The Failure of Structural Remedies in Sherman Act Monopolization Cases

Competition Policy and Antitrust

Article Snapshot

Author(s)

Robert W. Crandall

Source

AEI-Brookings Joint Center Working Paper No. 01-05, 2001

Summary

This paper looks at what happens when antitrust officials order firms to break up.

Policy Relevance

Historically, breaking up firms to increase competition has almost always failed. Government is slower than markets at finding ways around a firm with too much power.

Main Points

  •  In 2000, a United States District Court ordered Microsoft to be broken up into separate firms.

  • Between 1890 and 1996, breaking up a single firm has only been used as an antitrust remedy four or five times. Only in one case, the breakup of AT&T in 1984, is there evidence of economic benefits for consumers.

  • The benefits in the AT&T case could have been obtained without breaking up AT&T, simply by changing regulations.

  • Government is generally slower than entrepreneurs at finding ways to increase competition, and often government fails to understand why the market became concentrated to begin with.

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