Guest opinion: Addressing monopolies: A bipartisan issue

It is hardly coincidental that both The Wealth of Nations and the Declaration…

Guest opinion: Addressing monopolies: A bipartisan issue
Guest opinion: Addressing monopolies: A bipartisan issue 1

“People of the same trade seldom meet together that the conversation ends in a conspiracy against the public or some contrivance to raise prices.” This sentence from the eighteenth century moral philosopher and father of capitalism Adam Smith in his 1776 book, The Wealth of Nations, suggests his apprehension about monopolies. Smith was deeply concerned about the laws passed by the British Parliament that imposed high import duties on goods shipped from the colonies to England while granting trade monopolies to special interests and favored companies.  He was equally troubled by non-governmental monopolies created through conspiracies among businesses to restrict supply and raise prices.

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It is hardly coincidental that both The Wealth of Nations and the Declaration of Independence were written in the same year. Both were the products of the Enlightenment, a movement of the 17th and 18th centuries that emphasized reason and individualism rather than tradition.  Such thinking became the foundation of America’s adherence to market economics that places individual decisions over government control. But in this country and others it soon became clear that the concentration of market power required more than just a total laissez-fair approach.

The rapid post-Civil War economic expansion in this country gave rise to monopolistic behavior on the part of some businesses.  The concentration of market power in railroads, shipping, iron ore, steel manufacturing, banking and even sewing thread created the impetus for the 1890 passage of the Sherman Antitrust Act.  The act was “a comprehensive charter of economic liberty aimed at preserving free and unfettered competition of trade.”  In l914 the Clayton Antitrust Act was passed, and the Federal Trade Commission was established. These pieces of legislation, along with the Robinson-Patman Act of l936, established a framework for addressing harmful monopolistic behavior. However, much of the anti-trust legislation was targeted at traditional monopoly power as practiced among large, industrial companies.

Today market power is exhibited in different ways.  A company need not own massive infrastructure such as railroad lines and pipelines or regulated utilities such as AT&T to choke off competitors.  Easily identifiable monopolistic behaviors of the past are now replaced with more subtle ones.  For instance, Amazon will agree to offer a company’s product online and if it sells well, will develop a competitive item which it offers at a lower price, driving the original producer out of business. Facebook tracks consumers’ buying habits treating the data they collect as proprietary.  It then directs ads for complimentary or substitute products to those consumers.  These alleged monopolistic strategies significantly increase sales while lowering the cost of advertising. The result is monopolistically generated profits.

Apple and Epic Games Inc. are currently engaged in a court battle. Epic is accusing Apple of monopolistic behavior over its insistence that software developers must pay a 30% fee to use Apple’s App Store.   Epic circumnavigated Apple’s fee and charged customers directly.  The trial is already demonstrating the inadequacies of U.S. antitrust laws in addressing complex litigation involving technology.

In recent years, the courts have been less aggressive in their pursuit of anti-trust behavior regarding mergers and acquisitions of companies.  A company can purchase and fold into its enterprise other companies and/or buy products with the intent to create monopolies and raise prices.  These cases are most obvious in the pharmaceutical industry.  The pharmaceutical company, Turning, purchased the patent for the drug Daraprin and then increased its price by 5,000%.  Minnesota Senator Amy Klobuchar, a Democrat who enjoys a relatively good record of bi-partisan legislation, wrote a new book on monopoly power. She cites several other cases where such price increases prohibited patients’ ability to secure life-enabling drugs.

With few exceptions most in Congress find it hard to deny that anti-competitive behavior harms American consumers. Monopolies often reinforce “management stability” which tends to inflate managements’ salaries.  What board wants to fire senior management when it is earning profits even if from monopolistic pricing practices?  Monopolies also stymie innovations at a time when this country needs many new products and processes that assure our continued growth in a highly competitive global economy.

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


Michael A. MacDowell is President Emeritus of Misericordia University and is a Trustee of the Calvin K. Kazanjian Foundation.  He lives in Estero, FL.

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