"Proof" Deregulation Doesn't Work: Antitrust Law Exemptions

Filed under Political

Application of antitrust law is capricious and the exemptions are established to improve the shaky credibility as to the effectiveness of these laws.  Then, when the exemptions ultimately fail to bring objective improvements, they are used as "proof" that deregulation was a bad idea.

I have often brought up the idea that deregulation is good.  This applies to specific topics like private health insurance as well as the agricultural industry and banking.  So if I sent you to this article because you and I were chatting/talking about deregulation, welcome, and thank you for following the link!

I'll try to keep this short and to the point (well, to the point anyway).  I assert that deregulation always helps an industry overall.  A quick example of this can be find in any industry that has never been regulated or has minimal regulation to begin with.  So for example, I'll cite mobile phones and computers as two areas where the lack of regulation has helped those industries.

Are there examples where regulations were removed, causing an overall improvement?  My progressive friends who argue for regulation will cite antitrust exceptions as a counterexample to the benefits of deregulation.  They maintain that the exemptions (or exceptions) to antitrust law prove that deregulation is bad.

I keep hearing this argument, so let me address it from my point of view.

What is antitrust law?

First of all, what is antitrust law?  Primarily, the way regular people like you and I tend to encounter them is in the form of government price controls.  A corporation is only able to charge an amount that the government deems is fair and equitable.  Any time there is a cap on prices, the "evil greedy" corporation try to find a creative way to get around these caps.  Because evil greedy corporations are ... uh greedy!

According to the Department of Justice ...

Many consumers have never heard of antitrust laws, but when these laws are effectively and responsibly enforced, they can save consumers millions and even billions of dollars a year in illegal overcharges. Most states have antitrust laws, and so does the federal government. Essentially, these laws prohibit business practices that unreasonably deprive consumers of the benefits of competition, resulting in higher prices for products and services.

Source: Antitrust Laws and You

One way the evil greedy corporations could get around the price caps is to bring the price far below the fair and equitable amount.  This would supposedly put the competition out of business.  So antitrust law has also been created to keep prices from going too low.

Got that?  The same body of laws keep the price from going too high and too low.  Sort-of like Goldilocks (not too hot ... not too cold ... just right).  How is that possible?  Well, the summary above says it best, "... when these laws are effectively and responsibly enforced."  It is subject to the whim of the government.

And that's the main purpose of antitrust law.  There's a lot more to it than that, but the main goal is to protect consumers and keep prices where they should be.  And "where they should be" is determined by government.  And how does government know where prices should be?  They have really smart people, never mind the so-called "market signals," so stop asking those kinds of questions!

But I will question.  I always question.  I'll question if these antitrust exemptions even qualify as deregulation.  I assert they do not.  It is regulation on top of regulation that is then labeled "deregulation."  It is more accurate to call them "faux-deregulation."

What are antitrust law exemptions?

In a nutshell, antitrust law exemptions are where government gives a pass to certain corporations to do things that would normally be illegal under antitrust law.  Basically, if your industry is organized enough to have a lobby, you can probably get an exemption, if you have enough time and money.

One example of antitrust law exemptions is when the government allows corporations to join up and share resources.  So, for example, the Newspaper Preservation Act of 1970 allows for joint operating arrangements between newspapers to share production facilities and combine their commercial operations.

Before this act, it would have been illegal for two competing newspapers to join forces like this because government thinks it reduces competition.  But government realized (with the help of the lobbyists) their own regulations were getting in the way.  So they had a choice of either killing the newspapers with regulations or creating an exemption for them.

Why doesn't it work?

The primary reason antitrust exemptions are faux-deregulation is because antitrust law itself is ambiguous.  You can't make clear exemptions if the overall law isn't clear.  The application of antitrust law is unpredictable and at the whim of whoever is in charge.  Some actions cause the law to come down like a ton of bricks.  But then those same actions performed by another corporation are allowed, even before the exemptions are drafted.

It's a tangled web of law that is totally incomprehensible.  All it really shows is that the free market has never really been trusted by government, therefore blaming the free market for the failures of government to regulate it is foolish.

Posted via email from Anthony Martin's Weblog

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2 Comments

  1. Winterset says:

    My trackbacks never seem to work so I'll just push this into a comment. I've agreed and followed up on your points over at http://wp.me/pB9hB-2y.

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