Antitrust: Tougher Simpler Laws Needed


The problem of banks “too big to fail” was addressed in the Republican Presidential debates, as Gov. Huntsmann argued they set the nation up for a long-term disaster. He noted six banks control 9.4 trillion dollars, or 60 to 65% of GDP, with implicit taxpayer guarantees of protection. While he suggested they be “right-sized,” or reduced to a “proper size,” no one in the Republican Party openly advocated the filing of federal antitrust actions against these institutions, to bust them up.

President Obama should direct his Antitrust Division at the Justice Department to file lawsuits against all banks “too big to fail” to break them up, since they need to be able to go under, without taxpayer bailouts, to protect our system from harm. He should simultaneously ask Congress to amend the antitrust laws so market shares of 10% or more become presumptively illegal. The antitrust exemption for insurance companies should also be ended.

“Antitrust” arose late in the 19th Century, when big corporations, managed by trusts, operated free of government regulation, and controlled prices by eliminating competition. A populist one-issue Anti-Monopoly Party first appeared in the 1884 Presidential election, and the Democrats soon co-opted their platform.

The Sherman Antitrust Act of 1890 made monopolies, contracts in restraint on trade, and attempts to monopolize, illegal. In Standard Oil (1911), the Supreme Court ordered the dissolution of Standard upon finding they unreasonably affected interstate commerce, by destroying competition and restraining trade.

Antitrust law was strengthened under the Clayton Act (1914), which in part was to stop companies from becoming monopolistic in the first place, by prohibiting mergers that “substantially lessen competition.” The Federal Trade Commission (1914) was added to investigate antitrust violations, and to seek enforcement.

Problems arose in antitrust prosecutions in terms of how to define “market share.” Are coffee and tea in competition with each other? Are banks and derivative brokers in the same market? Geographic issues also posed problems. What geographic area is involved? Do we examine just Wall Street, all U.S. institutions, or only international banks? How much control leads to a monopoly? While 90% is clearly monopolistic, what about 60%, or market shares of less than 30%?

Since the crash of 2008, it is now time for Congress to revise the antitrust laws to expand their scope, and make the breakup of companies “too big to fail” much easier. They should declare market shares of 10% or more per se illegal, so competition is enhanced, and the risk of failure is reduced.

They should also eliminate the antitrust “exemption” enjoyed by insurance companies. The bailout of the American International Group (AIG), a multi-national insurance corporation, was done because it was “too big to fail.” The nation cannot afford the risk posed by such oversized entities. There is no rational reason for their antitrust exemption and they must be busted up.

It is time to break up corporations without the need to prove anything, except a market share of 10% or more. Since the Republicans will never approve of any regulations, the Democratic Party and President Obama will have to take the lead.

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