A Broad Sketch of the Antitrust Laws

The Federal Trade Commission (FTC) is in charge of enforcing antitrade in the USA. Their mandate is stated as follow:

“Free and open markets are the foundation of a vibrant economy. Aggressive competition among sellers in an open marketplace gives consumers — both individuals and businesses — the benefits of lower prices, higher quality products and services, more choices, and greater innovation. The FTC’s competition mission is to enforce the rules of the competitive marketplace — the antitrust laws. These laws promote vigorous competition and protect consumers from anticompetitive mergers and business practices. The FTC’s Bureau of Competition, working in tandem with the Bureau of Economics, enforces the antitrust laws for the benefit of consumers.”
https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws

1 -The Sherman Antitrust Act of 1890 was the first antitrust law. Its purpose was to:
– Prevent entities from restraining trade
– Stop monopolies from controlling industries

The Standard Oil Trust Case and the Stock Market Panic of 1910-1911

Standard Oil Co. of New Jersey v. United States 1911, was the most famous antitrust case. Standard Oil was John D. Rockefeller’s huge conglomerate that controlled oil prices in the USA. Rockefeller had used all kinds of abusive price schemes in order to put his competitors out of business.

The case resulted in the breakup of Standard Oil into several smaller oil companies that included Eastern Standard Oil or ESSO which is now Exxon Mobil, Standard Oil of Ohio, Standard Oil of Indiana, etc. As a consequence of the case business people were scared and the stock market crashed in the Panic of 1910-1911. The decision cited the “Rule of Reason” as a way to distinguish between big companies from badly behaving big companies – something that the populist, shameless, vote getter, Senator Elizabeth Warren should learn.

AT&T aka Ma Bell was broken up into the “Baby Bells” in 1982

AT&T had a telephone monopoly from its creation until President Reagan succeeded in breaking it up in 1982. I find the fact that a pro-business anti regulation President was the one to do the dirty work to be interesting- shades of President Trump and Amazon.

Amazon – Jeff Bezos Is Laughing, but he is not Trading after hours

2 – The Clayton Antitrust Act of 1914 plus the Creation of the FTC

The Clayton Act added more teeth to the antitrust laws such as prohibiting price discrimination. The Creation of the FTC enabled an independent Government agency to blackmail companies into settling threatened antitrust actions against alleged monopolies. The FTC is sort of like a special prosecutor for antitrust. The problem with the FTC is that they can abuse their power.

3 – The Robinson Patman Act of 1936

This law prevented price discrimination by large retailers who were able to get lower prices by purchasing goods in bulk. This all sounds familiar in today’s world. Did someone not get the memo as Home Depot did that very thing to drive small retailers out of business? Or is the act just sheer stupidity?

The Real Meaning of Antitrust Laws: “Show me the man and I’ll show you the crime”.

I did not want to bore you by going into the details of the antitrust laws. The list of laws and details of the aforementioned acts would take up more space than the reader could possibly be interested in reading. Just trust me when I say there are enough antitrust acts listed or already decided upon by the courts to get anyone. In a statement right out of a Franz Kafka novel, Russian dictator Joseph Stalin’s henchman, Lavrenty Beria said it best: “Show me the man and I’ll show you the crime.”

-The Microsoft case: If the government wants to get you they will go after you. In 1990 the FTC began an investigation of Microsoft because Microsoft Windows was on almost everyone’s computer desktop. Microsoft was in a position to control what programs one could see. So Joe Klein, an aggressive, politically self-righteous Assistant US Attorney, played the big bad Bill Gates card to blackmail Microsoft into paying a big fine and signing an antitrust consent decree.

The problem was that Microsoft and the computer industry were no longer doing the bad things that the government was suing it for. The rapid changes in technology had already changed things enough to make the case moot. Nevertheless, Joe Klein pushed on for years, eventually extracting a huge fine from Microsoft and getting the US Supreme Court to tell us all the things that Microsoft was not doing anymore but could not do if a time warp made us wake up ten years earlier.

Here is an MBA case study of the Microsoft case. It means diddly squat other than the fact that a great company was blackmailed and tied up in knots for years while the Federal Government scored political points.

http://www.pff.org/issues-pubs/pops/pop7.4microsoftmonopolyfacts.html

– Elizabeth Warren wants the large banks broken up and the bankers thrown in jail. It never ceases to amaze me how dangerous a politician can be. This lady has no understanding about what caused the 2007-2008 banking crises, but she wants blood only from the bankers: Some causes of the financial crises:

Bill Clinton’s repeal of the 1933 Glass-Steagall Act allowed banks and insurance companies to get into highly leverage brokerage business. There was a reason to keep our money safe by banning banks from trading.

Alan Greenspan’s insane easy money policy gave bankers the fuel to speculate in non-banking areas.

Barney Frank’s failure to regulate housing loans, Fannie Mae and Freddie Mac let phony appraisals and leveraged home loans run amuck.

Banks that took advantage of the lack of government control and were unleashed by the repeal of Glass-Steagall and got into all kinds of speculative businesses.

Alan Greenspan’s Federal Reserve did not oversee what was happening in banking and tightened money.

My point is that Elizabeth Warren is a politician who wants to be President and re-litigate the entire situation possibly by using the antitrust laws. Most of the causes of the financial crises have already been eliminated through regulation and legal action. Sure, some specific bankers should have gone to jail. But all in all the system was saved. There is still much regulation to enact. Just no lynching’s please.

-Trump’s Amazon Twitter war may be a precursor to legitimate antitrust action, but right now it is all politics. I have no doubt that a very good antitrust case can be made against Amazon. That goes for Facebook and Google too. We all know how impactful Amazon has become on our lives and the economy. Many retailers are getting destroyed and there has been enormous negative impact on shopping mall real estate.

But arbitrary and capricious twitter bashing of Amazon or antitrust action for political purposes is an abuse of power. A President who uses the tools of government to pick on a specific company for political reasons is Un-American. Tossing out unsubstantiated nonsense about the US Post Office is not the way to go.

Summary

If the Justice Department wants to sue Amazon in antitrust I suggest that the FTC studies the matter in depth and then make a case based upon the Rule of Reason cited above. That means specifically show where Amazon is being abusive. My gut tells me that there are many areas where Amazon’s power must be reined in. But my gut does not make laws. Right now there are too many politically motivated gut decisions being made.

I hope that President Trump cuts out the politically motivated Amazon bashing. Let’s also hope that he does not go after other large companies from his bedroom. Same thing goes for trade wars. If a President wants to start an antitrust suit he has a license to do so under our present loose laws. However, a responsible President should perform an in depth apolitical study of the complex issues involved as The Fourth Industrial Revolution blows by us.

https://www.cnbc.com/video/2018/04/04/trump-targets-big-tech.html