined a more intrusive and consumer-focused approach to section 2 enforcement as part of a larger national strategy to combat the “extreme” economic crisis the nation was then facing.
This Essay draws on macroeconomic theory and the New Deal experience to examine the relationship between section 2 standards and macroeconomic stability. In particular, this Essay evaluates the claim that more aggressive section 2 enforcement focused on maximizing the welfare of consumers who purchase from monopolists would help forestall and ameliorate economic downturns. While empirical evidence confirms the Obama Administration’s claims that New Deal efforts to cartelize prices and wages exacerbated the Depression, this Essay argues that substitution of this novel and more intrusive “consumer welfare effects” test for the Bush Administration’s “disproportionality” standard would not stimulate aggregate demand, and may even reduce national output at the margins. Given the ambiguity in the aggregate impact of such enforcement, this Essay concludes that antitrust regulation should abandon any pretensions of being a tool for macroeconomic stabilization, and focus solely on identifying and condemning conduct that on balance results in a misallocation of resources and a reduction in total economic surplus. By keeping its microeconomic focus, antitrust regulation can help maximize the potential value of the gross domestic product, while monetary and fiscal policy produce sufficient aggregate demand to ensure full employment of society’s resources and to achieve that potential value.