Antitrust Law - Needed or Not?

[idiom]

What's the point if they aren't enforced at all?

Look at the medical system, it has broad exemptions to all anti-trust law, and all consumer protections, along with huge amounts of government imposed barriers to entry.

Easiest thing in the world to fix, but nobody will touch the source of the problem.

 

[cubical]

Considering the government is the only entity that can force me to do anything, the only thing anti-trust laws should regulate is the government.

 

[green73]

Considering the government is the only entity that can force me to do anything, the only thing anti-trust laws should regulate is the government.

QFT

 

[Slutter McGee]

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

Not really. Some states have anti-price gouging laws, which even most keynsian economist will admit is stupid, but its really all about "in restrain of trade" when it comes to anti-trust in the US.

 

[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.

I can't. Barrier to entry is way too high. Those cartels went on for years btw.

 

[Slutter McGee]

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

Well there are obviously both. Significant barrier to entry makes it far more likely for cartels to form, whether this is artificial or natural. People here seems to have this idea that cartels are going to jack up prices to monopoly level. That is really fun in theory, but it does not happen in reality. Price fixing is harder to recognize in real life.

My point is pretty simple, I don't see how price fixing can ever be a good thing when significant natural barriers to entry exist: lets ignore government constructed 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.

You are quite right that the FED is a government supported monopoly, but I really don't want to get in discussion about currency, there are a million other threads discussing that particular monopoly. But most anti-trust laws are more arbitrary than politically motivated. Laws creating and supporting cartels are generally not considered anti-trust, as bad as those laws might be. Peanuts, Sugar, etc.

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.

The natural mechanism you mean, at least in high barrier entry, is the incentive to cheat. Certainly a grim strategy model is not realistic, but there are certainly also mechanisms for cartels to punish cheaters.

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.

There have certainly been a lot (most even) very bad anti-trust laws. I just don't see a good libertarian answer to price fixing....and also patents, which I will discuss later.

Slutter McGee

 

[Slutter McGee]

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.

From a macro perspective, you are completely right, actual perfect monopoly does not exist, and large market share does not equal monopoly. Predatory pricing is NOT an issue in the macro economy. Anybody who says it is, well they are probably an idiot. It does cause problems on a more micro level, but it is far easier for other firm to enter a market there. I think we agree on this.

Slutter McGee

 

[Slutter McGee]

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.

Vitamin cartel went on for over 10 years. They can be stable, especially if they are international cartels. Look at Hoffman LaRoche

Slutter McGee

 

[Slutter McGee]

Crap, I know I just responded to every post with a single post of my own. Probably should have combined them. Anyway, enjoying the discussion. I just listened to a live lecture from Israel Kirzner a couple days ago. Fascinating, brilliant, and frustratingly repetitive, but he had no answer for patents. Basically said "I have no fucking idea"...the expletive is my own interpretation.

Anybody want to help shift this to that subject a little. This is a question that I don't know the answer to either, especially from a free market perspective.

Slutter McGee

 

[helmuth_hubener]

I looked up Hoffman LaRoche. I see no evidence that they organized a successful cartel. It seems that the EU government did see evidence that they (with several other vitamin manufacturers) had a successful cartel. I am highly skeptical of any conclusions made by the EU government and any things they claim to see or know. The opposite of whatever they say would tend to be the truth.

So, again, I see no evidence that they organized a successful cartel. Do you have such evidence?

 

[Slutter McGee]

I looked up Hoffman LaRoche. I see no evidence that they organized a successful cartel. It seems that the EU government did see evidence that they (with several other vitamin manufacturers) had a successful cartel. I am highly skeptical of any conclusions made by the EU government and any things they claim to see or know. The opposite of whatever they say would tend to be the truth.

So, again, I see no evidence that they organized a successful cartel. Do you have such evidence?

Google aint that hard.

http://www.justice.gov/atr/public/press_releases/1999/2450.htm

Slutter McGee

 

[The Gold Standard]

I can't. Barrier to entry is way too high. Those cartels went on for years btw.

Then your complaint is with government restricting entry, not the "cartel". Natural barriers can be overcome if it is worth it to an entrepreneur, and if it isn't worth it then you obviously don't have a monopoly price in the industry.

 

[The Gold Standard]

Crap, I know I just responded to every post with a single post of my own. Probably should have combined them. Anyway, enjoying the discussion. I just listened to a live lecture from Israel Kirzner a couple days ago. Fascinating, brilliant, and frustratingly repetitive, but he had no answer for patents. Basically said "I have no fucking idea"...the expletive is my own interpretation.

Anybody want to help shift this to that subject a little. This is a question that I don't know the answer to either, especially from a free market perspective.

Slutter McGee

The answer for patents is easy. They should not exist. It is nothing more than government restricting entry. The idea that entrepreneurs would not have incentive to innovate without them is ridiculous. A true free market isn't the corporate dream many people make it out to be. There is ruthless competition from everywhere. You innovate and find ways to serve the customer if you want to eat. That is plenty of incentive. There are other ways to protect your designs from competitors, and being first to market also has financial advantages. Patents are completely unnecessary.

 

[Slutter McGee]

The answer for patents is easy. They should not exist. It is nothing more than government restricting entry. The idea that entrepreneurs would not have incentive to innovate without them is ridiculous. A true free market isn't the corporate dream many people make it out to be. There is ruthless competition from everywhere. You innovate and find ways to serve the customer if you want to eat. That is plenty of incentive. There are other ways to protect your designs from competitors, and being first to market also has financial advantages. Patents are completely unnecessary.

First off, the true free market does not exist. It is fine to look at what would be the case in a completely free market. But we also need to look at the world we live in. FDA approval can cost billions of dollars. We can argue that the FDA shouldn't exist but it does. Without patents for drugs, there is absolutely no reason to develop new drugs because there is zero profit opportunity.

And you can't pretend the question is that simple. Even Von Mises didn't have a good answer for patents.

Slutter McGee

 

[kcchiefs6465]

Well there are obviously both. Significant barrier to entry makes it far more likely for cartels to form, whether this is artificial or natural. People here seems to have this idea that cartels are going to jack up prices to monopoly level. That is really fun in theory, but it does not happen in reality. Price fixing is harder to recognize in real life.

I haven't read up on this subject in a while so please forgive my fogginess but every example of price fixing that I can think of was the result, in some form or another, of government interference/corruption.

Would it occur within a free market? Briefly, perhaps.

My point is pretty simple, I don't see how price fixing can ever be a good thing when significant natural barriers to entry exist: lets ignore government constructed barriers.

Price fixing isn't a good thing. Prices should rise and fall with regards to supply and demand.

You are quite right that the FED is a government supported monopoly, but I really don't want to get in discussion about currency, there are a million other threads discussing that particular monopoly. But most anti-trust laws are more arbitrary than politically motivated. Laws creating and supporting cartels are generally not considered anti-trust, as bad as those laws might be. Peanuts, Sugar, etc.

Indeed. So then I wonder, who is the decider whether an industry is cartelized?

My point with regards to the Fed is that when a currency is monopolized and its use forced upon a population, then I don't much wish to hear said monopolizers whining about the monopolization of a different, less encompassing, industry. Especially when their track record is disgusting, at best.

If the ironic hypocrites wished to hold any sort of legitimacy with regards to declaring what is and is not a monopoly, they'd abolish the legal tender laws and cease their monopoly over the currency.

The natural mechanism you mean, at least in high barrier entry, is the incentive to cheat. Certainly a grim strategy model is not realistic, but there are certainly also mechanisms for cartels to punish cheaters.

Can you give me an example of a sector that you would consider to have a high barrier entry completely or relatively absent government interference?

There are reasons that when coupled with a cartel member's incentive to 'cheat' (on the rules of their agreement) that would provide a natural discouragement from monopolies maintaining. One is profit drive. Two is human ingenuity. Without a government using force to enable or even establish these monopolies, the issue really would be a mild one.

As far as cartels punishing cheaters, sure. There would be ways to combat that as well. Public perception being a major one.

There have certainly been a lot (most even) very bad anti-trust laws. I just don't see a good libertarian answer to price fixing....and also patents, which I will discuss later.

Slutter McGee

I don't see a logical reason to let the biggest monopoly on the planet decide what is and is not a monopoly. Especially considering that a large portion of their modern existence is effecting a bastardization of trade. They distort (fix) the price on everything simply through their establishment and maintenance of a fiat, mandated currency.

Would price fixing be an issue in the free market? No. Not largely, anyways.

 

[Slutter McGee]

I haven't read up on this subject in a while so please forgive my fogginess but every example of price fixing that I can think of was the result, in some form or another, of government interference/corruption.

There have been tons of them. Most don't hold because the incentive to cheat is too high or competition enters into the market. In the short run they are a big deal, though not so big in the long run. But there are tons of examples of price fixing. Just look at what was going on before Sherman. Price fixing was going on in Steel (Basing point pricing), railroads, gun powder, and a host of other businesses...most with high fixed costs and natural barriers to entry.

Price fixing isn't a good thing. Prices should rise and fall with regards to supply and demand.

Agreed, but one of the bigger issues is the inflationary aspect of price fixing when the product is an intermediate good.

Indeed. So then I wonder, who is the decider whether an industry is cartelized?

Now that is a loaded question. You can use the Herfindahl Index which is better than most other measures, but that only measures industry concentration of an entire industry. 4 firms of equal size (hypothetically the only 4 in the industry) in a cartel are going to have the same index as 4 firms competing in perfect competition. The index is certainly helpful for showing which industries are more likely for a cartel to form.

Really the only way to determine that there is definitely a cartel is to find actual evidence of price fixing. Thank God that the idea of tacit collusion is no longer considered evidence of price fixing. Hard to imagine that the Supreme Court once decided prices moving in unison was.

My point with regards to the Fed is that when a currency is monopolized and its use forced upon a population, then I don't much wish to hear said monopolizers whining about the monopolization of a different, less encompassing, industry. Especially when their track record is disgusting, at best.

You will hear no disagreement from me when it comes to government sponsored and created cartels. But seeing as they are at this time legal, they fall outside the purview of current anti-trust legislation.

Can you give me an example of a sector that you would consider to have a high barrier entry completely or relatively absent government interference?

Mentioned a few earlier. Any industry with an extremely high fixed cost or need for capital is going to have natural barriers. We also have to take time lag into account. An investor might be able to build his own railroad, but until that railroad is actually built, price fixing from a cartel can do considerable damage to the economy in the short run.

There are reasons that when coupled with a cartel member's incentive to 'cheat' (on the rules of their agreement) that would provide a natural discouragement from monopolies maintaining. One is profit drive. Two is human ingenuity. Without a government using force to enable or even establish these monopolies, the issue really would be a mild one.

There is some fun game theory to get into. I agree with you in the long run monopolies would not be a huge issue in this hypothetical situation. I still think they would cause lots of harm in the relatively short run. But that situation does not currently exist.

I need to get back to studying but I will try replying to a little more of what you said later.

Slutter McGee

 

[The Gold Standard]

First off, the true free market does not exist. It is fine to look at what would be the case in a completely free market. But we also need to look at the world we live in.

Then what the fuck are you asking for? Patents are never going away. Government sponsored monopolies are never going away. I have no interest in debating the economics of our centrally planned disaster. What is the point? It's like arguing economics in the Soviet Union. I think the government should produce more bread to solve the bread lines. Or kill more people.

Without patents for drugs, there is absolutely no reason to develop new drugs because there is zero profit opportunity.

So there would not be any money in curing or treating illness? No demand for it? Without patents for drugs they would have to make something that works if they want to make any money.

 

[Slutter McGee]

Then what the fuck are you asking for? Patents are never going away. Government sponsored monopolies are never going away. I have no interest in debating the economics of our centrally planned disaster. What is the point? It's like arguing economics in the Soviet Union. I think the government should produce more bread to solve the bread lines. Or kill more people.

Give me a fucking break. The US is still a market economy. That is a bullshit analogy. I enjoy discussing what the world is instead of sitting around talking about what I want it to be. In this world there are policies that are conducive to more liberty and competition, and polices that are not. I find some of the anti-trust issues to be a gray area. Equating breadlines with patents is borderline retarded.

So there would not be any money in curing or treating illness? No demand for it? Without patents for drugs they would have to make something that works if they want to make any money.

No, there wouldn't be as much money. Development of drugs can cost billions even without government interference. But these drugs generally have a low marginal cost to actually produce afterwards. If a generic drug producer can simply transfer most of the fixed costs to the larger producer and still enter the market almost immediately after the drug has been released, then the larger producer has less profit incentive to actually make these drugs in the first place.

Slutter McGee

 

[The Gold Standard]

No, there wouldn't be as much money. Development of drugs can cost billions even without government interference. But these drugs generally have a low marginal cost to actually produce afterwards. If a generic drug producer can simply transfer most of the fixed costs to the larger producer and still enter the market almost immediately after the drug has been released, then the larger producer has less profit incentive to actually make these drugs in the first place.

Slutter McGee

Nothing short of space travel would cost billions to develop without government interference. But if we aren't talking about a free market then forget everything I said. You might as well keep patents because you're right there wouldn't be as much money without them, and if you got rid of them drug companies would lobby for some other kind of protection, so it's really irrelevant.

This system of government protecting their riches certainly incentivizes them to put drugs out there. Not good ones, but something. If that is the incentive you want, your betters have already set that up for you. The free market doesn't guarantee anyone wealth. It guarantees that those that best serve the customer and best run their operation will be successful. But we aren't talking about that, and I find no point in debating what kind of government intervention is functionally better than the ones we have now, because I already know what ideal solution is, whether realistic or not. Hence the Soviet bread line analogy. They could debate reality until they were blue in the face, but it doesn't matter. Only people free to own property and transact with other free people can ideally distribute bread.

 

[helmuth_hubener]

Google aint that hard.

http://www.justice.gov/atr/public/press_releases/1999/2450.htm

Slutter McGee

Once again, I do not think there is any evidence whatsoever that this cartel ever existed. I am open to reading and considering such evidence. But I have yet to read any.

To explain once again: that various government either found them "guilty" of something or agreed to be paid lots of money by them without making any ruling means less than nothing to me.

I don't know how I could be more clear.

Until someone can demonstrate actual, real documentation of the actual real live existence of an actual functioning cartel that went on for more than two years, I am very, very skeptical that such a thing has ever existed.