” Dynamic Competition” Does Not Excuse Monopolization

Jonathan Baker, Nov 01, 2008

In the 2004 Trinko decision, Justice Antonin Scalia, writing for the Supreme Court, depicted “monopoly power, and the concomitant charging of monopoly prices” as “an important element of the free-market system.” Scalia argued that “the opportunity to charge monopoly prices—at least for a short period . . . induces risk taking that produces innovation and economic growth.” According to Scalia, this benefit of monopoly explains a long-standing element of the antitrust prohibition against monopolization: “To safeguard the incentive to innovate, the possession of monopoly power will not be found unlawful unless it is accompanied by an element of anticompetitive conduct.” In that brief passage, Justice Scalia made two controversial claims, one about economics and the other about antitrust law.

He argued first that the prospect of achieving monopoly fosters innovation, and, second, that this economic proposition explains one important aspect of antitrust doctrine. The provocative new article by David S. Evans and Keith N. Hylton offers a detailed justification for Scalia’s claims (though, surprisingly, without reference to Scalia’s views). Neither Justice Scalia nor Professors Evans and Hylton draw out the implication of these claims for antitrust policy. Indeed, it is difficult for Evans and Hylton to say more about how they would change antitrust law while simultaneously relying on the “revealed preferences” of policy-mak…

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