Antitrust Activism Is Good

The antitrust division of the Department of Justice is busy these days, and the Wall Street Journal doesn't like it. It opines reports:

As if investors needed more to worry about. The outlook for corporate profits already is clouded by an uncertain economy, and markets remain skittish. Now there is a burst of antitrust activism.


But how much should investors worry? Markets often shrug off antitrust action, partly because it is hard to quantify potential damage.

Not exactly.

Markets more likely shrug off antitrust action because they like it. Anyone who's taken intro level economics knows that monopolies and anticompetitive activity are actually bad for the market. So while monopolies might not like it, the rest of the overall economy should be very happy when antitrust regulators do their jobs.

Don't get me wrong: witch hunts are bad. If the DOJ is just trying to annoy big corporations for kicks, then that's a waste of taxpayers' money and needlessly increasing regulatory risk. However, if antitrust investigations cause businesses to cease anticompetitive activity, then that's very good news for the overall economy. It's a win for competition, and competition is what makes capitalism work.

As a result, I'm a little confused why the Wall Street Journal is so down on antitrust regulators beefing up. It ends the article with the paragraph:

Increased scrutiny doesn't mean firms will start losing antitrust cases overnight. But the Justice Department might well choose a few big targets to make its presence felt. Investors should keep a close eye on who those might be.

Right, anyone who invests in anticompetitive companies might not be thrilled. But if the DOJ really does start ending more anticompetitive practices, then savvy investors should react by shifting some investments to small and midsize companies. After all, better competition might be bad news for the targeted industry behemoths, but it's good news for everybody else.

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Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.

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