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Source link: http://archive.mises.org/11928/monopoly-is-in-the-eye-of-the-regulator/

Monopoly Is in the Eye of the Regulator

March 4, 2010 by

A common complaint about antitrust laws is that they punish firms for being successful. Yup, that’s exactly what happened here:

Transitions Optical, Inc., the nation’s leading manufacturer of photochromic treatments that darken corrective lenses used in eyeglasses, has agreed to stop using allegedly anticompetitive practices to maintain its monopoly and increase prices, under a settlement with the Federal Trade Commission announced today. Photochromic treatments are applied to eyeglass lenses to protect the eyes from harmful ultraviolet (UV) light. Treated lenses darken when exposed to UV light and fade back to clear when the UV light diminishes.

“Transitions crossed the line between aggressive competition and illegal exclusionary conduct when it used its monopoly power to strong-arm key distributors into exclusive agreements and unfairly box out rivals so they could not use distributors,” said Richard Feinstein, Director of the FTC’s Bureau of Competition. “Its actions prevented others from competing on the merits, and consumers were forced to pay more for these lenses as a result. Such conduct runs afoul of the antitrust laws and is unacceptable.

In 2008, photochromic lenses constituted 18-20 percent of all corrective lenses purchased by consumers nationwide, with sales totaling approximately $630 million at the wholesale level. Over the past five years, Transitions had more than an 80 percent share of photochromic lens sales in the United States, and its share exceeded 85 percent in 2008.

The FTC charges that the company illegally maintained its monopoly by engaging in exclusive dealing at nearly every level of the photochromic lens distribution chain. First, Transitions refused to deal with manufacturers of corrective lenses, known as “lens casters,” if they sold a competing photochromic lens. Further down the supply chain, Transitions used exclusive and other agreements with optical retail chains and wholesale optical labs that restricted their ability to sell competing lenses.

First off, I’m not sure how one defines 80 or 85% of a market as a “monopoly.” Must be new math. Second, for all the rhetoric about Transitions using “illegal exclusionary tactics,” the complaint doesn’t contain a single allegation of fraud, violence, or threats. Transitions simply entered into contracts. The FTC didn’t like the terms of those contracts, however, so the Commission resorted to some strong-arming of its own to compel Transitions to sign a fraudulent agreement that restricts the company’s business practices for twenty years.

Oh, and note that the FTC actually breached its agreement even before it takes affect. The “consent” order says there’s no admission of liability or finding of illegal conduct. Yet the FTC’s own Richard Feinstein issued a false and misleading press release stating that Transitions’ conduct was “illegal.” This is what happens when you sign agreements at gunpoint with dishonest little trolls.

{ 8 comments }

Nate March 4, 2010 at 7:29 am

In the interest of fairness the FTC should next go after Coke and Pepsi when they make exclusive contracts, or universities that prohibit early admission applicants from applying to other universities while their early admission is under review. But I guess it’s easy to cherry pick when a real crime has not been committed.

iawai March 4, 2010 at 8:56 am

Oh, and note that the FTC actually breached its agreement even before it takes affect. The “consent” order says there’s no admission of liability or finding of illegal conduct. Yet the FTC’s own Richard Feinstein issued a false and misleading press release stating that Transitions’ conduct was “illegal.” This is what happens when you sign agreements at gunpoint with dishonest little trolls.

So Transitions should be able to go after the FTC for breach of contract, right? What, the Statist Court won’t allow that? how convenient.

S.M. Oliva March 4, 2010 at 8:58 am

“So Transitions should be able to go after the FTC for breach of contract, right? What, the Statist Court won’t allow that? how convenient.”

Indeed, there was a case exactly like that — a party to an FTC agreement sued over the Commission’s false public statements, and the court conveniently dismissed the case for lack of jurisdiction.

Bogart March 4, 2010 at 10:13 am

Coke and Pepsi? How about Goldman Sachs and the 9 banks making up the Federal Reserve. Or how about the Post Office or Public Education? This whole Anti Trust thing is and has always been a mechanism for those in power to wield it to destroy competitors of their friends.

htran March 4, 2010 at 10:38 am

“First, Transitions refused to deal with manufacturers of corrective lenses, known as “lens casters,” if they sold a competing photochromic lens.”

Since when does anyone have to do business with everyone? Even a competitor? I don’t know how anyone can justify that.

pussum207 March 4, 2010 at 12:13 pm

Hi Skip.

” I’m not sure how one defines 80 or 85% of a market as a ‘monopoly.’ ”

It’s worse than that. GIven that photochromic lenses represent only 18-20% of the market for corrective lenses, Transitions, it appears, had 80-85% of 18-20% (or 14-17% in total) of the market for corrective lenses. Of course, the FTC gets there by defining the “market” in question as the market for photochromic lenses which, I would humbly suggest, is nonsense.

Seattle March 4, 2010 at 1:56 pm

Transitions has a 100% Monopoly on Transitions brand lenses, of course!

Obviously, the only way to stop this abomination of the market process is to break up Transitions into multiple companies and replace all of their higher-ups with the State’s stooges.

(For those of you unfamiliar, this is the kind of logic the FTC actually uses)

S.M. Oliva March 4, 2010 at 2:33 pm

You’re absolutely correct, pussum207. The FTC tries to justify its market definition by arguing, “Well, customers who buy Transitions are so loyal to the product they won’t immediately respond to a small price increase by switching to another product, which any *rational* consumer would do; ergo, consumers need to be protected from their own irrational behavior.”

Read the D.C. Circuit’s decision in FTC v. Whole Foods. Janice Rogers Brown basically adopts that line of reasoning hook, line, and sinker.

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