Without generating by and large just results, any economic system loses its moral legitimacy in a hurry. Contracts, which are at the heart of the capitalist system, not only move goods from lesser to more highly valued uses, they are also the primary source of fairness in the marketplace. For all its real and alleged harshness, a market economy rests on consent. Consent, in addition to its economic and legal significance, has been at the heart of moral and political philosophy at least since the 17th Century. More recently, moral and political philosophers have identified contracts as justice generating procedures. As long as contracts are entered into voluntarily between competent parties, absent fraud, error, and vastly unequal bargaining power, we may plausibly presume the distributional outcome of an agreement to be fair. From a rights-based perspective, voluntary agreements among equals create obligations in an autonomy-preserving way, because no injustice is done to the willing (volenti non fit injuria). (Kant). From a consequentialist viewpoint, voluntary agreements are likely to be mutually beneficial, because otherwise at least one of the parties would have withheld its consent. (Hobbes). Both the rights-based approach (with the exception of a Nozick-style formalism) and the consequentialist approach require some measure of procedural and substantive equality for an agreement to be morally justified as fair. Against that backdrop, antitrust regulation serves two important purposes.

First, antitrust protects the the moral legitimacy of the economic system by promoting competition as a condition of contractual fairness. The ultimate subject of antitrust regulation is not individual transactions but markets, and the goal is to keep (or, more ambitiously, to make) markets competitive. Buyer competition ensures seller choice, and under conditions of meaningful seller choice, buyer—seller agreements can plausibly be presumed to be not only efficient but also fair.

Second, antitrust protects the integrity of the legal system. The operation of the legal system critically depends on its ability not to deal with certain problems. For example, the legal system refuses to decide political questions. It refuses to settle scientific or religious disputes. And it fights tooth and nail to stay out of the price setting business. In fact, when it comes to the latter, the display of humility by the judiciary is quite remarkable. Why such (self-) restraint? Because the legal system would quite literally overload and collapse if it had to deal with price setting in all but the rarest of circumstances. The legal system depends on prices being inputs, not outputs. Because the legal system is structurally coupled to the economic system through the institution of the contract, the law must insist on certain minimal conditions of justice in the economic system’s price setting mechanism. The maintenance of competitive markets through antitrust regulation is thus one the most important self-restraint-enabling interventions of the legal system in the operations of the economic system. Only as long as markets can plausibly be trusted to produce just results, can the law simply transform those results (prices) into enforceable obligations without fear of undermining its own legitimacy. The almost complete disengagement from substantive review at the transaction level requires certain procedural oversight of the market process. Antitrust performs that supervisory role.

Technorati Tags: antitrust, moral theory, proceduralism

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