Antitrust keeps superior products and marketing strategies from harming rivals, but halting such innovation harms consumers. It inhibits superior firms from passing on their efficiencies to consumers in lower prices. FULL ARTICLE by Gary Galles
Source link: http://archive.mises.org/15024/revealing-the-reality-of-antitrust/
Revealing the Reality of Antitrust
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Not true.
It is a safety mechanism designed to prevent system from implosion. Without it the large, most successful companies will quickly buy out all the competition and de facto monopolize whole sectors of the market…
The problem is as always – the enforcement. It is easy to see that like any tool it can be used for greater good or to do harm, such as when a certain party has unbalanced influence over the enforcing State agent. However, this is a different issue altogether. more related to politics, and not economics. I still believe that any system needs safety mechanisms to keep it in balance and checked… Any stable system cannot have a ever-growing dynamic in any direction. Any unchecked ever-increasing dynamic, such as company consolidations and buy-outs, will eventually destroy the system from within by concentrating all the economic potential in single or a small group of entities.
Much like a star that has used its hydrogen fuel implodes under the pull of gravity emanating from its mass, so will any unchecked socio-economic structure…
The market worked just fine before antitrust was passed.
“unchecked”? Wait a sec… so the government magically makes it checked? So we need a monopoly of force in order to “check” to make sure that voluntary transactions are doing their job?
That’s total nonsense. And aside from that what evidence can you point to regarding monopolies that don’t exist due to government privileges, licensing, regulations, etc.? Have you read the antitrust decisions? It’s fairly clear even if you look into the big cases like Standard Oil that antitrust has never been about punishing companies for having prices that are too high, and if it’s not about that what is the problem and how exactly am I to believe that the evil’s of voluntary transactions outweigh the evil of using a monopoly of force?
Who or what will prevent extreme consolidation of economic power in the hands of the few? The end result of the free-run market is an Oligopoly… How’s that any better then ouright feudal-serf economy where a few own everything and “graciously” “lend” what they possess to the commoners or serfs they own?
It will turn into the same old feudal system wrapped under the guise of “Free” market…
This will inevitably happen when all the money and all the real resources will be de facto and de jurum owned or controlled by infinitesimally small segment of the population…
Now, I am NOT advocating wealth redestribution, what I’m saying is that we need legal mechanism to prevent extreme economic polarization of a given society, otherwise you know what happens to the party when whiskey runs out…
You need to understand the “feudal” period better. Feudal peasants had more rights and freedoms than we do today. The highest recorded tax rate in Medieval England was 8%, and it lasted shortly after a peasant uprising for being unreasonable. Peasants were more educated and more literate than lords because they were the ones left responsible for managing the land while lords spent all their time off fighting in wars with other lords. Peasants, for the most part, were left alone. The hardship and poverty experienced back then is something we view in relative terms to how we live today. Their technology was far more primitive, which is why they appear to have lived such bad lives. We’re comparing it to what we have today.
Further, Oligopolies and Monopolies are *NOT* natural outcomes of a free market, they’re natural outcomes of a regulated market. Oligopolies and Monopolies have zero avenues available to them in a true free market to engage in the abuses they’re accused of. The second a price is raised or a salary is lowered to increase profit margins, someone else will jump into the market to provide higher wages and lower prices to undercut the prior monopoly or oligopoly. Don’t forget that greed cuts both ways. Someone who currently isn’t in the business will prefer to take a 4% profit when the competition is earning 6% becuase that 4% is better than the 0% he was earning before.
Oligopolies are the least to worry about because it involves playing by the rules. The second one decides to pay higher wages and/or charge lower prices, the whole thing collapses. Companies have zero means of enforcing such an oligopoly arrangement in an unregulated market becuase there is no government to run to to enforce such an arrangement.
This is also assuming the oligopoly or monopoly is bad. To get into a monopoly position, the company has to offer a product of such quality and of such low price that no one else can enter, that company must also pay high enough wages and offer an unmatched working environment to keep the employees from leaving. A monopoly will naturally self-destruct becuase it will charge too little to keep competitors out of the market and pay it’s employees too much to keep them from taking talents elsewhere. A monopoly effectively turns into a government agency, without the benefit of a tax-base to make up for the loss.
A monopoly only turns negative when the monopoly knows there is a government agency taxing and regulating potential start-ups, creating a nearly insurmountable barrier to entry. The monopoly also knows it has the advantage in obtaining subsidies and government contracts, which the potential competitor must fund, further increasing it’s operating costs.
The fairy tale about the free market monopoly is invented by the supporters of the state and state-created monopolies. In a free market, those monopolies of the state (think of your local cable television operator) will end up failing when new competitors arrive on the scene to undercut their costs and provide a better product.
“[...] This is also assuming the oligopoly or monopoly is bad. To get into a monopoly position, the company has to offer a product of such quality and of such low price that no one else can enter, [...]”
Well, not really…
All a for-runner company has to do is to buy out or by some other means stifle the competitors… The presence or absence of the state has nothing to do with this situation per se… I have witnessed this all firsthand myself in a country in Eastern Europe where I had a small business… The big guys with a lot of capital move in and buy out, intimidate or sabotage the little guys by either temporarily artificially lowering the offered prices, outright buying them out and dissolving them, or incorporating them…
As a Libertarian, you are missing the whole point of the nature of competition in the Free Market system – it is to win (i.e. make profits) by ANY means necessary, make more and more profits, and the to re-invest them over, and over again to gain even more… SO, on and on, until some external force hinders this infinite expansion…
The whole system is designed to have exponential growth trend with no amount of profit being sufficient to stop it…
As anyone who ever played the board game “Monopoly” can tell you, there is a point break in this game when a small number of players accumulate critical amount of money and resources, after which there is no stopping them – the matter of them owning everything is just a matter of time and technicalities, ’cause they can simply outdo the competition…
The growth dynamics in Free Market Economy can be modeled by a discontinuous function that in some critical point undergoes asymptotic expansion, tending to infinity (in terms of owning all the real assets and money)… The same characteristic is applicable to non-elastic materials, such as glass. The glass also has a point break, after attaining of which the tension applied to the material, inevitably breaks it.
Conclusion
Any stable system in the observable universe tends to have cyclical characteristic of growth, safeguarded by the laws of conservation. Therefore even the Free Market System has to have its safeguards to prevent or to maximally defer the reaching of the critical point or the singularity, in which all the system and all its laws break down…
“Therefore even the Free Market System has to have its safeguards”I completely agree with this statement. But aren’t you proposing government force and decision in place of natural free market safeguards such as consumer choice and business responsibility?
This article’s characterization of my concern is wholly inaccurate, as any fair reading of my cert petition would reveal. I thought Leegin was correctly decided, as I have stated in print, and I have no problem with concluding that vertical price-fixing claims should have to satisfy the standard rule of reason requirements of proving either market power, direct evidence of anticompetitive effects, or the absence of any procompetitive justification. The problem is that on remand the 5th Circuit declined to apply standard tests for finding market power (which was alleged), declined to apply the standard doctrine allowing direct evidence of anticompetitive effects to obviate the need to prove market power, and declined to give any weight to the lack of procompetitive justification. Also the Fifth Circuit wrongly held that the challenged agreement should be treated the same as purely vertical price-fixing even though it actually involved alleged horizontal agreements between retailers. If the article means to argue that vertical price-fixing should never be illegal no matter what the proof (i.e., that it should be per se legal), then its beef is with the Leegin decision itself. But as written, the article is attacking a straw man.
This is what I was afraid of while reading this article. Arguing against anti-trust on their grounds. All the legalese and gobbldygook is pointless. Are we to be free to make voluntary agreements or not? No one held a gun to anybody’s head until the government got involved.
“Much like a star that has used its hydrogen fuel implodes under the pull of gravity emanating from its mass, so will any unchecked socio-economic structure…”
Gotta love how some people like to justify themselves with scientism.
Sione
In my neck of the woods the Competition Commission and the judge heading up th eCompetition tribunal , have acquired all th ehallmarks of the Spanish INquisition. Based on a vague and ill-defined theology – the Universal Virtue of Competition – it has become a Law unto itself, and the ironies it gives rise to go almost unnoticed. Chief among them is the vitriol spat by the labour unions at th ecompanies brought to grovel before the Cardinal, all falling over themselves to gain ‘first-confessor’ leniency, or pay tribute to His Magnificence in the form of fines when they do not get there fast enough. Why is it that no-one sees the contradiction in the greatest anticompetitive, price-fixing force in the whole country – the Unions with wages – treating those who are seen to do precisely the same thing with the prices of stuff, as the Devil incarnate?
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