This 1954 Wilhelm Röpke article, republished here the other day, has a message worth repeating:
[T]he market economy rests on two essential pillars, not on one alone. It assumes not only the freedom of prices and competition (whose virtues the new socialist adepts of the market economy now reluctantly acknowledge), but rests equally on the institution of private property. This property must be genuine. It must comprise all the rights of free disposal without which — as formerly in Nationalist Socialist Germany and today in Norway — it becomes an empty legal shell. To these rights must be added the right to bequeath property.
Even more then a half-century later, this message rings true, particularly when you consider antitrust – a form of state intervention that rests on the express idea that competition is the only pillar of the market economy, and that property rights are, at best, a necessary evil.To cite a recent example, yesterday the Federal Trade Commission announced it would force International Salt Company LLC to sell its assets and contracts related to the sale of de-icing salt in Maine and Connecticut. The FTC said this was necessary because ISCO’s parent company, K+S Aktiengesellschaft, wanted to rival salt company Morton International, and government intervention was necessary to – wait for it – protect competition:
K+S’s proposed acquisition of Morton would violate federal antitrust laws by substantially lessening competition in the markets for de-icing salt in Maine and Connecticut. Morton and ISCO are the two primary bidders for the sale and delivery of bulk de-icing salt in Maine and Connecticut, and the combined company would have enjoyed a market share of greater than 70 percent in each state. There is no practical substitute for bulk de-icing salt that can be used to melt ice and snow, and it would be difficult for any other salt providers to enter the affected markets, the FTC’s complaint stated.
Notice the FTC did not state that ISCO and Morton would have a monopoly, or 100%, of the market. It said “greater then 70 percent in each state,” which is both nonspecific and irrelevant. Antitrust “law” does not establish actual percentages that companies cannot exceed. That is left to the unrestricted discretion of FTC officials.
As for the proposition that “it would be difficult for any other salt providers to enter the affected markets,” the FTC offers no evidence, except to say in a supporting document that “there is a lack of acceptable stockpile space along the coasts of Maine and Connecticut.” So property rights don’t apply when there’s scarcity involved. (I suppose this means IP really is the only legitimate form of property rights!)
Continuing with the FTC’s statement:
The Commission’s complaint further alleges that the proposed acquisition would eliminate the direct and substantial competition between ISCO and Morton and enable the merged company to raise prices in Maine and Connecticut. Because state and local governments are the primary purchasers of bulk de-icing salt, the FTC’s action ensures that governments, and ultimately taxpayers, will not bear the burden of anticompetitive price increases.
Now we’re getting to the heart of the matter. The FTC wants to protect local governments from hypothetical price increases. Funny how the FTC never gets involved when a local government rigs its own bidding process to favor a politically-connected firm – or even when a local government creates an outright monopoly to displace the market.
But let’s not allow mere hypocrisy to stand in the way of change – or in this case, a clumsy attempt to preserve the status quo:
The proposed consent order is designed to preserve the competition that would have been eliminated by the acquisition. In Maine, ISCO will sell de-icing salt stockpile space, associated handling and trucking contracts, and contracts for de-icing salt businesses for the 2009-2010 winter season to Eastern Salt. In Connecticut, ISCO will divest stockpile space, associated handling and trucking contracts, and contracts for de-icing salt businesses for the 2009-2010 winter season, and will also provide a three-year supply of de-icing salt to Granite State at a price no higher than ISCO’s costs. The divestitures will enable Eastern Salt and Granite State to become viable competitors in the de-icing salt business in the two states beginning with the 2010-2011 bidding cycle, replacing the competition previously provided by Morton, according to the FTC.
This is a lot of government planning for what’s supposed to be a “free” market. It also smells vaguely like the type of practice some libertarians decry as eminent domain abuse – seizing private property from one group and giving it to another under the pretense of generating a public benefit – although nobody ever calls it that. Of course, in traditional eminent domain cases, the victim generally isn’t required to give ongoing support to their aggressors. Here, ISCO has to make every effort to create a viable competitor; if the level of competition in 2011 doesn’t satisfy the FTC, ISCO could face additional penalties, including criminal contempt charges.
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Every system has property rights, even socialism. It is a question of assumes ownership of the property and who has the right to use the property. In any modern government system I would argue that government assumes all property rights. Even in “free-market” American, at any given time “your” property may be confiscated and a highway or national park built over it “for the good of the people”. But then who owns public property? Not the public, unless you have a warped view on what ownership is. It appeared for some time that our government viewed it as favorable to let us freely produce (to a degree), so that they may take their share of their property through taxes while maintaining the facade of private ownership. That way they could have privately produced assets to back their extracted revenues, considering very little production is coming out of government operations. There is also the added bonus of being able to present government failures as a product of capitalism. This system will inevitably fail the overlords as they lose productivity by having to step in and fix their government constructed “free-market” failures, further increasing inefficiency and diminishing the real value of what can be extracted. This system was doomed from the start; individuals are just too stuck in their own relative time periods to realize that our systems can fall just like those of the past. Oh, but I’m sure despite the contradicting evidence we’ve got it right this time.
It’s “Atlas Shrugged” time in the ex – land of the free
It’s a bit odd to criticize the notion of using hypothetical price increases as a justification for antitrust law. The very concept of a completely free market is hypothetical, yet its hypothetical advantages over the current system are referenced time and again, as if they were guaranteed to occur.
Absent from the criticism of the FTC’s use of hypotheticals is facts to counter them. Sure, the FTC may be hypocritical in many situations, but does that make their reasoning in this case wrong?
Disappointing, to say the least.
It’s also a little odd to dismiss the idea that freedom of entry into the market would be diminished due to lack of stockpile space. The practical question is: where can a competitor going to store enough salt to contest ISCO’s market?
Lastly, do we need to respect the property rights of a corporation the same as an individual’s property rights? It’s not obvious that this should be true, given that corporations are abstract entities, and enjoy freedoms that individuals don’t. Sensibly, we might treat corporations as tools, and only try to maximize their effectiveness at enhancing productivity, rather than attempting to be fair to them.
“It’s a bit odd to criticize the notion of using hypothetical price increases as a justification for antitrust law. The very concept of a completely free market is hypothetical, yet its hypothetical advantages over the current system are referenced time and again, as if they were guaranteed to occur. ”
Please show where advocates of the free market wish to exercise aggression on individuals based on hypothetical scenarios. Or shall we start trialing people based on hypothetical murders (and here we have an actual crime, not some “injury” against the public good or some such twaddle)?
Central planning in the name of competition.
A market share of 70% is a monopoly.
Hypothetical price increases are illegal, whether you intended to raise prices or not.
It’s amazing that supposedly educated people don’t see the Alice in Wonderland character of anti-trust.
At the same time if you actually lower prices below hypothetical production costs, you’re guilty of predatory pricing. Bureacrats appear to know the just price of everything, while the great scholars of the Church who debated the subject for a millenium decided no one but God could possibly know the just price because the variables involved were too numerous; the just price exists only in a free market.
This reminds me of the Alcoa Aluminum anti-trust case in which the judge actually stated that high quality and low prices resulting from low costs are the most anti-competitive steps a company could take. Duh!
Anti-trust boils down to making biggness a crime. But the state won’t tell you how big you have to be before hand in order to be a criminal. They wait until you have offended some judge and then hit you with the charges. I doubt it will be long before a 50% market share will be illegal. I don’t guess it has occurred to these brilliant legal minds that anti-trust is retro-active punishment.
In Oklahoma, the feds have decided that the health insurance market is not competitive because we only have 5 major insurance companies competing in the market. So not only do the feds claim to know the just price of everything, they have defined monopoly to mean any market share that offends a judge, and they know exactly how many companies must be in a market for it to be competitive. Man these guys must be geniuses because no person in history ever had that knowledge before.
fundamentalist wrote:
“Anti-trust boils down to making biggness a crime.”
It’s more like making *success* a crime.
But that’s socialism for you; reward failure, and punish success.
I am sadden by success since government will eventually come knocking.
Skip,
I wonder if further digging might find some political connection/lobbying effort of the FTC by the beneficiary firms?
This situation provides a perfect demonstration of why there should be a public option for salt distribution in this country!
Our system has been about letting the mice run around the maze looking for the cheese and as soon as the mice get close, they move the cheese. The mice are getting tired and are about to retreat to a corner and quit looking. I guess I could write a little book about it – sort of an Atlas Shrugged meets The Secret of NIMH……
Wow! Who knew that a company with a few too many bags of salt could be such a threat to a government with the firepower and surveillance technology of the most powerful military/police force in the history of mankind… perhaps they should label them as a terrorist organization too. Hypothetically, it is possible so why not just assume it and act now?
Hypothetically, I could also run a traffic light next week or fail to fill out a government form properly, or worse, I might actually run an inefficient buggy whip company out of business, so I guess I better go ahead and fess up to my hypothetical sins, lay on the public alter and cough up my sacrament to the all knowing all seeing thug-ocracy now.
With each new generation, the more the statist gets away with, the bolder they get and the more they encroach, until like a snowball rolling down a hill there is no stopping it until it hits absolute bottom… yet most of the myopic public still insist that it could never happen here.
Mike C.
That’s what psychiatry does. It locks you up just in case, even though you committed no crime…yet.
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