Antitrust law is something the government takes pretty seriously. In short, these are laws designed to protect consumers from companies that would abuse their market power to the detriment of the customer.
To keep bad actors in check, the Justice Department, together with the Federal Trade Commission, is empowered to bring legal action against companies that are in violation of a number of rules governing what companies can and cannot do.
Now, personally, I’m skeptical of most of these laws. “Market power” depends wholly upon the willingness of customers to buy your product, and it differs markedly from the kind of power government wields, power backed by the very real threats of violence and imprisonment.
As long as government is going to insist upon these laws, however, the least it could do is lead by example and follow its own rules. In fact, government routinely breaks just about every antitrust rule on the books, and we as taxpayers are the ones who suffer.
According to the Justice Department: “The goal of the antitrust laws is to protect economic freedom and opportunity by promoting free and fair competition in the marketplace.” In the interest of fairness, then, let’s see how government does at following its own rules.
The most well-known antitrust law is the prohibition, in most cases, of monopolies. A monopoly is a single firm that controls the market for all of a particular good or service. The utter lack of competition means that monopolies can charge higher prices and get away with a lower quality of service than firms that have to worry about losing customers to rival companies.
The government is itself one huge monopoly, claiming for itself the exclusive right to the use of force and the imposition of justice. It also creates a large number of smaller monopolies on other services. The most obvious example is probably the U.S. Postal Service, with private companies being forbidden from carrying letters for compensation. Anyone who has dealt with the post office can attest to the terrible inefficiencies created by such a system.
Government creates monopolies all the time, but is all too eager to shut them down when they result from voluntary mergers or a superior business model in the private sector.
Bundling occurs when a company packages two products together for the purposes of forcing a less-popular item on customers who want the more popular one.
The most high-profile example of this came in the early 2000s, when Microsoft was sued for violation of antitrust laws. Essentially, the complaint was this: Microsoft had significant market power in the market for operating systems — most people and businesses used Windows in some form or another — but the market for Internet browsers had several major players, including Netscape Navigator and Microsoft’s own Internet Explorer.
The lawsuit alleged that Microsoft was unfairly leveraging its power by bundling Internet Explorer free with Windows. Since most people were going to buy Windows anyway, they had little reason to pay extra to get a copy of Netscape.
So bundling is a no-no when private companies do it, but in fact, Congress does this all the time, by attaching unpopular legislation as riders to crucial “must-pass” bills. We’re likely to see more than one example of this in September, with the continuing-resolution fight to fund the government before the end of the fiscal year. Proposals so far have included attaching reauthorization of the U.S. Export-Import Bank to the funding bill, a measure that lacks the votes to succeed on its own.
Another proposal involves bundling the popular Permanent Internet Tax Freedom Act — to ban taxation of Internet access — with the controversial Marketplace Fairness Act — to allow the taxation of Internet sales across state lines. Again, it’s a case of leveraging an item people want to pass into forcing the acceptance of something unpopular. In the private sector, this would be illegal.
In the private sector, business working together to keep prices high is illegal — really illegal. In the interest of protecting consumers, government is quick to intervene whenever it catches a whiff of this kind of price-fixing. From a legislative standpoint, however, price-fixing is not only allowed, but practically a requirement of the job.
The most obvious example of this is direct price mandates, such as the minimum wage, but protectionist policies to keep prices high in certain industries have much the same function. Additionally, there is the practice of predatory pricing — keeping prices artificially low to drive competitors out of business. While prohibited for private companies, the government uses subsidies to keep prices down in industries such as “green” energy, with the partial goal of harming competing fossil fuels.
According to its own standards, then, government is engaged in all manner of anti-competitive practices that harm consumers and abuse the power of the institution. But if you’re expecting the Justice Department to come riding in on a white horse to fight for the little guy, I wouldn’t hold your breath.
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