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Wednesday, December 19, 2007 - 9:11pmSanction this postReply
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I'd like to offer an alternative framework for antitrust law such that Objectivists might find it not so reprehensible.

In the Oil Station Dilemma thread I suggested that antitrust law is about stopping business from cheating. Cheating, of course, presupposes (a) a set of rules, (b) a goal toward which those rules stride, and (c) one entity's ability to break those rules in order to better attain that goal. (It entails more, but I'll leave that till later if the situation so warrants.)

Under Objectivism, our goal is our own life/happiness, and the "rules" which stride toward that goal include practicing the virtues of rationality, productivity, and pride. Again, under Objectivism, to the extent people try to reach life/happiness by bypassing rationality, productivity, and pride is the extent to which they "cheat" reality, "cheat" themselves, and (more controversially, I suspect) even "cheat" the others whose goals and/or virtues are adversely affected by such behavior,

Antitrust law is just a mechanism by which to deter, stop, and prevent such cheating.

First, antitrust laws prohibit cartels, i.e., competitors who collude to restrict trading in order to raise profits for themselves. Such collusion embodies an "I'll be lazy if you'll be lazy" anti-productive agreement.  Given that anti-productivity is anti-life/happiness, such collusion is a lighter variety of a suicide pact. Thus, despite the profits that the colluders might gain, each colluder nevertheless veers farther from its goal of life/happiness, at least according to Objectivism.

Second, antitrust law prohibits abusive competitors.  A competitor is abusive if it sacrifices itself for the primary purpose of driving another competitor out of business, as opposed to the purpose of, say, producing a superior product/service (i.e., practicing productivity), or marketing more savvily (i.e., practicing rationality).  Such abuses include some instances of price gouging, predatory pricing, refusals to deal, and tying.  This often happens with monopolies. Please note, antitrust law is not triggered where the act merely accidentally/incidentally drives a competitor out of business, or when the competitor doesn't sacrifice itself to kill its competition.  And not all monopolies are violative of antitrust law. 

Third, antitrust law curbs mergers and acquisitions pretty much for the same reason antitrust law curbs cartels.

It's not difficult to analogize antitrust law to sports. It's a matter of good sportsmanship. Bad sportsmanship hurts the player who is guilty of it as well as those who are subject to it. Sometimes players can work it out on their own. Other times, particularly where it's unreasonable to expect the players to work it out on their own, the players can call in the referree (i.e., the government) to step in.

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Relatedly, I told Teresa that I'd find an example of an antitrust case that was justified.  Cartel cases, I think, are probably the way to go here. I remember one that involved a cartel in the airline industry.  It was an oligopolistic market with an inelastic demand curve and high barriers to entry. The cartel colluded to raise prices way high. If an airline outside the cartel tried to undercut the prices, the cartel participants, wielding its big market power, would drop their prices way below the undercutter's price until the undercutter was "disciplined" into pegging its price with the cartel's price, or leaving the market altgother. If a cartel participant tried to defect, they would be discipline by the other participants. And the non-defectors had some big boys in the market, thus ensuring that the colluders market power was strong enough to "discipline" defectors and outsider-undercutters alike. It worked until they were caught on tape and the DoJ went into smackdown mode.

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Heads up. I don't imagine I can spend too much time on this. And it's really not that big a deal to me anyway. I expect plenty of wrath for this thread. But I might just have to play like a good ol' capitalist, and let it be.

Jordan


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