Not a Simple Story of Big Business Capture: An Essay on the Political Economy of Antitrust

According to the view of the political economy of antitrust defended by Filippo Lancieri, Eric A. Posner, and Luigi Zingales in this issue of the Antitrust Law Journal, U.S. antitrust institutions have been captured by big business. This political economy theory, referred to below as the “big business capture theory” or the “capture theory,” is facially appealing because it rationalizes the distributional effect of the changes in antitrust law since the mid-20th century toward less-interventionist rules and enforcement efforts. Those changes have likely benefited big business substantially more than they benefited any other comparably broad interest group. But as will be discussed, the big business capture theory accounts for the influence of only one interest group and does not address how and why that group’s influence has waxed and waned over time.

The big business capture theory suggests four consequential lessons for antitrust policy, each of which is questioned or qualified below. First, it focuses attention on distribution to the exclusion of economic growth. It views antitrust primarily as a political contest among interest groups to appropriate rents, not as an economic regulatory field concerned to a great extent with economic growth and economic efficiency (albeit with material distributional consequences).

Second, if antitrust is a political arena, the capture theory suggests it is an undemocratic one. If antitrust is captured by business interests, particularly through their influence on courts, the least democratic branch of government, then the democratic legitimacy of antitrust law, rules, and enforcement policy is called into question.

Third, if antitrust is captured by business interests, antitrust rules and decisions cannot be justified as largely the product of value-neutral and academically oriented economic analysis and arguments. Rather, in business capture theory, the economic analysis and arguments accepted by policymakers are an intellectual superstructure largely exploited, and often developed, to serve business interests. The implication: if economics does not provide a good guide for judges and enforcers, then it should be downplayed or ignored by antitrust institutions.

Fourth, if the levers of antitrust enforcement are controlled by big business and manipulated to benefit their interests, as the capture theory supposes, then enforcement creates a critical threat to democracy. If the economic power of big business controls the policy arena that we look to for protection of the public interest against special interests, big business can exploit its political power to undermine all of our democratic institutions. The big business capture theory suggests that, after decades in which the antitrust laws were weakened in the service of business interests, our democracy is at serious risk of being supplanted by an oligarchic system in which concentrated economic power and political power are self-reinforcing. This capture theory thus implies that the critical political threat to democracy today is from a big-business-led oligarchy, not from authoritarianism.

This essay explains why the big business capture theory is incomplete, and it challenges the antitrust policy lessons that the theory suggests. Part I surveys reasons for caution in accepting the capture theory. Part II describes an alternative “settlement” political economy theory involving an informal or tacit political settlement by which political competition among interest groups led to an antitrust policy that pursues inclusive economic growth.

While these two political economy theories differ, they each provide a way to criticize the conservative (Chicago School-oriented) approach that has framed antitrust law and policy since the 1980s. The criticism suggested by the big business capture theory is that the conservative approach results from business capture and has, by strengthening big business, entrenched that capture or facilitated its extension. The criticism suggested by the settlement theory is that the conservative approach is undermining inclusive growth.

Part II defends the settlement theory by explaining why it is attractive on both normative and positive grounds. Part III discusses lessons for antitrust policy of the alternative approach. The final Part provides a brief conclusion.

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