in Violation of Antitrust Laws
by Chris Brown
antitrust laws have caused significant damage to consumers and businesses,
all in the name of "consumer protection" and "promoting
competition." Unfortunately, government views on antitrust
come from a fundamentally flawed understanding of economics – neoclassical
economics, the view that is taught in most university economics
courses today. In this view, anything other than a "perfectly
competitive market" or "perfect competition" is deemed
less than ideal. The irony is that in a neoclassical perfect competition
model what is actually being described is the absence
in the US it is the Department of
Justice that issues antitrust laws with the rationale that such
laws are intended
to "save consumers millions and even billions of dollars
a year in illegal overcharges." Antitrust laws come from three
acts – the Sherman Antitrust Act, the Clayton Act, and the Federal
Trade Commission Act – dating from 1890. It is the Sherman Antitrust
Act that we will briefly review, and then apply to government itself
to see how it fares. Certainly a just government would not violate
its own laws, or put itself above the law – or worse, become the
In its brochure
Enforcement and the Consumer" there are some quotes that
will mostly agree with. For example, we read the following:
open competition benefits consumers by ensuring lower prices and
new and better products. In a freely competitive market, each
competing business generally will try to attract consumers by
cutting its prices and increasing the quality of its products
or services. Competition and the profit opportunities it brings
also stimulate businesses to find new, innovative and more efficient
methods of production.
benefit from competition through lower prices and better products
and services. Companies that fail to understand or react to consumer
needs may soon find themselves losing out in the competitive battle.
So far, so
good. Now let’s read more about the purpose of the Sherman Antitrust
Antitrust Act has stood since 1890 as the principal law expressing
our national commitment to a free market economy in which competition
free from private and governmental restraints leads to the best
results for consumers. Congress felt so strongly about this commitment
that there was only one vote against the Act.
Still not much
to disagree with. Austro-libertarians believe in a universal non-aggression
axiom and the right to own property, which sounds like Austro-libertarians
believe in the same "commitment to a free market economy in
which competition free from private and governmental restraints
But then we
read the following, which will require more analysis and insight:
Act outlaws all contracts, combinations and conspiracies that
unreasonably restrain interstate and foreign trade.
If we remove
the ambiguous and subjective term "unreasonably," Austro-libertarians
also would like to allow all free trade and voluntary market
transactions. Any attempt to restrain any voluntary arrangement
through force would be in violation of the non-aggression axiom,
and of a just society. So how does the government itself
rank in terms of this part of the Act?
In terms of
interstate trade, the US government has restrained
trade through licensing,
and standards requirements.
For example, every car manufactured must meet certain government
requirements, with some states (e.g., California)
having different standards. In addition, entrepreneurs cannot open
a business without filling out numerous
forms, and cannot trade without government
approval. Other businesses receive subsidies,
which adversely affect and act as a restraint on competitors’ trade.
Even previous antitrust
lawsuits, where companies have to pay high law and court fees
– and possibly fines of billions
of dollars if found "guilty" – act to restrain trade,
and most definitely distort resource allocations and prices.
If we look
at foreign trade, government’s record is at least as bleak. The
US has placed restrictions in the form of licenses and standards
on both imports and exports. There are tariffs
every product – starting (naturally) with the Hamilton
Tariff of 1789 – quotas,
and other trade barriers, some
of which are deceptively masked as "free
trade agreements." Even labor is not able to move freely
due to passport
fees. These barriers and restraints are all designed to supposedly
economy, the health, and the safety of the American people."
is not looking so good for government. It is possibly in violation
of its own Sherman Act, and libertarian principles – this is probably
why the opaque term "unreasonably" was included. Let’s
continue on and see if things improve:
monopoly exists when only one firm controls the market for a product
or service, and it has obtained that market power, not because
its product or service is superior to others, but by suppressing
competition with anticompetitive conduct.
Here we come
to the greatest conflict. It is tough to let government off the
hook with the above statement – and there is no ambiguous wording
to exonerate it! Government is the ultimate monopoly. It controls,
inter alia, the judicial system and law enforcement, and
even has the sole power to interpret its own Sherman Act! We can
easily see how the government has suppressed competition with anticompetitive
conduct by creating the following (federal) agencies: Federal Drug
Administration, Federal Communications Commission, Department of
Energy, Army, Department of Education, Federal Reserve, NASA, United
States Postal Service, Patent and Trademark Office, etc. etc.
most definitely controls many parts of the economy directly, and
almost all areas indirectly. It acts as a monopoly through acts
of aggression. We can determine that its "product or service"
is inferior to others, as all other products and services are not
exchanged through force in a hegemonic relationship; rather they
are voluntarily exchanged, where both parties expect to benefit.
Under government, competition is not only suppressed but made illegal,
including severe punishment, and by the government. Punishment,
from which government monopoly is somehow exempt, is described in
the following way:
violations involving agreements between competitors usually are
punished as criminal felonies. The Department of Justice alone
is empowered to bring criminal prosecutions under the Sherman
Act. . . . For offenses committed on or after June 22, 2004,
individual violators can be fined up to $1 million and sentenced
to up to 10 years in federal prison for each offense, and
corporations can be fined up to $100 million for each offense.
Under some circumstances, the maximum fines can go even higher
than the Sherman Act maximums to twice the gain or loss involved.
It is a perverse
irony that the Department of Justice is the only power that can
prosecute violations of its own act regarding monopolies. For what
else is it but a monopoly of "justice?" It is to make
a mockery of the very term – it is a true injustice!
In order to
understand how absurd and unjust the Sherman Antitrust Act is, we
will conclude with Frédéric Bastiat. In The
Law Bastiat writes about what would happen if law became
[law] has exceeded its proper functions, it has not done so merely
in some inconsequential and debatable matters. The law has gone
further than this; it has acted in direct opposition to its own
purpose. The law has been used to destroy its own objective: It
has been applied to annihilating the justice that it was supposed
to maintain; to limiting and destroying rights which its real
purpose was to respect. The law has placed the collective force
at the disposal of the unscrupulous who wish, without risk, to
exploit the person, liberty, and property of others. It has converted
plunder into a right, in order to protect plunder. And it has
converted lawful defense into a crime, in order to punish lawful
there is a solution that has not been tried for a while: Liberty.
But, according to Bastiat, in order to achieve liberty we must adopt
the following viewpoint:
the whims of governmental administrators, their socialized projects,
their centralization, their tariffs, their government schools,
their state religions, their free credit, their bank monopolies,
their regulations, their restrictions, their equalization by taxation,
and their pious moralizations!
And away with
Brown [send him mail]
is a lecturer at the Australian Graduate School of Entrepreneurship.
He also centrally plans the Austro-libertarian
© 2008 LewRockwell.com