The Irony and Foolishness of Antitrust Laws
Antitrust laws have gone increasingly unquestioned since they were created in 1890 by the Sherman Antitrust Act. It is said that “monopoly power” leads to restrictive trade, higher prices, and decreased competition. While this statement certainly has truth, very few people understand it and the issue most definitely is not solved through the antitrust laws or created by the free market.
Oppressive monopolies will never be created by consumers and free individuals. If a “monopoly” were to appear in a free society because people liked the product, low price, and high quality, why should that be considered illegal? If a business grows in size because people voluntarily buy its product, there is nothing in the least oppressive about it. Today, though, the government is on the hunt for companies who are too big and represent a danger to consumers.
In 1914, through the Federal Trade Commission Act, the Federal Trade Commission (FTC) was established. Its mission in a nutshell is to engage in “consumer protection” by patrolling for and breaking up anti-competitive monopolies. Sounds nice, doesn’t it? Unfortunately, the logic still doesn’t make sense.
In a free market economy people are given the freedom to use their money in the ways they see best. In nearly every case, this involves finding the best product for the lowest price. When companies like Wrigley’s, YouTube, Google, and countless others have a strong and growing market share, it is because people find their services and products the best value.
What the FTC assumes is that there are cases when a business will gain huge control over a market and use that to crush competition. The question you have to ask is, How did that business become that large in the first place? In a free market it would occur voluntarily from consumers, and its success would remain dependent on the people who got them there to begin with. If its customers were to back out and the company failed to change its practices, the business would not last. In a true, voluntary free market system it is the regulatory power of the individual, not a government agency, that controls the fate of a business.
“Consumer protection” is not something the government can empower through an agency. The one role the government has in protecting the consumer is protecting the consumer’s right to make its his own decisions without the hand of government influencing the decision through force. When the government starts making the regulatory decisions, the power of individual decisions (which a free market is built upon) becomes greatly diminished, skewed, and loses much of its influence.
A recent example of the FTC’s intrusion is its dealings with Whole Foods’ $565 million buyout of Wild Oats over the course of 2007 and 2008. The FTC charged that because of the buyout, Whole Foods would suddenly be able to dramatically increase prices, destroy competition, and essentially control the organic food retail market. There are several faults with the FTC’s theories.
For one thing, Whole Foods and Wild Oats, while some of the larger national organic food chains, do not have near that much influence over the organic food industry. The theory assumes that Whole Foods and Wild Oats purchase all the organic produce in the country, therefore controlling the supply. This in itself is ludicrous. Whole Foods’ revenue over the past year has totaled approximately $8 billion, while the sales of the organic food industry reached approximately $25 billion last year.
Secondly, Whole Foods brought on a good deal of debt to achieve the buyout. Raising prices beyond what consumers are willing to pay would lead to the company’s bankruptcy rather quickly. There is nothing forcing people to shop at Whole Foods, yet the FTC again makes this assumption.
Third, and most obviously, there are many stores where organic food is widely available as the industry quickly increases in size. The FTC made its attacks based on the strange idea that Whole Foods and Wild Oats controlled the organic food industry. There is no reasoning or statistic basis for these arguments, yet because it was the bidding of the FTC, the legal battles waged on for about one year.
What’s especially ironic here is that while this battle was being waged in the name of “consumer protection”, billions of dollars was being handed out to Fannie Mae and Freddie Mac, two government-created corporations who you could say do have near monopolistic power over areas of mortgages. Don’t forget Bear Stearns, AIG, the auto businesses, and all the banks who were given billions of taxpayer dollars. Where was the FTC fighting for “consumer protection”?
When the government says that a company is “too big to fail,” doesn’t that mean it has a monopoly status? Since when does the government decide which companies can and can’t fail, all while funding the FTC to investigate, accuse, and battle individual businesses?
Anti-competitive businesses, which is the FTC’s stated purpose to prevent, are not created and do not succeed with a free market system. But they most certainly are created with a government-influenced economy where the government grants special favors to businesses, punishes others, and decides what companies succeed and fail. A free market, in which people can make their own decisions, will not and does not create harmful monopolies. Harmful monopolies can only be created with help from the government in one form or another.
With the escalation of unnecessary and abusive antitrust laws, government-supported and government-created corporations, and government bailouts, one thing is becoming much more clear. A business is no longer created for the benefit and liking of the customer, it is built for the approval and bidding of the government.
It is no longer the customers who control the fate of a business, but the government. It is no longer the individuals who have the supreme regulatory power, but the government. It is no longer the shareholders’ responsibility to control a business, but the government. It is no longer the people who rule the government, but the government who rules the people.
Truth, though, is never-ending and in the long run is the one thing that is sure to be victorious. Governments, tyrants, and central planners use everything in their power to destroy the laws of truth, freedom, and responsibility. But history has shown that it is those very laws of truth, freedom, and responsibility that lead to the inevitable destruction of deceitful principles, manipulation, and fraud, no matter if it is brought about by individual people or entire governments.
Therefore, it is these laws of truth, freedom, and responsibility, that will bring us back to our senses:
It is the customers who control the marketplace, not the government. It is the shareholders who make business decisions, not the government. A business is created to serve the people, not the government. Businesses answer to customers, not the government.
It is the people who know the best for themselves. Not the government.
