A truly capitalist market is free of government regulations because regulations are said to inhibit economic growth by creating barriers to entry and increasing prices. However, antitrust laws may seem necessary in a capitalist market, mainly because they promote competition in the market.
Antitrust laws were passed in the United States during the late 1800s as a result of large “trusts,” such as the steel and oil industries. These laws work in favor of the consumer because they keep companies from growing large enough to eliminate competition in their respective industries. Many large corporations may argue that these laws exist as a form of punishment, but that is because the companies are only speaking on behalf of their own self-interest. These laws simply keep such corporations from taking advantage of consumers. If competition were eliminated across a market, the remaining corporation may become a monopoly, allowing it to disregard quality and overprice its products or services. In a monopoly, order qualifiers become order winners, which has a negative impact on the quality of products. Competition forces corporations to seek some sort of competitive advantage, which certainly benefits the consumer.
Antitrust laws should not always be considered anti-merger, because antitrust laws are concerned with corporations gaining too much power in their respective markets. Take one of the most recent mergers in the news: the Kraft-Heinz merger. This should not be met with too much opposition from the Federal Trade Commission (FTC) because Heinz and Kraft are not necessarily selling the same products. Yes, they both produce food products, but Heinz produces condiments such as ketchup while Kraft produces foods such as macaroni and cheese. Generally, the FTC seems to be more concerned with horizontal integration rather than vertical integration. This is because horizontal integration eliminates competition and is likely to greatly increase the company’s market share. On the other hand, vertical integration is concerned with supply chains. While it may increase productivity and efficiency, it does not necessarily eliminate competition for a company.
It is reasonable for advocates of a free market to be in support of antitrust laws. These laws prevent the formation of monopolies, mergers that eliminate competition and increased pricing power of firms that may lead to forms of price discrimination. Those who are against antitrust laws may state that these laws inhibit economic growth, but they do not realize that the alternatives may do the same thing. The emergence of monopolies creates barriers to entry because it is difficult for smaller, younger firms to compete with a monopoly’s economies of scale. As long as antitrust laws are promoting competition, it is in the consumer’s best interest to be in favor of them.