Government 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 of competition.
Ironically, 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 law.
Free and 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.
Consumers 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 act:
The Sherman 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 [exists]."
But then we read the following, which will require more analysis and insight:
The Sherman 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, labelling, 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 on almost 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 and visa fees. These barriers and restraints are all designed to supposedly "protect the economy, the health, and the safety of the American people."
Perhaps this 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:
An unlawful 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.
The government 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:
Sherman Act 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. (Emphasis added.)
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!
And when [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 defense.
However, 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:
Away with 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 antitrust laws!
December 4, 2008