Competition and Competition Law in the Classical Liberal Tradition

This chapter critically examines the relationship between competition, antitrust law, and classical liberalism. While scholars in the classical liberal tradition emphasize the importance of competition, they are apprehensive of government intervention into private markets, where error costs, unintended consequences, and government overreach loom large. Classical liberalism traditionally favors negative over positive measures—such as removing government-created barriers to entry and refraining from enforcing private agreements that restrain trade—before considering direct regulatory intervention. Antitrust law may align with classical liberal principles, however, where it focuses on maintaining open market processes rather than pursuing specific market outcomes. In particular, the use of a consumer- or total-welfare standard and the adoption of an error-cost framework that tolerates type II errors (false negatives) over type I errors (false positives) minimize the risk of overenforcement that could stifle innovation and infringe upon economic liberties. Contemporary antitrust law generally does a good job of structuring rules to minimize error costs through presumptions and standards that coalesce into two main analytical approaches: per se analysis and the rule of reason. Conversely, modern antitrust falls short of the classical liberal ideal where it insists on treating perfectly competitive markets as its model, applies the wrong presumptions and standards to the wrong conduct, or misconstrues antitrust law as a tool for achieving political goals.

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