Corporate Rules and Political Rules: Antitrust as Campaign Finance Reform

Abstract

This Article addresses itself to two of the most significant political moments in the last decade: the Supreme Court decision in Citizens United v. FEC, and the 2008 bailout of the “Too Big To Fail” companies. It proposes that in light of these two watershed moments, policy makers should explore new antitrust laws with absolute size caps. First and foremost, it proposes that the existing division between the study of market structure and the study of political structure disables both fields. It argues that corporate rules are political rules, and should be treated as such, and understood in terms of their impact on democratic design. In particular, antitrust, which was considered a political tool for the first sixty years of its existence, should be again understood politically. Second, it argues that large-scale companies have disproportionate influence in the political marketplace because of their size. It engages the public choice “rent-seeking” literature, using models to show why spending money on politics becomes cheaper and more likely with scale. The models suggest significant economies of scale in the production of political power, and therefore greater incentives for larger companies to spend money seeking wealth through changes in laws and regulations instead of innovation and development. The existing evidence conforms to these models. In light of the model and evidence, it proposes new laws that would limit the absolute size of all limited liability companies. The laws would be enforced through the antitrust framework, but also rely on the self-enforcement of liability rules (companies over a certain size would lose limited liability). The Article anticipates several objections to the proposal: most prominently the objection that limiting size would be harmful for our economy. It reviews the evidence, demonstrating that in the production of goods and services over a certain size, there is very little evidence that large size adds social value. In the final section, the article explores some unproven assumptions about the relationship between size and the pursuit of political power that might help explain why scholars concerned with rent-seeking have not previously embraced a robust size-based antitrust.