Antitrust law – Tommy G Bites Back

OK, so you’ve raised a number of interesting points Peter. (Condescension coming right back at you!)

Let me begin by agreeing with you in very large regard, and indeed conceding vasts swathes of what you’ve written. Never let it be said that Tommy G is ungenerous! I completely agree that the free market is utterly dependent on, and therefore inextricably linked to, the State.

I also agree that there exists a readily identifiable kind of free marketeer who is every bit as devoted and rigid as the most nutty religious fundamentalist. I have faith in the free market, and I think that one reason it works is that it reflects the essential nature of what it is to be human. But I completely agree that it is an artifical construct, and that it is only through the protection of government that it works and that we do not descend into anarchy. It is a means to an end, not an ends in itself. There, I said it. Randians everywhere will be sharpening their knives.

So I do not dispute that the State has a right to get involved in the running of markets. Markets cannot function without the State enforcing contracts, protecting physical property, and defending intellectual property rights. I think that developments should be barred if they are likely to be ugly (see my ‘Come, Friendly Bombs’ post). I even take the view that some redistribution of wealth is proper, albeit that I would like to see vastly less of it, and only to maintain a (pretty low-hung) safety net.

I’m not even sure that I completely and necessarily disapprove of legislation to limit working hours, so long as that legislation emanates from the UK Parliament, and not the loathsome and unaccountable EU. So I see a role for the State to intervene in, and sometimes constrain, the market. Where we part company, and where with respect I don’t think you have made a remotely persuasive case, is in the specific matter of competition or ‘antitrust’ law.

I outlined my views in my original post on this topic, and I stressed that I believe antitrust law is not only unfair on the producer, but actively bad for the consumer. Let’s return to the ice cream example that has captivated us both. You don’t make an argument as to why one producer (such as the fictional Big Tommy Ices, BTI) cannot provide a sufficiently wide range of products – i.e. collection of choices - to keep the consumer happy. Are you able to do so?

You suggest that BTI offering a shopkeeper a free fridge on the condition that he uses it to stock BTI products exclusively is a ‘jerk-off little scheme’. (A jerk-off scheme involving ice cream sounds horrible, although doubtless the perverts among us would find it flavoursome and wholesome.) I don’t buy that. It seems to me perfectly reasonable for BTI to look for ways to make it easier for shops to stock their products. It is also reasonable that they should want those schemes (e.g. a free fridge) to benefit BTI alone, and not its rivals.

Now don’t get me wrong, I’m not being naïve here. I know that one reason (although not necessarily the only reason) that BTI would offer a fridge on these grounds would be to crowd its rivals out of the market that is this shop. But why shouldn’t it try to do that? Simple economics can and likely will determine the right course of action here. Mr Shopkeeper will either decide that his profits will be maximised by rejecting BTI’s offer so that he can stock a variety of brands, or he will decide that BTI’s proposal will be good for business. This is determined by the wants of his customers. The market can reflect their priorities and demands better than any pencilnecked bureaucrat or antitrust advocate could ever hope to. If Mr Shopkeeper makes the wrong decision, he’ll see that reflected in his takings.

So what if Mr Shopkeeper takes the latter route? Yes, rival brands will be kept out of his shop. Yes, that decision will have been taken because it is cheaper for him to do it this way. But maybe BTI offers a really broad range of choices. Choc ices, luxury ice cream, lollypops etc. Maybe it doesn’t. If it doesn’t, what do you think will happen? Well, what happened in the real world when Ben and Jerry of Vermont, USA reckoned that there was a gap in the market for better quality ice cream(s)? They started an ice cream company.

There is no legitimate need for antitrust law. There is a very real need to scrap antitrust law. It protects crap companies. Its application is arbitrary – would you have McDonalds compelled to stock products made by the local kebab shop? Aren’t McDonalds abusing their dominant market position? It raises prices, because Mr Shopkeeper has to fork out for a new fridge, or because BTI has to supply him with one for less return, and either BTI or Mr Shopkeeper passes on this additional cost to the consumer. It inhibits the future Bill Gateses of this world from being innovative and from starting companies in the first place. All of which effects are terrible for the consumer.

And I just hate it, OK?