Introduction: Structure vs. Conduct

In writing on competition policy, I shall draw heavily on a century of American experience. I shall do so, not because that experience has been one of unmixed wisdom and success – far from it – but because that is the experience with which I am most familiar.

American antitrust policy (as American competition policy is called for historical reasons) is largely determined by judicial interpretation. In the American legal system, laws are expounded by judges given the nature of the case before them. This has been true of the antitrust laws (which one chief justice called “as broad as the Constitution”). But I do not plan to give a history of court cases; rather, I shall be asking how economic analysis can or should inform public policy, including legal standards.

The first issue in competition policy is a basic one. Should procompetitive laws be aimed at preventing certain forms of behavior or at preventing the development of certain kinds of market structures? This issue runs through the entire history of American antitrust policy and must inevitably be faced in any thoughtful policy formation.

The conduct vs. structure question is easy to exemplify. Suppose that a firm grows and acquires all or nearly all of the market, attaining monopoly power. If no single act performed by the firm is itself obviously anti-competitive, then a behavioral standard will allow this to happen. A structural standard, by contrast, proceeds from the view that monopolies are bad even though monopolists may be good people.