Wednesday, March 13, 2002
Before I get into responding to each point, allow me to give you my impressions of the Sherman and Clayton antitrust acts. I actually have read them before (in college, I think, so that was a million years ago), but it's one thing to read them simply to know what they say, and another thing to look for something in particular.
The first thing that struck me was that it NEVER defined a clear standard regarding how to judge the relevant market.
For instance, the Sherman act specifies penalties for "Every person who shall monpolize, or attempt monpolize...trade or commerce" (Section 2). It makes illegal "any combination in form of trust or otherwise...in restraint of trade or commerce in any Territory" (Section 3). This is all well and good, assuming you understand what it means to restrict trade or commerce. The usual way to determine if an action is ACTUALLY restrictive of trade is to define the relevant market. Once defined, one can theoretically calculate whether or not an action taken by business restrains trade (I emphasize theoretically, because I don't agree, seeing as profits attract competition. Different issue, though).
Unfortunately, the Sherman act passes the buck, stating in Section 4 that "district courts of the United States are invested with jurisdiction to prevent and restrain violations of sections 1 to 7". Since the Sherman act never attempts to provide guidelines, it leaves the district courts (and the lawyers who make antitrust cases) a lot of leeway in determining what, in actuality, is the relevant market.
The effect of this uncertainty is to make certain business actions RETROACTIVELY illegal, given that there is no clear enumerated standard an accused company can use to determine if their actions are, in fact, restraining trade. As an example, you may have heard of the attempted merger of Staples and Office Depot. Most in the two companies were surprised when the government filed suit to stop the merger, seeing as, according to their balance sheets, they were competing not just with each other (and Office Max), but WalMart, Target, and other stores which carried a wide array of office supplies alongside other products.
However, the government chose to define the market as "the sale of consumable office supplies through office superstores", which, of course, excludes most of Staples and Office Depot's real competitors. The defendants called the market definition "contrived with no basis in law or fact", which to my mind should be obvious. How on earth is a company supposed to expect that the government is going to make such a market definition, contrary to all reasonable standards of what might be considered the TRUE market definition?
Lest I be accused of ignoring the Clayton act, if anything, it muddies the waters. For instance, in section 13 (a), it states that price discrimination is illegal "where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in line of commerce, or to injure, destroy or prevent competition". Again, no standard is specified by which to determine whether competition is actually being stifled. A few sentences down, it tries to help the issue somewhat by stating that activity is illegal "where it finds that available purchasers in greater quantities are so few as to render differentials on account thereof unjustly discriminatory or promotive of monopoly in any line of commerce." You should always be concerned whenever you see a law which says the standard is "unjustly discriminatory" pricing behavior. How EXACTLY does one determine what is unjust? Irrespective of that fuzzy standard, however, we STILL have nothing which helps us to determine the relevant market.
Fuzziness abounds in the Clayton act. In Section 13a (versus 13 (a) at the start of the document), it says that it is illegal to sell goods at "unreasonably low prices". Who gets to set the "unreasonable" standard? Government, of course, which means that large companies can do very little to prevent action under the Clayton act.
What I find particularly worrisome in the Clayton act is 13 (b). After stating that the burden of proof for "rebutting the prima-facie case thus made by showing justification shall be upon the person charged with a violation of this section", it states that "nothing herein contained shall prevent a seller rebutting the prima-facie case thus made by showing that his lower price or the furnishing of services or facilities to any purchaser or purchasers was made in good faith to meet an equally low-price of a competitor". All fine and dandy, assuming the government ALLOWS you to claim that a competitor is, in all truth, a competitor. This is why the market definition is so important. This is why it's ABSENCE in either document leads to actions becoming retroactively illegal. It is virtually impossible for companies to guess whether or not they shall be charged on antitrust grounds. Furthermore, it is impossible to know whether those "market definitions" used against the accused will even hold up in court.
Both the Sherman and Clayton acts provide no guidance to companies who hope to determine whether or not they are, in fact, monopolists, or whether the effect of their actions will be to construct a monopoly. It would be like having a law on the books which says that any person acting in a "morally reprehensible" fashion can be placed under arrest. What exactly does it mean to be "morally reprehensible"? The determinant, of course, will fall to police officers enforcing the law, giving them an incredible amount of freedom to arrest whoever they feel to be "morally reprehensible". Is driving too fast morally reprehensible? What about smoking? Is practicing Islam morally reprehensible?
In this light, let's deal with your points....
If you take the time to read these laws, you will see that 1) a company does not have to be a convicted monopolist prior to the actions in question and 2) their prior actions are not retroactively illegal.
Fine, ASSUMING there is actually a means by which for a company to determine whether or not they are a monopolist. Given that no such standard exists, however, it would seem that you would HAVE to be convicted as a monopolist before your activities are proscribed by government. Short of that, the law is retroactively applied to activity the convicted monopolist very well may not have understood to be monopolistic.
John, I invite you to read these acts and quote to me the portions that clearly show that a company's actions are made retroactively illegal.
This was the reason I wanted to explicate just how fuzzy the two acts are from a legal standpoint before dealing with your points. To state that actions would be retroactively illegal very well might have made the two acts illegal. Instead, the laws are crafted in such a way as to make the standard remain in the hands of government, the end result of which is to make a monopolists actions retroactively illegal, at least from the standpoint of the accused.
To quote from the Sherman Act, section 1: Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court.
By what market definition are we to determine that a company's actions are, in fact, in restraint of trade? What guidance is given in EITHER legislative act by which companies can determine whether their actions are in restraint of trade?
The constitution clearly states that No Bill of Attainder or ex post facto Law shall be passed. (Article I, Section 9). An ex post facto law is one that makes an action retroacively illegal. In fact, ex post facto translates (roughly) as "after the fact."
That only covers new laws which come into existence. New laws can't make actions which occurred prior to the signing of the law illegal. In other words, any company who acted in a "monopolistic" fashion prior to the arrival of the Sherman act was home free.
When I speak of "retroactively", I'm talking about government making market definitions which make actions which might reasonably have been thought to be legal given THEIR definition of the relevant market (which to my mind is more likely to be correct, seeing as they deal with that relevant market every day) illegal.
However, Antitrust laws are not ex post facto. They have been found constitutional under the "regulate Commerce" clause of the Constitution. (Article I, Section 8, Paragraph iii). You can look at the list of court cases at www.antitrustcases.com for a partial listing of the many times they have been tried in court and found constitutional.
The constitution says nothing about free trade. In fact, if our government wanted to move to central planning, they could legally do so. That's a rather unfortunate oversight in our constitution, in my opinion, because any state which CLAIMS to be free should secure the freedom of economic interactions. But then again, I think there are a number of unfortunate oversights, among them the right to bear arms. That was secured when guns cost a years salary, and were NOT the fully-automatic, low-cost assault weapons or handguns we have today.
In all truth, I don't think the case for antitrust repeal can be made on constitutional grounds, but on pragmatic grounds. Antitrust doesn't work. Hopefully, enough people will see that someday so that the laws might be repealed and an artificial drag on the economy might be removed.
Antitrust laws make certain actions illegal for everyone.
As I noted in my response to your post last Friday, yes, the same ill-crafted, arbitrary antitrust laws apply to everyone.
The first thing that struck me was that it NEVER defined a clear standard regarding how to judge the relevant market.
For instance, the Sherman act specifies penalties for "Every person who shall monpolize, or attempt monpolize...trade or commerce" (Section 2). It makes illegal "any combination in form of trust or otherwise...in restraint of trade or commerce in any Territory" (Section 3). This is all well and good, assuming you understand what it means to restrict trade or commerce. The usual way to determine if an action is ACTUALLY restrictive of trade is to define the relevant market. Once defined, one can theoretically calculate whether or not an action taken by business restrains trade (I emphasize theoretically, because I don't agree, seeing as profits attract competition. Different issue, though).
Unfortunately, the Sherman act passes the buck, stating in Section 4 that "district courts of the United States are invested with jurisdiction to prevent and restrain violations of sections 1 to 7". Since the Sherman act never attempts to provide guidelines, it leaves the district courts (and the lawyers who make antitrust cases) a lot of leeway in determining what, in actuality, is the relevant market.
The effect of this uncertainty is to make certain business actions RETROACTIVELY illegal, given that there is no clear enumerated standard an accused company can use to determine if their actions are, in fact, restraining trade. As an example, you may have heard of the attempted merger of Staples and Office Depot. Most in the two companies were surprised when the government filed suit to stop the merger, seeing as, according to their balance sheets, they were competing not just with each other (and Office Max), but WalMart, Target, and other stores which carried a wide array of office supplies alongside other products.
However, the government chose to define the market as "the sale of consumable office supplies through office superstores", which, of course, excludes most of Staples and Office Depot's real competitors. The defendants called the market definition "contrived with no basis in law or fact", which to my mind should be obvious. How on earth is a company supposed to expect that the government is going to make such a market definition, contrary to all reasonable standards of what might be considered the TRUE market definition?
Lest I be accused of ignoring the Clayton act, if anything, it muddies the waters. For instance, in section 13 (a), it states that price discrimination is illegal "where the effect of such discrimination may be substantially to lessen competition or tend to create a monopoly in line of commerce, or to injure, destroy or prevent competition". Again, no standard is specified by which to determine whether competition is actually being stifled. A few sentences down, it tries to help the issue somewhat by stating that activity is illegal "where it finds that available purchasers in greater quantities are so few as to render differentials on account thereof unjustly discriminatory or promotive of monopoly in any line of commerce." You should always be concerned whenever you see a law which says the standard is "unjustly discriminatory" pricing behavior. How EXACTLY does one determine what is unjust? Irrespective of that fuzzy standard, however, we STILL have nothing which helps us to determine the relevant market.
Fuzziness abounds in the Clayton act. In Section 13a (versus 13 (a) at the start of the document), it says that it is illegal to sell goods at "unreasonably low prices". Who gets to set the "unreasonable" standard? Government, of course, which means that large companies can do very little to prevent action under the Clayton act.
What I find particularly worrisome in the Clayton act is 13 (b). After stating that the burden of proof for "rebutting the prima-facie case thus made by showing justification shall be upon the person charged with a violation of this section", it states that "nothing herein contained shall prevent a seller rebutting the prima-facie case thus made by showing that his lower price or the furnishing of services or facilities to any purchaser or purchasers was made in good faith to meet an equally low-price of a competitor". All fine and dandy, assuming the government ALLOWS you to claim that a competitor is, in all truth, a competitor. This is why the market definition is so important. This is why it's ABSENCE in either document leads to actions becoming retroactively illegal. It is virtually impossible for companies to guess whether or not they shall be charged on antitrust grounds. Furthermore, it is impossible to know whether those "market definitions" used against the accused will even hold up in court.
Both the Sherman and Clayton acts provide no guidance to companies who hope to determine whether or not they are, in fact, monopolists, or whether the effect of their actions will be to construct a monopoly. It would be like having a law on the books which says that any person acting in a "morally reprehensible" fashion can be placed under arrest. What exactly does it mean to be "morally reprehensible"? The determinant, of course, will fall to police officers enforcing the law, giving them an incredible amount of freedom to arrest whoever they feel to be "morally reprehensible". Is driving too fast morally reprehensible? What about smoking? Is practicing Islam morally reprehensible?
In this light, let's deal with your points....
If you take the time to read these laws, you will see that 1) a company does not have to be a convicted monopolist prior to the actions in question and 2) their prior actions are not retroactively illegal.
Fine, ASSUMING there is actually a means by which for a company to determine whether or not they are a monopolist. Given that no such standard exists, however, it would seem that you would HAVE to be convicted as a monopolist before your activities are proscribed by government. Short of that, the law is retroactively applied to activity the convicted monopolist very well may not have understood to be monopolistic.
John, I invite you to read these acts and quote to me the portions that clearly show that a company's actions are made retroactively illegal.
This was the reason I wanted to explicate just how fuzzy the two acts are from a legal standpoint before dealing with your points. To state that actions would be retroactively illegal very well might have made the two acts illegal. Instead, the laws are crafted in such a way as to make the standard remain in the hands of government, the end result of which is to make a monopolists actions retroactively illegal, at least from the standpoint of the accused.
To quote from the Sherman Act, section 1: Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is declared to be illegal. Every person who shall make any contract or engage in any combination or conspiracy hereby declared to be illegal shall be deemed guilty of a felony, and, on conviction thereof, shall be punished by fine not exceeding $10,000,000 if a corporation, or, if any other person, $350,000, or by imprisonment not exceeding three years, or by both said punishments, in the discretion of the court.
By what market definition are we to determine that a company's actions are, in fact, in restraint of trade? What guidance is given in EITHER legislative act by which companies can determine whether their actions are in restraint of trade?
The constitution clearly states that No Bill of Attainder or ex post facto Law shall be passed. (Article I, Section 9). An ex post facto law is one that makes an action retroacively illegal. In fact, ex post facto translates (roughly) as "after the fact."
That only covers new laws which come into existence. New laws can't make actions which occurred prior to the signing of the law illegal. In other words, any company who acted in a "monopolistic" fashion prior to the arrival of the Sherman act was home free.
When I speak of "retroactively", I'm talking about government making market definitions which make actions which might reasonably have been thought to be legal given THEIR definition of the relevant market (which to my mind is more likely to be correct, seeing as they deal with that relevant market every day) illegal.
However, Antitrust laws are not ex post facto. They have been found constitutional under the "regulate Commerce" clause of the Constitution. (Article I, Section 8, Paragraph iii). You can look at the list of court cases at www.antitrustcases.com for a partial listing of the many times they have been tried in court and found constitutional.
The constitution says nothing about free trade. In fact, if our government wanted to move to central planning, they could legally do so. That's a rather unfortunate oversight in our constitution, in my opinion, because any state which CLAIMS to be free should secure the freedom of economic interactions. But then again, I think there are a number of unfortunate oversights, among them the right to bear arms. That was secured when guns cost a years salary, and were NOT the fully-automatic, low-cost assault weapons or handguns we have today.
In all truth, I don't think the case for antitrust repeal can be made on constitutional grounds, but on pragmatic grounds. Antitrust doesn't work. Hopefully, enough people will see that someday so that the laws might be repealed and an artificial drag on the economy might be removed.
Antitrust laws make certain actions illegal for everyone.
As I noted in my response to your post last Friday, yes, the same ill-crafted, arbitrary antitrust laws apply to everyone.
Monday, March 11, 2002
America loves its drugs, and loves to hate them. That hatred is expressed through its ongoing war on drugs, a war we have spent billions fighting even as the price of drugs has spiraled inexorably downwards. The costs of that "war" are borne by more than just Americans, however. As this article shows, Colombia is trapped in a civil war that impoverishes it's people and destabilizes it's government. That civil war is in no small part due to the profits generated from the drug trade.
When drugs are made illegal, the only people willing to produce and/or sell them exist in the black market. And when a market exists outside the structure of the legal market, the only limits on its practitioners are the extremes to which they are willing to go to sell their product. People like Pablo Escobar's Medellin cartel showed that the rewards for extremes of violence in the provision of cocaine was the lion's share of the market, with all the economic rewards that position entailed.
Trafficking in drugs, however, has become more dangerous the more money America throws at fighting it, leading to a militarization of the drug trade. Today, both sides in Colombia's civil war defend their trade with military hardware and fund their war with the income generated from drugs. America came close to such a situation during prohibition, when the profits to be generated from feeding the demand for alcohol made disorganized small-time gangsters into highly organized criminal corporations capable of manipulating government at the highest level. America ignores the corrupting influence of the drug trade, but only because demand for drugs is less than the demand was for alcohol, and the people it affects exist for the most part at the lowest levels of our society.
Recent government-sponsored ads try to blame drug users for funding terrorist organizations who make their money from the drug trade. The reality is that the war on drugs funnels money to such organizations, as those organizations are the only ones willing to run the risks associated with the drug trade. Blaming users is a dodge used to justify a drug war that isn't working. How many lives would have been saved in Columbia and our inner cities if we'd spent those billions on domestic prevention programs rather than M-16s and assault helicopters?
Supply arises to feed a demand. So long as the demand exists, suppliers will find a way to feed it.
When drugs are made illegal, the only people willing to produce and/or sell them exist in the black market. And when a market exists outside the structure of the legal market, the only limits on its practitioners are the extremes to which they are willing to go to sell their product. People like Pablo Escobar's Medellin cartel showed that the rewards for extremes of violence in the provision of cocaine was the lion's share of the market, with all the economic rewards that position entailed.
Trafficking in drugs, however, has become more dangerous the more money America throws at fighting it, leading to a militarization of the drug trade. Today, both sides in Colombia's civil war defend their trade with military hardware and fund their war with the income generated from drugs. America came close to such a situation during prohibition, when the profits to be generated from feeding the demand for alcohol made disorganized small-time gangsters into highly organized criminal corporations capable of manipulating government at the highest level. America ignores the corrupting influence of the drug trade, but only because demand for drugs is less than the demand was for alcohol, and the people it affects exist for the most part at the lowest levels of our society.
Recent government-sponsored ads try to blame drug users for funding terrorist organizations who make their money from the drug trade. The reality is that the war on drugs funnels money to such organizations, as those organizations are the only ones willing to run the risks associated with the drug trade. Blaming users is a dodge used to justify a drug war that isn't working. How many lives would have been saved in Columbia and our inner cities if we'd spent those billions on domestic prevention programs rather than M-16s and assault helicopters?
Supply arises to feed a demand. So long as the demand exists, suppliers will find a way to feed it.
