Stigler 71 tells us that regulation exists because firms want it to. Firms can use regulation to maximize profits, so they bid on regulation and draft it alongside lawmakers in an attempt to do so. For more typical forms of regulation like the Telecommunications Act of 1996, it's easy to pick out the benefits for firms. Most often, regulation allows them a legal outlet to restrict entry and monopolize a market, meaning they can produce where MR=MC. This is where the firm produces in their dream, ideal world. But how, then, do we reconcile the Sherman Antitrust Act of 1890, which seems antithetical to firms' efforts to produce where MR=MC, with the theory of regulatory capture? Stigler would likely argue that it can be reconciled through its enforcement.
According to Stigler's framework, it's not just in drafting and passing new laws that regulation can be captured--so, too, can it be captured through enforcement. In the context of the Sherman Antitrust Act, the enforcement of antitrust law can be influenced by the very businesses it seeks to regulate. This may occur in several different ways. For one, businesses could influence the industries or companies which receive the most legal scrutiny. Second, it may come through regulatory exceptions and favorable interpretations of the law. Lastly, it could also come through businesses using antitrust law as a strategic weapon to disadvantage their competitors. Stigler would say that this doesn't necessarily make the act ineffective; rather, he would challenge whether the act automatically advances public interest.
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