Key Ingredients

• Popular opinion and current antitrust thinking has demonized both monopolies and market concentration resulting from superior efficiency, painting them as market failures to be corrected.

• Do not accept the premise that your success is a market failure to be corrected.

• Monopolies and market concentrations that result because one or more firms build a better mousetrap are a natural part of our market system.

• In fact, they are a precondition to the type of growing returns that have delivered great wealth to our society and lifted innumerable people out of extreme poverty. 

• Classical economics and the law recognize them as such, condoning legitimate monopolies and market concentration while only condemning success seized through predatory behavior. 

Putting this noodle in context

Newly elected Argentinian President Javier Milei exploded onto the international scene with a speech unabashedly defending free enterprise as not just the only system to end world poverty, but also the only morally desirable system to do the same. 

In a speech laced with economic theory and libertarian philosophy, President Milei made a point to call out the political efforts to regulate monopolies and destroy their profits, which has the ultimate effect, whether intended or not, of destroying their economic growth.  President Milei reflects that “growing returns involves concentrated structures” and laments that such a precondition to growth—concentration—is seen as a market failure necessitating government regulation.  He reminds the audience those concentrated structures have flipped human history on its head, lifting 90% of the world populace out of extreme poverty.  

To view monopolies or concentrated structures resulting from superior efficiency in such a positive light strikes much of the U.S. antitrust community as bizarre.  Monopoly and concentration are dirty words, worthy of the hot tag in a document review and a sound bite quote in a deposition.  Even the new merger guidelines are intent on combating market “concentration” in the abstract, reflecting a belief that concentration is anticompetitive.  This belief grounds the antitrust agencies’ stated policy and their enforcement actions.  Indeed, certain successful companies are repeatedly accused of, investigated, and sued for unilateral (i.e., monopoly) conduct, no matter how much consumers, through their free choices, reaffirm their preferences for those companies’ products and services. 

But while this thinking (and in President Milei’s view, collectivist ideology) concerning monopolies and market concentration may have captured current antitrust enforcement, it has not captured the courts.  Antitrust case law and the classical economics on which it is based still recognizes President Milei’s stated truth: monopolies and market concentration resulting from superior efficiency have been a force for societal good. 

The race to monopoly, to a concentrated structure, drives the competitive process we so value in the first place.  Companies do not compete in the marketplace for the theoretical prize of perfect competition where revenues equal costs and no one makes above a return that will keep them in the business.  Companies compete because of the strong belief that they are making the right product at the right price and the slim chance of achieving monopoly profits.  Competition is society’s desired byproduct, but it is not the involved parties’ ultimate end.     

Because of this pursuit for monopoly profits, markets may tend toward concentration as the more efficient and higher quality producers outperform others.  Market concentration goes hand-in-hand with economic gains as the best producers enlarge both the consumer and producer surpluses, generating profits for supply side reinvestment and expanded purchasing power for increased consumer demand.  These economic gains have accomplished in two hundred years what mankind had not been able to accomplish for millennia previously—an enormous creation of wealth that lifted nearly all of the world’s population out of extreme poverty. 

Antitrust law acknowledges this economic reality.  In a case alleging unilateral conduct, a plaintiff must prove more than that a defendant has a high market share or is a monopolist.  Rather, the plaintiff must also prove the defendant achieved its high market share or monopoly position by predatory conduct—that is, behavior that makes no economic sense except by its tendency to eliminate competition.  Ordinarily, that means the plaintiff must show that the defendant has sacrificed short-run profits for some long-run harm to competitors that will make them less able to compete.  Monopolies achieved by providing consumers with better products at better prices than the competition are perfectly legal.  Even when the law uses presumptions concerning market concentrations, companies have the opportunity for rebuttal, and the burden of persuasion to prove harm to competition at all times remains with the claimant. 

But as President Milei’s speech reflects, classical economics and the law itself are easy to overlook, and maybe even forget, in the face of an overwhelming and contrary worldview.  Companies may find themselves on the back foot, having internalized the premise that big is bad and resorting to defending themselves by disowning their own success.  That is a dangerous strategy; it is also unnecessary.  We are lawyers who still believe classical economics and remember antitrust law.  And we will help you defend your success as the societal benefit it is.

The entirety of President Milei’s speech to the World Economic Forum can be read here.