A question that I have is whether a truly economically free society needs to (or should) have laws against anti-competitive behavior.

Take liquor distribution as an example. In the United States liquor distributors widely employ anti-competitive tactics. For example, they will threaten liquor stores that sell product from competing distributors with being cutoff. Since liquor stores rely on key brands, this is a lethal threat so the distributor can essentially prevent them from selling product from someone else. The six or seven liquor distributors in the US have essentially divided up the country geographically among themselves using this mechanism.

Some economists might argue, however, that this is only possible because of government regulations on alcohol. So, for example, for years regulations prevented small brewers from being possible, so there were only a few large brands, Budweiser, Schlitz, Michelob, etc. Because of the artificially restricted number of brands that opens the door for anti-competitive distribution monopolies, they argue. If there were no restrictions on distilleries, then the distribution monopolies would vanish, is the contention.

What is the basis for that kind of theory? Does it have a name? What is the argument against it?

  • $\begingroup$ You should look into natural monopolies and anti-trust economics. There is a plethora of literature on when/when not to regulate an industry. $\endgroup$ – VCG Aug 21 '16 at 12:42

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