Fight against monopolies: a bipartite issue |


“People of the same trade rarely meet so that the conversation ends in a conspiracy against the public or a way to raise prices.” This phrase from 18th century moral philosopher and father of capitalism Adam Smith in his 1776 book, “The Wealth of Nations,” suggests his apprehension of monopolies. Smith was deeply concerned about laws passed by the British Parliament which imposed high import duties on goods shipped from the colonies to England while granting trade monopolies to special interests and favoring business. He was also troubled by non-government monopolies created by business-to-business plots to restrict supply and raise prices.

It is no coincidence that both “The Wealth of Nations” and the Declaration of Independence were drawn up in the same year. Both were the product of the Enlightenment, a movement of the 17th and 18th centuries that emphasized reason and individualism rather than tradition. Such thinking has become the foundation for America’s adherence to the market economy which places individual decisions on government control. But in this country and others, it quickly became clear that the concentration of market power required more than just a laissez-faire approach.

The rapid economic expansion of this country after the civil war resulted in monopolistic behavior on the part of some companies. The concentration of market power in railroads, shipping, iron ore, steelmaking, banking, and even sewing thread spurred the passage in 1890 of the Sherman Antitrust Act. . The law was “a comprehensive charter of economic freedom aimed at preserving free and unhindered trade competition.”

In 1914, the Clayton Antitrust Act was passed and the Federal Trade Commission was created. These pieces of legislation, along with the Robinson-Patman Act of l936, established a framework for combating harmful monopoly behavior. However, much of the antitrust law targeted traditional monopoly power as practiced in large industrial companies.

Today, market power manifests itself in different ways. A business doesn’t need to own massive infrastructure like rail lines and pipelines or regulated utilities like AT&T to stifle its competition. The easily identifiable monopolistic behaviors of the past are now replaced by more subtle behaviors. For example, Amazon will agree to offer a company’s product online and, if it sells well, develop a competitive item that it offers at a lower price, leading the original producer to bankruptcy.

Facebook tracks the buying habits of consumers, treating the data they collect as proprietary. It then directs advertisements for complementary or substitute products to these consumers. These so-called monopoly strategies dramatically increase sales while lowering the cost of advertising. The result is monopolistically generated profits.

Apple and Epic Games Inc. are currently engaged in a legal battle. Epic accuses Apple of monopolistic behavior by insisting that software developers have to pay a 30% fee to use the Apple App Store. Epic bypassed Apple’s fees and billed customers directly. The lawsuit already demonstrates the inadequacies of US antitrust laws to deal with complex disputes involving technology.

In recent years, courts have been less aggressive in their prosecution of antitrust behavior regarding corporate mergers and acquisitions. A firm can buy and integrate other firms and / or buy products with the intention of creating monopolies and raising prices. These cases are the most obvious in the pharmaceutical industry. Pharmaceutical company Turning bought the patent for the drug Daraprin and then increased its price by 5,000%. Minnesota Senator Amy Klobuchar, a Democrat with a relatively good record on bipartisan legislation, has written a new book on monopoly power. She cites several other cases where such price increases have prevented patients from obtaining life-saving drugs.

With a few exceptions, most members of Congress find it hard to deny that anti-competitive behavior harms American consumers. Monopolies often reinforce “management stability” which tends to inflate management salaries. What board wants to fire senior management when it makes a profit, even if it is the result of monopoly pricing practices? Monopolies also hold back innovations at a time when this country needs many new products and processes that ensure our continued growth in a highly competitive global economy.

Perhaps President Biden’s quest for bipartisanship could be actualized by pushing for anti-trust legislation and encouraging its use to solve a problem identified by Adam Smith 245 years ago.

MICHAEL A. MCDOWELL is President Emeritus of the University of Misericordia and Trustee of the Calvin K. Kazanjian Foundation.

Source link


About Author

Shanta Harris

Leave A Reply