Tuesday, March 22, 2011

Points for Honesty

As I'm sure many of you have already heard, AT&T is trying to buy T-Mobile from Deutsche Telekom.  Naturally, the antitrust goons have raised hell, along with Sprint who isn't real happy about the deal.  I'm sure that I have discussed on this blog how Antitrust laws are the Jim Crowe of business regulations.  They are the most unjust, indefensible business laws on the books.  Being indefensible, they have garnered a creative assortment of proposed justifications of the economic, moral, and social varieties.  The best one yet, the most honest and the most frightening, I heard a couple days ago while watching CNBC.

Steve Forbes was guest hosting, and they were interviewing one of Clinton's Fascist Communication Commission Chairmen by the name of Reed Hundt.  They were talking about this acquisition, and Forbes asked Hundt something like "Don't you think that antitrust is fairly obsolete in this case?  These aren't large manufacturing firms than can stifle competition.  Competition in this industry is incredibly fierce between the two major players."  Ignore the problems with that question for the time being.  Here was Hundt's answer, paraphrased:

"Well, I've been an antitrust lawyer all my life, so if antitrust is obsolete than I'm in a lot of trouble."

I think that boils antitrust legislation--and most regulation--down to its essence.  Antitrust is right because it's my job.  Love it!


  1. Do you feel that antitrust law is merely outdated or that it should be eliminated entirely? I'd be interested in your thoughts on this matter.

    p.s. keep updating! I enjoy reading your blog.

  2. It should be eliminated entirely. For it to be outdated, it would have to have been legitimate at some point in history. If you look at where we were as an economy in terms of competitiveness prior to the Reagan administration's changes to how antitrust was enforced, we were essentially just waiting to die.

  3. So if a group of competitors get together to fix prices (to take a very basic example), you think they should be allowed to do so?

    I don't want to put words in your mouth, but I assume your reasoning is that in the long run the market will correct for this in one way or another (the cartel will collapse as the members back-stab each other; a new competitor will join the industry, etc). Can't it be argued that by the time this process runs its course, many will have suffered economic injury from the price-fixing? That it's better for the government to take action to prevent this short-term injury?

    (I'm not advocating for the preservation of the status quo; I'm just using a simple example for a jumping-off point.)

  4. My more basic answer is that you don't have a right to someone else's product. If I want to fix the price of, for example, an iPad at $600, you may think it's outrageous, because I could easily sell it to you for $100 and still make a healthy profit. None of that matters, however, because I (Steve Jobs) created it, and it is mine to sell. Now, if HP goes and creates a similar product and sells it for $100, I'm screwed, unless I give people a reason to pay $600 for my product (such as because Apple customers worship me and will buy whatever I throw at them). The same applies if Apple and HP fix their prices. Trade must always be voluntary on both ends. If I have something of value to you, and I'm able to charge more, why shouldn't I? If I need to price-fix to do that, I can try, but it will be at my own risk, not at the risk of the consumer, who wouldn't have any product if it weren't for me.

  5. I believe I understand your argument better now. Many who oppose the existence of antitrust laws seem to do so on the basis that they're inefficient or unnecessary. You may or may not believe this, but your main argument seems to be that, regardless of their economic justifications (or not), antitrust laws are immoral--for lack of a better word--because they regulate what Producers do with their own products. Is that an accurate paraphrase/summation?

    How would you respond to this hypothetical?

    State law requires that a home buyer obtain a title examination before purchasing a house. Title examinations can only be performed by attorneys of the state bar of Indiana. The state bar, which obviously has a monopoly on title examinations, fixes a price of $50,000 (or a similar price that's both exorbitant and not unconscionable) for each title examination. How would we combat this without antitrust law?

  6. That is an accurate summation, yes.

    As to the example, think about all the infringements on individual rights that led to the state bar's use of its power: requiring home buyers to obtain a title exam, requiring that title exams can only be performed by attorneys, and then requiring attorneys to pass the bar in order to do anything.

    Antitrust law would be like piling one more distortion on top of all the others.