Antitrust Law - Needed or Not?

[Slutter McGee]

I did a few searches before starting this thread, and while there seem to be a few threads in the past it has been several years, so I thought I would start a new general discussion on this topic.

I think we have come a long way in antitrust regulation since its inception. An understanding that large marketshare is not necessarily a bad thing, especially when it is a result of innovation is far more prevalent. Some logical price fixing schemes have even been allowed with an efficiency argument. Robinson Patman still needs to be repealed, but it is largely ignored by the DOJ.

While there have certainly been a lot of bad Supreme Court decisions and laws passed, it seems that enforcement of these regulations is getting more reasonable. At the same time other regulation has created more barriers to entry and retrained competition. So I just wanted to get yalls opinion on Price Fixing, Monopoly, Oligopoly, Mergers, Cartels, and anything to with this subject.

It seems to be a subject that a lot of libertarians are split on.

Slutter McGee

EDIT: Honestly, I enjoy studying IO theory more than policy decisions. If anyone wants to talk micro I'd enjoy it.

 

[presence]

Anti Trust would be a non issue without licensing schemes and patent protection rackets.

 

[green73]

The Crushing Case Against Antitrust: Tom DiLorenzo on the Tom Woods Show


Monopoly, Competition, and Antitrust - Tom Dilorenzo

 

[helmuth_hubener]

Needed or Not?

Nah, not needed. Doesn't help anyone. I prefer the alternative:

Let anyone

buy anything

from anyone they choose.

 

[green73]

Needed or Not?

Nah, not needed. Doesn't help anyone. I prefer the alternative:

Let anyone

buy anything

from anyone they choose.

Did it ever help?

 

[acptulsa]

Anti-trust laws were another reaction 'solution' to another problem created by government. Teddy Roosevelt used to bust the trusts that didn't contribute to his campaigns. As is evidenced by the fact that he didn't split Harriman's Union Pacific and Southern Pacific Railroads until his second term.

Yes, it's nice to be able to take those who engage in monopolistic practices (like Microsoft) to court, and a few carefully crafted laws can assist with that. But in practice, government still creates more monopolies than it breaks up.

 

[Lucille]

Chapter XVI (Page 172): https://mises.org/sites/default/files/God of the Machine_2.pdf

Denninger has had a lot to say about antitrust laws that the Medical Industrial Complex is allowed to violate with impunity (Sherman, Clayton, and Robinson-Patman). Most recently: http://market-ticker.org/akcs-www?singlepost=3373278

 

[helmuth_hubener]

Did it ever help?

It was pushed through by big business (esp. railroad) would-be cartelizers, because they thought it would help them. They couldn't set up stable cartels on the market, because there were just too many factors that kept upsetting the apple cart. The mis-nomered "anti"-trust laws setting up the Interstate Commerce Commission and etc. did help them to be able to finally raise barriers to entry and succeed to some extent in cartelizing things, is my understanding. Now did they actually help them, overall, long-term? Subjective, but I would say no.

Here's a nice lecture on all this from Murray Rothbard, extremely informative:

Scrap that, here's something much shorter that someone helpful has put up for us:

 

[Ronin Truth]

NOT!

https://www.google.com/search?hl=en.....1ac.1.34.heirloom-hp..2.11.2221.dbtP0uQuitg

 

[Slutter McGee]

Alright, so what about price fixing? This was a huge issues in vitamins, citric acid, and lycine. We can all here agree that big does not necessarily equal bad. But there have been issues of cartels forming that are not government mandated or created.

These hurt competition. They don't foster innovation, and fixed cost are so high for some of these industries that barriers to entry exist even without additional government regulation.

Slutter McGee

 

[Slutter McGee]

Chapter XVI (Page 172): https://mises.org/sites/default/files/God of the Machine_2.pdf

Denninger has had a lot to say about antitrust laws that the Medical Industrial Complex is allowed to violate with impunity (Sherman, Clayton, and Robinson-Patman). Most recently: http://market-ticker.org/akcs-www?singlepost=3373278

But a large part of those 3 laws are horrible. Robinson Patman is universally condemned as it should be. Clayton did some stupid crap with tying products to other products and Price Discrimination. Exclusive Dealing could be up for a little bit more debate as well as mergers. And Sherman was so vague that all kinds of stupid crap came from it.

 

[Ronin Truth]

Alright, so what about price fixing? This was a huge issues in vitamins, citric acid, and lycine. We can all here agree that big does not necessarily equal bad. But there have been issues of cartels forming that are not government mandated or created.

These hurt competition. They don't foster innovation, and fixed cost are so high for some of these industries that barriers to entry exist even without additional government regulation.

Slutter McGee

Antitrust laws made it illegal to charge more, less, or the same as the competition, as I understand it.

 

[The Gold Standard]

Government involvement is the only way a monopoly can exist.

 

[The Gold Standard]

Alright, so what about price fixing? This was a huge issues in vitamins, citric acid, and lycine. We can all here agree that big does not necessarily equal bad. But there have been issues of cartels forming that are not government mandated or created.

These hurt competition. They don't foster innovation, and fixed cost are so high for some of these industries that barriers to entry exist even without additional government regulation.

Slutter McGee

Then get in the citric acid and lysine business. Or make it known that their price fixing is propping up the price of those things. Someone else will come in and get a piece of that pie.

 

[acptulsa]

Government involvement is the only way a monopoly can exist.

No.

Government makes it far more likely that a monopoly will exist, but it isn't the one and only way it can happen.

 

[kcchiefs6465]

Alright, so what about price fixing? This was a huge issues in vitamins, citric acid, and lycine. We can all here agree that big does not necessarily equal bad. But there have been issues of cartels forming that are not government mandated or created.

These hurt competition. They don't foster innovation, and fixed cost are so high for some of these industries that barriers to entry exist even without additional government regulation.

Slutter McGee

Barriers to entry exist with regards to any entrepreneurial endeavor. Are they natural barriers or government created and enforced barriers?

Anti-trust laws are some of the most politically motivated and arbitrary laws to date. They establish trusts, even going so far as forcing every single one within this country to accept a piece of paper at current value for debts past or present, then have the nerve to offer a "solution." Even if trusts were an issue, one need not look too far to see that the USG does not have the American public's interests at heart and instead it operates under a system of crony capitalism and theft.

No matter how a business operates a case could be made that they are acting in a monopolistic manner. There are natural mechanisms in place that would largely prevent the 'cartelization' of various industries. That is, without government granted privileges and special favors.

It has been a while since I've read up on the subject but Tom Woods, Jr. has a lot of convincing stuff out there, Tom DiLorenzo has done a lot of work with regards to this issue, and Andrew Napolitano has written about various ridiculous cases of Congressional violation with regards to this in a few of his books.

 

[kcchiefs6465]

No.

Government makes it far more likely that a monopoly will exist, but it isn't the one and only way it can happen.

Most of the common examples cited are absurd and illogical.

"Well what if this company lowers their prices to extreme lows, saturates the market, buys up the competition, and then raises their prices once they've established a monopoly?"

I don't think these people really stop and think about what they say, or rather, what they are worried about, before speaking. That and they simply regurgitate progressive propaganda about robber barons, the horrors of capitalism, etc.

Too low of prices? You are trying to establish a monopoly by way of saturating the market before purchasing the competition. Too high of prices? Well you are exploiting the consumer as well as maintaining the barrier to free entry (to establish a monopoly, of course). No matter which way you cut it, a case for anti-trust litigation could be made.

 

[Lucille]

But a large part of those 3 laws are horrible. Robinson Patman is universally condemned as it should be. Clayton did some stupid crap with tying products to other products and Price Discrimination. Exclusive Dealing could be up for a little bit more debate as well as mergers. And Sherman was so vague that all kinds of stupid crap came from it.

I'm not sure that he's a fan of any of them. He's just saying, apply them to the medical cartel and watch prices drop like a stone. Why do they refuse? For whatever reason, low priced medical care and insurance are the last things the ruling class wants.

 

[kcchiefs6465]

The Myth of Predatory Pricing
by Thomas J. DiLorenzo​

The attempt to reduce or to eliminate predatory pricing is also likely to reduce or eliminate com petitive pricing beneficial to consumers.
--Harold Demsetz

Predatory pricing is one of the oldest big business conspiracy theories. It was popularized in the late 19th century by journalists such as Ida Tarbell, who in History of the Standard Oil Company excoriated John D. Rockefeller because Standard Oil's low prices had driven her brother's employer, the Pure Oil Company, from the petroleum-refining business.(1) "Cutting to Kill" was the title of the chapter in which Tarbell condemned Standard Oil's allegedly predatory price cutting.

The predatory pricing argument is very simple. The predatory firm first lowers its price until it is below the average cost of its competitors. The competitors must then lower their prices below average cost, thereby losing money on each unit sold. If they fail to cut their prices, they will lose virtually all of their market share; if they do cut their prices, they will eventually go bankrupt. After the competition has been forced out of the market, the predatory firm raises its price, compensating itself for the money it lost while it was engaged in predatory pricing, and earns monopoly profits forever after.

The theory of predatory pricing has always seemed to have a grain of truth to it--at least to noneconomists--but research over the past 35 years has shown that predatory pricing as a strategy for monopolizing an industry is irra- tional, that there has never been a single clear-cut example of a monopoly created by so-called predatory pricing, and that claims of predatory pricing are typically made by com- petitors who are either unwilling or unable to cut their own prices. Thus, legal restrictions on price cutting, in the name of combatting "predation," are inevitably protectionist and anti-consumer, as Harold Demsetz noted.(2)

Predatory pricing is the Rodney Dangerfield of economic theory--it gets virtually no respect from economists. But it is still a popular legal and political theory for several reasons. First, huge sums of money are involved in predato- ry pricing litigation, which guarantees that the antitrust bar will always be fond of the theory of predatory pricing. During the 1970s AT&T estimated that it spent over $100 million a year defending itself against claims of predatory pricing. It has been estimated that the average cost to a major corporation of litigating a predation case is $30 million.(3)

Second, because it seems plausible at first, the idea of predatory pricing lends itself to political demagoguery, especially when combined with xenophobia. The specter of a foreign conspiracy to take over American industries one by one is extremely popular in folk myth. Protectionist mem- bers of Congress frequently invoke that myth in attempts to protect businesses in their districts from foreign competition.

Third, ideological anti-business pressure groups, such as Citizen Action, a self-styled consumer group, also employ the predatory pricing tale in their efforts to discredit capitalism and promote greater governmental control of industry. Citizen Action perennially attacks the oil industry for either raising or cutting prices. When oil and gas prices go up, Citizen Action holds a press conference to denounce alleged price gouging. When prices go down, it can be relied on to issue a "study" claiming that the price reductions are part of a grand conspiracy to rid the market of all competitors. And when prices remain constant, price-fixing conspiracies are frequently alleged.

Fourth, predatory pricing is a convenient weapon for businesses that do not want to match their competitors' price cutting. Filing an antitrust lawsuit is a common alternative to competing by cutting prices or improving product quality, or both.

Finally, some economists still embrace the theory of predatory pricing. But their support for the notion is based entirely on highly stylized "models," not on actual experience.

http://www.cato.org/pubs/pas/pa-169es.html

Much more here: http://www.cato.org/pubs/pas/pa-169.html

 

[helmuth_hubener]

Alright, so what about price fixing? This was a huge issue in vitamins, citric acid, and lycine.[T]here have been issues of cartels forming that are not government mandated or created.

Forming, yes. Actually working for any length of time -- say, more than a year? I know of no such instance.

If you think that such a thing has happened, let us know the details and we can all look into it.

Myself, I am very, very skeptical. Everyone in a cartel has a huge incentive to cheat. Even if none of the companies were to cheat (never has happened, to my knowledge), in addition to that there is always internal cheating as middle managers and salesmen give special deals to increase business to their department or district and help their careers.

Cartels just aren't stable. Sorry.