But these views are being attacked by economists Vivek Ghosal of the Justice Dept.'s Antitrust Div. and Joseph C. Gallo of the University of Cincinnati, writing in the International Journal of Industrial Organization. Using data from 1929 through 1994, they show that the number of antitrust cases actually rises in a downturn. They also find that whether Republicans or Democrats are in power has no impact on the level of case activity. That means antitrust enforcement actions may be about to increase despite the professed probusiness views of the Bush Administration.
Ghosal and Gallo argue that antitrust is no different from most other types of law enforcement: Cases rise when violations go up. And when times get tough, with profits on the wane, companies collude to fix prices more often than during prosperity. The authors' most detailed findings are for 1955-1994. During that period, enforcement went up about two years after the economy started to slow, a lag due in part to time needed to investigate a complaint before filing a case. If unemployment rose by two percentage points, cases increased by 30%, says Ghosal, who notes that an average of 32 cases were filed each year in the 1955-1994 period. Gallo, who has done additional research using data since 1994, adds that the conclusions "still hold up" with more recent data. By Charles J. Whalen